Insurance Underwriter - Earnings and Guidance
The Hartford sees Q3 net loss of $220M
November 03, 2009 5:44 PM ET
By Mindi Westhoff
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The Hartford Financial Services Group Inc. on Nov. 3 reported third-quarter core earnings of $660 million, or $1.56 per share, compared to core losses of $422 million, or $1.40 per share, in the same quarter of 2008. The company reported a third-quarter net loss of $220 million, or 79 cents per share, compared to a net loss of $2.63 billion, or $8.74 per share, in the third quarter of 2008. The Thomson First Call mean estimate for the quarter called for earnings of $1.11 per share, according to SNL Financial. The quarter's net income reflected a deferred acquisition cost unlock benefit of $63 million after tax, and core earnings included a $232 million benefit from the DAC unlock. The lower net income benefit relates to a $169 million charge primarily related to the company's macro hedging program. Net income in the third quarter of 2008 reflected a $932 million after-tax charge related to the DAC unlock, and core earnings in the year-ago period reflected a $923 million after-tax charge related to the DAC unlock. The net realized capital loss for the third quarter was $885 million after tax, primarily due to after-tax impairments of $336 million and an after-tax loss of $435 million from the company's variable annuity hedging programs. Year-ago results included a net realized capital loss of $2.2 billion after tax. The company's life segment produced core earnings of $499 million, compared to core losses of $541 million in the year-ago period. The segment also saw a third-quarter net loss of $323 million, compared to a net loss of $1.82 billion in the third quarter of 2008. The P&C division saw core earnings of $246 million in the third quarter, compared to core earnings of $156 million year over year. Net income for the quarter came to $190 million for the P&C division, compared to a net loss of $774 million in the year-ago period. The current accident-year combined ratio for ongoing operations in the third quarter, excluding catastrophes, was 93.8%, compared to 91.8% in the prior-year period. Assets under managements for the quarter came to $387.0 billion, compared to $385.0 billion in the third quarter of 2008. Book value per common share as of Sept. 30 was $37.90, compared to $41.80 as of Sept. 30, 2008. The Hartford said it expects 2009 core EPS to be between 85 cents and $1.05, compared to the company's previous guidance of between zero cents and 20 cents. The company added that the guidance assumes that the U.S. equity markets produce an annualized return of 9.0%, including 7.2% stock appreciation and 1.8% dividends, from the S&P 500 level of 1,057 on Sept. 30. The guidance also assumes a fourth-quarter restructuring charge of $30 million after tax; preferred dividends and amortization of discount of $128 million on the cumulative perpetual preferred stock issued under the U.S. Treasury Department's Capital Purchase Program; a full-year, pretax underwriting loss of $225 million from other operations in property and casualty; a full-year catastrophe ratio of 3.6% to 4.0%; a pretax annualized yield on limited partnerships and other alternative investments of negative 21%; and diluted weighted average shares outstanding of 364 million for full year 2009. The Hartford also anticipates a 2009 combined ratio of between 91.0% and 93.0% for its P&C division's ongoing operations. | 
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