Hartford Financial Services Group Inc. (HIG), the insurer that counts billionaire hedge-fund manager John Paulson as its largest investor, posted a second-quarter loss on the cost of retiring investments made by Allianz SE. (ALV)
The net loss of $101 million, or 26 cents a share, compares with profit of $33 million, or 5 cents, a year earlier, according to a statement today from Hartford, which is based in the Connecticut city of the same name. Chief Executive Officer Liam McGee struck a deal in April to pay about $2.4 billion to buy back debt and warrants that were issued to Allianz.
McGee is counting on profit from property and casualty policies as the insurer shrinks life operations. He reached a deal in April to sell an annuities-distribution business and an agreement yesterday for American International Group Inc. to buy Woodbury Financial Services.
“Selling Woodbury is a favorable sign that Hartford is making progress on its divestiture plans,” Meyer Shields, an analyst at Stifel Nicolaus & Co., said in a note today. “Individual life and retirement plans will probably be more difficult to get done,” and those deals may be necessary to push the stock above $20 a share, he wrote.
Hartford climbed 14 cents to $16.46 at 4:58 p.m. in extended trading in New York. The company has gained less than 1 percent this year compared with the 1.5 percent advance in the 24-company KBW Insurance Index. Results were released after the close of regular trading.
Book value, a measure of assets minus liabilities, rose to $45.59 from $43.25 on March 31. Earnings excluding one-time items such as the Allianz-related cost climbed to $119 million from $14 million a year earlier.
Hartford lost half of one cent for every dollar it collected in premiums in its commercial property-casualty business, compared with a loss of 6.2 cents a year earlier. Catastrophe costs declined from the second quarter of last year when tornadoes struck U.S. states including Missouri and Alabama.
Premium revenue declined 4.1 percent to $3.4 billion. McGee said customer retention levels were “acceptable” as the company raised rates for renewing clients by 7 percent in the standard commercial business.
McGee’s predecessor, Ramani Ayer, turned to Allianz, Germany’s largest insurer for capital in 2008, agreeing to pay 10 percent on $1.75 billion of debt as capital markets froze. Hartford said this year it could replace the securities with less expensive debt.
Hartford needs to reach about $24.70 to recoup Paulson’s investment, filings to the U.S. Securities and Exchange Commission and data compiled by Bloomberg in February show. Results were released after the close of regular trading.
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