Hartford Posts Loss as CEO McGee Hedges Annuities
Hartford Financial Services Group Inc. (HIG) posted a first-quarter loss as the insurer recorded costs to pay down debt and guard against losses on savings products known as variable annuities.
The loss was $241 million, or 58 cents a share, compared with a profit of $96 million, or 18 cents, a year earlier, according to a statement today from Hartford, which is based in the Connecticut city of the same name. Core earnings, which exclude some investment results, were 92 cents a share, beating the 82 cent average estimate of 17 analysts surveyed by Bloomberg.
Chief Executive Officer Liam McGee is focusing on property- casualty coverage, after divesting a life insurance unit and ending variable-annuity sales. The firm said this month it recorded charges to guard against fluctuations in stocks and the yen on variable annuities it sold to Japanese savers. Hartford is paying some U.S. customers to give up the contracts as low interest rates and equity volatility weigh on results.
“Getting rid of very large and complicated run-offs takes a long time, there’s no easy answers to that,” Randy Binner, an analyst at FBR Capital Markets, said by phone before results were announced. McGee “is doing everything he can to make Hartford a more basic protection insurance company.”
Hartford fell 15 cents to $27.06 in extended trading at 4:55 p.m. in New York. The shares have advanced 31 percent in the past 12 months as McGee sold units to focus Hartford on coverage for homes, cars and businesses.
Sales of Hartford’s individual life, retirement, annuities- distribution and broker-dealer businesses have freed up more than $2 billion of capital. Hartford said in February it would reduce debt by about $1 billion and repurchase as much as $500 million in stock by the end of 2014.
Expenses tied to repaying debt were about $138 million, and costs related to Japan annuity hedging were more than $500 million, Hartford said. The charges aren’t included in operating earnings, Hartford said this month.
Hartford paid out 93.6 cents on claims and expenses for every premium dollar it took in at the property-casualty unit during the period, compared with 95.6 cents a year earlier. The insurer benefited from lower costs tied to natural disasters, after claims from Superstorm Sandy fueled a loss in the fourth quarter. Catastrophes cost Hartford $21 million in the first three months of this year, compared with $46 million a year earlier.
Core earnings at the property-casualty unit rose 12 percent to $318 million as the company recorded a gain after determining it had more funds set aside than necessary for coverage sold in prior years. Policy sales fell about 2.5 percent in the commercial segment to $1.65 billion, while they rose 2 percent to $878 million in the consumer markets business, which provides auto and homeowners coverage to individuals.
Hartford placed its annuities and other run-off businesses into the Talcott Resolution unit, run by Beth Bombara. Core profit at Talcott was $161 million, compared with $219 million a year earlier.
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