Private Equity Has Rebound on Asset Sales, Hartford CFO Says

  • Insurer anticipates ‘very strong results,’ CFO tells investors
  • Hartford stock climbs as CFO cites investments, buybacks

Hartford Financial Services Group Inc., which is among insurers pressured by low bond yields and volatile markets, is benefiting from a rebound beyond its fixed-income portfolio.

The annualized yield from so-called limited partnership holdings this quarter will probably exceed the company’s target of 6 percent, Chief Financial Officer Beth Bombara said Wednesday at a conference held by Keefe, Bruyette & Woods. The LP portfolio includes private-equity, hedge fund and real estate investments.

“We’re anticipating that we will have very strong results there,” she said. “We’ve benefited from some very strong returns in the private-equity portion of our portfolio, as some of those funds have sold some underlying investments. That has realized some gains.”

Private-equity funds struggled to find buyers for their holdings in late 2015 and the early months of this year as stock markets plunged. That hurt Hartford, as net investment income dropped 14 percent in the first quarter from a year earlier to $696 million. The figure climbed to $735 million in the three months ended June 30.

‘Nice to See’

The improvement is “nice to see because obviously last year, the second half of the year, those asset classes were challenged,” she said, adding that the problem extended into the first three months of 2016. “In the second quarter, we were again at about our 6 percent annualized yield, so it’s nice to see that trend continuing.”

The total investment portfolio was valued at more than $75 billion as of June 30, according to a regulatory filing from Hartford, which is based in the Connecticut city of the same name. The company advanced 1.9 percent to $41.50 at 4:15 p.m. in New York, the largest gain since July and the biggest increase in the 21-company S&P 500 Insurance Index. That narrowed the firm’s loss for the year to 4.5 percent.

Hartford increased the pace of buybacks after a share slump and will probably repurchase $350 million of its shares this quarter, up from a previous plan of $300 million, the CFO said. The stock plunged 9.3 percent on July 29 to $39.85 after the company said that second-quarter profit fell on higher-than-expected costs from auto insurance.

“Given the stock performance, we did take advantage of the price,” she said.

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