Hartford Posts Loss on Berkshire Deal, Asbestos Review
Hartford Financial Services Group Inc. (HIG), the insurer exiting life operations to focus on property-casualty coverage, posted a third straight loss on asbestos liabilities and costs tied to variable annuities.
The second-quarter net loss widened to $190 million, or 42 cents a share, from $101 million, or 26 cents, a year earlier when the company incurred costs retiring investments made by Allianz SE, Hartford said today in a statement. Operating earnings, which exclude some investment results, were 66 cents a share, missing the 71-cent average estimate of 17 analysts polled by Bloomberg.
Chief Executive Officer Liam McGee, 58, divested life-insurance and retirement-plan units, leaving operations that insure cars, homes and businesses. He struck a deal in June to sell a U.K. annuity business to Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), part of a strategy to limit risks from retirement products. Hartford, based in the Connecticut city of the same name, reviews asbestos-linked liabilities every year in the second quarter.
“There has to be more focus on the P&C operations,” Vincent DeAugustino, an analyst at Keefe, Bruyette & Woods, said in an interview before results were announced. “It comes down to how hard are they being on rate and what does that imply for retention and new business growth.”
Book value, a measure of assets minus liabilities, fell to $38.59 per share as of June 30, from $42.43 three months earlier, as rising interest rates pressured the value of Hartford’s bond portfolio.
Hartford recorded a $126 million after-tax loss on the sale of the U.K. unit. Buffett’s company agreed to pay $285 million for the business, adding about $1.75 billion in assets under management. Hartford recorded $421 million of realized capital losses, mostly tied to hedges on risks from variable annuities sold outside the U.S.
Losses related to the review of asbestos and environmental reserves were $91 million, compared with $33 million a year ago.
The insurer spent $1.05 on claims an expenses for every premium dollar at the property-casualty unit. That’s an improvement from $1.08 a year earlier. Policy sales increased 1.2 percent to $2.5 billion.
Hartford has rallied 37 percent this year through the close of regular trading today, beating the 35 percent advance of the 24-company KBW Insurance Index. The shares gained 7 cents to $30.85 in extended trading at 4:49 p.m.
McGee increased the share-repurchase authorization last month by $750 million to $1.25 billion and lifted the dividend 50 percent. Results were released after the close of regular trading.
McGee agreed last year to divest a life insurer, a broker-dealer, a retirement-plans unit and an annuities business. The sales, which Hartford has said freed up more than $2 billion in capital, came after billionaire hedge-fund manager John Paulson pressed McGee to split the company in two, an approach the CEO resisted.
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