News Currents

May 22, 2006

First quarter financial results upbeat, but some note disaster fallout

The financial results are in. Insurers generally had positive first quarters, although some were hurt by higher health care costs and continued fallout from last year’s natural disasters. Below are the financial highlights, compiled by KMPG, of some of the nation’s largest insurers and brokers.

Allstate Corp.: Allstate reported net income of $1.42 billion, or $2.19 per share, for the first quarter, compared with $1.12 billion, or $1.64 per share, for the same quarter last year. Operating income was $1.3 billion, compared with $1.14 billion a year ago. Property liability premiums written for the quarter were $6.73 billion, compared with $6.58 billion in the first quarter of 2005; the increase was mainly driven by standard auto and homeowners increases of 4.1 percent and 2.4 percent, respectively. Total quarterly revenue was $9.08 billion, compared with $8.7 billion a year ago. The first quarter’s property-liability combined ratio was 81.9 percent, down from 85.3 percent in the first quarter of 2005.

Aon Corp.: The broker reported fiscal first-quarter net income of $198 million, or 57 cents per share, compared with $200 million, or 59 cents per share, for the same quarter of 2005. Net income from continuing operations was $198 million, compared with $198 million a year ago. Revenue from risk and brokerage services was $1.66 billion for the first quarter, compared with $1.67 billion for the first quarter of 2005. Total revenue was $2.52 billion, compared with $2.46 billion in Q1 2005. Aon’s previously announced three-year restructuring plan, which includes employee termination, lease consolidation expenses and asset impairments, is expected to result in cumulative pre-tax charges of $290 million.

CNA Financial Corp.: The Chicago-based carrier reported net income of $229 million, or 82 cents per share, for the first quarter of 2006, compared with net income of $185 million, or 66 cents per share, a year earlier. Operating income was $234 million, compared to operating income of $192 million in the first quarter of 2005. The company experienced $8 million in after-tax catastrophe losses due to first-quarter hurricanes. Net written premiums for property and casualty operations were $1.76 billion, compared with $1.77 billion in the same period a year ago. The first quarter’s total combined ratio for property/casualty operations was 96.9 percent, compared with 99 percent a year ago.

The Hartford Financial Services Group: The Hartford reported net income of $728 million, or $2.34 per share, for the first quarter, compared with $666 million, or $2.21 per share, for the first quarter of 2005. Core earnings, which is Hartford’s Non-GAAP measure of operating income, was $797 million for the quarter, compared with $582 million a year ago. Net written property/casuatly premiums for the first quarter were $2.6 billion, a 2 percent increase year-over-year. The company reported a combined ratio of 87.9 percent in ongoing operations compared to 86.8 percent in 2005.

Lincoln National Corp.: The Philadelphia-based company reported net income of $221 million, or $1.24 per share, for the first quarter of 2006, compared with $179 million, or $1.01 per share, for the same quarter in 2005. Total revenue was $1.41 billion for the quarter, compared to $1.31 billion a year earlier. In the company’s retirement segment, income from operations was $123 million, compared with $98 million a year ago. Gross deposits in the segment were $2.9 billion.

Progressive Corp.: Progressive reported first-quarter net income of $437 million, or $2.21 per share, compared to $413 million, or $2.04 per share, for the same quarter a year earlier. The Mayfield Village, Ohio-based insurer said net premiums earned were $3.5 billion, compared to $3.35 billion in the first quarter of 2005. The combined ratio for the fourth quarter was 85.2 percent, up slightly from 85 percent a year ago. Total revenue for the first quarter was $3.66 billion, up 5 percent over the same period last year.

Prudential Financial: The Newark, N.J.-based carrier reported net income of $675 million, or $1.38 per share, for the first quarter of 2006 for its financial services businesses, compared to $766 million, or $1.49 per share, for the same quarter in 2005. Operating earnings were $669 million, compared with $601 million in the year-ago quarter. Total operating revenue was $6.13 billion, compared to $5.59 billion in last year’s first quarter. Assets under management on March 31, 2005, were $547 billion, up from $496 billion a year earlier.

Safeco: The Seattle-based insurer reported net income for the first quarter of $208 million, or $1.69 per share, compared to $212 million, or $1.65 per share, in the year-ago quarter. Operating earnings were $198 million, compared with $190 million in the first quarter of 2005. Safeco’s net earned premiums were $1.42 billion for the quarter, relatively unchanged from a year ago. The company reported total quarterly revenue of $1.56 billion, compared to $1.58 billion a year earlier. The property and casualty combined ratio for Q1 was 86.9 percent, compared with 88.5 percent in the first quarter of 2005.

St. Paul Travelers Cos.: St. Paul Travelers reported net income of $1.01 billion, or $1.41 per share, compared to $212 million, or 31 cents per share, a year earlier. Operating income for the first quarter was $1.01 billion, compared to $859 million in the first quarter of 2005. Net written premiums for the quarter were $4.77 billion, virtually unchanged from last year’s first quarter. Total revenue for the company was $6.05 billion, compared to $6.11 billion in the year-ago quarter. The quarterly combined ratio was 88.9 percent, down from 90.5 percent in the first quarter of 2005.

The information was obtained from the individual company financial statements. KPMG has not verified the information and does not endorse any of the numerical information provided.This article is being reprinted with permission from KPMG’s “Insurance Insider.” Copyright KPMG LLP.

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