The Hartford Financial Services Group, Inc. reported record third quarter 2006 net income of $758 million, or $2.39 per diluted share — a sizable 41 percent boost over the same quarter last year.
The Hartford’s core earnings in the third quarter of 2006 were up 31 percent to $727 million, or $2.30 per diluted share.
Property and casualty net income for the third quarter of 2006 was up 64 percent over the prior year to $381 million.
“The Hartford’s third quarter was very strong,” said Ramani Ayer, chairman and chief executive officer of The Hartford. “Good underwriting results before catastrophes, the light storm season and favorable development from prior year storms produced an excellent quarter for property and casualty. Significant increases in mutual fund, 401(k) plan and Japan annuity assets under management contributed to life operations profitability.
Ayer said the quarter benefited from a number of initiatives underway, including new agency appointments and new products.
In the property casualty operations, written premiums in the third quarter were $2.7 billion, up 3 percent over the third quarter of 2005. Strong written premiums growth in personal lines and small commercial were partially offset by declines in the company’s specialty commercial business. Written premiums would have increased 1 percent over the prior year without the effect of $60 million in reinsurance reinstatement premiums incurred in the third quarter of 2005, the company reported.
Property and casualty operations net income for the third quarter of 2006 was up 64 percent over the prior year to $381 million. Net income in the third quarter of 2005 was significantly affected by Hurricanes Katrina and Rita. During the third quarter of 2006, the company increased reserves by $43 million, pre-tax, as a result of its annual environmental study.
The combined ratio for property and casualty ongoing operations was 90.4 percent in the third quarter of 2006, compared with 97.9 percent in the year-ago period. This quarter’s combined ratio included 1.9 points for current year catastrophe losses, as well as 1.1 points or $39 million, pre-tax, of net favorable prior year development primarily related to a release of catastrophe reserves from the 2004 and 2005 hurricanes.
“Property and casualty had a great quarter with strong underwriting results in what is an increasingly competitive marketplace. We benefited from new agency appointments and AARP marketing efforts. New products, such as Dimensions with Auto Packages and an enhanced professional liability product for small technology firms, are providing customers with greater flexibility,” said Ayer.
Written premiums for business insurance were $1.3 billion for the third quarter of 2006, 6 percent higher than the third quarter of 2005. Written premiums would have increased 5 percent without the effect of the reinsurance reinstatement premium in 2005. Business insurance reported growth in both its small commercial and middle market businesses.
Strong customer retention and increased distribution through new agent appointments contributed to third quarter small commercial written premiums growth of 8 percent over the prior year to $657 million. This quarter, The Hartford launched an enhanced version of its professional liability insurance product for small technology firms with increased liability limits.
In middle market, third quarter 2006 written premiums were up 3 percent over the prior year to $637 million, due to improved customer retention. The company also continued its success with industry-specific products with the introduction of a new professional liability insurance product for small- to mid-sized business services firms._ _The business insurance combined ratio of 90.4 percent for the third quarter of 2006 included 1.9 points of current year catastrophe losses and 1.5 points of net favorable prior year reserve development.
Excluding catastrophes and prior year development, the combined ratio was 90.0 for the third quarter of 2006, 1 point higher than the prior year.
Personal Lines Insurance
Strong new business growth in both the company’s AARP and agency businesses contributed to $1 billion in personal lines written premiums for the third quarter of 2006. This represented a 9 percent increase over the prior year, or 6 percent excluding the impact of reinsurance reinstatement premiums in 2005. New business in AARP rose sharply as a result of increased direct response advertising. Solid retention and new customer acquisition drove AARP written premiums up 12 percent over the third quarter of 2005.
Third quarter 2006 written premiums for the company’s agency business increased by 11 percent over the prior year. During the quarter, The Hartford introduced its new auto insurance product, Dimensions with Auto Packages, in 18 states. This new product offers customers more flexibility with four unique bundles of features to match individual insurance needs. In addition, The Hartford continued to increase its distribution capabilities in personal lines, appointing nearly 500 new agencies during the most recent quarter. Over 5,400 agencies can now distribute The Hartford’s personal lines products, up from approximately 4,000 at the beginning of the year.
Personal lines reported a combined ratio of 90.7 percent for the quarter, including 2.3 points of current year catastrophe losses and 0.7 points of net favorable prior year reserve development. Excluding catastrophes and prior year development, the combined ratio was 89.0 for the third quarter of 2006, compared with 86.7 in the prior year.
Specialty Commercial Insurance
Written premiums in specialty commercial were $383 million in the third quarter of 2006, down 16 percent from the prior year. Excluding the effect of the 2005 reinsurance reinstatement premium, the company would have reported a 19 percent decline in written premiums for specialty commercial, and a 23 percent decline in specialty property in the third quarter of 2006 as compared with the prior year. The Hartford continued to be highly selective in its specialty property business, adjusting its exposures in catastrophe-prone areas._ _Specialty commercial reported a combined ratio of 89.4 percent for the third quarter of 2006, including 0.7 points of current year catastrophe losses and 0.5 points of net favorable prior year reserve development. Excluding catastrophes and prior year development, the combined ratio was 89.2, compared with 98.2 in the third quarter of 2005.
The Hartford reported core earnings for the first nine months of 2006 of $2.1 billion, or $6.68 per diluted share. Based on current information, The Hartford expects 2006 core earnings per diluted share to be between $8.75 and $8.95. The company’s previous guidance range was $8.50 to $8.80 per diluted share.
Source: The Hartford
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