As it warned earlier, Hartford Financial Services Group saw its profit fall in the second quarter due to large catastrophe losses and a charge to increase asbestos reserves.
Overall, The Hartford reported a net profit of $24 million for the quarter, compared to a year-earlier profit of $76 million.
The Hartford’s wealth management division reported net income of $351 million for the quarter. The company has been cross-selling wealth management products to its small commercial lines insurance customers.
Its combined commercial markets unit (property/casualty and group benefits) reported net income of $162 million in the second quarter, with P/C commercial insurance line by itself generating $121 million of that.
The commercial market profit, however, was offset by a net loss of $174 million in the firm’s consumer lines.
The total catastrophe losses of $290 million from 12 events were the highest level of second quarter catastrophe losses in The Hartford’s history. Most of the losses were caused by tornadoes that struck the U.S. in April and May. Other insurers have also suffered large catastrophe losses.
The Hartford’s asbestos costs were considerable and included a prior year reserve increase of $206 million. The company said the increase was primarily driven by higher frequency and severity of mesothelioma claims, particularly against certain smaller insureds. Other insurers are also still dealing with asbestos issues.
“The Hartford’s fundamental business results demonstrated solid performance in the second quarter, although catastrophe losses and an asbestos reserve increase affected results,” said Liam E. McGee, chairman, president and chief executive officer of The Hartford.
The P/C commercial lines combined ratio for the second quarter 2011 was 92.8, compared to 93.6 in the same quarter in 2010. P/C commercial lines written premiums increased 8 percent from the second quarter of 2010. Pricing improved in small commercial and middle market, led by rate increases in workers’ compensation, according to the insurer.
In consumer lines, the quarter’s combined ratio was 91.6, compared to 93.2 for the same period last year. The company said that 2011 accident year underwriting results before catastrophes continued to get better, due to improving margins in auto. During the quarter, the company announced a new affinity partnership with the Sierra Club, an organization with more than 1 million members. The insurer said this deal has resulted in a marketing base of more than 6 million new affinity member households generated over the past nine months. New business written premium for The Hartford-AARP auto program turned positive, with a 1 percent increase in new business premiums.
The company also took a charge of $73 million related to costs associated with a policy administration software project that was discontinued in its consumer products division.
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