The Hartford Financial Services Group said Wednesday its 2014 second quarter net loss widened to $467 million, compared to a net loss of $190 million during last year’s second quarter. The results were hit by $617 million of loss on discontinued operations, after-tax, from the sale of the company’s Japan annuity business.
The Hartford, Connecticut-based company’s second quarter core earnings, excluding special items, were $144 million, down 38 percent from $231 million a year ago.
Property & Casualty core earnings for the second quarter were $40 million, down 71 percent from $140 million during last year’s second quarter. Asbestos and environmental prior year development and weather losses affected the results.
Its Group Benefits segment earnings rose to $52 million, up 41 percent from last year, and the Mutual Funds segment earnings rose to $21 million, up 5 percent from a year ago.
The company said its second-quarter core earnings declined year-over-year as the rise in core earnings from Property & Casualty Commercial, Group Benefits and Mutual Funds was more than offset by higher prior year loss and loss adjustment expense reserve development (PYD) for asbestos and environmental.
The Hartford said the unfavorable PYD for asbestos and environmental reserves was $164 million, after-tax, for the second quarter, compared to $91 million, after-tax, during the same period last year.
The catastrophe losses for the latest quarter were $127 million, after-tax, up from last year’s second-quarter catastrophe losses of $121 million.
The Property & Casualty business overall combined ratio for the second quarter was 108.6 percent, deteriorating from 105.4 percent one year ago. Written premiums rose to $2.574 billion for the quarter, up 3 percent from the prior year period.
The Property & Casualty underwriting loss widened to $216 million for the second quarter, compared to an underwriting loss of $132 million in the 2013 second quarter. The company said the increase in the underwriting loss was driven by higher PYD related to asbestos and environmental in the P&C Other segment and higher underwriting losses in Consumer Markets, partially offset by improved underwriting gains in P&C Commercial.
In the P&C Commercial segment, the company said standard commercial renewal written pricing increases were 6 percent during the second quarter, which remained ahead of loss cost trends. The company said renewal written pricing increases averaged 6 percent in both Small Commercial and Middle Market and reflect rate increases in all lines of business.
The P&C Commercial segment’s combined ratio for the quarter was 94.2 percent, improving from 98.4 percent during the prior-year second quarter. Written premiums for this segment were $1.571 billion for the quarter, up 2 percent from last year. The underwriting gain for this segment jumped to $91 million, up from $25 million one year ago.
In the P&C Consumer Markets segment, the underwriting loss for the quarter widened to $60 million, compared to a loss of $9 million a year ago, due to higher catastrophes and less favorable PYD. Written premiums rose to $1.003 billion, up 4 percent from the prior-year second quarter. Renewal written price increases in the quarter averaged 5 percent in auto and 8 percent in homeowners, compared with 5 percent and 7 percent, respectively, during last year’s second quarter. This segment’s combined ratio for the quarter was 106.3, compared to 101.0 one year ago.
In P&C Other Operations segment, underwriting loss increased to $247 million compared with a loss of $148 million a year ago. The second quarter 2014 results included unfavorable PYD of $240 million, pre-tax, while last year’s second quarter had unfavorable PYD of $141 million, pre-tax. The company said this increase in unfavorable PYD was due to the impact of the annual A&E reserve review.
Looking at the unfavorable PYD, asbestos PYD rose to $212 million, before tax, in the latest quarter, compared with $130 million, before tax, in the prior-year second quarter. The Hartford said this increase in estimated PYD reflects a higher than previously estimated number of mesothelioma claim filings and an increase in costs associated with asbestos litigation. The company said it also experienced unfavorable development on certain assumed reinsurance accounts. Meanwhile, environmental PYD increased to $27 million, pre-tax, in the second quarter, compared with $10 million, pre-tax, in the prior-year second quarter, due to higher estimates for certain individual account exposures from unfavorable litigation results and increased clean up and expense costs.
In the Group Benefits segment, core earnings rose to $52 million, up 41 percent over the prior-year second quarter. Fully insured premiums declined 1 percent from second quarter 2013 when adjusted for the planned reduction of premiums from a third party marketing relationship in the Association-Financial Institutions (FI) block of business. The Mutual Funds segment’s earnings rose to $21 million for the quarter, up 5 percent from last year.
CEO Christopher J. Swift, who took the top post on July 1, succeeding Liam McGee, said the company will continue to emphasize profitable growth in P&C, Group Benefits and Mutual Funds and improved operating effectiveness and efficiency.
“Although asbestos and environmental prior year development and elevated weather losses impacted The Hartford’s second quarter results, the underlying business trends reflect the continued improvement in our operating fundamentals,” added The Hartford’s President Doug Elliot.
“The P&C business delivered 3 percent written premium growth and both the P&C and Group Benefits businesses delivered continued underlying margin improvement,” Elliot said, “and we are pleased that Standard Commercial pricing remains strong and ahead of loss cost trends.”
Was this article valuable?
Here are more articles you may enjoy.