P/C-Focused Hartford Sees Profit Rise 22% in Q4

By | February 10, 2015

Hartford Financial Services Group Inc., the insurer that sold life units to focus on property/casualty coverage, said fourth-quarter profit rose 22 percent as sales climbed at its main unit and margins improved.

Net income advanced to $382 million, or 86 cents a share, from $314 million, or 65 cents, a year earlier, Hartford, said in a statement Monday. Operating profit, which excludes some investment results, was 96 cents a share, beating by about 2 cents the average estimate in a Bloomberg survey of 15 analysts.

Hartford has divested life insurance units and is investing in coverage for homes, cars and businesses. Chief Executive Officer Chris Swift and his predecessor Liam McGee have worked to simplify the company, freeing up funds that they are using to repurchase shares and pay down debt.

“Hartford is still progressing through what is a remarkably positive story,” Vincent DeAugustino, an analyst with Keefe, Bruyette & Woods Inc., said in an interview prior to the results. “Part of that story is going to be a continuing capital deployment.”

The insurer spent 93.8 cents on claims and expenses for every dollar it took in at the property-casualty business in the fourth quarter, compared with paying 97.5 cents a year earlier. Policy sales at the business rose 5.2 percent to $2.47 billion.

Investment Portfolio

Hartford said core earnings, which exclude some investment results, will probably be $1.55 billion to $1.65 billion this year, compared with the average estimate of about $1.57 billion in a Bloomberg survey of analysts.

The yield on the property/casualty investment portfolio will fall to 3.9 percent in 2015 from 4.2 percent last year, Hartford said. Chubb Corp., the insurer of high-end homes and corporate boards, last week forecast 2015 profit that fell short of analysts’ expectations as the company projected a decline in investment income.

“With yields down a lot, there’s greater risk,” Robert Glasspiegel, an analyst with Janney Montgomery Scott LLC, said in an interview before Hartford’s results. The company’s fourth- quarter investment income fell 7.3 percent to $752 million.

The insurer slipped 8 cents to $39.48 in extended trading at 4:34 p.m. in New York. Hartford has dropped 5.1 percent from Dec. 31 to today’s close after rallying 15 percent last year and 61 percent in 2013. Results were announced after the close of regular trading.

Share Repurchases

Book value, a measure of assets minus liabilities, climbed to $42.84 per share on Dec. 31 from $42.23 three months earlier. Hartford spent $300 million to buy back shares in the fourth quarter, and $1.8 billion for the full year. The company said in July that it would $2.8 billion worth of stock in 2014 and 2015.

Swift, who was promoted to CEO in the middle of last year, said in a Jan. 13 interview that he would spend capital to expand P&C operations across the U.S. and improve the company’s technology.

Swift took on the additional role of chairman last month, a transition that occurred earlier than the insurer had previously planned. McGee, who repaid the insurer’s bailout, stepped down as CEO and chairman after a medical procedure related to a brain tumor.

For the full year, net income rose to $798 million, or $1.73 a share, from $176 million, or 36 cents, in 2013.

–With assistance from Jing Cao in New York.

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