The Hartford reported a big rise in net income for the 2018 first quarter, crediting improved overall underwriting results, lower catastrophe losses, a boost in net investment income and tax reform.
Net income for the quarter came in at $597 million, which compares to $378 million in the 2017 first quarter.
In property/casualty, the insurer’s combined ratio landed at 93.1 for Q1 2018, a 4.3-point improvement over Q1, with better auto results in both commercial and personal lines. In addition, lower catastrophe losses and favorable prior year development contributed to higher underwriting results.
“All of our markets remain competitive,” said The Hartford Chairman and CEO Christopher Swift, adding that in commercial lines, the pricing trend is mostly positive except for workers’ compensation where renewal premium rates are “generally flat to slightly down” but that largely reflects favorable loss experienced of the last several years.
Swift noted that small commercial new business grew 8 percent — the largest bump in new business in the company’s history— and the insurer expects this segment to continue to grow in the wake of momentum from its Maxum acquisition in 2016 and also its recent renewal rights agreement with Foremost Insurance. “This book [Foremost] is comprised of small commercial business segments that we know well and underwrite profitably,” he said, estimating The Hartford will keep about 75 percent of the $200 million book long-term.
In speaking to analysts, Swift stressed that investing in the company “remains the cornerstone” of management’s strategy. He cited continuing investments in technology to make Hartford an easier company to do business with and to provide digital services to customers.
“With our business is achieving returns well above our cost of capital, I want to be clear that we prefer to invest for profitable organic growth. However, we will not compromise our underwriting or pricing standards just to grow the top line. We will remain disciplined,” he said.
However the strategy going forward does not preclude acquisitions, particularly in commercial lines specialties and verticals where it has already recently done what he called “bolt-on” transactions including Maxum excess and surplus, Aetna group and life, and Foremost small business accounts. As he has indicated in the past, he said the insurer is interested in targets with up to $2 billion in premium.
Asked about the effect on tax cuts on workers’ compensation rates in particular, Swift said that expects his own company and others to adjust pricing models for new tax rates over time and to include the right tax rates in rate filings. However, loss costs will have more of an effect on what insurers charge. “I look at the last three to four years of comp experience and I think of how favorable, basically the aggregate environment, has been for comp as a line. And I think that’s the real fuel driving this loss cost trend that is dropping through these filings,” he said.
Additional first quarter reported results include:
- Consolidated net earned premiums came in at more than $3.9 billion versus $3.4 billion in the 2017 first quarter.
- First-quarter consolidated net investment income grew 10 percent over the same period in 2017, hitting $451 million before tax versus $410 million in Q1 2017.
- A reduction in the estimated loss on the sale of Talcot Resolution helped with the Q1 results, The Hartford said.
- Commercial lines net earned premiums grew to $1.7 billion for the quarter versus more than $1.68 billion in the 2017 first quarter.
- Personal lines net earned premiums were $859 million in Q1 2018, down from $934 million over the same period a year ago. The company has been ramping up its personal lines marketing efforts to increase new business, according to Doug Elliot, president.
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