The Hartford Financial Services Group, Inc. HIG reported second-quarter 2016 operating earnings of 31 cents per share, which missed the Zacks Consensus Estimate by roughly 60% and also plunged 66% year over year.
The underperformance stemmed due to the weakness in Personal Lines automobile and P&C Other Operations along with shut down of asbestos and poor performance of environmental (A&E) lines. However, underlying margins remained strong in Commercial Lines and Group Benefits.
Including extraordinary items, The Hartford reported net income of 54 cents per share, down 44% year over year.
Total revenue of The Hartford came in at $4.7 billion, down 0.17% year over year. The downside can be attributed mainly to lower premiums earned, fee income and less net investment income.
Segment Results
Property & Casualty (P&C): This segment’s core earnings were $15 million, down 92% from $193 million in the year-ago quarter. The P&C segment reported net income of $33 million in the second quarter, down 82% from $189 million in the prior-year period.
After tax, P&C underwriting losses were wider by $159 million from the year-ago quarter largely due to higher unfavorable PYD for the Personal Lines automobile. Shut down of asbestos and poor performance of environmental (A&E) lines, higher catastrophe losses and lower current accident year also contributed significantly to this loss.
P&C written premiums inched up 1.4% from the year-ago quarter to $2.6 billion on the back of growth in Commercial Lines and Personal Lines.
Investment income of $226 million decreased 5.4% year over year, while other revenues improved 15% from the year-ago quarter to $23 million.
Group Benefits: This segment of The Hartford generated core earnings of $46 million, down 19% year over year. The decline was attributable to lower net investment income and increased losses, partially offset by decreased expenses. Net income came in at $55 million, down 1.8% from $56 million in the prior-year quarter.
Group Benefits’ fully-insured ongoing premiums inched up 1% to $790 million. Loss ratio deteriorated 90 basis points year over year to 78.5% owing to the rise in group life loss ratio.
Mutual Funds: Core earnings at The Hartford’s Mutual Funds segment were $20 million, down 9.1% year over year. This was due to a decline in fees on account of lower average Assets Under Management (AUM) than the prior-year quarter. Net income in the quarter declined 9.1% year over year to $20 million. As of Jun 30, 2016, total AUM came in at $90.9 billion compared with $95.8 billion at the end of second-quarter 2015, primarily due to the steady runoff of Talcott AUM. The net flows of Mutual Fund decreased mainly due to higher redemption.