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Press Release: The Hartford Announces Fourth Quarter And Full Year 2020 Financial Results, 2021 Outlook For Select Business Metrics

· 02/04/2021 16:15
-- Charges in the 2019 period, including a $90 million, before tax, loss on extinguishment of debt and a $91 million, before tax, loss on reinsurance related to ceded premium paid for the Navigators adverse development cover (ADC) -- Higher CAY P&C underwriting gain -- An increase in net favorable P&C PYD before deferred gain on retroactive reinsurance-- A change to net realized capital losses from capital gains in 2019 -- A $312 million, before tax, deferred gain on retroactive reinsurance in 2020, primarily driven by adverse A&E reserve development and adverse PYD on Navigators reserves -- Excess mortality on group life claims of $239 million, before tax, primarily caused by direct and indirect impacts of COVID-19 -- Lower net investment income of $1.85 billion, before tax, compared to $1.95 billion in 2019 -- Restructuring costs of $104 million, before tax, in 2020-- $152 million, before tax, of excess mortality in group life, primarily caused by direct and indirect impacts of COVID-19 -- Less favorable P&C prior accident year development (PYD) within core earnings with $31 million, before tax, in fourth quarter 2020, compared to $58 million favorable PYD in fourth quarter 2019. The $31 million of net favorable development in fourth quarter 2020 included a $116 million, before tax, reserve reduction for prior year CAT reserves and a decrease in reserves for workers' compensation and package business, partially offset by a $125 million, before tax, increase in reserves for sexual molestation and abuse claims -- Decrease of $22 million, before tax, in income from the retained investment in Talcott Resolution-- Underlying P&C loss ratio improvement of 3.5 points to 58.3% in fourth quarter 2020 from 61.8% in fourth quarter 2019 -- P&C expense ratio improvement of 3.2 points, to 30.5% in fourth quarter 2020 from 33.7% in fourth quarter 2019 -- Lower P&C CAY CAT losses of $55 million, before tax, in fourth quarter 2020 compared with $115 million in fourth quarter 2019 -- Increase in net investment income to $556 million, before tax, from $503 million in fourth quarter 2019-- Lower current accident year (CAY) losses before CATs and lower operating expenses in P&C -- An increase in limited partnership (LP) income to $152 million, before tax, from $51 million in fourth quarter 2019-- $208 million, before tax, charge for asbestos and environmental (A&E) reserve development due to recording a deferred gain on retroactive reinsurance -- Excess mortality in group life of $152 million, before tax, primarily caused by direct and indirect impacts of COVID-19Three Months Ended Twelve Months Ended ($ in millions except per share Dec 31 Dec 31 Dec 31 Dec 31 data) 2020 2019 Change(1) 2020 2019 Change ------ ------ ---------- ------- ------ ------ Net income available to common stockholders $532 $543 (2)% $1,716 $2,064 (17)% Net income available to common stockholders per diluted share(2) $1.47 $1.49 (1)% $4.76 $5.66 (16)% Core earnings $636 $522 22% $2,086 $2,062 1% Core earnings per diluted share $1.76 $1.43 23% $5.78 $5.65 2% Book value per diluted share $50.39 $43.85 15% Book value per diluted share (ex. AOCI) $47.16 $43.71 8% Net income available to common stockholders' return on equity (ROE)(3) , last 12-months 10.0% 14.4% (4.4) Core earnings ROE(3) , last 12-months 12.7% 13.6% (0.9) ----------------- ------ ------ ---------- ------- ------ ------HARTFORD, Conn.--(BUSINESS WIRE)--February 04, 2021---- Fourth quarter 2020 net income available to common stockholders of $532 million ($1.47 per diluted share) decreased 2% from fourth quarter 2019, and core earnings* of $636 million (core earnings per diluted share* of $1.76) rose 22% from fourth quarter 2019 -- Full year 2020 net income available to common stockholders of $1.7 billion ($4.76 per diluted share) decreased 17% from full year 2019. Full year 2020 core earnings of $2.1 billion ($5.78 per diluted share) increased 1% from full year 2019 -- Net income ROE for the trailing 12-month period ended Dec. 31, 2020, was 10.0% and core earnings ROE* for the same period was 12.7% -- Book value per diluted share was $50.39, compared to $43.85 at Dec. 31, 2019; book value per diluted share excluding accumulated other comprehensive income (AOCI)* rose 8% to $47.16 -- Commercial Lines combined ratio of 91.8 compared with 98.2 in fourth quarter 2019; underlying combined ratio* of 90.7 was 5.2 points better than fourth quarter 2019 with underlying margin improvement across Small Commercial, Middle & Large Commercial and Global Specialty. Commercial Lines included $28 million, before tax, or 1.3 points of COVID-19 losses in the quarter -- Group Benefits net income margin was 3.9% in fourth quarter 2020 compared with 10.5% in the year prior. Core earnings margin* was 3.3% in fourth quarter 2020, compared with 10.6% in the year prior. Group Benefits experienced excess mortality of $152 million, before tax, or 8.1 points of margin impact, in fourth quarter 2020, primarily caused by direct and indirect impacts of COVID-19 -- Capital management actions include a quarterly dividend increase of 8% to $0.35 per common share, payable Apr. 2, 2021 to shareholders of record at the close of business on Mar. 1, 2021, and the previously announced share repurchase authorization of $1.5 billion, effective Jan.1, 2021 through Dec. 31, 2022

The Hartford Announces Fourth Quarter And Full Year 2020 Financial Results, 2021 Outlook For Select Business Metrics

(*) Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures

The Hartford (NYSE: HIG) today announced financial results for the fourth quarter and year ended Dec. 31, 2020.

"We have been through one of the most turbulent years in recent history, which was shaped by the COVID-19 pandemic, the economic shutdown, social unrest and a significant number of catastrophe events. Despite these challenges we delivered strong core earnings of $2.1 billion, or $5.78 per diluted share, and a twelve-month core earnings ROE of 12.7 percent. In the P&C business, underlying margin expansion reflects higher pricing, disciplined underwriting, and operating efficiencies through our Hartford Next initiative. Our investment portfolio performed well with strong partnership returns. Group Benefits results in the fourth quarter were impacted by higher mortality rates in Group life primarily related to COVID-19," said The Hartford's Chairman and CEO Christopher Swift.

The Hartford's President, Doug Elliot, said, "Hartford's P&C business results were strong during 2020 despite the challenges faced by our company and the industry. Small Commercial delivered record new business from our Spectrum package product during the last four months of the year. In Middle & Large Commercial and Global Specialty, significant positive pricing and underwriting discipline has improved underlying results. In Personal Lines we are looking forward to the launch of our new auto and home product during the first half of 2021. Our underwriting execution during this very difficult year, combined with expectations for continued strong pricing will drive margin improvement and set the foundation for growth in 2021."

Swift added, "Our businesses showed strong performance in a challenging year as the benefit of strategic priorities were evident in our results. As we manage through the pandemic, continued execution on our initiatives will generate further improvement in results and enhance value for all of our stakeholders."

CONSOLIDATED RESULTS:

[1] The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as "NM" or not meaningful

[2] Includes dilutive potential common shares; for net income available to common stockholders per diluted share, the numerator is net income less preferred dividends

[3] Return on equity (ROE) is calculated based on last 12-months net income available to common stockholders and core earnings, respectively; for net income ROE, the denominator is stockholders' equity including AOCI; for core earnings ROE, the denominator is stockholders' equity excluding AOCI

Fourth quarter 2020 net income available to common stockholders was $532 million, or $1.47 per diluted share, down 2% from fourth quarter 2019 due to:

Partially offset by:

Fourth quarter core earnings of $636 million, or $1.76 per diluted share, rose 22% from fourth quarter 2019. The increase was primarily due to:

Partially offset by:

Net investment income of $556 million, before tax, increased $53 million compared with the prior year period, primarily driven by an increase in LP income to $152 million, before tax, from $51 million in fourth quarter 2019, partially offset by lower reinvestment rates.

Full year 2020 net income available to common stockholders of $1.7 billion, or $4.76 per diluted share, decreased 17% and 16%, respectively, from full year 2019 due to:

Partially offset by:

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February 04, 2021 16:15 ET (21:15 GMT)