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Press Release: The Hartford Announces Fourth -3-

· 02/04/2021 16:15
Three Months Ended Twelve Months Ended ($ in millions, unless otherwise Dec 31 Dec 31 Dec 31 Dec 31 noted) 2020 2019 Change 2020 2019 Change ------ ------ ------ ------- ------ ------ Net investment income, before tax $556 $503 11% $1,846 $1,951 (5)% Annualized investment yield, before tax 4.3% 4.0% 0.3 3.6% 4.1% (0.5) Annualized investment yield, before tax, excluding LPs* 3.2% 3.8% (0.6) 3.3% 3.7% (0.4) Annualized LP yield, before tax 32.3% 11.9% 20.4 12.3% 14.4% (2.1) Annualized investment yield, after tax 3.5% 3.3% 0.2 3.0% 3.4% (0.4) ------------------- ------ ------ ------ ------- ------ ------Three Months Ended Twelve Months Ended ($ in millions, unless otherwise Dec 31 Dec 31 Dec 31 Dec 31 noted) 2020 2019 Change 2020 2019 Change ------ ------ ------ ------- ------ ------ Net loss $(41) $(29) (41)% $(222) $(171) (30)% Core loss $(51) $(39) (31)% $(178) $(126) (41)% Other revenue (loss) $(1) $28 (104)% $53 $96 (45)% Net investment income, before tax $6 $15 (60)% $22 $66 (67)% Interest expense and preferred dividends, before tax $62 $70 (11)% $257 $280 (8)% ------------------- ------ ------ ------ ------- ------ ------Three Months Ended Twelve Months Ended ($ in millions, unless otherwise Dec 31 Dec 31 Dec 31 Dec 31 noted) 2020 2019 Change 2020 2019 Change -------- -------- ------ -------- -------- ------ Net income $51 $41 24% $170 $149 14% Core earnings $46 $40 15% $163 $145 12% Daily average Hartford Funds AUM $130,485 $121,709 7% $120,908 $117,914 3% Mutual Funds and exchange-traded products (ETP) net flows $281 $218 29% $(3,084) $187 NM Total Hartford Funds assets under management (AUM) $139,436 $126,958 10% $139,436 $126,958 10% ---------------- -------- -------- ------ -------- -------- -------- Total group life loss ratio increased 23.9 points, primarily due to excess mortality, primarily caused by direct and indirect impacts of COVID-19 -- Total disability loss ratio of 65.1% increased 3.1 points compared with fourth quarter 2019, with fourth quarter 2020 including $5 million, before tax, or 0.7 points, of short-term disability COVID-19 related losses and less favorable prior period development compared to fourth quarter 2019Three Months Ended Twelve Months Ended ($ in millions, unless otherwise Dec 31 Dec 31 Dec 31 Dec 31 noted) 2020 2019 Change 2020 2019 Change ------ ------ ------ ------- ------ ------ Net income $59 $159 (63)% $383 $536 (29)% Core earnings $49 $161 (70)% $382 $539 (29)% Fully insured ongoing premiums (ex. buyout premiums) $1,317 $1,344 (2)% $5,305 $5,416 (2)% Loss ratio 80.2% 68.8% 11.4 74.5% 72.3% 2.2 Expense ratio 24.6% 25.8% (1.2) 25.2% 24.5% 0.7 Net income margin 3.9% 10.5% (6.6) 6.4% 8.8% (2.4) Core earnings margin 3.3% 10.6% (7.3) 6.4% 8.9% (2.5) --------------------- ------ ------ ------ ------- ------ ------Three Months Ended Twelve Months Ended ($ in millions, unless otherwise Dec 31 Dec 31 Dec 31 Dec 31 noted) 2020 2019 Change 2020 2019 Change ------ ------ ------ ------- ------ ------ Net income $170 $66 158% $718 $318 126% Core earnings $164 $61 169% $722 $285 153% Written premiums $673 $714 (6)% $2,936 $3,131 (6)% Underwriting gain $154 $28 NM $737 $160 NM Underlying underwriting gain $125 $37 NM $508 $258 97% Losses and loss adjustment expense ratio Current accident year before catastrophes 57.8 67.8 (10.0) 56.3 65.3 (9.0) Current accident year catastrophes 1.7 3.3 (1.6) 6.9 4.4 2.5 Prior accident year development (PYD) (5.5) (2.1) (3.4) (14.6) (1.3) (13.3) Expenses 25.8 27.5 (1.7) 26.8 26.7 0.1 Combined ratio 79.8 96.5 (16.7) 75.5 95.0 (19.5) Impact of catastrophes and PYD on combined ratio 3.8 (1.2) 5.0 7.7 (3.1) 10.8 Underlying combined ratio 83.6 95.3 (11.7) 83.1 91.9 (8.8) --------------------- ------ ------ ------ ------- ------ ------

Personal Lines

Net income of $170 million in fourth quarter 2020 was up $104 million from fourth quarter 2019, while core earnings of $164 million rose by $103 million. The improvement was driven by favorable auto frequency, higher net favorable PYD, lower CAY CAT losses, lower non-CAT property losses in homeowners and lower underwriting expenses.

Written premiums in fourth quarter 2020 were $673 million compared to $714 million in fourth quarter 2019 primarily due to a reduction in auto as non-renewed premium exceeded new business. Moderating claim frequency has led to lower renewal written price increases in auto while renewal written price increases in home increased to 8.8% in fourth quarter 2020. The auto underlying combined ratio of 89.6 improved 12.9 points from fourth quarter 2019, primarily due to lower auto frequency resulting from fewer miles driven as well as lower underwriting expenses.

The fourth quarter 2020 homeowners underlying combined ratio of 69.9 improved 9.2 points from fourth quarter 2019, primarily due to lower non-CAT property losses and lower underwriting expenses.

Combined ratio of 79.8 in fourth quarter 2020 was 16.7 points lower than fourth quarter 2019, primarily due to lower CAY loss costs and higher net favorable PYD. Underlying combined ratio of 83.6 was 11.7 points better than fourth quarter 2019, primarily due to lower auto claim frequency from fewer miles driven, lower non-CAT property losses in homeowners, and lower underwriting expenses.

Group Benefits

Net income and core earnings were $59 million and $49 million, respectively, decreasing 63% and 70%, respectively, from fourth quarter 2019, largely driven by $152 million, before tax, of excess mortality in group life, primarily caused by direct and indirect impacts of COVID-19, partially offset by lower insurance operating costs and other expenses.

Fully insured ongoing premiums were down 2%, compared to fourth quarter 2019, primarily due to lower insured exposure on in-force policies.

Loss ratio of 80.2% increased 11.4 points from fourth quarter 2019 with increases in both group life and group disability:

Expense ratio of 24.6% improved 1.2 points from fourth quarter 2019, primarily driven by lower incentive compensation and benefits expenses.

Hartford Funds

Net income of $51 million increased 24% compared with fourth quarter 2019, partly due to an increase in net realized capital gains due to mark-to-market gains on company assets invested in some of the funds. The remainder of the increase in net income and the $6 million increase in core earnings, to $46 million, was primarily due to an increase in fee income and lower administrative expenses, including a reduction in state income taxes and travel expenses. The increase in fee income, which was largely attributable to higher daily average Hartford Funds AUM, was partially offset by a continued shift to lower fee generating funds.

Daily average AUM of $130 billion in fourth quarter 2020 rose 7% from fourth quarter 2019 driven by increases in market values.

Mutual fund and ETP net inflows totaled $281 million in fourth quarter 2020, compared with net inflows of $218 million in fourth quarter 2019.

Corporate

Net loss of $41 million in fourth quarter 2020 compared with a net loss of $29 million in fourth quarter 2019, with the decrease due to lower income from the company's retained equity interest in Talcott Resolution, planned restructuring costs of $17 million, before tax, related to Hartford Next and lower net investment income, partially offset by an increase in net realized capital gains and lower interest expense. Fourth quarter 2020 core loss of $51 million increased $12 million compared with fourth quarter 2019 mostly due to the decrease in income from the company's retained equity interest in Talcott Resolution recognized within other revenues, and a decrease in net investment income, partially offset by a decrease in interest expense.

INVESTMENT INCOME AND PORTFOLIO DATA:

Fourth quarter 2020 consolidated net investment income of $556 million increased $53 million from fourth quarter 2019 as higher income from LPs and other alternative investments was partially offset by lower income from fixed maturities. Income from fixed maturities declined as a result of reinvesting at lower rates and lower yields on variable rate securities, partially offset by higher asset levels.

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