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Press Release: The Hartford Announces Fourth -6-

· 02/04/2021 16:15
-- Certain realized capital gains and losses - Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses that tend to be highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. -- Restructuring and other costs - Costs incurred as part of a restructuring plan are not a recurring operating expense of the business. -- Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before maturity, these losses are not a recurring operating expense of the business. -- Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a business or to reinsure loss reserves, are not a recurring operating expense of the business. -- Integration and transaction costs in connection with an acquired business - As transaction costs are incurred upon acquisition of a business and integration costs are completed within a short period after an acquisition, they do not represent ongoing costs of the business.As of ------------------------ Dec 31 Dec 31 2020 2019 Change ---------------------------------------------- ------- ------- ------ Book value per diluted share $50.39 $43.85 15% Per diluted share impact of AOCI $(3.23) $(0.14) NM ---------------------------------------------- ------- ------- ------ Book value per diluted share (excluding AOCI) $47.16 $43.71 8% ---------------------------------------------- ------- ------- ------Three Months Ended ---------------------------------------------------------------- Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 2020 2019 2020 2019 2020 2019 --------- --------- --------- --------- --------- --------- Consolidated P&C Group Benefits ------------- -------------------- -------------------- -------------------- Annualized investment yield, before tax 4.3% 4.0% 4.4% 4.0% 4.3% 4.3% Impact on annualized investment yield of limited partnerships and other alternative investments, before tax (1.1)% (0.2)% (1.2)% (0.3)% (0.8)% (0.4)% ------------- ----- ----- ----- ----- ----- ----- Annualized investment yield excluding limited partnerships and other alternative investments, before tax 3.2% 3.8% 3.2% 3.7% 3.5% 3.9% ------------- ----- ----- ----- ----- ----- ----- Twelve Months Ended ---------------------------------------------------------------- Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 2020 2019 2020 2019 2020 2019 --------- --------- --------- --------- --------- --------- Consolidated P&C Group Benefits ------------- -------------------- -------------------- -------------------- Annualized investment yield, before tax 3.6% 4.1% 3.7% 4.1% 3.9% 4.2% Impact on annualized investment yield of limited partnerships and other alternative investments, before tax (0.3)% (0.4)% (0.4)% (0.4)% (0.2)% (0.3)% ------------- ----- ----- ----- ----- ----- ----- Annualized investment yield excluding limited partnerships and other alternative investments, before tax 3.3% 3.7% 3.3% 3.7% 3.7% 3.9% ------------- ----- ----- ----- ----- ----- ------------------------ ------- --- ------ ---- ------ ------ ------ -------- ---- Income (loss) from continuing operations, net of tax 1,192 318 61 536 149 (171) 2,085 Net income (loss) 1,192 318 61 536 149 (171) 2,085 Preferred stock dividends -- -- -- -- -- 21 21 ------------------- ------- --- ------ ---- ------ ------ ------ --- -------- ---- Net income (loss) available to common stockholders 1,192 318 61 536 149 (192) 2,064 Adjustments to reconcile net income (loss) available to common stockholders to core earnings (losses) Net realized capital losses (gains), excluded from core earnings, before tax (268) (42) (19) (33) (4) (23) (389) Loss on extinguishment of debt, before tax -- -- -- -- -- 90 90 Change in loss reserves upon acquisition of a business, before tax 97 -- -- -- -- -- 97 Integration and transaction costs, before tax 38 -- -- 36 -- 17 91 Loss on reinsurance transaction, before tax 91 -- -- -- -- -- 91 Change in deferred gain on retroactive reinsurance, before tax 16 -- -- -- -- -- 16 Income tax expense (benefit) 7 9 4 -- -- (18) 2 ------------------- ------- --- ------ ---- ------ ------ ------ -------- ---- Core earnings (losses) 1,173 285 46 539 145 (126) 2,062 ------------------- ------- --- ------ ---- ------ ------ ------ -------- ----

DISCUSSION OF NON-GAAP FINANCIAL MEASURES

The Hartford uses non-GAAP financial measures in this press release to assist investors in analyzing the company's operating performance for the periods presented herein. Because The Hartford's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing The Hartford's non-GAAP financial measures to those of other companies. Definitions and calculations of other financial measures used in this press release can be found below and in The Hartford's Investor Financial Supplement for fourth quarter 2020, which is available on The Hartford's website, https://ir.thehartford.com.

Annualized investment yield, excluding limited partnerships and other alternative investments - This non-GAAP measure is calculated as (a) the annualized net investment income, on a Consolidated, P&C or Group Benefits level, excluding limited partnerships and other alternative investments, divided by (b) the monthly average invested assets at amortized cost, excluding repurchase agreement and securities lending collateral, derivatives book value, and limited partnerships and other alternative investments. The Company believes that annualized investment yield, excluding limited partnerships and other alternative investments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments. Annualized investment yield is the most directly comparable GAAP measure.

Book value per diluted share (excluding AOCI) - This is a non-GAAP per share measure that is calculated by dividing (a) common stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding and dilutive potential common shares. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes that excluding AOCI from the numerator is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per diluted share is the most directly comparable U.S. GAAP measure.

Core earnings - The Hartford uses the non-GAAP measure core earnings as an important measure of the Company's operating performance. The Hartford believes that core earnings provides investors with a valuable measure of the performance of the Company's ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain items. Therefore, the following items are excluded from core earnings:

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