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Press Release: The Hartford Announces Fourth -8-

· 02/04/2021 16:15
COMMERCIAL LINES Three Months Twelve Months Ended Ended ------------------- -------------------- Dec 31 Dec 31 Dec 31 Dec 31 2020 2019 2020 2019 ------------------- --------- -------- --------- --------- Net income $ 478 $ 302 $ 856 $1,192 Adjustments to reconcile net income to underwriting gain Net servicing loss (income) (2) 1 (4) (2) Net investment income (363) (298) (1,160) (1,129) Net realized capital losses (gains) (45) (42) 60 (271) Other expense (income) 10 11 35 38 Loss on reinsurance transaction -- -- -- 91 Income tax expense 105 68 176 270 ------------------- -------- ------- -------- ------ Underwriting gain 183 42 (37) 189 Adjustments to reconcile underwriting gain to underlying underwriting gain Current accident year catastrophes 42 89 397 323 Prior accident year development (17) (37) 44 (44) Current accident year change in loss reserves upon acquisition of a business -- -- -- 29 ------------------- -------- ------- -------- ------ Underlying underwriting gain $ 208 $ 94 $ 404 $ 497Three 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 ---------------- --------------- -------------- ----------------- Total net investment income $556 $503 $425 $363 $124 $123 Loss (income) from limited partnerships and other alternative assets (152) (51) (128) (38) (24) (13) ---------------- ------- ------ ------ ------ ------- ------ Net investment income excluding limited partnerships and other alternative investments $404 $452 $297 $325 $100 $110 ---------------- ------- ------ ------ ------ ------- ------ 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 ---------------- -------------- -------------- ------------------ Total net investment income $1,846 $1,951 $1,372 $1,392 $448 $486 Loss (income) from limited partnerships and other alternative assets (222) (232) (186) (186) (36) (46) ---------------- ------ ------ ------ ------ -------- ------ Net investment income excluding limited partnerships and other alternative investments $1,624 $1,719 $1,186 $1,206 $412 $440 ---------------- ------ ------ ------ ------ -------- ------Last Twelve Months Ended -------------------------- Dec 31 2020 Dec 31 2019 -------------------------------------------------- ------------ ------------ Net income (loss) available to common stockholders ROE 10.0% 14.4% -------------------------------------------------- ------------ ------------ Adjustments to reconcile net income (loss) available to common stockholders ROE to core earnings ROE Net realized capital losses (gains) excluded from core earnings, before tax 0.1 (2.7) Restructuring and other costs, before tax 0.6 -- Loss on extinguishment of debt, before tax -- 0.6 Loss on reinsurance transactions, before tax -- 0.6 Integration and transaction costs associated with an acquired business, before tax 0.3 0.6 Changes in loss reserves upon acquisition of a business, before tax -- 0.7 Change in deferred gain on retroactive reinsurance, before tax 1.8 0.1 Income tax expense (benefit) on items not included in core earnings (0.7) -- Impact of AOCI, excluded from core earnings ROE 0.6 (0.7) -------------------------------------------------- ------------ ------------ Core earnings ROE 12.7% 13.6% -------------------------------------------------- ------------ ------------

A reconciliation of consolidated net income (loss) ROE to Consolidated Core earnings ROE is set forth below.

Net investment income, excluding limited partnerships and other alternative investments -This non-GAAP measure is the amount of net investment income, on a Consolidated, P&C or Group Benefits level earned from invested assets, excluding the net investment income related to limited partnerships and other alternative investments. The Company believes that net investment income, excluding limited partnerships and other alternative instruments, 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 instruments. Net investment income is the most directly comparable GAAP measure.

Underlying combined ratio- This non-GAAP financial measure of underwriting results represents the combined ratio before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable GAAP measure. The underlying combined ratio represents the combined ratio for the current accident year, excluding the impact of current accident year catastrophes and current accident year change in loss reserves upon acquisition of a business. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve development. The changes to loss reserves upon acquisition of a business are excluded from underlying combined ratio because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of the combined ratio to the underlying combined ratio for individual reporting segments can be found in this press release under the heading "Business Results" for Commercial Lines" and "Personal Lines"

Underwriting gain (loss) - The Hartford's management evaluates profitability of the Commercial and Personal Lines segments primarily on the basis of underwriting gain or loss. Underwriting gain (loss) is a before tax non-GAAP measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of The Hartford's pricing. Underwriting profitability over time is also greatly influenced by The Hartford's underwriting discipline, as management strives to manage exposure to loss through favorable risk selection and diversification, effective management of claims, use of reinsurance and its ability to manage its expenses. The Hartford believes that the measure underwriting gain (loss) provides investors with a valuable measure of profitability, before tax, derived from underwriting activities, which are managed separately from the Company's investing activities. A reconciliation of net income to underwriting results for the quarterly periods and twelve-months ended Dec. 31, 2020 and 2019, is set forth below.

Underlying underwriting gain (loss) - This non-GAAP measure of underwriting profitability represents underwriting gain (loss) before current accident year catastrophes, PYD and current accident year change in loss reserves upon acquisition of a business. The most directly comparable GAAP measure is net income (loss). The Company believes underlying underwriting gain (loss) is important to understand the Company's periodic earnings because the volatile and unpredictable nature (i.e., the timing and amount) of catastrophes and prior accident year reserve development could obscure underwriting trends. The changes to loss reserves upon acquisition of a business are also excluded from underlying underwriting gain (loss) because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of net income (loss) to underlying underwriting gain (loss) for individual reporting segments for the quarterly periods ended Dec. 31, 2020 and 2019, is set forth below.

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