Hartford Financial Services Group Inc. (HIG:US), the insurer that counts billionaire hedge-fund manager John Paulson as its largest investor, posted a second-quarter loss on the cost of retiring investments made by Allianz SE. (ALV)
The net loss of $101 million, or 26 cents a share, compares with profit of $33 million, or 5 cents, a year earlier, according to a statement today from Hartford, which is based in the Connecticut city of the same name. Chief Executive Officer Liam McGee struck a deal in April to pay about $2.4 billion to buy back debt and warrants that were issued to Allianz.
McGee is counting on profit from property and casualty policies as the insurer shrinks life operations. He reached a deal in April to sell an annuities-distribution business and an agreement yesterday for American International Group Inc. to buy Woodbury Financial Services.
“Selling Woodbury is a favorable sign that Hartford is making progress on its divestiture plans,” Meyer Shields, an analyst at Stifel Nicolaus & Co., said in a note today. “Individual life and retirement plans will probably be more difficult to get done,” and those deals may be necessary to push the stock above $20 a share, he wrote.
Hartford climbed 14 cents to $16.46 at 4:58 p.m. in extended trading in New York. The company has gained less than 1 percent this year compared with the 1.5 percent advance in the 24-company KBW Insurance Index. Results were released after the close of regular trading.
Book value, a measure of assets minus liabilities, rose to $45.59 from $43.25 on March 31. Earnings excluding one-time items such as the Allianz-related cost climbed to $119 million from $14 million a year earlier.
Hartford lost half of one cent for every dollar it collected in premiums in its commercial property-casualty business, compared with a loss of 6.2 cents a year earlier. Catastrophe costs declined from the second quarter of last year when tornadoes struck U.S. states including Missouri and Alabama.
Premium revenue declined 4.1 percent to $3.4 billion. McGee said customer retention levels were “acceptable” as the company raised rates for renewing clients by 7 percent in the standard commercial business.
McGee’s predecessor, Ramani Ayer, turned to Allianz, Germany’s largest insurer for capital in 2008, agreeing to pay 10 percent on $1.75 billion of debt as capital markets froze. Hartford said this year it could replace the securities with less expensive debt.
Hartford needs to reach about $24.70 to recoup Paulson’s investment, filings to the U.S. Securities and Exchange Commission and data compiled by Bloomberg in February show. Results were released after the close of regular trading.
Paulson, who controls (HIG:US) about 8.5 percent of Hartford, has said the company should be split to free its property-casualty business from life insurance and the risk associated with annuity liabilities.
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