Hartford Financial Services Group Inc. (HIG:US), the insurer focusing on property-casualty coverage, posted a profit in the fourth quarter as catastrophe costs fell.
Net income (HIG:US) was $314 million, or 65 cents a share, compared with a loss of $46 million, or 13 cents, a year earlier, the Hartford, Connecticut-based company said today in a statement. Operating profit, which excludes some investment results, was 94 cents a share, beating by 4 cents the average estimate (HIG:US) of analysts surveyed by Bloomberg.
Chief Executive Officer Liam McGee, 59, has divested (HIG:US) a life insurer and a broker-dealer to concentrate on coverage for businesses, homes and autos. He’s used hedges in Japan and a deal with Warren Buffett’s Berkshire Hathaway Inc. to limit risks on retirement contracts sold in prior periods.
“The Japan hedging is by far the biggest risk-management action that they’ve taken,” Vincent DeAugustino, an analyst at Keefe, Bruyette & Woods, said in an interview before results were announced. “Going forward, it’s, to a large degree, going to be the commercial lines business and the personal lines business,” that generate profits.
Hartford advanced 1.2 percent to $32.58 at 5:11 p.m. in extended trading. The shares (HIG:US) have risen 28 percent in the past 12 months through the close of regular trading, beating the 15 percent gain of the Standard & Poor’s 500 index.
Book value, a measure of assets (HIG:US) minus liabilities, rose to $39.14 a share on Dec. 31 from $38.87 three months earlier.
Hartford authorized buybacks of as much as $2 billion this year and next, and said it plans to repay $656 million of debt. The company repurchased $225 million of stock in the last three months of 2013, bringing the full-year figure to $633 million including warrants. Hartford said it spent $118 million on buybacks in January.
Full-year profit jumped to $176 million, compared with a loss of $38 million in 2012 when the insurer incurred costs tied to superstorm Sandy and the sale of its individual life unit to Prudential Financial Inc. (PRU:US)
Hartford said core earnings, which exclude some investment results, will probably be $1.65 billion to $1.75 billion this year, compared with the $1.72 billion average estimate of analysts in a Bloomberg survey. The company projected that margins will improve at its commercial and consumer property-casualty units, excluding the costs of catastrophes and prior-year claims.
Hartford spent 95 cents on claims and expenses for every dollar it took in at the property-casualty business in the fourth quarter, down from paying $1.09 a year earlier.
Sales of commercial policies rose 0.6 percent to $1.46 billion as Hartford increased prices 8 percent for standard renewals. Sales of auto-and-home coverage to individuals rose to $886 million from $859 million. Renewal rates increased 5 percent for auto policies and 8 percent for home coverage, Hartford said.
Catastrophe losses shrank to $28 million in the three months ended Dec. 31, from $335 million in 2012’s fourth quarter. U.S. insurers had $12.8 billion in claims from catastrophes in 2013, less than half the average from 2000 to 2012, according to Munich Re, the world’s largest reinsurer.
Hartford completed the $285 million sale of its U.K. annuity unit to Berkshire in December, transferring liabilities to Buffett’s Omaha, Nebraska-based firm. In April, Hartford said it used hedges to end risks tied to currency and equity-market fluctuations on savings products in Japan. Hartford has also sold a U.S. annuity-distribution unit and a retirement-plans business.
The net loss was $15 million at Hartford’s Talcott Resolution unit, which includes results from retirement contracts sold in prior periods. The results were fueled by capital losses tied to hedges on variable annuities sold outside the U.S., Hartford said.
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