Hartford Financial Services Slips To Loss In Q3 - Update
October 29, 2008
Hartford Financial Services Group, Inc. (HIG), reported a net loss for the third quarter of fiscal 2008, compared to a profit in the previous year, hurt by sharp decline in ongoing operations under Property and Casualty insurance segments. Core losses for the quarter, excluding net realized capital losses, came in below analysts' mean estimates by as much as 12 cents.
The Hartford, Connecticut-based company reported a net loss for the third quarter of $2.6 billion or $8.74 per share, compared to a profit of $851 million, or $2.68 per share in the same quarter last year.
Included in the net loss for the latest quarter were net realized capital losses, after-tax, of $2.2 billion, as compared to $212 million recorded during the same period last year. Besides, third quarter 2008 net loss reflected a $932 million after-tax charge related to the company's revision of its estimates of future gross profits, commonly referred to as a "DAC unlock." Included in the net income for the third quarter of 2007 was $213 million gain related to the deferred acquisition costs or DAC unlock.
Excluding adjustments, core loss for the latest quarter were $422 million or $1.40 per share, compared to core earnings of $1.06 million, or $3.33 per share reported for the same quarter last year.
On average, 13 analysts polled by First Call / Thomson Financial expected the company to report a loss of $1.54 per share for the quarter.
Commenting on the results for the quarter, Ramani Ayer, Chairman and Chief Executive Officer, Hartford Financial said, "This was an extremely difficult quarter for the company. Volatile credit and equity markets and the largest catastrophe in the past three years significantly affected our results."
Total assets under management during the quarter decreased to $384.98 billion from $419.33 billion reported in the same period last year.
Assets under management under the Life Operations segment as at the end of September 2008 decreased by 9% to $333 billion from the same period last year, largely driven by equity market declines. Net loss for the segment including net realized capital losses after tax of $1.3 billion and a $941 million charge related to the DAC unlock, was $1.8 billion, compared to net income of $525 million reported during the corresponding quarter last year. Excluding charges, core loss from Life segment increased to $541 million, compared to core earnings of $682 million reported in the year-ago quarter.
Net loss from ongoing operations from the Property and Casualty segment, including net realized capital losses, was $666 million from $341 million reported in the same period last year. Excluding net realized capital losses, core earnings from the segment declined 61% to $156 million from $405 million reported in the year-ago quarter.
Combined ratio for the ongoing operations under the Property and Casualty segment, excluding catastrophe losses, was 91.8% for the quarter, the company noted.
Personal Lines Insurance written premiums for the quarter were $1.0 billion, down 1% from the prior year. Written premiums for Small Commercial were $652 million for the third quarter, down 2% from a year ago. Premiums written for middle market were $555 million, down 3% from the prior year. Specialty commercial written premiums for the quarter increased 1% to $361 million, from the previous year.
Net loss for the nine-month period, including net realized capital losses and other adjustments, was $1.94 billion or $6.29 per share, compared to net income of $2.35 billion or $7.35 per share reported in the corresponding period last year.
Core earnings for the nine-month period, excluding the net realized capital assets, declined by 60% to $1.07 billion or $3.44 per share from $1.60 billion or $8.33 per share reported in the corresponding period in 2007.
Outlook for 2008
Hartford currently expects 2008 core earnings to be between $4.30 and $4.50 per share. Previously, the company expected core earnings for full year 2008 in the range of $9.20 per share to $9.50 per share.
The stock price of the company rose 3.33% in the regular trading session and closed at $19.86, up $0.64 per share, on a volume of about 7.88 million shares. In extended trading, the stock is up $0.04 or 0.20%, at $19.90.
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