Hartford Mid Year Review: Net Investment Income In Focus

Hartford Financial’s (NYSE:HIG) stock is down over 6% year-to-date (YTD) following weak first and second quarter results. In the six months ending June 30 2016, the company’s core earnings declined 35% year-over-year (y-o-y) to $440 million on the back of weak underwriting results in the property and casualty (P&C) insurance business and a decline in net investment income. This decline in investment income was attributed to lower income from limited partnerships (LPs) and other alternative investments. The table below provides a breakdown of the company’s results so far. 

Investment Income Declines On Lower Yield In LPs

Hartford’s net investment income declined 11% in the first six months to $1.43 billion, owing to a 75% y-o-y decline in income from limited partnerships (LPs) and other alternative investments to $48 million. Going forward, the company will need to drastically improve its yield from LPs and other alternative investments, which declined from 8% in full year 2015 to 3.6% in the first half of 2016.

Interestingly, the company was not impacted much from the persistent low interest rate environment, as government securities are only about 10% of its fixed maturity investments, which contribute over 80% to net investment income.

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