The Hartford Financial Services Group (NYSE:HIG) reported a net loss of $46 million for the fourth quarter of 2012, affected primarily by one-time losses related to its divestiture of non-core businesses and the increased claims paid off to cover the damage caused by superstorm Sandy, across the east coast of the U.S. Excluding one-time gains and losses, the core earnings reported by the company were $265 million, down 12% from the figure reported for the same period in 2011.
Following the sale of its life insurance business to Prudential Financial (NYSE:PRU), its retirement plans business to Massachusetts Mutual Life Insurance Company (MassMutual), its broker-dealer business, Woodbury Financial Services to AIG (NYSE:AIG) and its individual annuity new business capabilities to Forethought Financial Group, the insurer has announced plans to increase focus on the property and casualty business, to generate higher returns for its shareholders. The company has allocated $500 million to repurchase shares and is also looking to reduce debt by $1 billion, to reduce debt-to-capital ratio to a level below 20%.
Our $22 price estimate for Hartford’s stock is 10% below the current market price. We will shortly update our model to account for the recently released earnings.
- How Did Hartford’s P&C Business Perform In The First Half Of 2016?
- Hartford Mid Year Review: Net Investment Income In Focus
- Hartford’s Q2 Earnings Fall More Than Expected On Underwriting Losses, Investment Income
- What To Expect From Hartford’s Q2 Results
- Why Brexit Shouldn’t Worry Hartford
- Hartford’s Q1 Core Earnings Drop On Investment Income Decline, Lower Underwriting Gains
P&C Hit By Sandy But Remains Strong
Hartford reported a total of $218 million in catastrophe related losses for the fourth quarter largely due to superstorm Sandy, which generated the highest number of claims for a single event in the company’s history. As a result, the EBIT margin for the year remained at 2%, in line with the figure reported in 2011 when hurricane Irene and tropical storm Lee led to high catastrophe related losses. Hartford reported a 9% increase in renewal price for the quarter and 8% for the year, which will help it improve its combined ratio going forward. We expect the margins to improve to about 15% in the coming years.
You can modify the interactive chart below to gauge the effect a change in forecast would have on our price estimate.
The company performed well in the face of adversity, closing 80% of property claims and 90% of auto claims received following the Superstorm. The earned premiums for the quarter were flat compared to 2011, but we expect an increase in Hartford’s share of the market with greater focus on the company’s part. There are approximately 2,500 total P&C companies in the U.S., including AIG and The Travelers Companies, Inc. (NYSE:TRV), with which Hartford competes.