Key Takeaways From Hartford’s Q4 and Full Year Results

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HIG: Hartford Financial Services Group logo
HIG
Hartford Financial Services Group

Hartford Financial (NYSE:HIG) released its fourth quarter and full year earnings on February 4, with annual revenues rising by 11% to $18.9 billion and core earnings rising by 55% to $1.5 billion. Core earnings is a non-GAAP measure which excludes the effect of one-time activity such as tax reforms or capital gains. In 2018, Hartford’s core earnings benefited from lower corporate tax rate and a solid performance by Commercial Lines and Group Benefits.

Fourth Quarter Synopsis

  • Core earnings decreased by 3% from the fourth quarter last year to $284 million, owing to a 100% increase in catastrophe losses in the Property & Casualty segment. These losses were offset by higher core earnings in Group Benefits, Commercial Lines, and Hartford Funds.
  • The combined ratio for Property & Casualty segment deteriorated from 98.4% in 2017 to 104.8% in 2018, driven by a 6.6% increase in loss ratio. On the other hand, a 1% improvement was observed in the underlying combined ratio from the fourth quarter last year.
  • In the Group Benefits segment, the lowest quarterly loss ratio of 72.6% and the highest quarterly core earnings margin of 8.9% was achieved.

Full Year Synopsis

  • Lower taxes and declining catastrophe losses drove core earnings up by 55% to $1.575 billion. Similar to quarterly results, the upside was aided by Commercial Lines, Group Benefits and Hartford Funds. Personal Lines took a hit with $546 million in catastrophe losses compared to $453 million last year.
  • The full year combined ratio for the Property & Casualty segment improved by 2% to 97.8% this year. This was again aided by Commercial Lines, where a 5% improvement in the combined ratio was observed.
  • There was a 52% increase in earned premiums for Group Benefits, fueled by Aetna’s U.S. group life and disability business, which was acquired by Hartford in 2017. A slight improvement in loss ratio was observed from 76.1% in 2017 to 75.3% in 2018.
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Management’s Outlook for 2019

The company’s management guided for key operational metrics of major business segments. The company expects the combined ratio to improve for Personal Lines by around 7% and deteriorate slightly for Commercial Lines. The Group Benefits segment is expected to see a 7% core earnings margin for 2019.

You can use our interactive dashboard on What to Expect from Hartford in 2019 to observe the impact of key segments on Hartford’s results and valuation.

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