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Hartford Financial Down on Catastrophe Losses, Investment Income

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Missing estimates

Hartford Financial Services Group (HIG) reported its 3Q15 earnings on October 26. With operating income per share of $0.86, the company missed Wall Street analysts’ estimates of $0.99 on higher catastrophe losses in personal lines, adverse prior-year development in commercial lines, and lower net investment income.

Hartford reported 3Q15 net income of $381 million, or $0.90 per diluted share, compared to $388 million, or $0.86 per diluted share, for the third quarter of 2014. The company’s revenue fell by 4.3% to $4.6 billion compared to 4.8 billion in the prior year’s corresponding quarter.

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Christopher Swift, Hartford chairman and CEO, noted in an October 26 press release, “While The Hartford delivered strong underlying performance in Commercial Lines and Group Benefits, our results this quarter reflect headwinds in several areas, resulting in a decrease in core earnings. Lower net investment income, adverse prior year development in Commercial Lines and higher catastrophes and loss costs in Personal Lines were the primary contributors to the decrease from third quarter 2014.”

Insurance and financial services

Hartford provides property and casualty insurance and group life and disability products to individual and business customers in the United States. The company also provides mutual funds to investors. It manages life and annuity products. Hartford conducts business principally in six segments:

  1. Commercial Lines (formerly Property & Casualty Commercial)
  2. Personal Lines (formerly Consumer Markets)
  3. Property & Casualty Other Operations
  4. Group Benefits
  5. Mutual Funds and Talcott Resolution
  6. Corporate category

The company sold its life units to Prudential Financial (PRU) for $615 million in order to focus on the property and casualty business.

Hartford Financial reported total revenue of $18.7 billion in the last fiscal year. Let’s compare this with the company’s peers:

  • Cincinnati Financial Corporation (CINF) – $4.9 billion
  • Markel Corporation (MKL) – $5.1 billion
  • Travelers Companies (TRV) – $27.2 billion

Together, these companies form 1.33% of the iShares Russell Mid-Cap Value ETF (IWS).

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