The Hartford’s 2011 fourth-quarter net income plummeted 79 percent to $127 million on above normal catastrophe and non-cat losses, low interest rates and volatility in the capital markets.
Net income for the year fell 61 percent to $662 million, and the company’s grim earnings report has once again raised the issue of splitting apart the company’s P&C and life operations.
Liam E. McGee, president and chief executive officer, says the property and casualty commercial market saw firming “across the board,” with a 7 percent increase in middle markets.
The acceleration of rate increases during the last quarter of 2011 “exceeded loss costs for most lines,” McGee says during a conference call.
The company’s results in its commercial markets segment was hurt by higher workers’ compensation loss costs, which drove up the combined ratio in the segment to 101.5 (excluding catastrophes and prior-year development), Hartford says.
Income in the fourth quarter was reduced by net prior-year reserve strengthening of $64 million in commercial markets, consumer markets and other operations. Hartford upped reserves in the workers’ compensation line of business for the 2010 accident year.
Christopher J. Swift, chief financial officer, says the company’s adjusted reserve estimates for 2010 and 2011 are holding up.
Hartford also strengthened current accident-year reserves by $57 million, it says.
Results were more favorable in the company’s consumer markets segment, which recorded fourth-quarter net income of $85 million compared to $30 million during the same period in 2010. The combined ratio here was 93 from 96.8 in the 2010 fourth quarter.
New business during the fourth quarter in consumer markets grew 21 percent compared to the same time in 2010 due to Hartford’s relationship with AARP.
Much of the talk during the earnings conference call centered on apparent inquiries Hartford has received on the feasibility of splitting its life and P&C companies. Swift says Hartford has been approached with the idea in the past, and “took a fresh look” at it with advisers.