The Hartford (HIG) reported net income of $216 million in second quarter 2016 ended June 30, a decrease of $197 million from second quarter 2015, principally due to lower P&C underwriting results and lower net investment income.
Property and casualty (P&C) underwriting losses deteriorated $159 million, after-tax, compared with second quarter 2015, largely due to higher unfavorable PYD for the personal lines automobile and run-off asbestos and environmental (A&E) lines, higher catastrophe losses and lower current accident year Personal Lines automobile results.
Net investment income declined $40 million, after-tax, compared with second quarter 2015 primarily due to a $35 million, after-tax, decline in investment income from limited partnerships and other alternative investments (LPs). These items, in addition to a $48 million tax benefit in second quarter last year, were the principal drivers of the decrease in core earnings from $389 million in second quarter 2015 to $122 million in second quarter 2016.
Second quarter 2016 net income per diluted share was $0.54, a decrease of 44 percent compared with net income per diluted share of $0.96 in second quarter 2015 due to the decrease in net income slightly offset by fewer shares outstanding. Second quarter 2016 weighted average diluted common shares outstanding declined 7 percent from second quarter 2015 as a result of the company’s equity repurchases over the last year. Second quarter 2016 core earnings per diluted share decreased 66 percent to $0.31 compared with $0.91 in second quarter 2015.
“Although many of our segments continued to generate solid results, the second quarter bottom line was disappointing, principally due to personal lines auto, P&C, other operations, asbestos and environmental,” said The Hartford’s Chairman and CEO Christopher Swift. “While underlying margins remain strong in commercial lines and group benefits, competition is increasingly aggressive and we continue to feel pressure on investment income due to lower interest rates.”
The Hartford’s President Doug Elliot added, “Commercial Lines had a strong quarter as we remain intensely focused on maintaining underwriting discipline. Group Benefits had slightly higher life severity, but we remain pleased with overall margins and results.
In Personal Lines, adverse auto liability claims experience has contributed to approximately 5 points of deterioration in our estimate of underlying 2016 auto margins. As a result, our outlook for the 2016 personal lines combined ratio before catastrophes and prior year development has increased to a range of 93.0 to 94.0.”
Swift concluded, “Looking forward, we expect the environment to remain challenging. Our primary objectives are to maintain margins in commercial lines and group benefits and to improve personal lines results.
We remain confident that we are taking the right approach in this environment, emphasizing underwriting discipline over growth,” Swift added. “With our strong capital generation and solid balance sheet, we have the financial flexibility to invest for the future in order to continue to strengthen our franchise and to create long-term shareholder value.”