Insurance group The Hartford has reported a 31 percent decrease in its first quarter 2016 net income, down to $323 million, compared to $467 million in the first quarter of 2015.
First quarter 2016 net income included net realised capital losses of $96 million, after-tax and deferred acquisition costs (DAC), compared with net realised capital gains of $2 million, after-tax and DAC, in first quarter 2015, primarily due to first quarter 2016 net losses on sales of securities and losses on the variable annuity (VA) hedge programme and other derivatives.
Losses were also mostly due to volatile capital market conditions during the quarter.
The firm’s written premiums stayed stable during the quarter, at $1.7 billion, only a 0.2 percent increase from the same time period in 2015.
The Hartford’s combined ratio for the first quarter of the year fared well at 91.1 percent, compared with 95.9 percent in the first quarter of 2015.
Its underwriting gain was also up 123 percent to $145 million for the first quarter of the year, compared with $65 million for same period of 2015. New business premiums was also up 4 percent in the quarter to $146 million, however, The Hartford’s net investment income was down 19 percent in the first quarter of the year to $209 million, compared with $257 million in the first three months of 2015.
First quarter 2016 core earnings in commercial lines was $249 million, an increase of $15 million, or 6 percent, from first quarter 2015 due to improved underwriting results that were partially offset by lower net investment income on legal and professional insurance services (L&P).
Commercial lines underwriting results were a gain of $145 million, before tax, in first quarter 2016 for a 91.1 combined ratio compared with a first quarter 2015 underwriting gain of $65 million, before tax, for a 95.9 combined ratio. The increase in underwriting gain reflected higher favourable prior year development (PYD), improved current accident year results and lower catastrophe losses. Excluding catastrophes and PYD, first quarter 2016 underwriting results improved by $48 million, before tax, compared with first quarter 2015 due to lower property losses and improved workers' compensation results.
The firm’s group benefits business posted an 8 percent decrease in core earnings to $48 million in the first quarter of 2016, compared with core earnings of $52 million in the same period of 2015.
Christopher Swift, The Hartford’s chairman and chief executive officer, said: “The Hartford’s commercial lines and group benefits businesses delivered strong underwriting results in the first quarter. However, core earnings declined 15 percent due to a decrease in total net investment income and personal lines results that were below expectations. Although homeowners improved, personal automobile loss trends continued to be challenging."
Doug Elliot, The Hartford's president, added: "Commercial lines and group benefits results reflected disciplined pricing and underwriting execution in a difficult market. Better underwriting results for small commercial, middle market and specialty commercial resulted in a 2.8 point improvement in the underlying commercial lines combined ratio.
“In group benefits, the twelve-month core earnings margin was 5.5 percent and premium grew slightly. However, in personal lines, automobile severity and frequency trends negatively impacted our profitability, including adverse prior accident year development. We have multiple initiatives currently underway to aggressively address the profitability of this line, including pricing, underwriting and agency actions.”
The Hartford, First Quarter 2016 Results, Christopher Swift, Doug Elliot, Insurance, North America