The Hartford Insurance Group, Inc. · NYSE:HIG
The Hartford Insurance — The Hartford Financial Services Group — Q4 2016 Earnings Presentation
32 slides from The Hartford Insurance's earnings presentation, Feb 2, 2017
Slide 1: Fourth Quarter 2016 Financial Results Presentation
The Hartford Financial Services Group, Inc. February 2, 2017 FOURTH QUARTER 2016 FINANCIAL RESULTS PRESENTATION
Slide 2: Safe harbor statement
Safe harbor statement Certain statements made in this presentation should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These include statements about The Hartford’s future results of operations. We caution investors that these forward-l
Slide 3: Consolidated 4Q16 Results and 2017 Key Business Metrics Outlook
CONSOLIDATED 4Q16 RESULTS AND 2017 KEY BUSINESS METRICS OUTLOOK
Slide 4: 4Q16 key financial highlights
4Q16 key financial highlights ▪ Net loss per diluted share of $0.22, including charge for the reinsurance Earnings agreement covering U.S. A&E1 ▪ Core EPS2,3 of $1.08, up 1% from 4Q15 ▪ BVPS, ex. AOCI2,4, up 3% over Dec. 31, 2015 to $45.24 BVPS and ROE ▪ Twelve month core earnings ROE2,5 excluding T
Slide 5: 4Q16 core EPS of $1.08, up 1% compared with 4Q15
4Q16 core EPS of $1.08, up 1% compared with 4Q15 ▪ Core EPS of $1.08 compared with $1.07 Core Earnings (Losses) By in 4Q15 as the 8% decrease in common Segment 4Q15 4Q16 Change 3 ($ in millions except per diluted share amounts) shares outstanding more than offset the Commercial Lines $289 $277 (4%)
Slide 6: Book value per diluted share, ex. AOCI, of $45.24, up 3%
Book value per diluted share, ex. AOCI, of $45.24, up 3% from Dec. 31, 2015 Book Value Per Diluted Share, ex. AOCI ▪ $45.24 BVPS, ex. AOCI, at Dec. 31, 2016 ◦ Up 3% from Dec. 31, 2015 $45.74 $45.24 $44.74 $44.27 ▪ $44.35 BVPS, including AOCI, at Dec. 31, $43.76 2016 ◦ Up 3% from Dec. 31, 2015 ▪ Incl
Slide 7: 2017 key business metrics outlook
2017 key business metrics outlook 2016 2017 Commercial Lines Combined Ratio ($ in millions) Actual Outlook 92.8 92.5 - 94.5 92.6 93.5 92.7 92.8 0.8 0.4 0.5 Key business metrics: 1.9 3.0 2.3 Commercial Lines combined ratio1,2 92.8 92.5 - 94.5 89.7 - 90.0 89.4 91.7 Personal Lines combined ratio1 104.8
Slide 8: Business Segment 4Q16 Results
BUSINESS SEGMENT 4Q16 RESULTS
Slide 9: P&C underlying combined ratio deteriorated 2.6 points primarily due to personal auto
P&C1 underlying combined ratio deteriorated 2.6 points primarily due to personal auto, partially offset by reduced expenses ▪ P&C combined ratio of 97.2, 5.6 points P&C Combined Ratio higher than 4Q15 reflecting: 112.0 ◦ CAY loss and LAE2 before CATs 10.2 96.5 97.2 91.6 94.7 10.2 up 3.8 points 1.1 4
Slide 10: Commercial Lines: Maintained strong underwriting margins
Commercial Lines: Maintained strong underwriting margins Commercial Lines Combined Ratio ▪ Combined ratio was 91.3, 3.2 points higher than 4Q15, reflecting: 91.1 95.0 93.9 91.3 ◦ Unfavorable PYD up 2.2 points principally 88.1 5.2 1.5 3.9 3.1 due to commercial auto liability 32.5 33.3 32.9 32.2 32.6
Slide 11: Small Commercial: Higher auto and property losses partially offset
Small Commercial: Higher auto and property losses partially offset by improved workers' compensation results ▪ Underlying combined ratio was 86.0, a 0.9 Small Commercial Combined Ratio point deterioration from 4Q15 due to: 92.2 90.5 89.4 5.3 89.0 ◦ Higher auto and property losses 2.7 4.5 85.3 2.2 ◦
Slide 12: Middle Market: Improved underwriting profitability
Middle Market: Improved underwriting profitability ▪ Underlying combined ratio of 88.9 Middle Market Combined Ratio improved 0.1 point compared with 4Q15 99.8 98.3 99.4 due to workers' compensation, offset by 6.3 7.9 6.3 93.3 92.0 higher auto losses 4.3 3.1 ▪ Written premiums up 1% compared with 4Q1
Slide 13: Specialty Commercial: Continued strong underwriting results
Specialty Commercial: Continued strong underwriting results Specialty Commercial Combined Ratio ▪ 4Q16 underlying combined ratio improved 83.9 92.8 76.5 94.0 88.8 3.3 points over 4Q15 to 94.8 due to better 0.3 underwriting results in National Accounts, Financial Products and Bond 98.1 94.3 95.4 93.7
Slide 14: Personal Lines: Core loss due to higher auto bodily injury liability losses
Personal Lines: Core loss due to higher auto bodily injury liability losses partially offset by reduced expenses Core Earnings (Loss) and ▪ Core loss principally due to higher auto liability Underlying Combined Ratio ($ in millions) 101.8 losses and PYD and higher CATs, partially 93.5 94.2 96.1 offs
Slide 15: Personal Lines Auto: Lower underwriting results due to higher current accident year losses
Personal Lines Auto: Lower underwriting results due to higher current accident year losses and adverse PYD ▪ Underlying combined ratio of 113.6, up 10.7 Automobile Underlying Combined Ratio 113.6 points over 4Q15 due to higher auto liability losses partially offset by lower expenses 102.9 102.7 103.
Slide 16: Personal Lines Auto: Profitability improvement initiatives impact new written premium
Personal Lines Auto: Profitability improvement initiatives impact new written premium ▪ Multiple profitability improvement initiatives Agency Auto New Written Premium underway including pricing, underwriting, agency management and expenses (57%) ▪ As a result of profitability improvement initiatives
Slide 17: Personal Lines Auto: Using pricing segmentation to re-price under-performing business
Personal Lines Auto: Using pricing segmentation to re-price under- performing business and retain profitable segments 93.2 - 95.2 1. Policies in force 60 days after renewal effective date divided by policies available to renew 2. Auto policies renewing between January and November 2016 3. [Renewal p
Slide 18: Personal Lines Homeowners: Underlying combined ratio up 2.3 points
Personal Lines Homeowners: Underlying combined ratio up 2.3 points primarily due to large fire losses ▪ 4Q16 homeowners combined ratio of 80.9, Homeowners Underlying Combined Ratio an increase of 4.0 points over 76.9 in 4Q15 79.6 72.4 75.1 74.2 74.7 primarily due to large fire losses and higher CATs
Slide 19: Group Benefits: Core earnings of $59 million, up 48% from 4Q15
Group Benefits: Core earnings of $59 million, up 48% from 4Q15 Core Earnings and Core Earnings Margin ▪ Core earnings of $59 million, a $19 million ($ in millions) $59 increase from 4Q15 $51 $48 $46 ◦ 6.5% core earnings margin up from 4.6% in 4Q15 $40 ▪ 4Q16 loss ratio of 76.7% improved 1.7 points 6
Slide 20: Mutual Funds: Core earnings down primarily due to transaction-related expenses
Mutual Funds: Core earnings down primarily due to transaction- related expenses ▪ Core earnings of $17 million down from $20 Mutual Fund3 Net Flows ($ in millions) million in 4Q15 primarily due to transaction expenses related to the acquisition of Lattice $405 $194 Strategies and the adoption of 10
Slide 21: Talcott Resolution: VA and fixed annuity contract counts declined
Talcott Resolution: VA and fixed annuity contract counts declined 10% and 5%, respectively, since Dec. 31, 2015 ▪ Core earnings of $111 million increased Talcott Resolution Core Earnings ($ in millions) from $83 million in 4Q15, primarily due to $111 $104 higher net investment income from LPs and $9
Slide 22: Investment Portfolio 4Q16 Results
INVESTMENT PORTFOLIO 4Q16 RESULTS
Slide 23: Investment Portfolio: Well-diversified portfolio with strong credit performance
Investment Portfolio: Well-diversified portfolio with strong credit performance ▪ Fixed maturities portfolio weighted Investment Portfolio Composition average credit rating of “A+” as of Dec. Investment by sector (%) Dec. 31, 2015 Dec. 31, 2016 31, 2016, consistent with prior quarter Fixed maturitie
Slide 24: Total investment portfolio annualized yield, excluding LPs, up slightly
Total investment portfolio annualized yield, excluding LPs, up slightly from 4Q15 to 4.2% Total Net Investment Income ▪ Total investment income up 9% over 4Q15 ($ in million) primarily due to a $61 million, before tax, $772* $758* increase in income on LPs $695* $696* $735* $93 $40 $73 $12 ▪ Annuali
Slide 25: P&C portfolio investment income and yield also favorably impacted by LPs
P&C portfolio investment income and yield also favorably impacted by LPs ▪ P&C investment income up 15% from Total Net Investment Income 4Q15 due to a $27 million, before tax, ($ in millions) $305* $310* increase in investment income on LPs $270* $272* $292* $36 $36 ◦ LP income up from $9 million, b
Slide 26: Limited partnership and other alternative investments income up sharply
Limited partnership and other alternative investments income up sharply over 4Q15 ▪ Total LP income of $73 million, before Total Net Investment Income, Before Tax, From LPs ($ in millions) tax, up by $61 million, before tax, over 4Q15 1Q16 2Q16 3Q16 4Q16 4Q15 largely due to improved real estate resu
Slide 27: Appendix
THE HARTFORD
Slide 28: 2016 Talcott Resolution statutory surplus allocation
2016 Talcott Resolution statutory surplus allocation Talcott Resolution Statutory Surplus Allocation As of Dec. 31, 2016 ($ in billions) $4.4 Billion Total Statutory Surplus1 $0.3 55% $0.3 Institutional and Individual Fixed Annuities $2.1 VA 18% $0.7 Other 2 January 2017 dividend $1.0 Second half 20
Slide 29: Stress scenario Talcott Resolution capital margin, after dividends, of $1.4 billion
Stress scenario Talcott Resolution capital margin, after dividends, of $1.4 billion Talcott Resolution Dec. 2018 Base Favorable Stress Projected Capital Margin Scenario Scenario Scenario ($ in billions) Capital margin1 before dividends to holding company $3.5 $3.8 $2.0 Less: 2017 dividends to holdin
Slide 30: VA, investment and interest rate impacts are key drivers of capital margin
VA impacts, investment-related impacts and interest rate impacts are key drivers of capital margin changes from base to stress scenario Talcott Resolution Projected 2018 Capital Margin Favorable Stress ($ in billions) Scenario Scenario Base Scenario $2.9 $2.9 Change in projected 2018 capital margin,
Slide 31: Market assumptions for scenarios used in capital margin projections
Market assumptions for scenarios used in capital margin projections 31 Copyright ©2017 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 32: Catastrophe reinsurance program as of January 2017
Catastrophe reinsurance program as of January 2017 Primary catastrophe treaty reinsurance coverages as of January 1, 2017: ($ in millions) Per Effective for % of layer(s) Coverage occurrence Retention the period reinsurance limit Property losses arising from a single catastrophe event [1],[2] 1/1/20
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