The Hartford Insurance Group, Inc. · NYSE:HIG
The Hartford Insurance — The Hartford Financial Services Group — Q4 2015 Earnings Presentation
24 slides from The Hartford Insurance's earnings presentation, Feb 4, 2016
Slide 1: Fourth Quarter 2015 Financial Results Presentation
The Hartford Financial Services Group, Inc. February 4, 2016 FOURTH QUARTER 2015 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: 4Q15 key financial highlights
4Q15 key financial highlights ▪ Core EPS1,2 of $1.07, up 11% from 4Q14 principally due to Commercial Lines Core Earnings underwriting results and lower common shares outstanding ▪ BVPS ex-AOCI1,3, up 7% over Dec. 31, 2014 to $43.76 BVPS and ROE ▪ Twelve month core earnings ROE1,4 9.2%, up 0.8 point
Slide 4: 4Q15 core EPS of $1.07 increased by 11% compared with 4Q14
4Q15 core EPS of $1.07 increased by 11% compared with 4Q14 ▪ Core EPS of $1.07 increased by 11% Core Earnings (Losses) By compared with $0.96 in 4Q14 primarily Segment 4Q14 4Q15 ($ in millions except per diluted share amounts) Change 3 due to improved Commercial Lines Commercial Lines $251 $289 15%
Slide 5: P&C core earnings increased 13% to $358 million
P&C1 core earnings increased 13% to $358 million P&C Combined Ratio 102.8 ▪ 4Q15 P&C core earnings of $358 million 93.8 94.9 97.3 91.6 13.9 increased by $42 million compared with 1.8 3.2 4.3 1.1 31.0 30.7 30.8 4Q14 due to improved Commercial Lines 30.1 30.1 underwriting results, partially offset by:
Slide 6: Commercial Lines: CAY underwriting margins improved in 4Q15
Commercial Lines: CAY underwriting margins improved in 4Q15 Commercial Lines Combined Ratio ▪ 4Q15 combined ratio of 88.1, 4.3 points better than 4Q14, primarily due to improved CAY 92.4 95.9 92.2 94.5 88.1 3.6 underwriting results and favorable PYD 1.2 3.9 3.5 ◦ PYD was a favorable 1.0 point versus
Slide 7: Small Commercial: Strong underwriting and top-line results
Small Commercial: Strong underwriting and top-line results Small Commercial Combined Ratio ▪ Small Commercial underwriting margins remained very strong in 4Q15 86.1 93.9 89.2 88.0 85.3 4.3 ◦ 4Q15 combined ratio of 85.3, a 0.8 point 4.1 1.2 0.2 improvement over 4Q14 due to improved CAY loss and LAE a
Slide 8: Middle Market: Continued strong profitability
Middle Market: Continued strong profitability ▪ Middle Market underwriting margins Middle Market Combined Ratio 102.5 98.9 continued to improve 97.8 94.5 8.7 93.3 3.1 5.2 ◦ 4Q15 combined ratio of 93.3, a 4.5 point 5.2 4.3 improvement over 4Q14 largely due to favorable CAY results ▪ CAY combined rati
Slide 9: Specialty Commercial: Continued strong underwriting results
Specialty Commercial: Continued strong underwriting results Specialty Commercial Combined Ratio ▪ Specialty Commercial underwriting margins 101.4 100.4 94.5 81.5 83.9 were strong and improved from 4Q14 2.3 1.6 ◦ 4Q15 combined ratio of 83.9, a 17.5 point improvement over 4Q14, primarily due to favora
Slide 10: Personal Lines: Margins impacted by higher automobile and homeowners losses
Personal Lines: Margins impacted by higher automobile and homeowners losses Core Earnings and Combined Ratio1 ▪ 4Q15 combined ratio of 95.3 increased 1.5 ($ in millions) points over 4Q14 primarily due to higher CAT $75 losses, increased frequency in automobile and $65 higher non-weather related loss
Slide 11: Personal Lines: Automobile underwriting margins impacted by higher frequency
Personal Lines: Automobile underwriting margins impacted by higher frequency ▪ 4Q15 automobile CAY combined ratio Automobile Combined Ratio1 before CATs of 102.9, up 0.5 point over 102.4 101.6 102.9 94.6 96.6 4Q14 due to higher physical damage and liability frequency, although largely consistent wit
Slide 12: Personal Lines: Homeowners CAY combined ratio, before CATs, increased 4.3 points
Personal Lines: Homeowners CAY combined ratio, before CATs, increased 4.3 points ▪ 4Q15 homeowners CAY combined ratio Homeowners Combined Ratio1 before CATs of 72.4 increased 4.3 points 79.7 82.4 72.6 72.4 compared with 4Q14 68.1 ◦ Increase primarily due to a lower level of non-weather related losse
Slide 13: Group Benefits: Core earnings margin of 4.6% versus 5.3% in 4Q14
Group Benefits: Core earnings margin of 4.6% versus 5.3% in 4Q14 principally due to less favorable group life results ▪ Core earnings down 11% over 4Q14 Core Earnings Margin1 ($ in millions) principally due to less favorable group life $56 $52 results $45 $47 ◦ 4.6% core earnings margin down from 5.
Slide 14: Mutual Funds: Solid performance and continued positive net flows
Mutual Funds: Solid performance and continued positive net flows Mutual Fund² Net Flows ▪ Mutual Fund performance remains solid as ($ in millions) 61%, 55% and 58% of funds outperformed peers on a 1-, 3- and 5-year basis1, $529 $405 $250 $307 respectively $(349) ▪ Fourth consecutive quarter of posit
Slide 15: Talcott Resolution: VA and fixed annuity contract counts declined
Talcott Resolution: VA and fixed annuity contract counts declined 11% and 8%, respectively, since Dec. 31, 2014 Talcott Resolution Core Earnings ▪ Core earnings of $83 million declined from ($ in millions) $98 million in 4Q14, primarily due to: $171 ◦ Lower net investment income, including lower $37
Slide 16: High quality and well-diversified investment portfolio
High quality and well-diversified investment portfolio ▪ Fixed maturities portfolio weighted Investment Portfolio Composition average credit rating of “A+” as of Dec. Investment by sector (%) Dec. 31, 2014 Dec. 31, 2015 31, 2015 Corporate 36% 37% ◦ 5.4% rated below investment grade (BIG) Municipal 1
Slide 17: P&C portfolio investment yield impacted by lower LP returns
P&C portfolio investment yield impacted by lower LP returns ▪ P&C investment income down 4% over Total Net Investment Income ($ in millions) 4Q14 due to lower LP investment income ◦ P&C investment income declined 2%, $327* $307* excluding a $7 million, before tax, decrease $282* $53 $39 $267* $270*
Slide 18: Book value per share, ex-AOCI, of $43.76, up 7% from Dec. 31, 2014
Book value per share, ex-AOCI, of $43.76, up 7% from Dec. 31, 2014 ▪ $43.76 BVPS, ex-AOCI, at Dec. 31, 2015 Book Value Per Diluted Share, ex. AOCI ◦ Up 7% from Dec. 31, 2014 $43.76 $42.99 ◦ Up 2% from Sept. 30, 2015 $42.41 ◦ Including dividends, total value creation of 9% $41.47 $40.71 in 2015 ▪ $42
Slide 19: Appendix
THE HARTFORD
Slide 20: Improved quality of below investment grade exposure in 2015
Improved quality of below investment grade exposure in 2015 Below Investment Grade Exposure ($ in millions) ▪ BIG exposure was $3.2 billion, or 4.4% of Dec. 31, 2014 Dec. 31, 2015 total investments at Dec. 31, 2015, down Amortized Fair Amortized from $3.4 billion at Dec. 31, 2014 Fair Value1 Cost Va
Slide 21: Talcott Resolution annual assumptions update results included in 4Q15
Talcott Resolution annual assumptions update results included in 4Q15 ▪ The annual study of Talcott Resolution Annual Policyholder Assumptions policyholder behavior assumptions was Study Impact on 4Q15 Net Income completed in 4Q15 ($ in millions) ◦ Completed in 3Q14 last year Talcott Resolution ▪ Up
Slide 22: Energy sector exposure in the investment portfolio totaled $2.5 billion
Energy sector exposure in the investment portfolio totaled $2.5 billion at Dec. 31, 2015, down $1.2 billion from Dec. 31, 2014 The company's direct exposure within its investment portfolio to the energy sector totals approximately 3% of total invested assets as of December 31, 2015 and is primarily
Slide 23: Higher-risk emerging market exposure totaled less than $400 million
Higher-risk emerging market exposure totaled less than $400 million at Dec. 31, 2015, down $188 million from Dec. 31, 2014 ▪ Direct exposure to emerging Higher-Risk Emerging Market Exposure2 market issuers totaled $1.1 December 31, 2014 December 31, 2015 billion, or 1.6% of total Change in Amortized
Slide 24: 2015 catastrophe reinsurance program
2015 catastrophe reinsurance program Primary catastrophe treaty reinsurance coverages as of January 1, 2016: Per Effective for % of layer(s) Coverage occurrence Retention the period reinsurance limit Principal property catastrophe program covering property catastrophe losses 1/1/2016 to 90% $850 $35
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