The Hartford Insurance Group, Inc. · NYSE:HIG
The Hartford Insurance — The Hartford Financial Services Group — Q1 2014 Earnings Presentation
27 slides from The Hartford Insurance's earnings presentation, Apr 29, 2014
Slide 1: First Quarter 2014 Financial Results Presentation
The Hartford Financial Services Group, Inc. Investor Presentation April 29, 2014 FIRST QUARTER 2014 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-
Slide 3: Liam E. McGee, Chairman, President and CEO
Liam E. McGee Chairman, President and Chief Executive Officer FIRST QUARTER 2014 FINANCIAL RESULTS PRESENTATION
Slide 4: Doug Elliot, President, Commercial Markets
Doug Elliot President, Commercial Markets FIRST QUARTER 2014 FINANCIAL RESULTS PRESENTATION: COMMERCIAL MARKETS
Slide 5: 1Q14 P&C Commercial Underwriting Margins Improved
1Q14 P&C COMMERCIAL UNDERWRITING MARGINS IMPROVED P&C Commercial Combined Ratio • 1Q14 underwriting results improved from 1Q13, with favorable prior year development (PYD) partially offset by higher catastrophes (CATs) 98.4 98.1 − Favorable PYD of 0.5 points, compared with 94.0 93.7 91.2 1 unfavorab
Slide 6: Favorable 1Q14 P&C Commercial Pricing, Retention and Premium Trends
FAVORABLE 1Q14 P&C COMMERCIAL PRICING, RETENTION AND PREMIUM TRENDS P&C Commercial Written Premiums ($ in millions) • Written premiums rose 1% versus 1Q13: − Small Commercial rose 3% $1,669 $1,645 $1,533 $1,567 $1,463 − Middle Market rose 4% $229 $248 $219 $248 − Specialty Commercial decreased 8% du
Slide 7: Small Commercial: 1Q14 Results Driven by Sustained Pricing and Underwriting Initiatives
SMALL COMMERCIAL: 1Q14 RESULTS DRIVEN BY SUSTAINED PRICING AND UNDERWRITING INITIATIVES Small Commercial Written Premiums & Retention ($ in millions) $865 • Written premiums increased 3% over 1Q13 $842 $787 − Renewal written price increases averaged 7% $134 $740 $715 $131 $125 − New business premium
Slide 8: Middle Market: Improved Margins and Product Mix in 1Q14
MIDDLE MARKET: IMPROVED MARGINS AND PRODUCT MIX IN 1Q14 Middle Market Written Premiums & Retention • Middle Market 1Q14 written premiums rose 4% ($ in millions) $546 $518 $555 $566 over 1Q13 $570 $97 $102 $111 − Renewal written price increase of 6% $116 $107 − New business premium rose to $111 milli
Slide 9: Specialty Commercial: 2013 Actions Improve 1Q14 Underwriting Margins
SPECIALTY COMMERCIAL: 2013 ACTIONS IMPROVE 1Q14 UNDERWRITING MARGINS Specialty Commercial Written Premiums ($ in millions) • Written premiums decreased 8% versus $248 $248 $229 1Q13 driven by non-renewal and pricing $219 $101 $93 $186 $58 actions in Programs $85 − Programs declined 43% due to 2013 $
Slide 10: Group Benefits: Improving New Business and Margins in 1Q14
GROUP BENEFITS: IMPROVING NEW BUSINESS AND MARGINS IN 1Q14 Core Earnings & After-Tax Margin2 ($ in millions) $55 • Core earnings of $45 million, up 50% over 1Q13 $45 5.9% − After-tax core earnings margin of 5.1% $37 $36 5.1% versus 3.2% in 1Q13 $30 3.9% • Loss ratio improved 2.9 points from 3.9% 3.2
Slide 11: Andy Napoli, President, Consumer Markets
Andy Napoli President, Consumer Markets FIRST QUARTER 2014 FINANCIAL RESULTS PRESENTATION: CONSUMER MARKETS
Slide 12: Consumer Markets: Top Line Growth Continued in 1Q14
CONSUMER MARKETS: TOP LINE GROWTH CONTINUED IN 1Q14 WITH STRONG PRICING AND RETENTION Core Earnings and Combined Ratio1 ($ in millions) $101 • Written premiums increased 6% due to 93.6 steady policy retention, strong new 91.1 $73 87.4 business growth and sustained renewal 88.9 $68 written pricing in
Slide 13: Christopher J. Swift, EVP and CFO
Christopher J. Swift Executive Vice President and Chief Financial Officer FIRST QUARTER 2014 FINANCIAL RESULTS PRESENTATION: 1Q14 RESULTS AND 2Q14 OUTLOOK
Slide 14: 1Q14 Core Earnings Included Favorable Items Totaling $58 Million
1Q14 CORE EARNINGS INCLUDED FAVORABLE ITEMS TOTALING $58 MILLION, OR $0.12 PER DILUTED SHARE ($ in millions except per diluted share amounts) 1Q13 1Q14 1Q14 core earnings included CAY catastrophes (above) below outlook $36 $- favorable items totaling $58 million ($0.12 per diluted share): Favorabl
Slide 15: 1Q14 Core Earnings Rose 23% to $564 Million
1Q14 CORE EARNINGS ROSE 23% TO $564 MILLION Core Earnings (Loss) By Segment ($ in millions except per diluted share amounts) 1Q13 1Q14 Change 4 • 1Q14 core earnings of $564 P&C Commercial $224 $264 18% million, up 23% Consumer Markets 73 101 38% • Core earnings per diluted share1 P&C Other Operation
Slide 16: 1Q14 Book Value Per Diluted Share, ex-AOCI, of $40.17
1Q14 BOOK VALUE PER DILUTED SHARE, EX-AOCI, OF $40.17, UP 2% FROM DEC. 31, 2013 Book Value Per Diluted Share, ex. AOCI • $40.17 book value per diluted share (BVPS), $39.09 $38.44 $38.91 $39.30 $40.17 excluding accumulated other comprehensive income (AOCI)1, at March 31, 2014 − Up 2% since Dec. 31, 2
Slide 17: Japan Sale Estimated Pro Forma Capital Benefit of $1.4 Billion
JAPAN SALE ESTIMATED MARCH 31, 2014 PRO FORMA CAPITAL BENEFIT OF $1.4 BILLION • Agreement to sell Hartford Life Insurance K.K., our Japan Annuity company, to ORIX Life Insurance March 31, Corporation, a subsidiary of ORIX Corporation (NYSE: Talcott Resolution – Japan 2014 IX), for $895 million − Exp
Slide 18: Further Progress on Group Benefits Legal Entity Separation
FURTHER PROGRESS ON GROUP BENEFITS LEGAL ENTITY SEPARATION Current Ownership Structure • Group Benefits legal separation from Talcott Resolution completed during 1Q14 The Hartford (NYSE:HIG) − Group Benefits to be written exclusively out of Hartford Life & Accident (HLA) − March 31, 2014 statutory s
Slide 19: 2Q14 Core Earnings Outlook of $295 Million to $320 Million, Excluding Japan Annuity
2Q14 CORE EARNINGS OUTLOOK OF $295 MILLION TO $320 MILLION, EXCLUDING JAPAN ANNUITY • 2Q14 outlook of $295 million to $320 2Q13 2Q14 million, or $0.63 to $0.68 per diluted share ($ in millions except per diluted share amounts) Core earnings $324 $350-$375 − 2Q14 core earnings outlook including Japan
Slide 20: First Quarter 2014 Presentation: Appendix
FIRST QUARTER 2014 PRESENTATION: APPENDIX
Slide 21: 1Q14 P&C (Combined) Core Earnings of $386 Million
1Q14 P&C (COMBINED)1 CORE EARNINGS OF $386 MILLION P&C (Combined) Written Premiums • Written premiums increased 3% over 1Q13 ($ in millions) $2,523 $2,501 $2,556 $2,597 − 1% growth in P&C Commercial $2,349 − 6% growth in Consumer Markets $878 $967 $988 $927 $886 • P&C (Combined) core earnings grew 2
Slide 22: Consumer Markets: 1Q14 Auto Written Premiums Up 5%
CONSUMER MARKETS: 1Q14 AUTO WRITTEN PREMIUMS UP 5% Auto Combined Ratio1 102.7 • Auto written premiums increased 5% 96.8 93.3 93.8 91.6 over 1Q13 due to a 20% increase in new business and strong policy and premium retention − Policy retention of 87%, up 1 point − Premium retention of 89%, up 1 point
Slide 23: Consumer Markets: Homeowners Top Line Growth Continues in 1Q14
CONSUMER MARKETS: HOMEOWNERS TOP LINE GROWTH CONTINUES IN 1Q14 Homeowners Combined Ratio1 • Homeowners written premiums up 7% over 1Q13 on renewal pricing increases 77.9 77.9 77.6 77.4 70.6 and continued strong retention − Renewal written price increases rose to 8% from 6% in 1Q13 − Strong policy co
Slide 24: Mutual Funds: Positive Net Flows and Higher Core Earnings
MUTUAL FUNDS: POSITIVE NET FLOWS AND HIGHER CORE EARNINGS Mutual Funds Core Earnings & AUM1 $20 $20 $20 $21 • Core earnings of $21 million, up 5% from $20 $18 million in 1Q13 due to a 13% increase in $65.8 $66.8 $70.9 $73.3 average Mutual Funds4 assets under $63.6 management (AUM), partially offset
Slide 25: Talcott Resolution: 1Q14 Japan VA Policy Count Decreased 11% Sequentially
TALCOTT RESOLUTION: 1Q14 JAPAN VA POLICY COUNT DECREASED 11% SEQUENTIALLY Japan VA Retained NAR3 & Annualized Full Surrender Rates • Policy count decreased 11% during 1Q14 and ($ in billions) 33% since 1Q13, a permanent reduction in risk 34.8% 30.8% 41.5% 38.1% • 1Q14 Japan VA full surrender rate, w
Slide 26: Talcott Resolution: 94% of U.S. VA GMWB Contracts Out-of-the-Money
TALCOTT RESOLUTION: 94% OF U.S. VA GMWB CONTRACTS OUT-OF-THE-MONEY U.S. VA Retained NAR & Annualized Full Surrender Rates1 ($ in billions) • U.S. VA full surrender rates were 12.3% in 1Q14 versus 14.5% in 4Q13 and 1Q13, respectively 17.5% 20.3% 14.5% 12.3% − Enhanced Surrender Value (ESV) program an
Slide 27: 1Q14 GAAP and Statutory VA Impacts
1Q14 GAAP AND STATUTORY VA IMPACTS Consolidated GAAP Basis (before tax and DAC) ($ in millions) 1Q13 2Q13 3Q13 4Q13 1Q14 (Increase) decrease in GMWB net liability1 $404 $163 $378 $185 $31 (Increase) decrease in SOP 03-1 reserves 81 36 28 38 (24) Increase (decrease) in fair value of hedge assets1 (61
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