Weakness in investment income, personal lines hit Hartford results

Hartford Financial Services Group Inc. saw net income fall in the first quarter of 2016 from a year earlier on lower income from limited partnerships and other alternative investments, as well as “disappointing” results in personal lines, the insurer said Friday.

The company's first-quarter net income declined 30.8% from the 2015 period, to $323 million, the Hartford, Connecticut-based insurer said in a Thursday earnings statement.

It attributed the decrease to overall core earnings which, at $385 million, were down 14.8% from a year earlier on lower total net investment income and unfavorable personal lines results.

During a Friday conference call with analysts, Chairman and CEO Christopher J. Swift said: “We continue to face some of the same headwinds from the second half of 2015. First, personal auto lost cost trends remain challenging … Second, commercial lines performance has been very strong but competition continues to intensify, making it more challenging to grow at acceptable returns. Third, consistent with capital market activity, limited partnership investment income remained low.”

First quarter 2016 net investment income for all lines totaled $272 million, down 16.8% from a year earlier, according to the statement.

However, Mr. Swift said he's “generally pleased with our results this quarter, particularly in commercial lines and group benefits, each of which delivered strong margins.”

Core earnings for commercial lines rose 6.4% on better underwriting results, according to the statement. And written premiums for commercial lines were up 0.2%, to $1.73 billion, in the first quarter.

With a commercial lines underwriting gain of 123.1%, or $145 million before tax, for the quarter, the combined ratio for improved 4.8 points to 91.1% from 95.9%.

“The increase in underwriting gain reflects higher favorable (prior accident year development), improved current accident year results and lower catastrophe losses,” according to the statement. “Excluding catastrophes and (prior accident year development), 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.”

Noting the improved workers compensation margins, Hartford President Doug Elliot said during the call that “loss trends in workers compensation remain favorable and returns are within our target range.” He added that the company released workers compensation reserves across commercial lines.

Hartford in March announced its agreement to purchase the holding company of excess lines insurer Maxum Specialty Insurance Group for $170 million.

During the call, Mr. Swift said that “we are hard at work on our integration plans” and that the “addition will further strengthen our market leadership in small commercial by extending our product capabilities, adding (excess and surplus) talent and helping to improve the customer and agent experience.”

Mr. Swift also noted that the insurer repurchased $350 million in common shares this quarter and plans to complete its buyback program by the end of 2016.