Yahoo Finance Hartford Financial (HIG) Q1 Earnings Meet, Revenues Rise Y/Y
The Hartford Financial Services Group, Inc. HIG reported first-quarter 2023 adjusted operating earnings of $1.68 per share, which met the Zacks Consensus Estimate. The bottom line inched up 1% year over year.
Operating revenues of HIG amounted to $3,915 million, which advanced 8.6% year over year in the quarter under review. However, the top line missed the consensus mark by 1.1% but surpassed our estimate of $3,908.7 million.
The quarterly results benefited from solid contributions from Commercial Lines and Group Benefits businesses. Improved net investment income, attributable to growing interest rates, also contributed to the upside. However, the upside was partly offset by elevated catastrophe losses, resulting from several winter storms, wind and hail events, coupled with declining fee income and a high expense level.
The Hartford Financial Services Group, Inc. Price, Consensus and EPS Surprise
The Hartford Financial Services Group, Inc. price-consensus-eps-surprise-chart | The Hartford Financial Services Group, Inc. Quote
Q1 Operations
Net earned premiums rose 8.9% year over year to $5,063 million in the first quarter. The reported figure surpassed the Zacks Consensus Estimate of $5,049 million and our estimate of $5,024.8 million.
The net investment income of Hartford Financial was $515 million, up 1% year over year on the back of increased yields on fixed-income securities. However, the metric lagged the consensus mark of $525 million but beat our estimate of $510.6 million. Net investment income registered year-over-year increases across the Commercial Lines, Personal Lines, Hartford Funds and Corporate segments.
Total benefits and expenses escalated 8.3% year over year to $5,257 million in the quarter under review, which stood higher than our estimate of $5,183.1 million.
The pretax income of HIG totaled $653 million, which climbed 20.7% year over year and beat our estimate of $625.3 million.
Segmental Update
P&C
Commercial Lines
Revenues of the segment grew 13.2% year over year to $3,095 million in the first quarter but lagged the Zacks Consensus Estimate of $3,099 million. Core earnings of $436 million declined 4% year over year due to higher catastrophe losses, a decrease in favorable prior accident year development within core earnings and a modest uptick in the workers' compensation loss ratio.
The underlying combined ratio deteriorated 20 basis points (bps) year over year to 88.5% due to an elevated underlying loss and loss adjustment expense ratio.
Personal Lines
Revenues were recorded at $803 million in the segment, which improved 4.4% year over year and came higher than the consensus mark of $785 million. The segment reported core breakeven earnings in the quarter under review, which compared unfavorably with the prior-year quarter’s core earnings of $84 million. The metric suffered a blow due to the increased severity of auto liability and physical damage.
The underlying combined ratio of 97% deteriorated 850 bps year over year.
P&C Other Ops
The segment reported revenues of $13 million, which rose 8.3% year over year but missed the Zacks Consensus Estimate of $16 million.
Group Benefits
The segment’s revenues of $1,724 million advanced 8% year over year in the first quarter and surpassed the consensus mark of $1,694 million. Core earnings of $90 million increased 15-fold year over year on the back of growing fully insured ongoing premiums and improved group life and disability loss ratio.
The loss ratio improved 680 bps year over year to 75.2%, thanks to a reduced mortality level, favorable long-term disability incidence and expense savings stemming from the Hartford Next initiative.
Hartford Funds
Revenues in the segment amounted to $249 million, which dropped 10.8% year over year in the quarter under review and lagged the Zacks Consensus Estimate of $253 million. Core earnings plunged 26% year over year to $37 million, which lagged our estimate of $39.5 million. The decline in fee income as a result of reduced daily average assets under management (AUM) gave a blow to the metric.
The daily average AUM of the segment was $127.1 billion, which decreased 15% year over year due to lower market values and net outflows in the trailing 12 months.
Corporate
The segment’s revenues of $26 million in the first quarter increased 26-fold year over year and beat the Zacks Consensus Estimate of $23.3 million. The segment reported a net loss of $24 million, narrower than the prior-year quarter’s loss of $59 million. A narrowed loss resulted from reduced interest expenses and improved net investment income.
Financial Update (as of Mar 31, 2023)
Hartford Financial exited the first quarter with cash of $152 million, which plunged 33.6% from the 2022-end level. Total investments of $53.7 billion increased 2.1% from the figure at 2022 end.
Total assets amounted to $74.2 billion, up 1.7% from the figure as of Dec 31, 2022.
Debt moved up marginally from the 2022-end level to $4,358 million.
Total stockholders’ equity of $14,340 million rose 4.9% from the figure at 2022 end.
Book value per share fell 4% year over year to $44.27.
Core earnings’ return on equity during the trailing 12 months deteriorated 50 bps year over year to 14.3% at the first-quarter end.
Capital-Deployment Update
Hartford Financial returned $484 million to shareholders, which included $350 million in share buybacks and $134 million in common dividend. HIG had a leftover buyback capacity of $2.4 billion, pursuant to its $3-billion share repurchase program, as of Mar 31, 2023.
Outlook
From the Hartford Next program, management expects cumulative savings of $625 million in 2023.
Zacks Rank
Hartford Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Some Other Insurers
Of the other insurance industry players that have reported first-quarter 2023 results so far, the bottom-line results of Chubb Limited CB, Arch Capital Group Ltd. ACGL and AXIS Capital Holdings Limited AXS beat the Zacks Consensus Estimate.
Chubb reported first-quarter 2023 core operating income of $4.41 per share, which outpaced the Zacks Consensus Estimate by 0.9%. The bottom line improved 15.1% from the year-ago quarter. Net premiums written of CB improved 16.6% year over year to $10.7 billion in the quarter. Net investment income was $1.11 billion, up 34.7%. The figure was higher than our estimate of $957.3 million. P&C underwriting income was $1.21 billion, down 5.5% from the year-ago quarter.
Arch Capital’s first-quarter 2023 operating income of $1.73 per share surpassed the Zacks Consensus Estimate by 14.6%. Earnings also surpassed our estimate of $1.42. The bottom line increased 57.3% year over year. ACGL’s operating revenues of $3.1 billion rose 41.1% year over year. It beat the Zacks Consensus Estimate by 8.7% and surpassed our estimate of $2.9 billion. Net premiums written climbed 30% year over year to $3.4 billion. Net investment income increased 9.9% year over year to $199 million and beat our estimate of $81 million. Underwriting income increased 24.5% year over year to $570 million.
AXIS Capital posted first-quarter 2023 operating income of $2.33 per share, beating the Zacks Consensus Estimate by 23.2%. The bottom line increased 11.5% year over year. Total operating revenues of $1.3 billion missed the Zacks Consensus Estimate by 6.7%. The top line however rose 0.6% year over year on higher net investment income. The net investment income of AXS increased 47.2% year over year to $134 million. Underwriting income of $139.4 million increased 0.4% year over year.
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