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The Hartford Reports Fourth Quarter 2012 Financial Results

Posted on 06 Feb 13 by Annie George

The Hartford reported a net loss of $46 million, or $0.13 per diluted share, for the three months ended Dec. 31, 2012 (fourth quarter 2012) compared with net income of $118 million, or $0.23 per diluted share, for the quarter ended Dec. 31, 2011 (fourth quarter 2011). The decline in net income compared to the prior year quarter was due to higher catastrophe losses, largely from Storm Sandy, restructuring and other costs, hedging losses on runoff annuity blocks, and increased net realized capital losses due to the sales of the Retirement Plans and Individual Life businesses.

Fourth quarter 2012 core earnings declined to $265 million, or $0.54 per diluted share, from $301 million, or $0.61per diluted share, in the fourth quarter of 2011. The decrease in fourth quarter 2012 results was due to higher catastrophe losses as a result of Storm Sandy in the company's Property & Casualty (P&C) operations which were offset by improved results in Group Benefits, Corporate and Talcott Resolution, which is comprised of the company's legacy Wealth Management runoff businesses, as well as the Individual Life and Retirement Plans businesses that were sold in January, 2013.

The company also announced that it has reviewed with the Connecticut Insurance Department its capital management plans and that it has received approval from the Department for a $1.2 billion extraordinary dividend from its Connecticut domiciled life insurance companies. In addition, it expects to dissolve the company's Vermont life reinsurance captive and return approximately $300 million of surplus to the holding company. These actions are expected to be completed by the end of the first quarter of 2013.

The company also announced that it expects to reduce debt by approximately $1 billion, including the repayment of the 2013 and 2014 debt maturities totaling $520 million. In addition, The Hartford's Board of Directors has authorized a $500 million share repurchase program, expiring at Dec. 31, 2014.

"The Hartford had a strong finish to 2012 and the fourth quarter concluded a year of strategic accomplishments for the company," said The Hartford's Chairman, President and Chief Executive Officer Liam E. McGee. "Following the successful close of the sales of the life businesses, we enter 2013 with a sharper focus on the P&C, Group Benefits and Mutual Funds businesses. We are also very pleased to share our capital management plans, which will be accretive to shareholders and effectively balance a number of critical goals for The Hartford, including paying down debt, returning capital to shareholders and further strengthening our financial flexibility to take actions to reduce risk in the legacy annuity liabilities."

"In the fourth quarter, pricing continued to improve across our P&C and Group Benefits businesses, with P&C Standard Commercial renewal written price increases of 9%. Group Benefits core earnings were up significantly in the fourth quarter. Consumer Markets achieved a combined ratio improvement of 2.4 points, excluding catastrophes and prior year development. I also want to express my appreciation for the professionalism and dedication demonstrated by my Hartford colleagues in response to Storm Sandy," added McGee.

The company also reported net income for the year ended Dec. 31, 2012 of $350 million, or $0.66 per diluted share, compared with 2011 net income of $712 million, or $1.40 per diluted share. The decline in net income was largely due to the second quarter $587 million loss on extinguishment of debt incurred as a result of the debt refinancing and increases in 2012 for net realized capital losses due to hedging of the company's runoff annuity blocks and for restructuring and other costs associated with the sales of the Retirement Plans, Individual Life and other businesses.