Posted on 14 Jul 2011
Hartford Financial Services Group Inc. in its preliminary results for the second quarter warned that profit fell by about 68% on the increased cost of natural disasters and a charge related to asbestos policies it sold years ago.
Net income of about $24 million declined from $76 million in the same period a year earlier, the company said in a statement Wednesday disclosing preliminary results. The profit decline includes $447 million in catastrophe costs before taxes, nearly double its disaster tally from a year earlier.
The company increased its asbestos reserves by $290 million before taxes, the result of an annual review of its asbestos liabilities. Like other insurers, Hartford stopped offering liability protection against asbestos injuries decades ago, but the long-ago policies are still resulting in new claims.
The preliminary earnings announcement sent Hartford shares down 2.9% to $24.87 in after-market trading.
Hartford joins a roster of insurers including Allstate Corp. and Travelers Cos. in warning of substantial losses stemming from severe weather in the quarter. Allstate earlier Wednesday pegged its second-quarter catastrophe costs at $2.3 billion before taxes.
The spike in claims comes primarily from a series of severe tornadoes that killed hundreds of people and caused extensive damage in Alabama, Missouri and more than a dozen other states. Disaster-modeling company AIR Worldwide estimates a cluster of twisters in late April and another in late May were the two largest tornado losses on record, and caused up to $12.5 billion in insured losses combined.
Hartford said core earnings, which exclude some investment results and discontinued operations, were about $12 million, compared with $92 a year earlier.
Hartford also announced a $73 million after-tax charge on the write-off of costs tied to a discontinued software project and a $52 million tax benefit from the resolution of a decade-old tax matter.
Hartford Chief Executive Liam McGee said in the statement that the results " were affected by severe U.S. catastrophe activity and other items unrelated to the fundamental performance of the underlying business. "The company's underlying insurance operations and investment portfolio "continued to perform well," he said.