Hartford Financial Services Group, Inc. (RAISED – Free Report) reported adjusted operating profit of $2.02 per share in the fourth quarter of 2021, which beat Zacks’ consensus estimate by 32.9%. Additionally, net income increased 14.8% year over year.
HIG results benefited from slightly higher net investment income, higher assets under management, higher PYD in P&C, lower accident year catastrophe losses outstanding (CAY) in P&C, a decrease in incurred losses in P&C COVID-19 and an improvement in underlying business lines loss and claims expense ratio, etc. It also saw strong contributions from its Commercial, P&C Other Operations, Group Benefits and Hartford Funds segments.
However, the results were partially offset by higher underwriting expenses due to compensation expenses, direct marketing and AARP technology costs, higher contingent and surcharge commissions, and a loss ratio and adjustment expense. higher underlying claims.
Total operating revenue rose 7.4% year over year to $3.7 billion in the fourth quarter. Revenue exceeded the consensus mark by 2.1%.
Net investment income increased 3.1% year-over-year to $573 million in the quarter under review, driven by higher income from limited partnerships and alternative investments (LP ), partly offset by lower reinvestment rates.
Total revenue for the $3 billion segment increased 13.5% year-over-year in the fourth quarter.
Base revenue climbed 40% year-over-year to $622 million. The increase is explained by a slight increase in the favorable net PYD as well as an improvement in the underlying underwriting gain. Other contributing factors include lower CAY CAT losses and higher net investment income.
The underlying combined ratio contracted 180 basis points (bps) year-over-year to 88.9% due to reduced COVID-related losses.
Total revenue fell 3.2% year-over-year to $814 million in the quarter under review.
Core earnings of $70 million plunged 57% year-over-year in the fourth quarter, primarily due to lower underlying underwriting gain as well as lower favorable net PYD as well as CAY CAT losses.
The underlying combined ratio rose 1230 basis points year over year to 95.9% due to higher CAY losses before CATs as well as a higher expense ratio.
P&C Other operations
Revenue of $23 million jumped 35.3% year over year in the quarter under review.
Segment revenue was $1.6 billion, up 8.1% year-over-year.
Base loss was $12 million for the quarter compared to base profit of $49 million a year ago. This was primarily due to higher group disability and loss of life ratios and higher insurance operating costs and other expenses with a reduction in net profit.
The loss ratio increased by 380 basis points year-over-year to 84% due to the increase in group life and disability insurance.
Operating revenue rose 14% year over year to $310 million in the fourth quarter.
Core earnings of $60 million were up 30% year-over-year on the back of a slight increase in Hartford funds’ average daily assets under management.
Average assets under management rose 20% year-over-year to $157 billion in the fourth quarter, driven by rising market values and robust net inflows.
The sector reported operating revenue of $31 million, down 22.5% year-on-year in the quarter under review.
The $41 million base loss was narrower than the $51 million loss in the prior year quarter due to an improvement in net investment income.
Financial update (as of December 31, 2021)
Book value per share increased 2% year over year to $51.36.
Core earnings return on equity remained stable at 12.7% at the end of 2021.
Share buyback and dividend update
In the fourth quarter, HIG rewarded its shareholders with share buybacks and ordinary dividends of $500 million and $120 million, respectively.
Revenue for the year increased 9.1% year over year. HIG’s net profit increased 37% year over year, while base profit increased 4% from the year-ago quarter level. In 2021, HIG delivered strong results driven by P&C margin expansion, driven by strong commercial insurance results as well as partnership returns.
Hartford Financial currently carries a Zacks rank #2 (buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of other insurers
Among insurance industry players that have reported their fourth quarter results so far, the net results of International Society of the Old Republic (OR I – free report), The Travelers Companies, Inc. (TRV – free report) and Brown & Brown, Inc.. (BOYFRIEND – Free Report) beat Zacks’ respective consensus estimate.