The Hartford Insurance Group, Inc. · NYSE:HIG
The Hartford Insurance — The Hartford Financial Services Group — Q2 2016 Earnings Presentation
23 slides from The Hartford Insurance's earnings presentation, Jul 28, 2016
Slide 1: Second Quarter 2016 Financial Results Presentation
The Hartford Financial Services Group, Inc. July 28, 2016 SECOND QUARTER 2016 FINANCIAL RESULTS PRESENTATION
Slide 2: Safe harbor statement
Safe harbor statement Certain statements made in this presentation should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These include statements about The Hartford’s future results of operations. We caution investors that these forward-l
Slide 3: 2Q16 key financial highlights
2Q16 key financial highlights ▪ Core EPS1,2 of $0.31, down 66% from 2Q15 principally due to unfavorable Core Earnings PYD3 in personal automobile (auto) and A&E4, lower income from LPs5, higher CAT6 losses and lower CAY7personal auto results ▪ BVPS ex-AOCI1,8, up 5% over June 30, 2015 to $44.74 BVPS
Slide 4: 2Q16 core EPS of $0.31, down 66% compared with 2Q15
2Q16 core EPS of $0.31, down 66% compared with 2Q15 ▪ Core EPS of $0.31, compared with $0.91 Core Earnings (Losses) By in 2Q15 due to a 69% decrease in core Segment ($ in millions except per diluted share amounts) 2Q15 2Q16 Change 3 earnings, partially offset by 7% decrease Commercial Lines $264 $22
Slide 5: P&C combined ratio increased 9.2 points primarily due to A&E PYD and Personal Lines automobile losses
P&C1 combined ratio increased 9.2 points primarily due to A&E PYD and Personal Lines automobile losses P&C Combined Ratio 112.0 ▪ P&C combined ratio was up 9.2 points 102.8 10.2 97.3 94.7 including an increase in unfavorable A&E 6.3 7.6 4.3 91.6 4.8 10.2 1.1 PYD of $70 million, or 2.6 points 30.8 30
Slide 6: Annual A&E reserves review results
Annual A&E reserves review results U.S. A&E Net Reserves Liability1 ▪ Asbestos PYD of $197 million, before tax, ($ in millions) in 2016 because aggregate indemnity and 2014 YE 2015 YE 2016 YTD defense costs have not declined as Beginning expected due to greater than expected Reserves $1,984 $1,951 $
Slide 7: Commercial Lines: CAY underwriting margins declined
Commercial Lines: CAY underwriting margins declined Commercial Lines Combined Ratio ▪ Combined ratio before CATs and PYD was 89.8, a 1.4 point increase over 2Q15, 92.2 94.5 91.1 95.0 reflecting: 3.9 3.5 88.1 5.2 1.5 ◦ Higher property losses and underwriting 32.3 33.2 32.5 33.3 32.9 expenses ◦ Partia
Slide 8: Small Commercial: Lower underwriting margins with improved top-line
Small Commercial: Lower underwriting margins with improved top-line ▪ Small Commercial underwriting margins Small Commercial Combined Ratio declined in 2Q16 92.2 89.2 89.4 5.3 ◦ 2Q16 combined ratio of 92.2, a 3.0 point increase 88.0 4.1 85.3 2.7 over 2Q15 principally due to lower CAY results, 1.2 0.
Slide 9: Middle Market: Lower underwriting results with stable top-line
Middle Market: Lower underwriting results with stable top-line ▪ Middle Market margins declined in 2Q16 Middle Market Combined Ratio ◦ 2Q16 combined ratio of 99.8, a 5.3 point 102.5 deterioration over 2Q15 due to higher 98.3 99.8 8.7 94.5 7.9 property losses, including CATs and 93.3 6.3 underwriting
Slide 10: Specialty Commercial: Continued strong underwriting results
Specialty Commercial: Continued strong underwriting results ▪ Specialty Commercial underwriting margins Specialty Commercial Combined Ratio 100.4 81.5 were strong and improved from 2Q15 83.9 76.5 92.8 1.6 ◦ 2Q16 combined ratio of 92.8, a 7.6 point improvement over 2Q15, primarily due to favorable PY
Slide 11: Personal Lines: Higher auto losses resulted in core losses for 2Q16
Personal Lines: Higher auto losses resulted in core losses for 2Q16 Core Earnings (Losses) and Combined Ratio1 ▪ 2Q16 combined ratio of 112.6 deteriorated 13.4 ($ in millions) 95.6 94.2 points over 2Q15 primarily due to higher auto 89.1 93.5 89.7 liability losses in prior and current accident years,
Slide 12: Personal Lines: Lower auto underwriting results due to higher loss cost trends
Personal Lines: Lower auto underwriting results due to higher loss cost trends ▪ 2Q16 auto combined ratio of 117.0, up 18.7 Automobile Combined Ratio1 points principally due to higher auto liability 101.6 102.9 102.7 losses in prior and current accident years 96.6 96.2 ◦ Unfavorable PYD of 10.8 poin
Slide 13: Personal Lines: Homeowners combined ratio before CATs and PYD up 1.6 points
Personal Lines: Homeowners combined ratio before CATs and PYD up 1.6 points primarily due to higher fire losses ▪ 2Q16 homeowners combined ratio of 102.4, Homeowners Combined Ratio1 primarily reflecting higher non-catastrophe, 82.4 72.6 72.4 75.1 74.2 non-weather losses ▪ Combined ratio before CATs
Slide 14: Group Benefits: Core earnings declined from 2Q15
Group Benefits: Core earnings declined from 2Q15 ▪ Core earnings down 18% from 2Q15 due to Core Earnings Margin1 ($ in millions) higher group life severity and lower net $56 investment income $47 $48 $46 ◦ 5.1% core earnings margin down from 6.3% in $40 2Q15 6.3% 5.5% 5.5% 5.1% 4.6% ▪ 2Q16 loss rati
Slide 15: Mutual Funds: Core earnings declined due to lower assets under management
Mutual Funds: Core earnings declined due to lower assets under management ▪ Core earnings declined to $20 million from Mutual Fund3 Net Flows ($ in millions) $22 million in 2Q15 primarily driven by lower fees as a result of lower average assets $307 $405 $250 under management (AUM) $(186) ▪ Performa
Slide 16: Talcott Resolution: VA and fixed annuity contract counts declined
Talcott Resolution: VA and fixed annuity contract counts declined 10% and 7%, respectively, since June 30, 2015 ▪ Core earnings of $91 million declined from Talcott Resolution Core Earnings ($ in millions) $171 million in 2Q15, primarily due to: $171 ◦ Tax benefit of $48 million in 2Q15; $37 ◦ Lower
Slide 17: Investment Portfolio: Well-diversified portfolio with strong credit performance
Investment Portfolio: Well-diversified portfolio with strong credit performance ▪ Fixed maturities portfolio weighted Investment Portfolio Composition average credit rating of “A+” as of Investment by sector (%) Dec. 31, 2015 Jun. 30, 2016 June 30, 2016 Fixed maturities, AFS 1 81% 82% ◦ 5.3% rated b
Slide 18: Total investment portfolio annualized yield, excluding LPs, flat versus 2Q15
Total investment portfolio annualized yield, excluding LPs, flat versus 2Q15 ▪ Total investment income down 8% over 2Q15 Total Net Investment Income ($ in million) primarily due to a $54 million, before tax, $796* decrease in income on LPs 94 $730* $695* $696* $735* ◦ Total investment income, exclud
Slide 19: P&C portfolio investment income and yield also impacted by LPs
P&C portfolio investment income and yield also impacted by LPs ▪ P&C investment income down 5% over Total Net Investment Income 2Q15 due to a $16 million, before tax, ($ in millions) $307* reduction in investment income on LPs $39 $267* $270* $272* $292* ◦ LP income declined from $39 million, before
Slide 20: Below investment grade exposure declined slightly in 2Q16
Below investment grade exposure declined slightly in 2Q16 ▪ BIG exposure was $3.2 billion, or 4.3%, BIG1 Exposure by Credit Quality2 ($ in millions) of total investments at June 30, 2016, with 4.4% at June 30, 2015 and 4.4% at $3,244 $3,196 $3,192 $3,281 $3,234 $242 $205 $175 $191 $225 Mar. 31, 2016
Slide 21: Energy sector investment exposure totaled $2.4 billion at June 30, 2016
Energy sector investment exposure totaled $2.4 billion at June 30, 2016, down $1.4 billion from Dec. 31, 2014 Energy Exposure1 Composition ▪ Energy related holdings were $2.4 billion, ($ in millions) or approximately 3% of total invested $2,990 assets as of June 30, 2016 $202 $2,779 $251 $208 $2,535
Slide 22: Limited partnership and other alternative investments income
Limited partnership and other alternative investments income ▪ Total LP income of $40 million, before Total Net Investment Income, Before Tax, From LPs ($ in millions) tax, down by $54 million, before tax, over 2Q15 3Q15 4Q15 1Q16 2Q16 2Q15 largely due to lower income from private equity Net Investm
Slide 23: Book value per diluted share, ex-AOCI, of $44.74, up 2% from Dec. 31, 2015
Book value per diluted share, ex-AOCI, of $44.74, up 2% from Dec. 31, 2015 Book Value Per Diluted Share, ex. AOCI ▪ $44.74 BVPS, ex-AOCI, at June 30, 2016 $44.74 ◦ Up 2% from Dec. 31, 2015 $44.27 $43.76 ◦ Up 5% from June 30, 2015 $42.99 $42.41 ◦ Including dividends, total value creation of 7.4% over
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