The Hartford Insurance Group, Inc. · NYSE:HIG
The Hartford Insurance — The Hartford Financial Services Group — FY2015 Earnings Presentation
33 slides from The Hartford Insurance's earnings presentation, Feb 5, 2016
Slide 1: 2015 Results and 2016 Outlook Presentation
The Hartford Financial Services Group, Inc. February 5, 2016 2015 RESULTS AND 2016 OUTLOOK PRESENTATION Copyright © 2016 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
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: Christopher J. Swift, Chief Executive Officer
Christopher J. Swift Chief Executive Officer February 5, 2016 2015 RESULTS AND 2016 OUTLOOK PRESENTATION Copyright © 2016 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 4: 2015 - A successful year with strong financial results
2015 - A successful year with strong financial results • Core earnings per diluted share1 increased 15% over 2014 to $3.88 • Core earnings return on equity (ROE)1,2 rose to 9.2% from 8.4% • Book value per diluted share1, excluding accumulated other comprehensive income (AOCI), grew by 7% • Reduced d
Slide 5: The Hartford is well-positioned in a challenging market
The Hartford is well-positioned in a challenging market • Continuing to invest in operating capabilities and talent that are making us a broader and deeper risk player and a more efficient and customer-focused company ̶ Attracting and retaining strong talent, enabling expansion into new industry ver
Slide 6: The Hartford's 2016 outlook
The Hartford’s 2016 outlook • The Hartford remains focused on: – Organically growing each of the businesses, and exploring acquisitions that meet financial and strategic objectives – Maintaining underwriting discipline and tightly managing expenses to support ongoing investment in capabilities and t
Slide 7: P&C and Group Benefits
Doug Elliot President February 5, 2016 P&C AND GROUP BENEFITS Copyright © 2016 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 8: P&C had another year of strong financial performance in 2015
P&C had another year of strong financial performance in 2015 Written Premiums • P&C themes: ($ in millions) $10,578 − Improved results in Commercial Lines $10,244 − Personal Lines below our expectations but pleased with AARP Direct business $9,929 and progress made in repositioning Agency business •
Slide 9: Commercial Lines delivered profitable growth in core earnings
Commercial Lines delivered profitable growth in core earnings • Core earnings of $1,003 million, up 1% Core Earnings driven by 0.8 point improvement in ($ in millions) $1,003 $996 combined ratio over 2014 $827 • CAY combined ratio, before CATs, of 90.0 represented 1.5 points of margin improvement –
Slide 10: Small Commercial delivered outstanding results
Small Commercial delivered outstanding results • CAY combined ratio, before CATs, of Written Premiums and Policy Count Retention ($ in millions) 86.6 improved 0.4 point versus 2014 $3,388 $3,243 • Written premiums grew 4% in 2015, $3,084 driven by strong retention and new 81% 84% 84% business − Stro
Slide 11: Middle Market made solid progress with improved margin
Middle Market made solid progress with improved margin • CAY combined ratio, before CATs, of Written Premiums and Policy Count Retention ($ in millions) 91.4 for 2015, an improvement of 3.1 $2,364 points over 2014 $2,271 $2,293 • Written premiums up 3% driven by solid 79% 80% 81% retention and incre
Slide 12: Specialty Commercial delivered increased written premiums and improved margin
Specialty Commercial delivered increased written premiums and improved margin • CAY combined ratio, before CATs, of Written Premiums ($ in millions) 98.8 improved 1.4 points over 2014 $819 $811 $838 – Driven by very strong performance in 94 29 30 Bond and Financial Products 173 188 191 243 247 237 •
Slide 13: Personal Lines results impacted by higher automobile and homeowners losses
Personal Lines results impacted by higher automobile and homeowners losses Core Earnings • 2015 core earnings down 12% from ($ in millions) 2014 $205 $210 $185 − CAY combined ratio, before CATs, of 92.0, a 1.4 point deterioration mainly from higher automobile losses and increased non-weather losses
Slide 14: Group Benefits had a very strong year with core earnings margin increase
Group Benefits had a very strong year with core earnings margin increase to 5.6% • 2015 core earnings up 8% over 2014, Core Earnings & Core Earnings Margin with core earnings margin of 5.6% ($ in millions) $195 − Core earnings improvement driven by $180 premium growth and disciplined expense $158 ma
Slide 15: Commercial Lines 2016 outlook
Commercial Lines 2016 outlook • Facing near term pricing and competitive Commercial Lines Combined Ratio challenges, but remain committed to long- term objective of profitable growth 93.4 92.6 91.8 – 93.8 1.9 2.7 2.81 – Product development capabilities – Customer experience – Technology – Innovating
Slide 16: Personal Lines 2016 outlook
Personal Lines 2016 outlook • Personal Lines focused on three goals Combined Ratio – Improve margins of automobile and 97.0 96.6 – 98.6 95.5 homeowners products 4.9 4.9 6.6 – Maximize AARP partnership – Leverage agency channel to target AARP members and other segments • 2016 CAY combined ratio outlo
Slide 17: Group Benefits 2016 outlook
Group Benefits 2016 outlook • Drive growth in core employer Core Earnings Margin offerings and voluntary products 5.6% 5.5% - 6.0% ‒ Capabilities are being well-received 5.2% • 2016 core earnings margin outlook of 5.5% to 6.0% • Strong renewal rates and new sales activity in early 2016 ‒ New sales w
Slide 18: 2015 Results and 2016 Outlook - Beth Bombara, CFO
Beth Bombara Chief Financial Officer February 5, 2016 2015 RESULTS AND 2016 OUTLOOK Copyright © 2016 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 19: Talcott Resolution returned $1 billion in capital in 2015
Talcott Resolution returned $1 billion in capital in 2015 • Core earnings up 9% from 2014 Core Earnings − Lower operating expenses, contract holder ($ in millions) $472 initiative costs and taxes, including a favorable $412 $433 tax benefit, offset partially by lower fees and net $102 $90 $97 invest
Slide 20: Investment portfolio credit quality and performance remained strong in 2015
Investment portfolio credit quality and performance remained strong in 2015 • Total impairments in 2015 increased Impairments1, Before Tax $107 ($ in millions) largely from intent to sell on energy and other commodity-related securities $74 $63 $54 • Reduced energy holding exposure to $26 $17 $2.5 b
Slide 21: Portfolio yield flat despite continued low rate environment
2015 portfolio yield flat, despite continued low rate environment • Total annualized investment yield, Net Investment Income, Before Tax before tax, excluding limited ($ in millions) partnerships and other alternative 2013 2014 2015 investments (LP), held up well in low Consolidated $3,264 $3,154 $3
Slide 22: 2015 core earnings of $1,650 million, up 7%
2015 core earnings of $1,650 million, up 7%; 2015 core earnings per diluted share of $3.88, up 15% • 2015 core earnings rose 7% over ($ in millions except per diluted share amounts; after tax) 2014 2015 Change3 2014 Core earnings $1,548 $1,650 7% – Core earnings, excluding CATs below Core earnings p
Slide 23: 2014 - 2016 capital management plan
2014 - 2016 capital management plan • $5.8 billion 2014 – 2016 capital Capital Management Actions1 ($ in billions) management plan − $4.375 billion for equity repurchases $0.3 $0.3 − $1.431 billion for debt management $0.2 $0.32 • As of Feb. 3, 2016, have completed: $0.8 − $3.2 billion of share repu
Slide 24: 2015 core earnings ROE
2015 core earnings ROE • Providing expanded ROE 2015 Core Earnings ROE1 disclosure for net income and core earnings 13.5% • ROE for subsidiaries are 10.9% adjusted for debt and interest 10.3% 9.2% expense allocated in proportion to legal entity equity 6.2% 1. Last twelve months return on equity excl
Slide 25: 2016 core earnings outlook of $1.575 billion to $1.675 billion
2016 core earnings outlook of $1.575 billion to $1.675 billion • 2016 core earnings outlook of 2% to ($ in millions) 2015 2016 Actual Outlook 8% increase, adjusted for certain Consolidated core earnings $1,650 $1,575 - $1,675 net unfavorable items in 2015 and Less favorable (unfavorable) items: Talc
Slide 26: Financial objectives - 2016 and beyond
Financial objectives – 2016 and beyond While markets are more challenging, our financial strength, capital flexibility and underwriting and expense discipline are important competitive advantages that will help us continue to create shareholder value Our key financial objectives in 2016 and beyond i
Slide 27: Questions and Answers
QUESTIONS AND ANSWERS Copyright © 2016 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 28: Appendix
APPENDIX Copyright © 2016 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 29: 2015 Talcott Resolution statutory surplus allocation consistent with 2014
2015 Talcott Resolution statutory surplus allocation consistent with 2014 Talcott Resolution Statutory Surplus Allocation As of Dec. 31, 2015 ($ in billions) $5.0 Billion Total Statutory Surplus1 $0.25 Institutional and Individual Fixed Annuities $0.5 52% VA Other, including Private Placement 17% $0
Slide 30: Talcott Resolution capital margin remains above minimum in stress scenario
Talcott Resolution capital margin, after dividends, remains above minimum1 in stress scenario Talcott Resolution Dec. 2017 Base Favorable Stress Projected Capital Margin Scenario Scenario Scenario ($ in billions) Capital margin before dividends to holding company $4.2 $4.4 $2.4 Less: 2016 dividends
Slide 31: Key drivers of capital margin changes from base to stress scenario
In addition to VA impacts, investment-related impacts and interest rate impacts are key drivers of capital margin changes from base to stress scenario Talcott Resolution Projected 2017 Capital Margin Favorable Stress ($ in billions) Scenario Scenario Base Scenario $3.4 $3.4 Change in projected 2017
Slide 32: Market scenarios used in capital margin projections
Market scenarios used in capital margin projections Dec. 31, 2015 Base Favorable Stress Actual Interest 10-year Treasury • Follows forward • Follows forward rates + 50 • 0–100 bps decrease across Rate 2.27% rates bps term structure in 2016 • 10-year Treasury • 10-year Treasury 3.15% at • Increases s
Slide 33: Holding company sufficient to fund 2016 interest, dividends, capital management
Holding company sufficient to fund 2016 interest, dividends, capital management plans and holding company liquidity 2015 2016E • Approximately $1.9 billion in ($ in billions) Beginning holding company $2.1 $1.7 expected subsidiary dividends in resources 2016 Sources of cash: • Estimated holding comp
The Hartford Financial Services Group — FY2015 Earnings Presentation on 6ix