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The Hartford income drops 57% as COVID-19 hits investments

30th April 2020 - Author: Matt Sheehan

Property and casualty insurer The Hartford has reported a 57% decrease in net income during the first quarter of 2020, primarily due to the impact of the coronavirus (COVID-19) pandemic on its investment portfolio.

The HartfordNet income came to $268 million in Q1, compared with $625 million for the same period last year.

The Hartford saw net realized capital losses over Q1, largely driven by both realized and unrealized losses on its equity investment portfolio, compared with net realized capital gains in 2019.

It also reported net unfavorable prior accident year development (PYD) on legacy Navigators reserves which, while covered by reinsurance, was recognized as a deferred gain on retroactive reinsurance.

Property and casualty (P&C) underwriting results were relatively flat with 2019 as lower catastrophe losses were offset by a change to unfavorable prior year development.

Underlying underwriting results, which exclude catastrophes and prior year development, were up slightly from the prior year including the effect of favorable non-cat weather and lower auto claim frequency, largely offset by higher underwriting expenses in Commercial Lines

The company was also impacted by approximately $50 million, before tax, in underwriting operations related to the COVID-19 pandemic.

This included higher short-term disability claims and new benefits in Group Benefits as well as a reduction in estimated audit premiums receivable and an increase in the allowance for current expected credit losses (CECL), including on premiums receivable, reinsurance recoverables and other balances.

Net investment income of $459 million, before tax, was $11 million below first quarter 2019 due to valuation declines on equity fund investments, a lower yield on fixed maturity investments resulting from reinvesting at lower rates and a lower yield on variable rate investments.

“This crisis has challenged all aspects of daily life with wide-ranging impacts to our stakeholders,” said Doug Elliot, President of The Hartford. “In the quarter, pricing momentum in middle market remained strong. Excluding workers’ compensation, standard commercial rate increases in this line were 9.4 percent and accelerated during the quarter.”

“In Global Specialty, the underwriting actions we took to improve profitability coupled with rigorous execution on renewal pricing, drove the improvement in our underwriting margins. As the next few months unfold we will continue to help our customers prevail, while maintaining a culture of underwriting and pricing discipline for the long-run,” Elliot continued.

Chairman and CEO Christopher Swift also commented: “We entered 2020 in a position of strength, focused on execution to build on the momentum in our businesses. In the first quarter we generated an industry leading twelve month ROE on core earnings of 13.3 percent.”

“The global pandemic has changed the immediate circumstances, but we have an unwavering commitment to our people, customers, partners, and communities. With the combination of our purpose, talented and dedicated employees, and a strategy for future success, I am confident we will manage through this difficult time and continue to thrive.”

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