The Hartford Financial Services Group, Inc. (HIG) reported second-quarter 2023 adjusted operating earnings of $1.88 per share, which outpaced the Zacks Consensus Estimate by 1.6%. However, the bottom line declined 13% year over year.
Operating revenues of HIG rose 8.3% year over year to $4,078 million in the quarter under review. Yet, the top line missed the consensus mark by a whisker.
The quarterly results benefited from well-performing Commercial Lines and Group Benefits businesses. While the Commercial Lines unit benefited on the back of higher premiums written, the Group Benefits business gained from improved fully insured ongoing premiums and sound core earnings margin. However, the upside was partly offset by elevated catastrophe losses, inflationary headwinds in personal auto business and an increased expense level.
The Hartford Financial Services Group, Inc. price-consensus-eps-surprise-chart | The Hartford Financial Services Group, Inc. Quote
Q2 Operations
Net earned premiums of Hartford Financial amounted to $5,220 million, which improved 8.5% year over year in the second quarter and beat our estimate of $5,136.3 million.
Net investment income dipped 0.2% year over year to $540 million in the second quarter but surpassed our estimate of $537.4 million. The year-over-year decline was due to reduced returns from limited partnerships and other alternative investments. Net investment income witnessed year-over-year decreases across the Personal Lines and Group Benefits segments. The metric improved year over year in the remaining four segments, which are Commercial Lines, P&C Other Ops, Hartford Funds and Corporate segments.
Total benefits, losses and expenses of $5,377 million increased 11.6% year over year in the quarter under review, higher than our estimate of $5,330.7 million.
HIG reported a pretax income of $672 million, which advanced 21.3% year over year and surpassed our estimate of $658.2 million.
Segmental Update
P&C
Commercial Lines
The segment recorded revenues of $3,210 million in the second quarter, which rose 15.3% year over year. Core earnings fell 9% year over year to $493 million due to higher catastrophe losses, a decrease in net favorable prior accident year development within core earnings and an elevated loss ratio in workers’ compensation. Yet, the metric came higher than our estimate of $455.4 million.
The underlying combined ratio of 88.3% deteriorated 20 basis points (bps) year over year due to an increased underlying loss and loss adjustment expense ratio.
Personal Lines
Revenues of $820 million grew 6.6% year over year in the second quarter. The segment reported a core loss of $57 million against the prior-year quarter’s core earnings of $21 million. Higher severity of auto liability and physical damage dampened the metric.
The underlying combined ratio deteriorated 760 bps year over year to 101.7% in the quarter under review.
P&C Other Ops
The segment’s revenues of $16 million more than doubled year over year in the second quarter.
Group Benefits
The segment reported revenues of $1,724 million in the quarter under review, which improved 9.3% year over year and beat our estimate of $1,681.3 million. Core earnings dropped 18% year over year to $133 million due to an elevated group life loss ratio and a decline in net investment income. The metric surpassed our estimate of $111.6 million.
The loss ratio came in at 72.1%, which deteriorated 200 bps year over year due to increased claim severities.