First quarter 2022 net income available to common stockholders of $440 million ($1.30 per diluted share) increased 80% from the 2021 period, and core earnings* of $561 million (core earnings per diluted share* of $1.66) were up 176% from the prior year quarter.
Net income ROE for the trailing 12 months of 15.4% and core earnings ROE* for the same period of 14.8%.
Property & Casualty (P&C) written premiums rose 9% in first quarter 2022 driven by Commercial Lines premium growth of 12%.
Commercial Lines first quarter combined ratio of 90.3 improved 19.4 points and the underlying combined ratio* of 88.3 improved 2.9 points compared with the prior year quarter.
Group Benefits fully insured ongoing premiums were up 5%, compared with first quarter 2021, driven by an increase in exposure on existing accounts and strong persistency.
During the quarter, The Hartford returned $530 million to shareholders, including $400 million of shares repurchased and $130 million in common stockholder dividends paid.
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
** All amounts and percentages set forth in this press release are approximate unless otherwise noted.
HARTFORD, Conn.–(BUSINESS WIRE)–The Hartford (NYSE: HIG) today announced financial results for the quarter ended March 31, 2022.
“The Hartford is off to a strong start in 2022 delivering a trailing 12-month core earnings ROE of 14.8%. Results were driven by another quarter of profitable growth and expanding margins in Commercial Lines, excellent partnership returns, and lower excess mortality in Group Benefits,” said Chairman and CEO Christopher Swift.
President Doug Elliot added, “During the first quarter, our Property & Casualty business sustained the momentum built during 2021. Commercial underwriting results were outstanding with expanding margin contributions from each business. Commercial pricing moderated from the fourth quarter but is still exceeding loss trends across most product lines. In Personal Lines, we are pleased with the performance and a combined ratio of 90.4. Prevail is contributing to new business growth and rate filings will address inflation and supply chain pressures in both auto and homeowners. Our Property & Casualty first quarter results were strong, and we are well positioned for continued profitable growth.”
Swift continued, “The Hartford is a proven performer. Quarter after quarter results illustrate how our strategy translates into a consistent and sustainable financial performance. I am confident that the company has never been in a better position to grow, deliver on our goals and maximize value creation for our stakeholders.”
CONSOLIDATED RESULTS:
Three Months Ended
($ in millions except per share data)
Mar 31
2022
Mar 31
2021
Change
Net income available to common stockholders
$440
$244
80%
Net income available to common stockholders per diluted share1
$1.30
$0.67
94%
Core earnings2
$561
$203
176%
Core earnings per diluted share2
$1.66
$0.56
196%
Book value per diluted share
$46.36
$48.04
(3)%
Book value per diluted share (ex. AOCI)2
$51.42
$47.31
9%
Net income available to common stockholders’ return on equity (ROE)3, last 12-months
15.4%
10.5%
4.9
Core earnings ROE2,3, last 12-months
14.8%
10.9%
3.9
[1] Includes dilutive potential common shares; for net income available to common stockholders per diluted share, the numerator is net income less preferred dividends
[2] Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
[3] Return on equity (ROE) is calculated based on last 12-months net income available to common stockholders and core earnings, respectively; for net income ROE, the denominator is common stockholders’ equity including AOCI; for core earnings ROE, the denominator is common stockholders’ equity excluding AOCI
The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as “NM” or not meaningful
First quarter 2022 net income available to common stockholders was $440 million, or $1.30 per diluted share, up 80% from first quarter 2021, primarily due to a $435 million, before tax, change from an underwriting loss* to an underwriting gain in first quarter 2022 and a decrease in excess mortality in group life, partially offset by a $225 million, before tax, change to net realized losses in first quarter 2022.
First quarter core earnings of $561 million, or $1.66 per diluted share, rose 176% from first quarter 2021. The increase was primarily due to:
Favorable P&C prior accident year development (PYD) within core earnings of $36 million, before tax, in first quarter 2022, largely driven by reserve decreases in workers’ compensation, compared with $223 million of unfavorable PYD in first quarter 2021 that was primarily due to a reserve increase for general liability driven by the initial settlement with Boy Scouts of America (BSA) related to sexual abuse claims.
A reduction in P&C current accident year (CAY) catastrophe (CAT) losses, net of reinsurance, to $98 million, before tax, in first quarter 2022, including $27 million from the Ukraine conflict, compared with $214 million in first quarter 2021.
An increase in earnings generated by 8% growth in P&C earned premium and 5% increase in Group Benefits fully insured ongoing premium.
A reduction in excess mortality losses in group life with $96 million before tax of losses in first quarter 2022, compared with $185 million in first quarter 2021.
A reduction in P&C CAY COVID-19 incurred losses with no losses in first quarter 2022 compared with $24 million, before tax, of losses in first quarter 2021.
A decrease in the Commercial Lines underlying loss and loss adjustment expense ratio before COVID-19 incurred losses* of 0.8 points to 56.1% in first quarter 2022 from 56.9% in first quarter 2021.
An increase in earnings from Hartford Funds driven by higher assets under management.
Partially offset by:
An increase in the group disability loss ratio primarily reflecting less favorable prior incurral year development on long-term disability and an increase in the group life loss ratio before considering excess mortality claims due to a higher loss ratio under group accidental death claims business.
An increase in the Personal Lines underlying loss ratio* of 4.4 points to 60.8% in first quarter 2022 from 56.4% in first quarter 2021, driven by an increase in auto claim frequency and severity.
An increase in insurance operating costs and other expenses, primarily driven by higher technology costs, higher claim costs to handle elevated claim levels resulting from the pandemic and a decrease in the allowance for credit losses on premiums receivable in the 2021 period, partially offset by incremental savings from the Hartford Next program and a reduction in AARP direct marketing costs.
Net investment income was flat in first quarter 2022 compared with the prior year period as greater income from limited partnerships and other alternative investments (LP’s) and the effect of a higher level of invested assets was offset by a lower yield on fixed maturities resulting from reinvesting at lower rates during the 2021 calendar year.
March 31, 2022, book value per diluted share of $46.36 decreased 10% from $51.36 at Dec. 31, 2021, principally due to a change from net unrealized gains to net unrealized losses on investments within AOCI as a result of an increase in interest rates and wider credit spreads.
Book value per diluted share (excluding AOCI)* of $51.42 as of March 31, 2022, increased from $50.86 at Dec. 31, 2021, as the impact from net income in excess of stockholder dividends during the first quarter of 2022 was partially offset by the dilutive effect of share repurchases.
In first quarter 2022, The Hartford returned $530 million to stockholders, consisting of $130 million in common stockholder dividends paid and $400 million of common share repurchases.
Net income available to common stockholders’ ROE (net income ROE) was 15.4% for the twelve month period ending March 31, 2022.
Core earnings ROE for the twelve month period ending March 31, 2022 was 14.8%, an increase of 3.9 points from first quarter 2021 due to higher trailing 12-month core earnings, partially offset by higher average common stockholder’s equity ex AOCI.
BUSINESS RESULTS:
Commercial Lines
Three Months Ended
($ in millions, unless otherwise noted)
Mar 31
2022
Mar 31
2021
Change
Net income
$383
$129
197%
Core earnings
$456
$105
NM
Written premiums
$2,809
$2,503
12%
Underwriting gain (loss)1
$242
$(216)
NM
Underlying underwriting gain1
$290
$197
47%
Losses and loss adjustment expense ratio
Current accident year before catastrophes
56.1
58.0
(1.9)
Current accident year catastrophes
3.3
7.8
(4.5)
Unfavorable (favorable) prior accident year development
(1.3)
10.6
(11.9)
Expenses
31.9
32.9
(1.0)
Policyholder dividends
0.3
0.3
—
Combined ratio
90.3
109.7
(19.4)
Impact of catastrophes and PYD on combined ratio
(2.0)
(18.4)
16.4
Underlying combined ratio1
88.3
91.2
(2.9)
[1] Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
First quarter 2022 net income of $383 million increased from net income of $129 million in first quarter 2021, principally due to a $458 million, before tax, change from an underwriting loss to an underwriting gain, partially offset by a $135 million, before tax, change to net realized losses in first quarter 2022.
Commercial Lines core earnings of $456 million in first quarter 2022 increased by $351 million from first quarter 2021, primarily from:
Favorable P&C prior accident year development (PYD) within core earnings of $33 million, before tax, in first quarter 2022, driven by reserve decreases in workers’ compensation, compared with $232 million of unfavorable PYD in first quarter 2021 that was primarily due to a reserve increase for general liability driven by the initial settlement with BSA on sexual abuse claims.
A $94 million, before tax, decrease in CAY CAT losses, net of reinsurance, with first quarter 2022 losses including $27 million from the Ukraine conflict with the remainder from tornado, wind and hail events in the Southeast and winter storms along the East Coast. The $27 million before tax of catastrophe losses in first quarter 2022 related to the Ukraine conflict, largely recorded within Global Specialty, consisted of exposures under political violence and terrorism policies including aviation war, and under credit and political risk insurance policy exposures.
An increase in earnings generated by 11% growth in earned premium.
There were no current accident year COVID-19 incurred losses in first quarter 2022 compared with $24 million in the first quarter 2021.
A decrease in the underlying combined ratio before COVID-19* losses of 1.8 points, including a lower expense ratio of 1.0 points and a lower underlying loss and loss adjustment expense ratio before COVID-19 losses of 0.8 points, driven by earned pricing exceeding loss trends in several lines.
Combined ratio was 90.3 in first quarter 2022, 19.4 points lower than 109.7 in first quarter 2021, primarily due to an 11.9 point change to net favorable PYD, 4.5 points of lower CAY CAT losses, and a 2.9 point improvement in the underlying combined ratio.
Underlying combined ratio was 88.3, improving 2.9 points from first quarter 2021 due to COVID-19 losses incurred in first quarter 2021, a lower underwriting expense ratio and lower loss ratios before COVID-19.
Small Commercial underlying combined ratio of 85.9 improved by 2.4 points from first quarter 2021 driven primarily by COVID-19 losses incurred in first quarter 2021 and a lower expense ratio.
Middle & Large Commercial underlying combined ratio of 91.5 improved by 3.8 points from first quarter 2021 primarily due to lower non-CAT property losses, COVID-19 losses incurred in first quarter 2021, and a lower expense ratio.
Global Specialty underlying combined ratio of 88.2 improved by 1.7 points from first quarter 2021 primarily due to a lower expense ratio, COVID-19 losses incurred in first quarter 2021 and lower loss ratios in U.S. lines of business, partially offset by a higher loss ratio in international, primarily due to a non-catastrophe marine loss in the quarter.
The decrease in the expense ratio was driven by the impact of higher earned premium and incremental savings from the Hartford Next program, partially offset by higher technology costs and a decrease in the allowance for credit losses on premiums receivable in the 2021 period.
First quarter 2022 written premiums of $2.8 billion were up 12% from first quarter 2021, reflecting higher policy count retention across all lines, new business premium growth in small commercial, the effect of renewal written price increases across all lines and higher audit and endorsement premiums from a larger exposure base, including due to higher payrolls.
Personal Lines
Three Months Ended
($ in millions, unless otherwise noted)
Mar 31
2022
Mar 31
2021
Change
Net income
$77
$135
(43%)
Core earnings
$84
$131
(36%)
Written premiums
$707
$715
(1)%
Underwriting gain
$69
$124
(44%)
Underlying underwriting gain
$83
$121
(31%)
Losses and loss adjustment expense ratio
Current accident year before catastrophes
60.8
56.4
4.4
Current accident year catastrophes
2.4
5.3
(2.9)
Unfavorable (favorable) prior accident year development
(0.4)
(5.7)
5.3
Expenses
27.6
27.1
0.5
Combined ratio
90.4
83.1
7.3
Impact of catastrophes and PYD on combined ratio
(2.0)
0.4
(2.4)
Underlying combined ratio
88.5
83.5
5.0
Net income of $77 million in first quarter 2022 was down $58 million from first quarter 2021 largely driven by a $55 million before tax decrease in underwriting gain and a $16 million before tax change to net realized losses in first quarter 2022.
Personal Lines core earnings of $84 million decreased by $47 million due to:
Lower net favorable PYD, with $3 million before tax of favorable PYD in first quarter of 2022 driven by auto liability reserve releases compared with $42 million of favorable PYD in first quarter 2021 that included higher reserve releases for auto liability and catastrophes.
A decrease in underlying underwriting gain, largely driven by higher auto claim frequency and severity and a decrease in earnings associated with a 2% decline in earned premium.
Partially offset by lower CAY CAT losses with catastrophes of $17 million before tax in first quarter 2022 driven by tornado, wind and hail events in the Southeast and winter storms along the East Coast.
Combined ratio of 90.4 in first quarter 2022 increased 7.3 points relative to first quarter 2021, primarily due to lower net favorable PYD and a higher underlying combined ratio, partially offset by lower CAY CAT losses.
Underlying combined ratio of 88.5 was 5.0 points higher than first quarter 2021, primarily due to higher auto loss costs and, to a lesser extent, a higher expense ratio.
The auto underlying combined ratio of 93.3 increased 7.0 points from first quarter 2021, primarily due to higher auto frequency and severity and a higher expense ratio, partially offset by an increase in earned pricing.
The homeowners underlying combined ratio of 77.4 was relatively flat from 77.2 in first quarter 2021 due to a slight increase in the expense ratio. The underlying loss and loss adjustment expense ratio was flat as an increase in severity was offset by lower frequency of weather claims and the effect of earned pricing increases.
The increase in the expense ratio to 27.6 was driven by higher technology costs and the effect of a decline in earned premium, partially offset by lower AARP direct marketing costs and incremental savings from the Hartford Next program.
Written premiums in first quarter 2022 were $707 million compared with $715 million in first quarter 2021 primarily due to:
A reduction in auto as non-renewed premium exceeded new business despite an increase in new business over first quarter 2021.
An increase in homeowners primarily due to an increase in new business and the effect of written pricing increases, partially offset by slightly lower policy count retention.
Higher renewal written price increases in auto in response to recent increases in loss cost trends.
Renewal written price increases in homeowners of 8.8% in first quarter 2022.
Group Benefits
Three Months Ended
($ in millions, unless otherwise noted)
Mar 31
2022
Mar 31
2021
Change
Net income (loss)
($6)
$9
(167)%
Core earnings (loss)
$8
($3)
NM
Fully insured ongoing premiums (ex. buyout premiums)
$1,438
$1,372
5%
Loss ratio
81.9%
84.3%
(2.4)
Expense ratio
25.9%
25.3%
0.6
Net income margin
(0.4)%
0.6%
(1.0)
Core earnings margin
0.5%
(0.2)%
0.7
Net income (loss) decreased to a $6 million loss in first quarter 2022 from $9 million of income in first quarter 2021, primarily driven by a change from $19 million before tax of net realized gains in first quarter 2021 to $16 million before tax of net realized losses in first quarter 2022.
Core earnings of $8 million in first quarter 2022 improved from a loss of $3 million in first quarter 2021 primarily due to lower excess mortality losses in group life and the effect of higher fully insured ongoing premiums, partially offset by a higher loss ratio before considering excess mortality, higher operating expenses and modestly lower net investment income.
Fully insured ongoing premiums were up 5%, compared with first quarter 2021, driven by an increase in exposure on existing accounts and strong persistency. Fully insured ongoing sales were $389 million in first quarter 2022, down 24% as the prior year period benefited from expansion of paid family medical leave programs in several states.
Loss ratio of 81.9% decreased 2.4 points from first quarter 2021 with a decrease in group life due to lower excess mortality, partially offset by an increase in group disability:
Total group life loss ratio improved 9.9 points, to 98.4%, primarily due to lower excess mortality, primarily caused by direct and indirect impacts of COVID-19. Excess mortality losses were $96 million before tax in first quarter 2022 compared with $185 million in first quarter 2021. The $96 million of excess mortality losses in the first quarter of 2022 included $122 million of losses with dates of loss in the first quarter and a $26 net decrease of estimated losses from prior incurral years. Apart from excess mortality claims, the group life loss ratio increased primarily due to a higher loss ratio under group accidental death business.
Total disability loss ratio of 73.2% increased 4.8 points compared with first quarter 2021, primarily due to less favorable prior incurral year development on long-term disability as the 2021 period benefitted from low incidence levels from earlier in the pandemic. The three month period ending March 31, 2022 included $9 million, or 1.1 points, of losses on short-term disability claims related to COVID-19 as compared with $13 million, or 1.8 points, for the three months ended March 31, 2021.
Expense ratio of 25.9% increased 0.6 points from first quarter 2021, primarily driven by higher claim costs to handle elevated claim levels resulting from the pandemic and an increase in technology costs, partially offset by expense savings from the Hartford Next operational transformation and cost reduction program, and higher earned premiums.
Hartford Funds
Three Months Ended
($ in millions, unless otherwise noted)
Mar 31
2022
Mar 31
2021
Change
Net income
$42
$47
(11)%
Core earnings
$50
$45
11%
Daily average Hartford Funds AUM
$150,131
$143,164
5%
Mutual Funds and exchange-traded funds (ETF) net flows
$(424)
$774
(155)%
Total Hartford Funds assets under management (AUM)
$148,046
$145,198
2%
Net income of $42 million in first quarter 2022 decreased from $47 million in first quarter 2021, largely due to a change from net realized gains to net realized losses related to investments in funds seeded by the company, partially offset by higher fee income.
Core earnings of $50 million increased from $45 million in first quarter 2021 as an increase in fee income, mostly attributable to higher daily average Hartford Funds AUM, and a higher tax benefit in the 2022 period for stock-based compensation was partially offset by higher variable expenses.
Daily average AUM of $150 billion in first quarter 2022 rose 5% from first quarter 2021 driven by net inflows and an increase in market values over the previous twelve months.
Despite net inflows over the previous four quarters, first quarter 2022 mutual fund and ETF net outflows totaled $424 million, compared with net inflows of $774 million in first quarter 2021. While market values of the funds increased over the previous twelve months, there was a net decrease in market value of $8.2 billion in the three months ended March 31, 2022.
Corporate
Three Months Ended
($ in millions, unless otherwise noted)
Mar 31
2022
Mar 31
2021
Change
Net loss
$(59)
$(58)
(2)%
Net loss available to common stockholders
$(64)
$(63)
(2)%
Core loss
$(48)
$(60)
20%
Other revenue (loss)
$1
$(8)
NM
Net investment income, before tax
$3
$3
—%
Interest expense and preferred dividends, before tax
$67
$62
8%
Net loss of $59 million in first quarter 2022 compared with a net loss of $58 million in first quarter 2021, driven, in part, by a change to net realized losses in first quarter 2022, partially offset by lower restructuring costs related to Hartford Next of $5 million, before tax, in first quarter of 2022 compared with $11 million, before tax, in the 2021 period.
First quarter 2022 core loss of $48 million decreased $12 million compared with first quarter 2021 core loss of $60 million primarily due to a loss of $8 million before tax in the 2021 period from the company’s previously owned equity interest in Talcott Resolution and a higher tax benefit in the 2022 period for stock-based compensation, partially offset by an increase in interest expense.
INVESTMENT INCOME AND PORTFOLIO DATA:
Three Months Ended
($ in millions, unless otherwise noted)
Mar 31
2022
Mar 31
2021
Change
Net investment income, before tax
$509
$509
—%
Annualized investment yield, before tax
3.6%
3.8%
(0.2)
Annualized investment yield, before tax, excluding LPs*
2.9%
3.1%
(0.2)
Annualized LP yield, before tax
14.6%
21.1%
(6.5)
Annualized investment yield, after tax
2.9%
3.1%
(0.2)
First quarter 2022 consolidated net investment income of $509 million was flat to first quarter 2021 as greater income from limited partnerships and other alternative investments and the effect of a higher level of invested assets was offset by a lower yield on fixed maturities resulting from reinvesting at lower rates in 2021.
Income from LPs was $126 million, before tax, in first quarter 2022, increasing from $112 million, before tax, in first quarter 2021, mostly driven by the sale of an underlying real estate property in the 2022 period and higher real estate fund valuations, partially offset by lower returns on private equity funds in the 2022 period. Income from LPs, including from private equity and other funds, is generally reported on a three-month lag.
Contacts
Media Contacts:
Michelle Loxton
860-547-7413
michelle.loxton@thehartford.com
Matthew Sturdevant
860-547-8664
matthew.sturdevant@thehartford.com
Investor Contact:
Susan Spivak Bernstein
860-547-6233
susan.spivak@thehartford.com
