The Hartford Financial Services Group Inc. reported a $101 million second-quarter net loss Wednesday, a consequence of paying off a huge debt to Allianz SE.
Retiring the debt is part of the insurer’s continuing effort to refocus its priorities on insurance underwriting. As part of that plan, it said Tuesday that it is selling its securities brokerage Woodbury Financial Services to American International Group Inc.
The insurer said its loss for the April-through-June period amounted to 26 cents per share and compared with net income of $33 million, or 5 cents per share, a year earlier.
The quarter was dominated by a $587 million loss for retiring the debt. Results also included a $77 million loss from discontinued operations due to the sale of Federal Trust Corp.
The insurer said its operating earnings rose to $119 million, or 23 cents per share, from $14 million, or a penny per share, last year. That was well below analysts’ average estimate of 44 cents per share, according to FactSet.
The Hartford completed purchasing back the Allianz debt in April for $2.43 billion, a move it said it made in the interest of more financial flexibility and to save about $45 million annually in interest payments.
The debt and warrants were issued to the German insurer in October 2008, during the depths of the financial crisis. Hartford had said then that Allianz’s $2.5 billion investment would help it strengthen its capital position.
Chairman and CEO Liam McGee said the company is on plan in its effort to focus more on property and casualty insurance, group benefits and mutual funds businesses. He said second-quarter results benefited from the pricing and underwriting actions the company initiated last year in property and casualty and group benefits.
Catastrophe losses for the quarter totaled $189 million, down sharply from a year ago when it was hit hard by storm losses and increased litigation costs related to old asbestos lawsuits.
[The Hartford said net income for its Commercial Markets — which include P/C Commercial and Group Benefits units — rose 16 percent to $184 million in the second quarter from $159 million reported during the same period one year ago. The P/C Commercial net income was $149 million, up from $118 million posted during the prior-year period.
The P/C Commercial written premiums grew 1 percent to $1.516 billion due to higher pricing across all business lines, offset by slightly lower retention and new business premiums. The P/C Commercial combined ratio for the second quarter was 100.5 percent, improving from 106.2 percent one year ago.
The company said P/C Commercial continued to benefit from strong renewal written pricing trends in all business lines. Small Commercial and Middle Market renewal written pricing increases averaged 7 percent, consistent with the first quarter of 2012. Middle Market pricing increased 10 percent, while Middle Market workers’ compensation renewal pricing increased 16 percent in the quarter.
Retention remained strong at 82 percent in Small Commercial, a slight decline from 83 percent in the second quarter of 2011. Middle Market retention was down to 73 percent compared with 79 percent in the prior year period, reflecting the impact of the company’s pricing actions on its renewal book of business.
Consumer Markets had a net loss of $50 million for the second quarter of 2012 compared with a net loss of $172 million a year earlier. The Consumer Markets combined ratio for the quarter was 112.6 percent, improving from 121.1 percent one year ago.
In the 2012 second quarter, Consumer Markets written premiums were $950 million, down 2 percent compared to a year earlier. However, new auto and homeowners written premium rose 17 percent, helped by strong production in AARP Direct and AARP Agency.
Net investment income, excluding trading securities, declined 1 percent to $1.097 billion, before tax, in the second quarter of 2012 compared with the second quarter of 2011 due to a slight decrease in the annualized investment yield earned on fixed maturities that was partially offset by higher investment income from an increased balance in higher yielding mortgage loans.]