By Andrew Frye
Feb. 8 (Bloomberg) -- Hartford Financial Services Group Inc., the bailed-out insurer that replaced its chief executive officer in October, reported its first profit in six quarters on improved investment results.
Fourth-quarter net income of $557 million, or $1.19 a share, compares with a loss of $806 million, or $2.71, in the same period a year earlier, Hartford said today in a statement distributed by Business Wire. Excluding some investment results, the company earned $1.51 a share, within the estimated range the company announced last month.
CEO Liam McGee, a former Bank of America Corp. executive, has promised to reduce risk at Hartford after bets by his predecessor, Ramani Ayer, pushed the insurer into five straight losses and a $3.4 billion U.S. rescue. McGee, 55, is preparing his strategy for the insurer as the firm enters its third century of business. The company said today it would make a presentation to investors on April 1.
“Although the company posted strong earnings in the fourth quarter, the economy and market conditions remain uncertain,” McGee said in the statement.
Realized capital losses after tax and an accounting charge dropped 78 percent to $132 million from $598 in the same period a year earlier.
Hartford, based in the Connecticut city of the same name, said it expects 2010 operating earnings between $3.70 a share and $4 a share. That compares with the $3.97 a share average estimate of 18 analysts surveyed by Bloomberg.
Two Years of Losses
The insurer said last month that fourth-quarter operating earnings were $1.45 to $1.60 a share, an increase from the company’s previous projection of a range of 65 cents a share to 80 cents a share.
Rising stock and bond markets helped return Hartford to profit. The insurer’s investment portfolio and sales suffered in 2008 and into 2009 as the U.S. economy slumped and companies and homeowners struggled to repay mortgages and refinance debt. Hartford lost $2.75 billion in 2008 and $887 million for all of 2009.
“It’s a company with a strong brand, and it still has a strong market presence,” said Randy Binner, an analyst with FBR Capital Markets, before results were released. “But the question is, can they still earn the way that they used to, or at some lower level.”
Hartford has advanced about 59 percent on the New York Stock Exchange in the nine months since its bailout request was accepted by the U.S. Treasury on May 14. In the 12 months prior to the U.S. rescue, Hartford fell about 80 percent.
Under Review
Hartford offers property-casualty coverage, including homeowners’ and car policies, as well as savings and retirement products such as whole life insurance and variable annuities.
McGee is reviewing Hartford’s portfolio of businesses. In November, he announced the discontinuation of some life insurance products sold to companies. McGee will discuss “the company’s business, capital and financial outlook” at the April 1 investor day, the statement said today.
It was the retirement and life insurance businesses that suffered most during the downturn, and analysts including Suneet Kamath of Sanford C. Bernstein & Co. have said Hartford is hampered by its wide array of businesses. Bigger rival Prudential Financial Inc. has exited auto insurance to focus on life and retirement sales. MetLife Inc., the biggest U.S. life insurer, gets less than 10 percent of its earnings from home and auto policies, according to Bloomberg data.
“We tend to think that Hartford’s combination of life and P&C is something of a ‘forced marriage’ at this point,” Kamath said in a December research note. Hartford’s property-casualty and life businesses each contributed about half of the firm’s earnings from 2005 to 2007, according to Bloomberg data. In 2008, the life insurance business lost money, while the property casualty unit had a profit.
To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net.