This summary is based on the first quarter fiscal 2008 earnings call conducted by Hartford Financial Services. (HIG) on April 29, 2008.
Management:
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Chief Executive Officer: Ramani Ayer
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President, Chief Operating Officer: Thomas M. Marra
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President, Chief Operating Officer: Neal S. Wolin
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Executive Vice President, Chief Financial Officer: David M. Johnson
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Co-Chief Operating Officer: John C. Walters
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Co-chief Operating Officer: Lizabeth H. Zlatkus
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Chief Investment Officer: David M. Znamierowski
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Investor Relations: Kim Johnson
Key Investors Issues
- Net income of $145 million or 46 cents a share, was down 83%.
- Assets under management rose 10% to $424 billion from $387 billion in the prior year.
- Book value per share ex. AOCI increased 8% over the last 12 months to $63.79.
First Quarter Highlights:
Net income of $145 million or 46 cents a share, was down 83% from $876 million or $2.71 a share in the prior year, reflected a total of $648 million in net realized capital losses.
- The property and casualty operations had an excellent quarter driven by disciplined risk selection and successful retention initiatives.
- Underwriting income proved to be stronger than expected with a combined ratio of 87.8, a full point better than the prior year quarter.
- On the life side, the firm continued to execute on critical initiatives to expand the earning space, growing assets by 10% over the last year driven by mutual funds and retirement plans businesses.
- Assets under management rose 10% to $424 billion from $387 billion in the prior year.
The firm’s investments are well diversified and of high quality, and over 80% of the portfolio consists of fixed maturities of which more than 95% are investment grade or high-quality government securities.
- The general spread widening seen in fixed income securities also caused the investment portfolio’s net unrealized loss position to increase, moving from $500 million at the end of 2007 to about $2 billion.
- Despite the unprecedented dislocations experienced in the fixed-income markets, the firm remains comfortable with the ABS, CMBS, and CLO positions.
- Book value per share ex. AOCI increased 8% over the last 12 months to $63.79.
- The $1.5 billion capital margin is in place and the firm has significant debt capacity.
Segment Highlight:
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Life Operations: mutual funds proved to be a top performer, setting a new quarterly record for deposits at $4 billion.
- The firm finalized three acquisitions in retirement plans that lay the groundwork for The Hartford to expand in this exciting market segment.
- Assets under management were $370 billion, up 10%, largely driven by the assets acquired from the retirement plans transactions and positive flows in the mutual fund business.
- Life reported a net loss of $155 million, primarily due to the effect of $550 million of net realized losses, including $220 million related to the implementation of accounting standard SFAS 157.
- Net income for the first quarter of 2007 was $438million.
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Retail Products Group deposits were $6.8 billion in 2008 compared with $7.3 billion in 2007, the decrease largely due to the difficult market and competitive environment, which affected annuity sales.
- Total retail products assets under management were $165 billion, compared with $168 billion in 2007.
- The net loss was $77 million, primarily due to the effect of $262 million of net realized capital losses, including $209 million of realized losses arising from the implementation of SFAS 157 and $42 million of realized losses related to variable annuity living benefit guarantees.
Variable annuity deposits were $2.5 billion, compared to $3.3 billion in the prior year due to the market and competitive environment.
- Net outflows were $1.2 billion, compared with $583 million in the prior year period.
- In early May, The Hartford plans to launch a new variable annuity product with an industry-leading investment lineup and enhanced income riders.
- Variable annuity assets under management ended the quarter at $108 billion, compared
with $115 billion on March 31, 2007.
- The Hartford Mutual Fund Family''s outstanding performance across an array of funds contributed to record retail mutual fund deposits of $4 billion.
- Total mutual fund assets under management were $46.8 billion a 10% increase over 2007.
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Retirement Plans assets under management stood at $46.4 billion, compared with $25.9 billion at March 31, 2007.
- The Hartford closed on the three acquisitions announced in late 2007 and two of these acquisitions, Sun Life Retirement Services, Inc. and Princeton Retirement Group, Inc., added $18.7 billion of retirement plan mutual fund assets under management.
- Total deposits were $2.2 billion, up 30% from the $1.7 billion reported in the prior year.
Deposits to 401(k) plans increased 30% over the prior year to $1.8 billion.
- Retirement plans reported a net loss of $5 million, including the effect of $23 million of net realized capital losses.
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Institutional Solutions Group assets under management were $62 billion, an increase of 15% over the prior year, driven by strong sales in the second and third quarter of 2007 and market appreciation in 2007.
- Institutional solutions reported a net loss of $120 million, including the effect of $142 million of net realized capital losses.
- Deposits were $1.7 billion, compared with deposits of $2.9 billion in 2007, which benefited from a large bank-owned life insurance sale.
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Individual Life sales were $65 million, up 8% from the prior year as sales were up across all product lines, with 20% growth through the wirehouse/regional broker/dealer sales channels.
- Net income was $20 million, including the effect of $21 million of net realized capital losses.
- The firm launched enhancements to its flagship universal life insurance product, including lower rates, and launched Hartford Solo db Life, a new product designed for small businesses that need both life insurance and a retirement plan.
