Why did reported net income grow faster than core earnings?

Net income available to common stockholders rose 18%, while core earnings rose 6%. Core earnings exclude net realized losses, which were $13 million in Q3 2024 versus $90 million in Q3 2023, so the smaller realized loss drove more of the GAAP increase than of the core increase. The gap also reflects the $26 million deferred gain amortization on the Navigators ADC, which is excluded from core earnings.

Is the dividend increase sustainable given the quarter's catastrophe losses?

The company cited strong capital generation and raised the quarterly dividend to $0.52 per share, payable January 3, 2025. Quarterly dividends paid totaled $138 million, against $400 million in buybacks. Current accident year catastrophe losses of $247 million were manageable relative to earnings of $752 million, but the filing does not provide forward-looking payout guidance.

What is driving the deterioration in Commercial Lines' reported combined ratio?

The reported combined ratio rose to 92.2 from 90.2, driven by 0.9 points of higher current accident year catastrophe losses, including $55 million from Hurricane Helene, and 0.5 points of less favorable prior-year development. The underlying loss ratio also rose 0.7 points, primarily from a higher general liability loss ratio, which investors may view as a trend to monitor.

How is Personal Lines' profitability trending?

Personal Lines posted net income of $31 million versus a $12 million loss a year earlier. Its combined ratio improved to 102.5 from 107.9, and its underlying combined ratio improved to 93.7 from 99.0. Renewal written price increases of 20.8% in auto and 15.2% in homeowners indicate that pricing actions are offsetting elevated loss cost trends, though the segment still operates above a 100 combined ratio on a reported basis.

Why did limited partnership income decline, and does it matter for future earnings?

LP income fell to $37 million from $72 million, and the annualized LP yield dropped to 3.0% from 6.3%, mainly because of lower returns on private equity funds. Excluding LPs, net investment income grew 18% to $622 million, driven by higher invested assets and a 40 basis point increase in annualized yield. LP income is volatile, so investors should focus on the excluding-LP trend for underlying investment earnings.

HIG/HIG-PG 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed October 24, 2024. Cited figures are marked; the original filing is the authoritative source.

The Hartford (NYSE: HIG) reported strong third-quarter 2024 results on October 24, 2024.

Net income available to common stockholders rose 18% year over year to $761 million^a ($2.56 per diluted share), while core earnings, the company's preferred non-GAAP measure, grew 6% to $752 million ($2.53 per diluted share). Trailing 12-month core earnings ROE improved to 17.4% from 14.9% a year earlier, and net income ROE reached 20.0%. Management also announced an 11% increase in the quarterly common dividend to $0.52 per share, and the company repurchased $400 million of stock during the quarter.

The quarter's underlying picture is mixed by segment. Commercial Lines grew written premiums 9% to $3.3 billion^b and kept an underlying combined ratio of 88.6, though its reported combined ratio deteriorated to 92.2 from 90.2 because of higher catastrophe losses, including $155 million of current accident year cat losses, and a higher general liability loss ratio. Personal Lines is recovering: its combined ratio improved to 102.5 from 107.9, and its auto underlying combined ratio improved 7.0 points, though it remains above 100 on a reported basis.

Group Benefits held a 70.2% loss ratio flat year over year, but its core earnings margin fell to 8.7% from 9.8% on a higher expense ratio. Investment income rose 10% to $659 million^c, supported by higher reinvestment yields and a larger asset base. This was partly offset by lower limited partnership income ($37 million versus $72 million), and net realized losses were smaller than in the prior year.

Book value per diluted share reached $56.39^d, up 14.1% year to date, and $63.17 excluding AOCI. Investors should note that the quarter also benefited from a $26 million pre-tax amortization of a deferred gain tied to the Navigators adverse development cover, and that Hurricane Helene contributed $104 million of losses.

02—Key points

Key Highlights

Core earnings of $752 million ($2.53 per diluted share) rose 6% year over year; net income available to common stockholders rose 18% to $761 million ($2.56 per diluted share).
Trailing 12-month core earnings ROE improved to 17.4% from 14.9%, and net income ROE was 20.0%.
Quarterly common dividend increased 11% to $0.52 per share, and $400 million of stock was repurchased during the quarter.
Commercial Lines written premiums grew 9% to $3.3 billion, with an underlying combined ratio of 88.6, though reported combined ratio rose to 92.2 on higher catastrophe losses.
Personal Lines combined ratio improved 5.4 points to 102.5, with the auto underlying combined ratio improving 7.0 points to 101.5 on double-digit renewal price increases.
Net investment income rose 10% to $659 million, but limited partnership income fell to $37 million from $72 million.
Hurricane Helene losses of $104 million and a $26 million Navigators ADC deferred gain benefit affected quarterly results and warrant normalization when assessing run-rate earnings.

03—Questions

Frequently Asked Questions

Why did reported net income grow faster than core earnings?
Net income available to common stockholders rose 18%, while core earnings rose 6%. Core earnings exclude net realized losses, which were $13 million in Q3 2024 versus $90 million in Q3 2023, so the smaller realized loss drove more of the GAAP increase than of the core increase. The gap also reflects the $26 million deferred gain amortization on the Navigators ADC, which is excluded from core earnings.
Is the dividend increase sustainable given the quarter's catastrophe losses?
The company cited strong capital generation and raised the quarterly dividend to $0.52 per share, payable January 3, 2025. Quarterly dividends paid totaled $138 million, against $400 million in buybacks. Current accident year catastrophe losses of $247 million were manageable relative to earnings of $752 million, but the filing does not provide forward-looking payout guidance.
What is driving the deterioration in Commercial Lines' reported combined ratio?
The reported combined ratio rose to 92.2 from 90.2, driven by 0.9 points of higher current accident year catastrophe losses, including $55 million from Hurricane Helene, and 0.5 points of less favorable prior-year development. The underlying loss ratio also rose 0.7 points, primarily from a higher general liability loss ratio, which investors may view as a trend to monitor.
How is Personal Lines' profitability trending?
Personal Lines posted net income of $31 million versus a $12 million loss a year earlier. Its combined ratio improved to 102.5 from 107.9, and its underlying combined ratio improved to 93.7 from 99.0. Renewal written price increases of 20.8% in auto and 15.2% in homeowners indicate that pricing actions are offsetting elevated loss cost trends, though the segment still operates above a 100 combined ratio on a reported basis.
Why did limited partnership income decline, and does it matter for future earnings?
LP income fell to $37 million from $72 million, and the annualized LP yield dropped to 3.0% from 6.3%, mainly because of lower returns on private equity funds. Excluding LPs, net investment income grew 18% to $622 million, driven by higher invested assets and a 40 basis point increase in annualized yield. LP income is volatile, so investors should focus on the excluding-LP trend for underlying investment earnings.

04—Continue

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