The Hartford Financial Services Group reported much higher earnings in the third quarter compared with a year ago, driven by a very quiet summer in terms of natural disasters and higher prices on home, auto and commercial property insurance.
Net income was $401 million for the three-month period, or 83 cents per diluted share, compared with $60 million, or 11 cents per diluted share, during the same period a year before.
Core earnings were $378 million, or 78 cents per share, compared with $50 million, or 8 cents per share. Analysts polled by Thomson Reuters were expecting, on average, 83 cents per share.
Combined revenue of The Hartford's commercial markets, consumer markets and wealth management businesses was down 1 percent to $4.55 billion for the quarter from $4.6 billion during the same period in 2011.
"Renewal pricing increased 8 percent in standard commercial, 4 percent in personal auto and 6 percent in homeowners, with higher retention in all three lines," said The Hartford's Chairman and CEO Liam E. McGee.
The Hartford is among many property-casualty insurers that have raised rates in recent years as part of a natural cycle in the industry. Premiums for commercial insurance — coverage for property damage and liability paid by businesses — had fallen for 30 straight financial quarters from 2003 to 2011, when the industry started to raise prices again, according to the Insurance Information Institute.
Some insurers, such as The Travelers Cos. and The Hartford, say the price trend is exacerbated by disappointing results on investment income, and insurers are making up for it by charging customers more.
"I think there is clearly some impact of low interest rates in the price increases, because, again, we're all trying to run our property-casualty businesses to acceptable combined ratios," McGee said in an interview.
Combined ratios are, simply put, a fraction of the amount insurers spend on claims and expenses divided by their premium revenue.
Additionally, higher unemployment drives up losses for certain lines of business, such as workers' compensation and group benefits, which, in turn, drives up prices, McGee said.
Catastrophe losses for the quarter totaled $7 million, after taxes, which was $68 million below budget. Catastrophe losses were $60 million for the third quarter in 2011, after taxes.
Quarterly revenue in the company's commercial lines was $2.89 billion, up from $2.87 billion last year. Quarterly revenue in consumer markets, which includes homeowner's insurance and auto coverage, was down to $989 million from $1 billion last year. Quarterly revenue in wealth management, which includes life insurance, is down to $666 million from $731 million last year.
Quarterly net income for commercial lines was $194 million, up from $78 million last year. Consumer markets had a third-quarter net loss of $16 million last year and a third-quarter profit of $94 million this year. Wealth management had a net loss of $8 million during the third-quarter last year and a profit of $22 million this year.
The Hartford released earnings after the markets closed Thursday. The stock was down 26 cents to $21.66 in after-hours trading.