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$HIG 2Q15 Call: Mutual Fund core earnings rose 5% in the second quarter, primarily due to higher fee income on increased average assets under management, excluding Talcott variable annuity funds. Fund performance remained solid this quarter with 69% of funds outperforming peers over the last 5 years helping to improve net flows to a positive $250MM
$HIG stated that in the middle market, construction had a good 1Q17 as did marine and some other verticals. Therefore, the company is grinding its way in the generalist space of middle market and the growth there has not been as robust. The momentum, however, in construction has been positive over the last couple of years.
$HIG's net investment income increased 5% to $728MM, before tax, in 1Q17 compared with $696MM, before tax, in 1Q16 due to higher investment income on LPs, partially offset by the effect of lower invested assets, principally due to the runoff of Talcott Resolution, and a lower annualized investment yield, excluding LPs.
$HIG reported a 17% increase in 1Q17 earnings, primarily due to lower net realized capital losses, partially offset by higher catastrophe losses. Net income was $378MM or $1.00 per share compared to $323MM or $0.79 per share in 1Q16. Diluted EPS rose 27% in 1Q17. Total revenues grew to $4.6Bil from last year.
During 4Q16, $HIG repurchased $280MM of stock, which completed the $4.375Bil equity repurchase plan that expired in Dec. 31. In Jan. 2017, the company repurchased about 2.3MM shares for $110MM. Approx. $1.2Bil is available now under the 2017 equity repurchase authorization.
$HIG reported that the developments in corporate tax reform, infrastructure spending and possible replacement of Affordable Care Act and other changes in regulations could impact the company. In 2017, $HIG expects to maintain strong margins in Commercial Lines and Group Benefits segments and improve auto segment's profitability.
$HIG, which agreed to sell its run-off UK subsidiaries to Catalina in July 2016, reported that this deal is expected to close in the next few months. For 2017, the company expects a challenging environment with higher regulatory, fiscal and macroeconomic uncertainty. The competition to remain robust in 2017, $HIG said.
$HIG's core earnings for 4Q16 declined to $415MM from $445MM last year, while core EPS rose to $1.08 from $1.07 as the impact of share repurchases more than offset the 7% decline in core earnings. The results were affected by a decline in property and casualty underwriting results.
$HIG slipped to a 4Q16 loss from a profit last year, due to a $423MM charge resulting from a reinsurance agreement with National Indemnity Co. covering its asbestos and environmental liability exposures. Net loss was $81MM or $0.22 per share compared to a profit of $421MM or $1.01 per share a year ago.
$HIG stated that the company expected rate of change in auto frequency to moderate in 2H16 based on the increased levels seen in 2H15. Given higher-than-expected auto frequency trends in 3Q16, the company currently expects the full-year underlying auto combined ratio to be at the higher end of its guidance range of 101-103.
$HIG reported strong results in both commercial lines and group benefits in 3Q16. In the quarter, personal lines posted core earnings of $25MM, up $8MM from the year ago quarter. The underlying combined ratio was 96.1, increasing 0.5 point from a year ago, resulting from higher auto loss and liability loss costs.
$HIG said the company is seeing both increased frequency and severity of bodily injury claims, having the longest reporting lag and highest severity. The company also stated that it does not expect to achieve the full-year personal lines underlying combined ratio of 90 to 92 provided in Feb.
Insurance and financial services company $HIG said the company now expects the 2016 personal lines underlying combined ratio to be in the 93-94 range, reflecting favorable homeowners results YTD. Commercial lines and group benefits posted strong quarter, even as market headwinds intensified.
$HIG CEO Christopher Swift said that underlying margins remain strong in Commercial Lines the company continues to feel pressure on investment income due to lower interest rates. For 2016, Personal Lines combined ratio before catastrophes and prior-year development is expected to be between 93.0-94.0.
$HIG's book value per diluted share was $47.02, up 9% from Dec. 31, 2015; and book value per diluted share excluding accumulated other comprehensive income was $44.74, a 2% increase from Dec. 31, 2015. During 2Q16, the company repurchased 7.8MM common shares for a total of $350MM.