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The Hartford Financial Services Group In Reports Operating Results (10-Q)

November 01, 2012 | About:
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10qk

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The Hartford Financial Services Group In (HIG) filed Quarterly Report for the period ended 2012-09-30.

Hartford Financial Services Group Inc has a market cap of $9.46 billion; its shares were traded at around $21.91 with a P/E ratio of 9.8 and P/S ratio of 0.4. The dividend yield of Hartford Financial Services Group Inc stocks is 1.8%.

Highlight of Business Operations:

The announced sale of this business has had a negative impact on sales of retirement plan products and surrender rates. In addition, insurance operating costs and other expenses includes restructuring costs for the three and nine months ended September 30, 2012 of $10 and $14, respectively, related to the Company's plan to pursue the sale of the Retirement Plans business. For further discussion of the Company's March 2012 announcement regarding its business and strategy evaluation, see MD&A – Outlooks.

The Company holds investments in securities backed by states, municipalities and political subdivisions (“municipal”) with an amortized cost and fair value of $12.9 billion and $14.3 billion, respectively, as of September 30, 2012 and $12.6 billion and $13.3 billion, respectively, as of December 31, 2011. The Company s municipal bond portfolio primarily consists of high quality essential service revenue and general obligation bonds. As of September 30, 2012, the largest issuer concentrations were the states of California, Illinois and Massachusetts, which each comprised less than 4% of the municipal bond portfolio and were primarily comprised of general obligation bonds. As of December 31, 2011, the largest issuer concentrations were the states of California, Massachusetts and Illinois, which each comprised less than 3% of the municipal bond portfolio and were primarily comprised of general obligation bonds.

For the three and nine months ended September 30, 2012, impairments recognized in earnings were comprised of credit impairments of $14 and $40, respectively, impairments on equity securities of $4 and $63, respectively, and securities that the Company intends to sell of $19 and $61, respectively.

Impairments recognized in earnings were comprised of credit impairments of $42 and $103, respectively, impairments on equity securities of $0 and $10, respectively, and securities that the Company intended to sell of $18 and $25, respectively. Credit impairments primarily related to structured securities as a result of continued property-specific deterioration of the underlying collateral. The remaining credit impairments were primarily direct private equity investments that were impaired due to the likelihood of a disruption in contractual principal and interest payments due to the restructuring of the debtor s obligation. Impairments on equity securities related to preferred stock associated with these direct private equity investments, and impairments on securities that the Company intended to sell consisted of corporate financial services securities and ABS collateralized by aircraft.

Dividends to the HFSG Holding Company from its insurance subsidiaries are limited by state regulation. The payment of dividends by Connecticut-domiciled insurers, including dividends associated with the proceeds from a sale of any of our life businesses, is limited under the insurance holding company laws of Connecticut. These laws require notice to and approval by the state insurance commissioner for the declaration or payment of any dividend, which, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of the insurer s policyholder surplus as of December 31 of the preceding year or (ii) net income (or net gain from operations, if such company is a life insurance company) for the twelve-month period ending on the thirty-first day of December last preceding, in each case determined under statutory insurance accounting principles. In addition, if any dividend of a Connecticut-domiciled insurer exceeds the insurer s earned surplus, it requires the prior approval of the Connecticut Insurance Commissioner. The insurance holding company laws of the other jurisdictions in which The Hartford s insurance subsidiaries are incorporated (or deemed commercially domiciled) generally contain similar (although in certain instances somewhat more restrictive) limitations on the payment of dividends. Dividends paid to HFSG Holding Company by its life insurance subsidiaries are further dependent on cash requirements of HLI and other factors. The Company s property-casualty insurance subsidiaries are permitted to pay up to a maximum of approximately $1.4 billion in dividends to HFSG Holding Company in 2012 without prior approval from the applicable insurance commissioner. The Company s life insurance subsidiaries are permitted to pay up to a maximum of approximately $625 in dividends to HLI in 2012 without prior approval from the applicable insurance commissioner. The aggregate of these amounts is the maximum the insurance subsidiaries could pay to HFSG Holding Company in 2012 without prior approval from the applicable insurance commissioner. In addition to statutory limitations on paying dividends, the Company also takes other items into consideration when determining dividends from subsidiaries. These considerations include, but are not limited to expected earnings and capitalization of the subsidiary, regulatory capital requirements and liquidity requirements of the individual operating company. For the nine months ended September 30, 2012, HFSG Holding Company and HLI received no dividends from the life insurance subsidiaries, and HFSG Holding Company received $722 in dividends from its property-casualty insurance subsidiaries, including dividends of $122 to fund interest payments on an intercompany note between Hartford Holdings, Inc. and Hartford Fire Insurance Company.

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