Investors Overreacted Big Time to This Insurer's Earnings Reporthttp://www.fool.com/investing/general/2014/02/06/investors-overreacted-big-time-to-this-insurers-ea.aspx Jessica Alling
February 6, 2014
No one likes to be disappointed during earnings season. But for investors in The Hartford (NYSE: HIG), this week's results may not have been the spark that ignited a big sell-off.
Largely supported by its commercial Property and Casualty division, The Hartford saw revenues growing 43% in P&C and 56% in Group benefits. Commercial P&C premiums enjoyed a sixth consecutive quarter of 8% rate increases, while maintaining an 80% average for retention. New revenue in small and middle market policies was up 13% for the quarter. The small business segment is the strongest in terms of combined rate hikes and retention, with small commercial auto policies experiencing an 11% rate increase.
The future for the Talcott Resolution segment has a positive outlook. With 88% and 76% of US and Japanese accounts, respectively, beyond the surrender charge period, there is a higher probability that the insurer can induce more surrenders through its Enhances Surrender Value program.
Like many of the other insurers looking to get out the the variable annuities business, The Hartford has been offering attractive opportunities for customers to exit their accounts, allowing the reduction of future risk for the company. So far, The Hartford is reporting a 38% acceptance rate of its ESV program.
The insurer pronounced its expectations for 2014 to be slightly better than the full year 2013, with the top range for earnings hitting the $1.75 billion mark. Though this is a 7% improvement from 2013, it came as a slight disappointment for investors who continue to look for sustained growth from the insurance sector.
One of the biggest factors that investors need to keep in mind is the very favorable conditions that insurers experienced in 2013. As we saw in the Traveler's earnings report, catastrophic losses were almost non-existent compared to 2012, thanks to the absence of a large ca