The Hartford on Wednesday reported a second-quarter loss of $101 million as it bought back investments made by German insurer Allianz during the financial crisis in 2008.
The Hartford had a $587 million loss related to buying $2.43 billion in outstanding warrants held by Allianz. Allianz bought the right to buy 16 percent of The Hartford when it gave the local property-casualty and life insurer $2.5 billion in 2008.
The warrants entitled Allianz to buy back 69.3 million shares of The Hartford's stock. The Hartford announced it would repurchase the warrants on April 2, which it is financing by issuing senior notes and "junior subordinated debt."
Between the time Allianz bought the warrants and debentures from The Hartford in October 2008 and when The Hartford bought them back in April, Allianz gained $1.4 billion, a rate of return equal to about 21 percent annually.
Wednesday, The Hartford Financial Services Group reported a net loss of $101 million for the three-month period ending June 30, or 26 cents per diluted share, compared with net income of $33 million, or 5 cents per share, during the same period last year.
Core earnings for the quarter were up, to $119 million, or 23 cents per share, compared with $14 million, or 1 cent per share, during the same period a year before. Analysts polled by Thomson Reuters were expecting 46 cents per share.
The Hartford, along with other property-casualty insurers, reported far less in losses related to tornadoes, hail, thunderstorms and other spring catastrophes compared with the disastrously active season last year.
On July 16, The Hartford announced that it expected catastrophe losses for the second quarter of between $280 million and $300 million before taxes. During the same period last year, The Hartford had $447 million in catastrophe losses before taxes.
The company also is among many in the industry raising rates for insurance on commercial property, automobiles and homes.
"P&C pricing remains strong," said Chairman and CEO Liam E. McGee. "Renewal pricing increased 7 percent in standard commercial with acceptable retention, and rose 4 percent in personal auto and 6 percent in homeowners. Group Benefits results also improved modestly compared to the prior year reflecting stable incidence and a small improvement in terminations."
Revenue dropped 15 percent for the second quarter from $5.4 billion last year to $4.57 billion this year. Revenue fell 3 percent to 5 percent for the bulk of the company's business: commercial markets; consumer markets, which includes homeowners' and automobile insurance; and wealth management.
Revenue in the runoff, or discontinued, business lines plummeted 107 percent to a $43 million loss related to higher net investment losses.
Shares of the company were down 5 cents to $16.27 in after-hours trading Wednesday.