On Friday, The Hartford announced that it filed an amended Form 10-Q with the U.S. Securities and Exchange Commission to restate its third-quarter 2012 results—a change that turned a previously reported net income figure of $350 million into a net loss of $38 million.
The company said it also determined that there was a material weakness in its internal control over financial reporting at Sept. 30, 2012, which was remediated as of Dec. 31, 2012.
While the restatement did not impact core earnings (earnings excluding net realized capital gains and losses), which remain at the previous figure of $1.4 billion, shareholders’ equity is now $22.4 billion at Dec. 31, 2012, rather than $22.8 billion.
In a statement, The Hartford said the amended filing corrects for an error in the company’s preliminary calculation of the gain or loss relating to the Individual Life business transaction under U.S. generally accepted accounting principles.
“We regret the error, but importantly the adjustments have no impact on our reported 2012 core earnings, statutory results or surplus, and announced capital management plan,” said The Hartford’s Chairman, President and Chief Executive Officer Liam E. McGee. “The Individual Life, Retirement Plans and Woodbury Financial Services transactions were attractive for The Hartford and completed on favorable financial terms. They generated an aggregate statutory capital benefit of $2.2 billion and this remains unchanged.”
In September 2012, The Hartford estimated that the Individual Life transaction would not generate a material gain or loss under GAAP. Following the identification of the error, the company estimates that the transaction will result in a GAAP loss of $393 million, after tax, The Hartford said, adding that the estimate is subject to change pending the final determination of net assets sold, transaction costs and other adjustments.
The carrier further explained that the error resulted from the omission of the impact of certain reinsurance recoverable balances on the gain/loss calculations for the transaction.
The revised third quarter 2012 financial results include a $388 million after-tax loss related to the transaction, which reflects the impairment of goodwill and the establishment of a loss accrual for premium deficiency. Net realized investment losses of $5 million, after tax, related to the transaction were included in the company’s announced fourth quarter 2012 financial results.
The company’s previously filed financial statements for the third quarter of 2012 should no longer be relied upon, The Hartford said.
Source: The Hartford