Hartford Financial Services Group Inc., the insurer that sold its life units to focus on property/casualty coverage, plunged the most in the 88-company Standard and Poor’s 500 Financials Index after third-quarter profit fell, missing analysts’ estimates.
Hartford dropped $3.73, or 7.6 percent, to $45.08 at 9:45 a.m. in New York, the biggest decline in two months. The company had gained 17 percent through Monday’s close.
Net income slipped 1.8 percent to $381 million as insurance underwriting ratios deteriorated, especially in car coverage, the Hartford, Conn.-based company said Monday in a statement after markets closed. Operating income, which excludes some investment results, was 86 cents a share, compared with the 99 cent average estimate of 16 analysts surveyed by Bloomberg.
“Results were underwhelming” at the division that sells P/C coverage to individuals, Credit Suisse Group AG analysts led by Thomas Gallagher said in a note Tuesday. The insurer was hurt by “worse-than-expected claims in auto liability and physical damage frequency.”
Car insurers have been pressured by rising auto claims as vehicle owners drive more miles in an expanding economy. Allstate Corp. and the GEICO unit at Warren Buffett’s Berkshire Hathaway Inc. have said they are seeking to raise rates to counter the trend.
Earnings at Hartford’s personal lines division fell 76 percent to $17 million. The underwriting profit margin narrowed from homeowners coverage and swung to a loss on automobiles.
Core earnings in the commercial P/C operations fell 19 percent to $216 million from a year earlier. The insurer spent 97.3 cents on claims and expenses for every dollar it took in during the third quarter at its P/C business, Hartford said in the financial supplement on its website. That compares with 93 cents a year earlier.
“Our results this quarter reflect headwinds in several areas, resulting in a decrease in core earnings,” Chief Executive Officer Christopher Swift said in the statement, citing a decline in investment income, claims costs tied to policies sold in prior years and increased expenses for catastrophes.
Net investment income decreased to $730 million from $810 million. The contribution from the alternatives portfolio, which includes real estate joint ventures and some hedge fund investments, declined 78 percent to $22 million.
Book value, a measure of assets minus liabilities, increased 1.1 percent to $43.32 a share from $42.86 as of June 30.
The Talcott Resolution unit, which includes annuity contracts being wound down by the insurer, generated $107 million compared with a profit of $122 million in the same period last year. Mutual funds’ earnings were $22 million, the same as last year. The group-benefits segment posted a profit of $47 million, up 24 percent from a year earlier.