Hartford Financial Services Group Inc. posted the third-biggest decline in the S&P 500 Index after second-quarter profit plunged on losses from auto insurance.
The insurer dropped $4.08, or 9.3 percent, to $39.85 at 4 p.m. in New York, the company’s steepest one-day fall since 2011. The decline wiped out the company’s gain for the year.
Net income fell by almost half to $216 million from $413 million a year earlier, according to a statement late Thursday from Hartford, which is based in the Connecticut city of the same name. The personal lines business, which includes car and home coverage, posted an operating loss of $55 million, compared with profit of $42 million a year earlier on increased automobile claims costs, partly tied to distracted drivers.
The insurer’s personal lines combined ratio was 112.6, up 13.4 points from the 2015 second quarter. Its commercial lines combined ratio was 95.0, up 2.8 points from second quarter 2015 due to higher accident and catastrophe losses this year.
“In personal lines, we have had a difficult stretch,” President Doug Elliot said in a conference call Friday. There is “no hiding our disappointment” in those results.
Auto insurers including Allstate Corp. and the Geico unit at Warren Buffett’s Berkshire Hathaway Inc. said a year ago that they were raising rates to counter the increased frequency of accident claims. Michael Nannizzi, an analyst at Goldman Sachs Group Inc., asked why the response seemed slower at Hartford, which sells car policies through a relationship with the AARP, an association for people who are 50 or older.
“Some of it was our own self-inflicted actions and we have to take full accountability for that,” Chief Executive Officer Christopher Swift said on the call. He also said that Hartford seeks to maintain “a level of stability with AARP and its members,” given the company’s decades-long relationship with the group.
Profit from commercial insurance slipped 15 percent to $224 million. Other property-casualty operations generated a loss of $154 million after a review of asbestos and environmental policies showed that the company needed to add to reserves because of higher-than-expected legal costs. Hartford announced a deal Tuesday in which Catalina Holdings Ltd. agreed to take on a book of asbestos-related liabilities in the U.K. from the insurer.
Softer Than Expected
At the group benefits business, profit declined 18 percent to $46 million. The contribution from mutual funds slipped about 9 percent to $20 million. Hartford’s operating earnings per share were 31 cents, missing by 49 cents the average estimate in a Bloomberg survey of analysts.
“The quarter was softer than expected across all of Hartford’s ongoing businesses,” Ryan Tunis, an analyst at Credit Suisse Group AG, said in a note to clients.
Net investment income dropped 7.7 percent to $735 million. Results were hurt by lower profit from private equity and real estate partnerships.
*Carrier Management added combined ratio data to this story.