The Hartford reported core earnings of $389 million for the second quarter 2015, an increase of $245 million from $144 million in second quarter 2014. The increase was due in part to improved underwriting results with lower catastrophe costs in property/casualty insurance.

Second quarter 2015 net income totaled $413 million compared with a net loss of $467 million in second quarter 2014, which included a $617 million loss on discontinued operations from the sale of the company’s Japan annuities business. Excluding this loss, second quarter 2015 net income improved $263 million over second quarter 2014, largely as a result of the $245 million increase in core earnings.

“The Hartford delivered strong financial and operational performance for the second quarter of 2015, reporting improved results across all of our businesses,” said The Hartford’s Chairman and CEO Christopher Swift said in a statement accompanying the results. “Reflecting our financial strength, we also expanded our capital management plan and increased our quarterly common stock dividend. Looking ahead, we have the right strategy, capabilities and people to drive our continued success in a dynamic marketplace.”

M&A Possibilities

In his statement, Swift said that as the company manages its excess capital going forward, it will prioritize opportunities that accelerate premium growth and operating capabilities. During a briefing this morning with analysts asking about a potential merger or acquisition, Swift said any acquisition The Hartford might entertain would be one that adds to its product lines and helps it capture more market share in the U.S. as opposed to internationally. He said the company has flexibility to finance an acquisition should it find a deal that makes sense.

“We are U.S.-focused,” he said.

On the second quarter results, The Hartford President Doug Elliot noted that both commercial and personal property/casualty lines delivered improved underwriting results, with a combined ratio of 88.9 before catastrophes and prior year development.

“Operationally, we strengthened our underwriting capabilities, increased distribution effectiveness and added new leadership talent,” Elliot said.

After Swift became CEO in July 2014, former General Re President Morris Tooker joined the company as chief underwriting officer for Small Commercial, Middle Market, Large Commercial and Personal Lines segments and the insurer made other appointments.

P/C Commercial Lines

Core earnings in Commercial Lines increased $51 million, after-tax, or 24 percent, in second quarter 2015 to $264 million, after-tax, largely due to an improvement in the combined ratio before catastrophes and prior year loss and loss adjustment expense reserve development. Net investment income also contributed to the increase.

The gain on Commercial Lines underwriting rose to $126 million for a 92.2 combined ratio compared with a second quarter 2014 underwriting gain of $60 million and a 96.2 combined ratio. The increased underwriting gain and improved combined ratio were principally due to stronger underwriting results.

The second quarter 2015 commercial combined ratio before catastrophes improved 4.7 points over second quarter 2014 to 88.4, reflecting improvement in each of the three business lines: Middle Market, Small Commercial and Specialty Commercial. The improvement in both Small Commercial and Middle Market resulted from continued improvement in workers’ compensation and favorable non-catastrophe weather and non-weather property experience.

Second quarter 2015 written premiums in Commercial Lines grew 5 percent over second quarter 2014 to $1,655 million, reflecting continued renewal written price increases and strong retention in Small Commercial and Middle Market, which together comprise about 87 percent of Commercial Lines written premiums. Second quarter 2015 renewal written price increases averaged 3 percent in Standard Commercial, including 3 percent in Small Commercial and 2 percent in Middle Market.

P/C Personal Lines

The second quarter 2015 core earnings in Personal Lines totaled $42 million, compared with core losses of $27 million in second quarter 2014 primarily due to better underwriting results as a result of lower catastrophe and non-catastrophe weather losses. The gain on Personal Lines underwriting improved to $8 million for a combined ratio of 99.2, compared with underwriting losses of $74 million in second quarter 2014 and a combined ratio of 107.8. Catastrophe losses fell to $97 million compared with $161 million in second quarter 2014. Catastrophes represented 10.0 points on the second quarter 2015 combined ratio versus 16.7 points in second quarter 2014.

Second quarter 2015 combined ratio before catastrophes improved 2.0 points compared with second quarter 2014 to 89.1 due to improved homeowners results. The combined ratio before catastrophes for homeowners declined from 81.4 in second quarter 2014 to 72.6 in second quarter 2015 as a result of improved frequency and severity of homeowners weather-related losses, lower fire losses and rate increases over the past year. The combined ratio before catastrophes for automobile rose slightly from 96.0 in second quarter 2014 to 96.6 in second quarter 2015 due to higher automobile liability severity.

Second quarter 2015 Personal Lines written premiums rose 1 percent over second quarter 2014 reflecting growth in AARP Direct due to automobile new business growth, rate increases and stable retention. Renewal written price increases in second quarter 2015 were 6 percent in automobile and 8 percent in homeowners, consistent with the past several quarters, while premium retention was stable with first quarter 2015 at 87 percent for automobile and 90 percent for homeowners. Compared with second quarter 2014, premium retention was down 1 point for automobile and down 2 points for homeowners. Underwriting actions resulted in a 9 percent decrease in new business premiums to $125 million in second quarter 2015 compared with second quarter 2014, comprised of a 7 percent decline in automobile and 17 percent in homeowners.