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Charge related to reinsurance agreement pushes The Hartford to net loss in Q4'16

The Hartford Financial Services Group Inc. reported a fourth-quarter 2016 net loss of $81 million, or 22 cents per share, compared to net income of $421 million, or $1.01 per share, a year ago.

The loss was mostly due to a $423 million after-tax charge resulting from a reinsurance agreement with National Indemnity Co. covering The Hartford's asbestos and environmental liability exposures. The loss also included an unlock charge of $12 million, after tax, compared to an after-tax unlock benefit of $35 million a year earlier.

Core earnings for the period were $415 million, or $1.08 per share, compared with $445 million, or $1.07 cents per share, a year earlier.

Both core and net earnings were impacted by a $102 million after-tax decrease in property and casualty underwriting results. They were partially offset by a $40 million after-tax increase in investment income from limited partnerships and other alternative investments. The Hartford said the weaker P&C underwriting results were mostly due to higher current accident-year personal auto liability losses.

The S&P Capital IQ consensus normalized EPS estimate for the quarter was 93 cents.

The personal lines segment posted a loss of $18 million, compared to net income of $51 million a year earlier. The personal lines combined ratio sharply deteriorated on a year-over-year basis, jumping to 106.7% from 95.3%. The automobile line's combined ratio climbed to 118.1% from 103.5% in the fourth quarter of 2015.

Commercial lines logged $267 million in net income, compared with $293 million in the final quarter of 2015. Its combined ratio worsened to 91.3% from 88.1%. The company said the deterioration was due to net unfavorable prior accident-year development and higher catastrophe losses, which mostly stemmed from Hurricane Matthew and other wind and hail events.

Book value per share was $44.35 as of Dec. 31, 2016, compared with $42.96 a year earlier. Excluding accumulated other comprehensive income, book value per share was $45.24, versus $43.76 as of Dec. 31, 2015.

Core earnings for the full year 2016 totaled $1.34 billion, or $3.38 per share, versus $1.65 billion, or $3.88 per share, a year earlier. Net income for the year was $896 million, or $2.27 per share, compared with $1.68 billion, or $3.96 per share, in 2015.

The S&P Capital IQ consensus normalized EPS estimate for 2016 was $3.25.

The company bought back 30.8 million shares for a total of $1.3 billion over the course of 2016.

For 2017, The Hartford expects its commercial lines combined ratio to be between 92.5% and 94.5%. It anticipates its personal lines combined ratio coming in between 99.0% and 101.0%. Property and casualty net investment income, before tax and excluding limited partnerships and other alternative investments, is projected to be between $975 million and $1.03 billion.