Hartford Announces 3-Q Earnings Estimates

By Caroline McDonald

NU Online News Service, Oct. 14, 10:28 a.m.EDT?The Hartford Financial Services Group Inc. announcedyesterday that its third-quarter earnings estimates per dilutedshare will be between $1.15 and $1.18.

By comparison, the third-quarter 2002 adjusted operatingearnings per share amount was $1.15, said spokesperson JoyceWillis. The latest estimate failed to meet analysts' projections,which on average estimated $1.29 according to those surveyed byThomson First Call.

Ms. Willis said that The Hartford typically gives full-yearrather than quarterly estimates and that the company is "estimatinghigher for the full year than we did earlier this year."

The third-quarter earnings amount includes additional reservesfor the cost of claims resulting from Hurricane Isabel and a legaldispute with Bancorp Services, LLC, the Hartford, Conn.-basedcompany said.

The company also said in a statement it estimates claim costsrelated to Hurricane Isabel to be $26 million (after-tax), or 9cents per diluted share, for the third quarter.

Reserves were increased by about $40 million (after-tax), or 14cents per diluted share, for the third quarter. The increasereflects the company's current best estimate of the cost ofresolving the Bancorp dispute.

Elizabeth Sacksteder, senior vice president of litigation,explained to National Underwriter that in 2000 Bancorpfiled a suit alleging that Hartford had "infringed a patent thatrelated to an administration system for administering a particulartype of corporate owned life insurance account."

She said Bancorp also alleged that prior to obtaining a patent,The Hartford had "misappropriated an alleged trade secret whichrelated to a different aspect of the particular type of corporateowned life insurance account."

In 2002, she continued, Bancorp received a verdict and judgmentin its favor on the trade secret part of the case, which Hartfordis appealing. The insurer won the patent part of the case.

The third-quarter 2003 earnings estimate assumes that thecompany will have no net realized capital gains or losses in thequarter. While the company may incur net realized capital gains orlosses in the quarter, any such gains or losses are not expected tobe material, according to The Hartford.

The Hartford also adjusted its full-year 2003 operating incomeper share guidance to $5.10-to-$5.25 per diluted share. Thisestimate excludes the effect of net realized capital gains orlosses, the first-quarter asbestos charge and the third-quarterBancorp expense.

Due to the Bancorp expense and improving performance in TheHartford's life operations, the company said its full-year 2003operating income per diluted share guidance is as follows:

? The full-year estimate reflects diluted weighted averageshares of 274.1 million.

? Calculated using diluted weighted average shares of 274.1million for the full year. The earnings per share impact of theestimated Bancorp reserve addition in the third quarter of 14 centsis based on diluted weighted average shares of 284.8 million.

? The asbestos reserve addition had an earnings per share impactof $6.66 in the first quarter. The first-quarter EPS calculationreflected basic weighted average shares of 255.4 million. Thefull-year estimate reflects basic weighted average shares of 272.5million.

? Included in net income but not in operating income is $133million (after-tax) of net realized capital gains reported throughJune 30. Realized gains are not expected to be material in thethird quarter and are not estimated for the fourth quarter.

The Hartford said it uses the non-GAAP financial measureoperating income as an important measure of the company's operatingperformance.

The company said in its guidance that it presented operatingincome as net income, before the after-tax effect of net realizedcapital gains and losses, the first-quarter asbestos reserveaddition and the third-quarter Bancorp reserve addition.

The company said this operating income measure excludes theeffect of realized capital gains and losses, which tend to behighly variable; it excludes the effect of the first-quarterasbestos charge, which relates solely to legacy businesses; and itexcludes the third-quarter Bancorp expense, which is unrelated toongoing operations.