The Hartford HIG today reported that it has filed an amended Form 10-Q with the
U.S. Securities and Exchange Commission (SEC) to restate its results for the
third quarter ended September 30, 2012. The amended filing corrects for an
error in the company's preliminary calculation of the gain or loss relating to
the Individual Life business transaction under U.S. generally accepted
accounting principles (GAAP). The company is now reporting a full year 2012
net loss of $38 million and shareholders' equity of $22.4 billion at December
31, 2012, as compared with the previously reported 2012 net income of $350
million and shareholders' equity of $22.8 billion. The company's 2012 core
earnings of $1.4 billion are unchanged.
“We regret the error, but importantly the adjustments have no impact on our
reported 2012 core earnings, statutory results or surplus, and announced
capital management plan,” said The Hartford's Chairman, President and Chief
Executive Officer Liam E. McGee. “The Individual Life, Retirement Plans and
Woodbury Financial Services transactions were attractive for The Hartford and
completed on favorable financial terms. They generated an aggregate statutory
capital benefit of $2.2 billion and this remains unchanged.”
In September 2012, The Hartford estimated that the Individual Life transaction
would not generate a material gain or loss under GAAP. Following the
identification of the error, the company estimates that the transaction will
result in a GAAP loss of $393 million, after tax. This estimate is subject to
change pending the final determination of net assets sold, transaction costs
and other adjustments. The error resulted from the omission of the impact of
certain reinsurance recoverable balances on the gain/loss calculations for the
transaction.
*Denotes financial measure not calculated based on generally accepted
accounting principles (“non-GAAP”)
The revised third quarter 2012 financial results include a $388 million
after-tax loss related to the transaction, which reflects the impairment of
goodwill and the establishment of a loss accrual for premium deficiency. Net
realized investment losses of $5 million, after tax, related to the
transaction were included in the company's announced fourth quarter 2012
financial results.
The company's previously filed financial statements for the third quarter of
2012 should no longer be relied upon. In addition, the company has determined
that there was a material weakness in its internal control over financial
reporting at September 30, 2012, which was remediated as of December 31, 2012.
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