Hartford: Strategizes Ways To Improve Personal Line, Annuities Profitability

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Dec. 08–The Hartford's top executives presented a sweeping strategy Thursday, designed to boost profitability in home and auto insurance, group benefits, commercial insurance for mid-sized companies, annuities and retirement plans.

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Increasing profitability on those lines could be accomplished by increasing prices, decreasing costs or both.

At the same time, the company wants to increase revenues on its life insurance, specialty commercial, small-business commercial and mutual funds business. Those business lines are already producing high profit returns.

The company hopes to increase revenue while maintaining that same profitability — which contrasts with some companies' efforts to increase revenue by decreasing prices which can lessen profitability.

As part of its effort to grow its mutual fund business, for example, The Hartford is adding up to 50 people to its distribution team. Boston-based Wellington Management will be a sole "sub-advisor" to The Hartford's funds, expanding an existing relationship with the wealth management firm.

"The Hartford is accelerating its growth plans for the mutual funds business," said Liam E. McGee, The Hartford's CEO. "Mutual Funds is a high growth, high ROE [return on equity] business. Aligning more closely with a well-respected advisor like Wellington by designating them as our preferred sub-advisor is an important step toward our longer-term goal to create shareholder value."

In its Consumer Markets segment, which is personal homeowners' and auto insurance, The Hartford is aiming for the "mature, preferred" customers — not necessarily revenue growth. The insurer has said on several occasions that it plans to grow personal lines through its affinity relationships with groups such as AARP, the American Kennel Club and Sierra Club.

The strategy is in direct contrast to stiff price competition in personal lines among other insurers, such as GEICO and Progressive. The Hartford noted that its personal lines business more profitable than the industry average.

While more people are buying personal-lines insurance directly online, the majority still prefer to use an agent. In 2006, 80 percent of The Hartford's customers used an agent compared with 76 percent in 2010.

The company's catastrophe loss ratio — the amount it pays in damage from major storms such has hurricanes compared with the premiums it charges — decreased in the Northeast because of higher prices and less exposure along the coast. Tornadoes and hail storms meant that the company had a worse loss ratio in the Midwest and Southwest than in the Southeast and Northeast, and it will change its prices accordingly.

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