The Hartford to take $251m hit from COVID-19 losses in Q2

US-based property/casualty insurer  The Hartford expects to take pre-tax $251 million ($198 million after tax) hit from losses related to the global COVID-19 pandemic in second quarter 2020.

The current accident year catastrophe losses at the insurer are expected to equal $248 million pre-tax ($196 million after tax) in the quarter, which includes $138 million pre-tax, for wind and hail events as well as $110 million, before tax, related to civil unrest in the US.

The company has estimated COVID-19 incurred losses in property & casualty of $213 million pre-tax, largely comprised of reserves for business interruption claims on property policies, workers’ compensation net of favorable frequency, and financial lines.

COVID-19 property losses also include reserves for estimated legal costs to defend lawsuits for business interruption claims where the contract requires direct physical loss or damage to trigger coverage.

Workers’ compensation COVID-19 losses include an estimate for presumptive losses, relating to states that have passed laws or issued executive orders or agency rules providing for the presumption of coverage for certain industry classes, including health care and other essential workers.

Additionally, the company expects COVID-19 incurred losses in group benefits of $38 million pre-tax, related mostly to group life claims.

The Hartford also plans to increase its allowance for credit losses on premiums receivable by $44 million pre-tax, given higher expected uncollectible receivables due to the economic effects of COVID-19.

For the second quarter, the company expects net favorable reserve development of $268 million pre-tax, including a $400 million pre-tax reduction in reserves for prior year catastrophes. This net favorable reserve development includes a $102 million, before tax, increase in reserves for sexual molestation and abuse claims. The favorable catastrophe reserve development includes a reduction in estimated losses from various wind and hail events in 2018 and 2019 and from the 2017 and 2018 California wildfires, including recognizing a subrogation recoverable from PG&E in the amount of $289 million, before tax, or $228 million, after tax.

The company’s estimate of net prior accident year development also includes reserve increases of $54 million, before tax, on legacy Navigators reserves for the 2018 and prior accident years, which is ceded to National Indemnity Company under an adverse development cover.

The Hartford expects net investment income in second quarter 2020 of $339 million, before tax, primarily due to an estimated $71 million, before tax, loss on limited partnerships and other alternative investments.