Investor Relations

Non-GAAP and Other Financial Measures

The Hartford includes in its public disclosures financial measures that are not calculated based on generally accepted accounting principles (“non-GAAP”).  The Hartford uses non-GAAP and other financial measures to assist investors in analyzing the Company’s operating performance.  Because The Hartford’s calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing The Hartford’s non-GAAP and other financial measures to those of other companies.
Many of the non-GAAP and other financial measures used by The Hartford are included in The Hartford’s quarterly Investor Financial Supplement.  An explanation of those measures, including for each non-GAAP financial measure a reconciliation to the most directly comparable GAAP measure, is set forth in each Investor Financial Supplement.
From time to time in various public disclosures other than the Investor Financial Supplement, The Hartford provides the non-GAAP financial measure core earnings, before tax related items, for the five-year period ended December 31, 2008, and for the three and nine months ended September 30, 2008 and 2009.  The Hartford also provides this non-GAAP financial measure on a per diluted common share basis.  The Hartford provides these adjusted measures of core earnings to enhance investor understanding of the company’s ongoing businesses by eliminating:

  • those realized capital gains and losses that tend to be highly variable from period to period based on capital market conditions;
  • the cumulative effect of accounting change;
  • the effects of tax related items, because these items either are non-recurring or are highly variable from period to period.

Net income is the most directly comparable GAAP measure.  A reconciliation of net income (loss) and net income (loss) per diluted common share to these non-GAAP financial measures for the five-year period ended December 31, 2008 is set forth below.

  YEAR ENDED
DECEMBER 31,
(in millions, except for per share data) 2004 2005 2006 2007 2008
Net income (loss) $2,115 $2,274 $2,745 $2,949 $(2,749)
   Less: Preferred dividends - - - - 8
Net income (loss) available to common shareholders 2,115 2,274 2,745 2,949 (2,757)
   Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings 166 32 (120) (558) (3,607)
   Less: Cumulative effect of accounting change (23) - - - -
   Less: Tax related items 216 - - - -
   Add: Preferred dividends - - - - 8
Core earnings, as adjusted for the foregoing items $1,756 $2,242 $2,865 $3,507 $858
 
Weighted average common shares outstanding and dilutive potential common shares [1] 297.0 305.6 315.9 319.1 306.7
 
Diluted earnings (losses) per common share
Net income (loss) available to common shareholders $7.12 $7.44 $8.69 $9.24 $(8.99)
   Less: Difference arising from shares used for the denominator between net loss and core earnings - - - - (0.18)
   Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings 0.56 0.10 (0.38) (1.75) (11.52)
   Less: Cumulative effect of accounting change (0.08) - - - -
   Less: Tax related items 0.73 - - - -
   Add: Preferred dividends - - - - 0.03
Core earnings, as adjusted for the foregoing items [2] $5.91 $7.34 $9.07 $10.99 $ 2.74

[1] As a result of the antidilutive impact from the net loss for the year ended December 31, 2008, The Hartford is required by generally accepted accounting principles to use basic weighted average shares in the calculation of diluted earnings per common share for the year ended December 31, 2008.  In the absence of the net loss, 313.0 weighted average common shares outstanding and dilutive potential common shares would have been used in the calculation for the year ended December 31, 2008.
 
[2] Due to core earnings for the year ended December 31, 2008, core earnings per common share is calculated using weighted average common shares outstanding and dilutive potential common shares of 313.0 for the year ended December 31, 2008.
 

A reconciliation of net loss and net loss per diluted common share to these non-GAAP financial measures for the three and nine months ended September 30, 2008 and 2009 is set forth below.

THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
(in millions, except for per share data) 2008 2009 2008 2009
Net loss $(2,631) $(220) $(1,943) $(1,444)
   Less: Preferred dividends and accretion of discount   - 62   - 65
Net loss available to common shareholders (2,631) (282) (1,943) (1,509)
   Less: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses)   (2,209) (880)   (3,009) (1,551)
Core earnings (losses) available to common shareholders $(422) $598 $1,066 $42
 
Weighted average common shares outstanding (basic) 301.1 356.1 308.8 334.1
   Dilutive effect of stock compensation 1.0 1.1 1.5 0.8
   Dilutive effect of CPP Warrants [1] - 25.3 - 8.7
Weighted average common shares outstanding and dilutive potential common shares (diluted)  302.1 382.5 310.3 343.6
Basic earnings (losses) per common share
Net loss available to common shareholders $(8.74) $(0.79) $(6.29) $(4.52)
   Less: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses)  (7.34) (2.47) (9.74) (4.65)
Core earnings (losses) available to common shareholders    $(1.40) $1.68   $3.45 $0.13
Diluted earnings (losses) per common share [2]
Net loss available to common shareholders $(8.74) $(0.79) $(6.29) $(4.52)
   Less: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses)  (7.34) (2.35) (9.73) (4.64)
Core earnings (losses) available to common shareholders    $(1.40) $1.56   $3.44 $0.12

[1] The Hartford issued 52.1 million warrants to purchase The Hartford Common Stock to the U.S. Department of the Treasury on June 26, 2009 at a strike price of $9.79.
[2] As a result of anti-dilutive impact, in periods of a loss, weighted average common shares outstanding are used in the calculation of diluted earnings per share.