<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 18, 1996
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ITT Hartford Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-19277 13-3317783
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(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) No.)
Hartford Plaza, Hartford, Connecticut 06115
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (860) 547-5000
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None
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
On October 18, 1996, ITT Hartford Group, Inc. issued the press release set
forth as Exhibit 99 hereto.
Certain of the statements contained in the press release (other than
statements of historical fact) are forward-looking statements. Forward-looking
statements are made based upon management's expectations and belief concerning
future developments and their potential effect upon ITT Hartford. There can be
no assurance that future developments will be in accordance with management's
expectations or that the effect of future developments on ITT Hartford will be
those anticipated by management. Actual results could differ materially from
those expected by ITT Hartford, depending on the outcome of certain factors,
including (i) future social, economic, legal or legislative developments that
may affect ITT Hartford's ultimate remaining liability for environmental and
asbestos claims, and changes in methodologies for estimating that liability,
(ii) significant changes in interest rates, (iii) adverse property and casualty
loss development for events insured by ITT Hartford, (iv) changes in mortality,
morbidity, investment, persistency and expense experience and (v) increased
competition, particularly price competition, reducing product margins on ITT
Hartford's businesses.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit Description
- ---------------- ----------------------------
99. Press release issued
October
18, 1996.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ITT HARTFORD GROUP, INC.
/s/ James J. Westervelt
October 18, 1996 By: _______________________________
------------------
(Date) Name: James J. Westervelt
Title: Senior Vice President and
Group Controller
3
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EXHIBIT INDEX
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Exhibit Description
- --------- --------------------------------
99. Press release issued October
18, 1996.
4
<PAGE>
EXHIBIT 99
[LOGO]
ITT HARTFORD News Release
ITT Hartford Group, Inc. .Hartford Plaza. Hartford, CT 06115
Date: October 18, 1996
For Release: Upon Receipt
Contact: Connie Gurney Sue Honeyman
Office: 860/547-6237 Office: 860/547-4976
Home: 860/521-3192 Home: 203/397-9233
ITT HARTFORD REPORTS THIRD QUARTER LOSS
DUE TO ENVIRONMENTAL, GIC CHARGES
HARTFORD, Conn. - ITT Hartford Group Inc. (NYSE:HIG), an insurance and financial
services company, today reported a $543 million ($4.63 per share) net loss for
the third quarter, due to $693 million of non-recurring after-tax charges. These
actions increase asbestos and environmental reserves ($510 million), accelerate
future losses on the company's closed book of Guaranteed Investment Contracts
($169 million), and address other, primarily foreign tax-related, items ($14
million).
"With the advent of new methodologies and databases, we believe it was
financially responsible and prudent to conduct a ground-up analysis,
unparalleled in its scope, of our asbestos and environmental exposures," said
Donald R. Frahm, The Hartford's chairman and chief executive officer. "By taking
today's action, we address our ultimate asbestos and environmental liabilities.
This action and the other one-time charges eliminate a substantial drag on our
annual operating earnings and position us for a strong future."
Absent these charges, The Hartford would have reported $150 million of
net income for the quarter, a 13 percent decline from the same quarter last
year. Core earnings were $132 million, down 15 percent compared with $155
million for last year's third-quarter, primarily due to unusually high
catastrophe claims and the resolution of several large environmental cases.
Excluding these two items, core earnings were up 16 percent to $215 million from
$186 million for the third quarter 1995. Catastrophe claims for the period were
unusually high at $49 million, more than triple the $14 million reported for the
same period last year.
-more-
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3rd Q/2
Due to the non-recurring GIC charge, The Hartford's revenues were down
7 percent to $2.8 billion. Revenues for ongoing operations, which exclude the
GIC charge and other run-off operations, were up 1 percent to almost $3 billion
compared with the $2.9 billion for the same quarter last year. Realized capital
gains, excluding the GIC charge, were $18 million (after-tax), triple last
year's third quarter. Since the beginning of the year, assets have grown nearly
11 percent to $104 billion from $93.9 billion.
For the first nine months of the year, the company reported a net loss
of $304 million, compared with $418 million of net income for the same period
last year. Core earnings were down 4 percent to $343 million from $356 million
last year, due primarily to unusually adverse catastrophe experience in the
first and third quarters. Excluding these items, core earnings for the nine-
month period rose 19 percent to $601 million from $505 million for the
comparable period in 1995. Revenues for ongoing operations, which exclude the
GIC charge and other run-off operations, increased 6 percent to $9.1 billion,
from $8.6 billion for the first nine months of last year.
"This has been a pivotal 10 months for The Hartford. We became an
independent company, elected Ramani Ayer as the company's next chairman and my
successor, and we put some long-term problems behind us," said Frahm. "We also
launched a family of mutual funds, forged ahead with our overseas expansion, and
further solidified our relationship with The American Association of Retired
Persons by winning a segment of their Group Health Insurance Program."
Environmental
The asbestos and environmental charge The Hartford took today raises the
company's asbestos and environmental reserves to $2.1 billion from $1.3 billion.
The charge resulted from a comprehensive, ground-up analysis of the company's
asbestos and environmental exposures in its property-casualty businesses.
The study, which was launched this past April, examined policy, site and
exposure level data in the company's primary, specialty, excess, surplus, and
reinsurance operations. A prominent international actuarial firm reviewed The
Hartford's approach and concluded that the way the company studied its
exposures, the thoroughness of its analysis, and the way the company came to its
estimates, were reasonable and comprehensive.
-more-
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3rd O/3
GIC
The second charge The Hartford took today addressed its closed book GIC
portfolio. By taking the charge, the company accelerates most of the future
losses expected on its closed book GIC portfolio. The losses resulted from
reinvestment at lower rates of GIC portfolio assets due to unprecedented
mortgage prepayments in the early 1990s.
ITT Hartford (NYSE: HIG) is one of the nation's oldest and largest
international insurance and financial services operations, with 1995 revenues of
$12.2 billion. As of September 30, 1996, ITT Hartford had assets of $104 billion
and shareholder equity of $4.1 billion. It is a leading provider of commercial
property and casualty insurance, automobile and homeowners coverages, and a
variety of life insurance, annuities, employee benefits and asset management
plans.
###
ITT Hartford's Internet address is http://www.itthartford.com.
<PAGE>
ITT HARTFORD ENVIRONMENTAL STUDY FACT SHEET
WHAT IS THE STUDY: ITT Hartford's asbestos and environmental study involved a
system-wide, ground-up analysis of the company's environmental and asbestos
exposures. Using newly available methodologies and databases, the study
examined policy, claim, site and exposure data of The Hartford's primary
insurance companies, as well as its excess, surplus, reinsurance and run-off
operations.
The scope of the study - involving primary, excess, surplus and reinsurance
lines in its property-casualty operations - is unparalleled in the insurance
industry.
WHY WAS THE STUDY CONDUCTED: As a responsible insurer with a tradition of
prudent reserving, The Hartford believed it was necessary to capitalize on
newly available methodologies and databases to examine its environmental and
asbestos exposures throughout its property-casualty operations.
WHEN WAS THE STUDY PERFORMED: The study was launched this April and completed in
October.
WHO CONDUCTED THE STUDY: The Hartford's claim, actuarial and legal personnel,
working with outside counsel and consultants, conducted the study.
In addition, a prominent international actuarial firm reviewed The Hartford's
approach and concluded that the way the company studied its exposures, the
thoroughness of its analysis, and the way the company came to its estimates,
were reasonable and comprehensive.
WHAT WERE THE STUDY'S FINDINGS: The study determined that the company needed to
increase its reserves to $2.1 billion from $1.3 billion to cover its ultimate
costs of environmental and asbestos claims. This reserve, resulting in a $510
million after-tax, third-quarter charge, will cover existing and future
environmental and asbestos claims for the company's primary, excess, surplus and
reinsurance lines in the United States, as well as for affected lines in its
international operations.
Although survival ratio* is only one - and not the sole - measure of an
insurer's reserving position, The Hartford's 8.7 year survival ratio for
asbestos and 10.8 year survival ratio for pollution have now been strengthened
to 15.1 years for asbestos and 16.7 years for pollution. The combined survival
ratio for asbestos and environmental is now 16.1, up from 10.0 prior to this
action, and positions The Hartford as one of the best reserved companies in the
industry.
*Survival ratio is the number of years it would take to exhaust a company's
asbestos and environmental reserves, based on current rate of annual spending.
The Hartford's survival ratio is based on average annual spending over the most
recent three-year period.
10/18/96
# # #
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<TABLE>
<CAPTION>
ITT HARTFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS
THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1996 & 1995
(In millions except for per share information)
Third Quarter Nine Months
- ------------------------------------- ----------------------------------------
1996 1995 % Chg 1996 1995 % Chg
- ------------ ---------- --------- -------------- ---------- ---------
Highlights
----------
<C> <C> <C> <S> <C> <C> <C>
$ (543) $ 173 NM Net income (loss) $ (304) $ 418 NM
Core earnings (x-NAPC cats and weather
$ 215 $ 186 16% related losses & environmental activity) $ 601 $ 505 19%
(49) (14) (250%) Catastrophes and weather related losses (156) (67) (133%)
(34) (17) (100%) Environmental activity (102) (82) (24%)
- --------- ---------- ------------ ----------
$ 132 $ 155 (15%) Core earnings $ 343 $ 356 (4%)
========= ========== ============ ==========
$ 2,836 $ 3,058 (7%) Total revenues $ 9,140 $ 8,977 2%
Total assets $ 104,021 $ 90,237 15%
Per Share Information
---------------------
$ (4.63) $ 1.48 NM Net income (loss) $ (2.59) $ 3.57 NM
Core earnings (x-NAPC cats and weather
$ 1.83 $ 1.59 15% related losses and environmental activity) $ 5.13 $ 4.31 19%
$ 1.13 $ 1.32 (14%) Core earnings $ 2.93 $ 3.04 (4%)
Book value (including unrealized gain (loss)) $ 34.68 $ 42.60 (19%)
Book value (excluding unrealized gain (loss)) $ 34.00 $ 43.54 (22%)
117.2 117.1 0.1 Weighted average common shares outstanding 117.2 117.1 0.1
NM Not Meaningful
</TABLE>
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<TABLE>
<CAPTION>
ITT HARTFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS
THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1996 & 1995
(In millions)
SUMMARY SEGMENT RESULTS
Net Income
----------
Third Quarter Nine Months
- -------------------------- ---------------------------
1996 1995 % Chg 1996 1995 % Chg
- -------- ------- -------- -------- ------- --------
<C> <C> <C> <S> <C> <C> <C>
North American P&C (x-cats and weather
$ 126 $ 108 17% related losses & environmental activity) $ 352 $ 278 27%
24 28 (14%) International 71 77 (8%)
67 60 12% Life 180 157 15%
- -------- ------ ------ ------
217 196 11% Ongoing operations 603 512 18%
(2) (10) 80% Runoff (x-environmental activity) (2) (7) 71%
- -------- ------ Consolidated core earnings (x-NAPC cats and ------ ------
215 186 16% weather related losses & environmental activity) 601 505 19%
(49) (14) (250%) Catastrophes and weather related losses (156) (67) (133%)
(34) (17) (100%) Environmental activity (102) (82) (24%)
- -------- ------ ------ ------
132 155 (15%) Core earnings 343 356 (4%)
(510) - - A & E charges (510) - -
(169) - - GIC charges (169) - -
(14) 12 NM Allocated distribution items and other adjustments (14) 25 NM
18 6 200% Net realized capital gains, after-tax 46 37 24%
- -------- ------ ------ ------
$ (543) $ 173 NM Net income (loss) $ (304) $ 418 NM
======== ====== ====== ======
NM Not Meaningful
</TABLE>
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ITT HARTFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS
THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1996 & 1995
(In millions)
SUMMARY SEGMENT RESULTS
Revenues
--------
<TABLE>
<CAPTION>
Third Quarter Nine Months
--------------------- ---------------------
1996 1995 % Chg 1996 1995 % Chg
---- ---- ----- ---- ---- -----
<C> <C> <C> <S> <C> <C> <C>
$ 1,594 $ 1,589 - North American P&C $ 4,756 $ 4,746 -
389 376 3% International 1,178 1,106 7%
993 983 1% Life 3,166 2,751 15%
- ------- ------- ------- -------
2,976 2,948 1% Ongoing operations 9,100 8,603 6%
70 110 (36%) Runoff 250 374 (33%)
GIC realized
(210) - - capital loss (210) - -
- ------- ------- ------- -------
$ 2,836 $ 3,058 (7%) Total revenues $ 9,140 $ 8,977 2%
======= ======= ======= =======
</TABLE>
