UPDATE: Hartford, Allstate Warn Of Profit Declines On Catastrophes

Hartford Financial Services Group Inc. (HIG) joined a host of U.S. insurers in warning that second-quarter profit had been hurt by tornadoes that plagued the country in April and May.

Net income of about $24 million declined 68% from the same period a year earlier, the company said in a statement Wednesday disclosing preliminary results. The profit decline includes $447 million in catastrophe costs before taxes, nearly double its disaster tally from a year earlier.

Earlier Wednesday, Allstate Corp. (ALL) put its pretax catastrophe tally at $2.3 billion for the quarter.

In Hartford's case, the profit decline also includes the cost of an increase to its asbestos reserves of $290 million before taxes, the result of an annual review of its asbestos liabilities. Like other insurers, Hartford stopped offering liability protection against asbestos injuries decades ago, but the long-ago policies are still resulting in new claims.

The preliminary earnings announcement sent Hartford shares down 2.7% to $24.90 after the close of trading.

Hartford joins Allstate, Travelers Cos. (TRV) and a roster of smaller companies, including Meadowbrook Insurance Group Inc. (MIG) and State Auto Financial Corp. (STFC), in warning of substantial losses stemming from severe weather in the quarter.

The jump in claims comes primarily from a series of severe tornadoes that killed hundreds of people and caused extensive damage in Alabama, Missouri and more than a dozen other states. Disaster-modeling company AIR Worldwide estimates a cluster of twisters in late April and another in late May were the two largest tornado losses on record and caused up to $12.5 billion in insured losses combined.

Travelers warned last month that it was slowing its share-buyback program after the tornadoes contributed to about $1 billion in disaster costs after taxes. Meadowbrook, based in Michigan, on Wednesday said storms cost the company about $12.5 million before taxes, about double its normal catastrophic loss. State Auto on Tuesday said second-quarter results would include $155 million to $165 million in pretax catastrophe losses.

Hartford said core earnings, which exclude some investment results and discontinued operations, were about $12 million, compared with $92 million a year earlier.

Hartford also announced a $73 million after-tax charge on the write-off of costs tied to a discontinued software project and a $52 million tax benefit from the resolution of a decade-old tax matter.

Hartford Chief Executive Liam McGee said in the statement that the results "were affected by severe U.S. catastrophe activity and other items unrelated to the fundamental performance of the underlying business." The company's underlying insurance operations and investment portfolio "continued to perform well," he said.

The company will release full second-quarter results on Aug. 3.

-By Erik Holm, Dow Jones Newswires; 212-416-2892; [e-mail]