The Hartford Financial Services Group, Inc. HIG has emerged as a lucrative investment option, courtesy of rate increases across Commercial Lines business and a growing cash balance. In fact, these factors instill optimism in the stock’s long-term prospects as well.
The stock currently has a Zacks Rank #2 (Buy) and an impressive Value Score of A. Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank of 1 (Strong Buy) or 2, offer the best opportunities in the value investing space. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let’s analyze the factors that make this stock a compelling choice for investors right now.
Strong Earnings Surprise History: Hartford Financial boasts an impressive earnings surprise record. It has a trailing four-quarter earnings surprise of 18.35{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, on average.
Positive Estimate Revision: The Zacks Consensus Estimate for current-quarter and current-year earnings have been revised upward by 4.8{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} and 10.4{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, respectively, over the past 60 days.
Strong Operating Profit: Hartford Financial’s trailing 12-month return on equity (ROE) of 12.2{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} as of Sep 30, 2020, compares favorably with the industry’s ROE of 7.8{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. This, in turn, reflects its tactical efficiency in utilizing its shareholders’ funds.
Well-Performing Commercial Lines Business: The COVID-19 pandemic, which has been taking a toll on the global economy, has not spared insurers as well. Nevertheless, the company has been striving to enhance digital capabilities to counter the pandemic. Moreover, market conditions for insurers started improving since third-quarter 2020. Though new business in the company’s Commercial Lines were impacted by the pandemic, premiums in the same business line have witnessed an improvement of 10.8{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} for the first nine months of 2020. This uptick can be attributed to persistent written pricing increases across all Commercial Lines barring workers’ compensation, and benefits derived following the buyout of the Navigators Group completed last year. Moreover, the Standard Commercial Lines is well-poised for growth on the back of prudent underwriting actions undertaken.
Constant Efforts to Streamline Operations: The insurer has been striving to streamline business operations through strategic dispositions. These initiatives highlight the company’s endeavor of intensifying focus on its U.S. operations, reduce costs and enhance operating leverage, which in turn, is likely to pave the way for increased availability of capital. With more freed up capital, the company can resort to several growth initiatives such as buyouts and prudent shareholder-friendly moves via buybacks and dividend payments. Notably, Hartford Financial approved a share buyback program worth $1.5 billion in this month itself.
Robust Balance Sheet: The company’s balance sheet position looks strong with increasing cash balance. Also, Hartford Financial has robust cash generating abilities.
Price Performance
Shares of Hartford Financial have gained 25.7{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in the past six months compared with the industry’s rally of 20.9{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}.
The price performance looks decent in comparison to its multiline insurance peers, namely, MetLife, Inc. MET, Old Republic International Corporation ORI and American International Group, Inc. AIG. While shares of MetLife rallied 30{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in the past six months, shares of Old Republic and AIG have gained 21.6{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} and 20.8{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, respectively, in the same time frame.
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The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report
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