Hartford Financial (HIG) Up 94.9% in a Year: More Room to Run?
Hartford Financial's (HIG) cost-cutting measures, strategic initiatives and operational efficiency are likely to perk up its shares.
The Hartford Financial Services Group, Inc. HIG continues to be in the good books of investors on the back of its strategic initiatives, financial flexibility and an efficient capital management position. Its cost-cutting measures, operational excellence and margin expansion are another highlight of the stock.
In the past year, shares of this presently Zacks Rank #2 (Buy) company have surged 94.9%, outperforming its industry’s growth of 44.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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In the second quarter of 2021, the company gained from an improved net investment income, lower COVID-19 related losses, reduced current accident-year (CAY) CAT losses, rise in the Commercial Lines earned premium and an improved underlying ex-COVID-19 property and casualty (P&C) loss ratio. Revenues increased on the back of higher net investment income. In Property & Casualty, results were driven by better investment income and a solid contribution from Commercial Lines.
The company is steadily growing on the back of a series of strategic measures made to boost its risk profile. Hartford Financial is constantly vending non-core businesses to concentrate on its U.S. operations and enhance its operating leverage. Apart from lowering expenses, driving profitability and improving returns to its shareholders, these divestitures are enhancing financial flexibility by freeing up more capital.
Hartford Financial is putting in efforts to bolster its portfolio through acquisitions. In 2019, the company closed the buyout of Navigators Group, a specialty insurer for a deal value of $2.1 billion. The move helped it expand the company’s product offerings and geographic reach plus strengthen its commercial business lines.
The company has also been taking several measures to decrease benefits and expenses for a while now. In 2020, total benefits and expenses fell 11.3% year over year.
Hartford Financial took strategic actions to cut down on costs by $540 million within 2022 and $625 million in 2023. We expect its expenses to continue declining on the back of its strategic initiatives.
Its capital position remains impressive. Total debt is 23.9% (almost unchanged from the sequential figure) of its total equity, lower than the industry average of 42%. It took several initiatives to improve its liquidity. Its times interest earned stands at 12.34X, above the industry's average of 9.55X. Thus, its financial flexibility looks impressive.
The insurance company’s capital appreciations, repayment of government funds and measures to de-risk its balance sheet increased its financial strength. It also has an intelligent capital management strategy, featuring share buybacks and dividend hikes. Management announced that the company increased its share repurchase authorization by $1 billion, thus bringing the plan through 2022 to $2.5 billion. In the first six months, it returned $933 million in the form of dividends and share buybacks.
Further Upside Left?
We believe that the company is well-poised for growth on the back of several growth initiatives, an array of product offerings and its underwriting capabilities.
Its return-on-equity (ROE) reflects its growth potential. The company’s trailing 12-month ROE of 12.5% compares favorably with the industry average of 9.8%, reflecting its efficiency in using its shareholders’ funds.
Other Stocks to Consider
Some other stocks worth considering are Chubb Limited CB, CNO Financial Group, Inc. CNO and American International Group, Inc. AIG, each carrying a Zacks Rank of 2 at present.
Chubb, CNO Financial and American International have a trailing four-quarter earnings surprise of 7.14%, 26.12% and 15.09%, on average, respectively.
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The Hartford Financial Services Group, Inc. (HIG): Free Stock Analysis Report
American International Group, Inc. (AIG): Free Stock Analysis Report
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Chubb Limited (CB): Free Stock Analysis Report
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