On Jul 10, 2013, the shares of Hartford Financial Services Group, Inc. (HIG - Analyst Report) reached a new 52-week high of $31.82. The momentum was driven by this Zacks Rank #2 (Buy) company’s strong fundamentals and continued efforts to streamline its operating structure by divesting non-core subsidiaries and businesses.
Hartford Financial has been trying to trim down the size as well as risk of the legacy variable annuity blocks in its Talcott Resolution segment, which covers the runoff and sold businesses. As such, it announced an agreement to divest its subsidiary, Hartford Life International Limited, to Columbia Insurance Company, a subsidiary of Berkshire Hathaway Inc. (BRK.B - Analyst Report).
Hartford Financial has been considerably successful so far and the segment has attained self-sufficiency with regards to capital. This divestiture is expected to help toward the same and be beneficial for the company despite the expected negative impact in the second quarter of 2013.
Earlier, Hartford Financial also sold Woodbury Financial Services in Dec 2012 and its Retirement Plans and Individual Life Insurance businesses in Jan 2013. Further, the company terminated its Individual Annuity business in 2012 and sold its new variable annuity business infrastructure in Jan 2013.
These measures helped in increasing its statutory capital and reduce expenses, apart from allowing the company to focus on its core businesses. Moreover, the strong financial position, lower risk and increasing financial flexibility of Hartford Financial prompted the company to announce a 50% increase in its quarterly dividend and $750 million hike in its share repurchase authorization on Jun 26, 2013.
Hartford Financial delivered two consecutive quarter of positive earnings surprise. Banking on its continued efforts to improve operational performance, we expect its second-quarter 2013 earnings per share to surpass estimates as well. The Zacks Consensus Estimate for the company’s second-quarter earnings currently stands at 72 cents per share, translating to a year-over-year surge of nearly 212%.
Nevertheless, the valuation of Hartford Financial looks stretched. Though the shares are currently trading at a 15% discount to the peer group average on a forward price-to-earnings basis and at par with the peer group average on a price-to-book basis, its return on equity is 36.7% lower than the peer group average. However, the 1-year-return from the stock is 89.7%, much above S&P’s return of 24.3%.
Apart from Hartford Financial, other multi-line insurers worth considering are Assured Guaranty Ltd. and Enstar Group Limited (ESGR - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).