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The Hartford (HIG) Q3 Earnings: Is a Surprise in Store?

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The Hartford Financial Services Group, Inc. (HIG - Free Report) is scheduled to report third-quarter earnings after the closing bell on Jul 27. Last quarter, the company delivered a negative earnings surprise of 59.74%.

Let’s see how things are shaping up for this announcement.

Factors Influencing this Past Quarter

In spite of stiff competition the company is expected to display growth in the third quarter on the back of strong performance by commercial lines and group benefits.

The Hartford’s continuous focus on underwriting discipline, retention, and maintaining underlying margins should have a positive impact on its commercial line segment.

Continuous improvement in the performance of Homeowners’ business should bolster the top line. Also, impressive marketing efforts are expected to drive top-line growth.

The company continued to return capital to investors in the third quarter and is expected to complete its current capital management plan of $4.4 billion of common equity repurchases by the end of 2016. We expect these factors to boost the bottom line by reducing share count.

The Hartford’s efforts to improve operating capability and maximize efficiency should support the company’s profitability. Strategies like an increase in the number of rate filings and aggressive non-rate actions should help in margin expansion.

Discontinuation of unproductive agency relationships, de-authorizing certain agents from the AARP program and rolling out a new compensation structure focused on key partner agents are expected strengthen the company’s operational excellence. Advancing capabilities with initiatives in distribution, product, digital technology, and analytics likely have supported the company’s leadership in the market. These efforts should have a favorable impact on the upcoming earnings.

However, a persistently low interest rate along with Brexit-induced uncertainty might limit growth in net investment income in the to-be-reported quarter.

Also, the Personal Lines business remains a drag for The Hartford. The company does not expect margin improvement in this segment before early 2017.

Earnings Whispers

Our proven model does not conclusively show that The Hartford will beat on earnings in the quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The Hartford has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 95 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: The Hartford has a Zacks Rank #3.

Please note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

HARTFORD FIN SV Price and EPS Surprise

 

Stocks to Consider

Here are some other companies from the insurance space that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

MetLife Inc (MET - Free Report) , which is slated to report third-quarter earnings on Nov 2, has an Earnings ESP of +1.65% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cigna Corp. (CI - Free Report) has an Earnings ESP of +2.62% and a Zacks Rank #3. The company is set to report third-quarter earnings on Nov 3.

The All State Corporation (ALL - Free Report) has an Earnings ESP of +2.38% and a Zacks Rank #2. The company is likely to report third-quarter earnings on Oct 31.

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