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The Hartford (HIG) Grows on Initiatives; Cat Losses a Drag
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On Jan 2, 2016, we issued an updated research report on The Hartford Financial Services Group Inc. (HIG - Free Report) .
Shares of The Hartford have gained 7.7% compared with the Zacks categorized Multiline Insurance industry's gain of 31%. This underperformance might have resulted from persistently soft interest rate over the last few months that have limited the growth of net investment income. Along with this, its significant exposure to catastrophe losses and weak performance of its personal lines business also might have affected shareholders’ confidence in the stock.
However, since the last month, interest rates have started rising. Along with other insurance companies like Alleghany Corporation , First American Financial Corporation (FAF - Free Report) and Arch Capital Group Ltd. (ACGL - Free Report) , to name a few, The Hartford is also expecting better days ahead.
The Hartford’s numerous strategic initiatives including the well-executed strategic dispositions of its legacy run-off businesses and many more have helped it improve its risk profile. Divesture of its non-core businesses along with strategic acquisitions and alliances have helped it to concentrate on its U.S. operations by enhancing its operating leverage. In the last quarter, the company inked a deal with Catalina Holdings UK Limited to sell its U.K. property & casualty (P&C) run-off subsidiaries, namely Downlands Liability Management Ltd. and Hartford Financial Products International Ltd in order to avoid its P&C run-off exposures in the U.K. The divesture is expected to be completed in fourth-quarter 2016.
These initiatives have significantly bolstered the underwriting results of The Hartford. Robust inorganic growth has helped it continuously capitalize on its premium growth. In the last quarter, on the back of solid revenue growth, earnings have grown 23% year over year.
Capital appreciations, repayment of government funds and measures to de-risk its balance sheet have increased the company’s financial strength. The company also displays intelligent capital management by regularly returning excess capital to shareholders via dividend increases and share buybacks.
Nevertheless, continuously declining income from fixed maturities and limited partnerships is a major cause of concern for The Hartford. Being a property and casualty insurer, the company also remains exposed to numerous catastrophic events, which often result in loss of earnings.
In addition to this, the company’s Personal lines segment has incurred considerable amount of auto liability loss. Although the company has taken several initiatives to boost the margin of this segment, its efforts have not been sufficient to mitigate the negatives. As a result, the base of this business has weakened significantly.
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The Hartford (HIG) Grows on Initiatives; Cat Losses a Drag
On Jan 2, 2016, we issued an updated research report on The Hartford Financial Services Group Inc. (HIG - Free Report) .
Shares of The Hartford have gained 7.7% compared with the Zacks categorized Multiline Insurance industry's gain of 31%. This underperformance might have resulted from persistently soft interest rate over the last few months that have limited the growth of net investment income. Along with this, its significant exposure to catastrophe losses and weak performance of its personal lines business also might have affected shareholders’ confidence in the stock.
However, since the last month, interest rates have started rising. Along with other insurance companies like Alleghany Corporation , First American Financial Corporation (FAF - Free Report) and Arch Capital Group Ltd. (ACGL - Free Report) , to name a few, The Hartford is also expecting better days ahead.
The Hartford’s numerous strategic initiatives including the well-executed strategic dispositions of its legacy run-off businesses and many more have helped it improve its risk profile. Divesture of its non-core businesses along with strategic acquisitions and alliances have helped it to concentrate on its U.S. operations by enhancing its operating leverage. In the last quarter, the company inked a deal with Catalina Holdings UK Limited to sell its U.K. property & casualty (P&C) run-off subsidiaries, namely Downlands Liability Management Ltd. and Hartford Financial Products International Ltd in order to avoid its P&C run-off exposures in the U.K. The divesture is expected to be completed in fourth-quarter 2016.
These initiatives have significantly bolstered the underwriting results of The Hartford. Robust inorganic growth has helped it continuously capitalize on its premium growth. In the last quarter, on the back of solid revenue growth, earnings have grown 23% year over year.
Capital appreciations, repayment of government funds and measures to de-risk its balance sheet have increased the company’s financial strength. The company also displays intelligent capital management by regularly returning excess capital to shareholders via dividend increases and share buybacks.
Nevertheless, continuously declining income from fixed maturities and limited partnerships is a major cause of concern for The Hartford. Being a property and casualty insurer, the company also remains exposed to numerous catastrophic events, which often result in loss of earnings.
In addition to this, the company’s Personal lines segment has incurred considerable amount of auto liability loss. Although the company has taken several initiatives to boost the margin of this segment, its efforts have not been sufficient to mitigate the negatives. As a result, the base of this business has weakened significantly.
The Hartford presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>