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Hartford Financial Gains From Strategic Moves, Risks Remain

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The Hartford Financial Services Group, Inc’s (HIG - Free Report) strategic dispositions of its legacy run-off businesses have improved its risk profile. In addition, divesture of its non-core businesses along with strategic acquisitions and alliances have helped it concentrate on core U.S. operations.

The company also displays intelligent capital management by enhancing shareholders’ value through share buybacks and dividend payments on a regular basis.

Its shares have rallied nearly 16.3%, outperforming the industry’s gain of 11.4% in a year’s time. This reflects the company’s strong foothold in the property and casualty market.

The company’s capital appreciations, repayment of government funds and measures to de-risk its balance sheet have increased its financial strength. The company has also been able to successfully lower its debt burden through divestures and notes issuance.

Nevertheless, being a property and casualty insurer, the company also remains exposed to numerous catastrophic events, which often result in earnings volatility. Its third-quarter 2017 results were highly impacted by hurricanes Harvey and Irma.

Its Personal lines segment has also incurred considerable amount of auto liability loss. Continuing the previous trend, the segment’s revenues further declined in the first nine months of 2017. Also, the Talcott Resolution segment has been a drag for quite some time.

Consequently, the company’s valuation looks expensive at the current level. Looking at the company’s forward 12-month price-to-earnings (P/E-F1) ratio, investors may not want to pay any further premium. Currently, it has trailing 12-months P/E-F1 ratio of 15.1, which is higher than the industry average of 14.2.

Zacks Rank and Stocks to Consider

Hartford Financial presently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the insurance industry are Radian Group Inc. (RDN - Free Report) , First American Financial Corporation (FAF - Free Report) and Prudential Financial, Inc. (PRU - Free Report) . Each of the stocks holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Radian Group offers mortgage and real estate products and services in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 4.52%.

First American Financial offers financial services. The company delivered positive surprises in each of the last four quarters with an average beat of 12.74%.

Prudential Financial provides insurance, investment management, and other financial products and services in the United States and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 0.16%.

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