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On May 17, 2013, we upgraded Hartford Financial Services Group Inc. (HIG - Analyst Report) to Neutral from Underperform based on the strong first-quarter operating results and the new capital plan that is enhancing financial flexibility and return to shareholders.

Why the Upgrade?

On Apr 29, 2013, Hartford Financial reported first-quarter 2013 operating earnings of 92 cents per share, surpassing the Zacks Consensus Estimate of 83 cents and 87 cents per share earned in the year ago quarter. Moreover, this multi-line insurer with a Zacks Rank #2 (Buy) delivered positive earnings surprises in 2 of the last 4 quarters with an average beat of 8.47%.

Improvements in the Property & Casualty, Group Benefits, Mutual Funds and Corporate segments were the chief reason for the increase in Hartford Financial’s earnings, partially offset by lower earnings in the Talcott Resolution segment.

Moreover, Hartford Financial sold many non-core businesses to focus on its U.S. operations, reduce expenses and enhance operating leverage. The sale of Woodbury Financial Services in Dec 2012 and the Retirement Plans and Individual Life Insurance businesses in Jan 2013 cumulatively enhanced the net statutory capital by $2.2 billion, most of which will be recognized in 2013.

Hartford Financial also terminated its Individual Annuity business in 2012 and sold its new variable annuity business infrastructure in Jan 2013, which is expected to cut down pre-tax expenses by $100 million in 2013. Measures to improve financial and risk management, and increased focus on the high-yielding mutual funds business are the other positives.

Hartford Financial’s Zacks Consensus Estimate for 2013 increased 1.3% to $3.20 per share as 5 of 16 estimates were revised higher over the last 30 days. For 2014, 6 of 16 estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 1.2% to $3.51 per share.

Other Stocks to Consider

Apart from Hartford Financial, other multi-line insurers worth considering are Assured Guaranty Ltd. (AGO - Snapshot Report), Eastern Insurance Holdings, Inc. and Kemper Corporation (KMPR - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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