On May 17, 2013, the shares of Hartford Financial Services Group, Inc. (HIG - Analyst Report) reached a 52-week high of $31.51. The momentum was driven by the strong first-quarter operating results and the impact of the new capital plan.
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, the capital management plan announced by Hartford Financial in Feb 2013 is aimed at boosting financial flexibility by reducing debt and returning more value to shareholders through share repurchases. The debt reduction will also save $55 million in annualized interest by the end of 2014.
Nevertheless, the valuation of Hartford Financial looks stretched. Though the shares are currently trading at a 15.1% discount to the peer group average on a price-to-earnings basis and a 13% discount to the peer group average on a price-to-book basis, its return on equity of 5.7% is 26% lower than the peer group average of 7.7%. However, the 1-year-return from the stock is 82.5%, much above S&P’s return of 28.7%.
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).