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Why Is The Hartford (HIG) Down 0.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for The Hartford (HIG - Free Report) . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is The Hartford due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Hartford Financial Q3 Earnings Top Estimates, Rise Y/Y

Hartford Financial reported third-quarter 2019 adjusted operating earnings of $1.50 per share, beating the Zacks Consensus Estimate by 19% on higher revenues and its Commercial Lines business. The bottom line also improved 30.4% year over year.

Total operating revenues of $5.2 billion were up 9.5% year over year on the back of its Commercial Lines business.

Quarterly Segment Results

Property & Casualty (P&C)

Commercial Line


During the quarter under review, the segment’s total revenues were $2.6 billion, up 26% year over year.

Net income of $336 million rose 16% year over year owing better new investment income, increased net realized capital gains and a better underwriting gain. Core earnings of $303 million increased 14% over the prior-year quarter’s level on higher underwriting gain, net investment income, etc.
The segment’s underlying combined ratio was 93.9%, expanding 20 basis points (bps) in the quarter under review.

Current accident year catastrophe loss came in at $3.3 million, down 37.7% year over year.

Personal Lines

Total revenues were $890 million, down 4% year over year. Net income of $94 million generated soared 84% from the year-ago figure, driven by lower current accident year catastrophe losses, higher net investment income and better net realized capital gains. Core earnings of $87 million also surged 85% year over year, driven by underwriting gain, net investment income and new business premiums. Underlying combined ratio of the segment expanded 50 bps to 92.3% in the quarter under review due to higher expense ratio.

P&C Other Ops

Revenues grossed $25 million, flat year over year.

Group Benefits

Group Benefits’ total revenues of $1.5 billion inched up 0.5% year over year.
Net income of $146 million was up 90% year over year. Core earnings of $141 million in the third quarter were up 38% year over year. This upside is attributable to lower disability loss ratio. Total loss ratio of 71.1% improved 440 bps from the year-earlier quarter as lower group disability loss ratio was offset by higher group life loss ratio.

Hartford Funds

Hartford Funds’ operating revenues were $256 million, down 4.5% year over year.

Hartford Financial reported net income of $40 million and core earnings of $39 million, respectively down 2.6% and 5.4% year over year, primarily due to lower investment management fee revenues on account of fee reductions and a shift to lower fee funds. Average AUM was $120 billion, flat with the year-ago quarter’s figure.

Corporate

Operating revenues rose 22.5% to $25 million. The segment’s core losses of $37 million were narrower than the $45-million loss incurred in the prior-year quarter. This was mainly on the back of increased earnings from the retained equity interest. The segment’s net loss of $99 million was wider than the year-ago quarter’s loss of $35 million.

Financial Update

Book value per share as of Sep 30, 2019 was up 23% to $43.13 from the level as of Dec 31, 2018. Core earnings’ return on equity rose 200 bps to 12.3%.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted -6.39% due to these changes.

VGM Scores

At this time, The Hartford has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, The Hartford has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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