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Here's Why You Should Stay Away From Hartford Financial

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The Hartford Financial Services Group, Inc. (HIG - Free Report) has been witnessing downward earnings estimate revisions of late. The Zacks Consensus Estimate for current-year bottom line of $4.65 per share has moved 0.6% south over the past 30 days, indicative of analysts’ bearish sentiment on the stock.

So, what could be the reason for this pessimistic stance? The company’s first-quarter 2020 adjusted operating earnings of $1.34 per share fell 3.6% year over year due to a decline in income at Talcott Resolution, reduced net investment income, higher insurance operating costs and other expenses along with short-term disability and paid family leave reserves related to the coronavirus.

Moreover, the current challenging interest rate environment continues to pose a threat to the company. The same is further anticipated to affect new cash flows, reinvestment rates and the overall portfolio yield.

Per its last earnings call, management stated that it expects its premiums to be negatively impacted by the coronavirus outbreak due to unfavorable exposure, business closures and reductions. Lower customer payroll might also affect the company’s results. Hartford Financial also took certain initiatives, such as a 15% refund of April and May's personal auto premium on account of fewer miles driven and lower reported claims, which in turn, might dent its revenues. For the second quarter, the company expected a decline in new business premiums as well as a 15% drop in written premiums.

Hartford Financial’s Personal Lines segment has been posting weak results for the last few quarters, which raises a concern for the company.
It has been incurring elevated expenses since 2015. Escalating costs due to higher benefits, losses and loss adjustment expenses, amortization of deferred acquisition costs, insurance operating costs and other expenses weigh on the company’s margins.
As a property and casualty insurer, the company is substantially exposed to catastrophic events, which is putting on its underwriting results. In the first quarter, it faced a cat loss of $74 million due to tornado, wind and hail events in the Midwest and Southeast regions.

The company's 2020 earnings estimate stands at $4.65 per share while the same for current-year revenues is pegged at $13.22 billion, both implying a respective downside of 17.7% and 35% from the year-ago reported figures.

Shares of this Zacks Rank #4 (Sell) company have lost 26.7% in a year's time, wider than its industry's decline of 19.1%.

Stocks to Consider

Some better-ranked stocks in the same space are CNO Financial Group, Inc. (CNO - Free Report) , EverQuote, Inc. (EVER - Free Report) and Kemper Corporation (KMPR - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CNO Financial is a top-tier holding company for a group of insurance companies operating throughout the United States, which develops, administers and markets supplemental health insurance, annuity, individual life insurance and other insurance products. Its earnings beat estimates in three of the trailing four quarters and missed the same in one, the positive average being 12.5%.

EverQuote operates an online marketplace for insurance shopping in the United States. Its bottom line surpassed estimates in all the last four quarters, missing the mark on one occasion, the average positive surprise being 86.7%.

Kemper Corporation provides property and casualty, and life and health insurance in the United States. Its earnings beat estimates in all the trailing four quarters, lagging the consensus mark in the remaining two, the average beat being 16.3%.

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