Are shares of Hartford Financial attractive at current levels?

Hartford Financial Stocks (NYSE: HIG) is down about 7% year-to-date compared to the S&P500’s 24% decline over the same period. Additionally, at its current price of $64 per share, it has 32% upside potential from its fair value of $85 – Trefis’ estimate for Hartford Financial Rating. The P&C insurance giant (P&C) posted mixed results in the first quarter of 2022, with earnings beating consensus but revenue missing the target. It recorded total revenue of $5.4 billion, up 2% year-on-year, mainly due to a 7% increase in earned premiums. Premiums mainly benefited from an 11% increase in the commercial P&C segment, followed by a 5% growth in the group insurance unit. That said, the increase was partially offset by a decline in net realized gains (losses) from $80 million to -$145 million. In addition, net investment income (NII) for the period remained stable. This was primarily due to lower returns from fixed-maturity investments, which offset gains from limited partnerships and other alternative investments, and higher invested assets. In total, adjusted net income jumped 80% year-on-year to $440 million in the quarter. This was because of a favorable decrease in total profits, losses and expenses.

The company’s revenue improved 9% year-on-year to $22.4 billion in 2021. It was driven by 5% growth in total premiums earned, fees and expenses. other considerations, coupled with a 25% increase in NII and an increase in net realized capital gains. . While premium growth was driven by the commercial property and casualty insurance and group benefits segments, commission income increased due to higher average assets under management (AuM) of the Hartford funds. Similarly, the NII benefited from rising income from limited partnerships and other alternative investments, an increase in invested assets and improved returns from equity investments. Overall, revenue growth coupled with lower total benefits and expenses resulted in a 37% increase in adjusted net income to $2.3 billion.

Net investment income (NII) is very important for any insurance company for its profitability. We expect fixed-maturity investments to suffer in 2022 due to rising interest rates, which will negatively impact the NII. Additionally, premium and commission income is expected to increase as the economy recovers. Globally, Hartford Financial Revenue are expected to remain around $22.25 billion in fiscal 2022. In addition, HIG’s adjusted net income margin is expected to see some improvement over the course of the year, resulting in adjusted net income of $2.34 billion and annual GAAP EPS of $6.87. This, coupled with a P/E multiple just above 12x, will lead to a valuation of $85.

Here you will find our previous coverage of Hartford Financial stocks, where you can follow our view over time.

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Return June 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
High return -11% -seven% 35%
S&P 500 return -11% -24% 84%
Trefis Multi-Strategy Portfolio -12% -29% 184%

[1] Cumulative monthly and cumulative annual as of 06/17/2022
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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