On Jul 1, 2014, we issued an updated research report on
Hartford Financial Services Group Inc.
). The company's focus on core operations, efficient capital
deployment and constant upgrade in services are expected to drive
long-term growth. However, exposure to catastrophic events, weak
investment portfolio and a challenging regulatory environment are
Hartford Financial has been focused on enhancing core operations by
de-risking its portfolio. For this, the company resorted to
divestitures over the past couple of years. The latest of its
endeavors include the closure of the sale of Hartford Life
Insurance K.K. (HLIKK), which is expected to generate capital
benefit of $1.4 billion. To make its business better, Hartford
Financial also collaborated with IBM in Apr 2014. Moreover, the net
unrealized gains position of the company also improved over the
past few years.
Moreover, Hartford Financial's capital appreciation, repayment of
government funds and measures to de-risk the balance sheet
increased its financial strength. This has helped the company to
increase its share repurchase program and repay debts in the first
quarter of 2014. Additionally, new business premiums have increased
in the auto and home product lines over the last two years. To
improve services further, the company launched an online quoting
platform in Jun 2014. The introduction of the commercial auto
product on this new quote-to-issue platform completes the small
product offering of the company, and is expected to generate
returns going forward. Hartford Financial also scores strongly with
the credit rating agencies.
On the flip side, Hartford Financial's substantial exposure to
catastrophic events continues to raise caution. Catastrophe losses
increased in the last reported quarter and the unpredictable nature
of these events is a further operating risk. The company has also
witnessed a decline in net investment income over the past few
years. Significant fluctuations in the fixed income or equity
markets could weaken the company's financial position further.
Moreover, the Talcott Resolution segment has been a drag for quite
some time, given the lowered earnings from divested businesses and
continued run-off of the annuity block. In anticipation of higher
catastrophes and expenses associated with policyholder initiatives
on the U.S. annuity business, earnings in this segment are expected
to decline more than 50% in the second quarter of 2014. Another
concern for Hartford Financial is the challenging regulatory
environment that is likely to affect the company's finances and
Earlier, Hartford Financial reported first-quarter 2014 earnings of
$1.18 per share that outperformed the Zacks Consensus Estimate and
was higher than the year-ago quarter figure by 27%. Notably, this
Zacks Rank #3 (Hold) insurer delivered positive earnings surprises
in three of the last four quarters with an average beat of 12.10%.
Other Stocks to Consider
Better-ranked players in the industry that look attractive at
current levels include
CNO Financial Group Inc.
Radian Group Inc.
). While Radian sports a Zacks Rank #1 (Strong Buy), CNO Financial
and AXA Group have a Zacks Rank #2 (Buy).
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HARTFORD FIN SV (HIG): Free Stock Analysis
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