On Apr 10, 2013, shares of
Hartford Financial Service Group Inc.
) hit a 52-week high of $27.15.
Hartford Financial is trying to boost its financial
flexibility by reducing debt and returning more value to
shareholders through share repurchase, per a capital plan
announced on Feb 4, 2013. Accordingly, the company has already
completed a cash tender offer for repayment of senior notes worth
$800 million at a premium value of $1 billion.
Additionally, Hartford Financial plans to issue a new
long-term senior debt securities equal to the maximum amount of
Waterfall Notes repurchased, i.e. $350 million. These debt
repayments and issue of senior debt securities will cumulatively
reduce the total debt by $1 billion, according to the plan.
Further, the company plans to repurchase shares worth $500
million by the end of 2013.
Hartford Financial has generated a significant amount of
surplus capital from the recent divestitures of Woodbury
Financial Services, Retirement Plans, Individual Life Insurance
and Individual Annuity businesses. This surplus capital is
driving the capital plan.
With respect to earnings trend, Hartford Financial delivered
positive earnings surprise in 2 out of 4 quarters in 2012 with an
average beat of 14.4%. Our proven model shows that this
multi-line insurer is likely to beat earnings in the first
quarter of 2013 because it has a right combination of a positive
Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and Zacks Rank. ESP or Expected Surprise Prediction,
which represents the difference between the Most Accurate
Estimate and the Zacks Consensus Estimate, is +1.25%. Hartford
Financial presently carries a Zacks Rank #3 (Hold).
The valuation of Hartford Financial's shares is reasonable.
The shares are trading at a discount on a price-to-book and
forward price-to-earnings basis and return on equity of 6.4% is
also lower than the peer group average of 7.7%. The 1-year return
from the stock is 28.4%, above S&P'sreturn of
Other stocks in the insurance sector that are worth a look are
CNO Financial Group Inc.
) - Zacks Rank #1 (Strong Buy),
Eastern Insurance Holdings Inc.
) - Zacks Rank #2 (Buy) and
FBL Financial Group Inc.
) - Zacks Rank #2 (Buy).
CNO FINL GRP (CNO): Free Stock Analysis
EASTERN INSURNC (EIHI): Free Stock Analysis
FBL FINL GRP-A (FFG): Free Stock Analysis
HARTFORD FIN SV (HIG): Free Stock Analysis
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