We have retained our Neutral recommendation on
Hartford Financial Services Group Inc.
) following impressive second quarter results.
AMER INTL GRP (AIG): 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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Why the Reiteration?
Hartford's operating earnings for the second quarter of 2013 came
in at 66 cents per share, surpassing the year-ago quarter's
earnings of 56 cents by approximately 18%. However, the results
lagged the Zacks Consensus Estimate of 71 cents per share by 7%.
Improved performances in the Property & Casualty (P&C),
Group Benefits, Mutual Funds and Corporate segments primarily
drove Hartford Financial's earnings, partially offset by lower
earnings in the Talcott Resolution segment. Top line growth was
also impressive, driven by premium growth across most segments.
Since 2010, Hartford Financial has stabilized significantly with
improved earnings performance, positive credit trends,
strengthened capital and liquidity positions.
Moreover Hartford Financial's strong financial results,
satisfactory financial leverage, considerable cash balance and
limited credit and investment risks have boosted the company's
future outlook. The company works towards boosting financial
flexibility by reducing debt and returning more value to
shareholders through share repurchases. Hartford Financial also
scores strongly with the credit rating agencies. Furthermore
Hartford's divestiture initiatives to enhance core operations and
operating leverage are noteworthy. As of recent, the Talcott
team's decision to sell the U.K. variable annuity (VA) business
by year end 2013 is expected to eliminate the risk and expenses
associated with the VA block.
Again, the decision in Apr 2012, to cut premium rates for its
accidental death and dismemberment policyholders by 45% is
expected to boost membership significantly in the upcoming years.
This multi-line insurer currently carries a Zacks Rank #2 (buy).
On the tepid side Hartford Financial's auto and home product
lines have been a drag for the past few years. A continued
decline in policies in force in auto and home in the first half
of 2013 further indicates the downward trend. Moreover, being a
property and casualty insurer, Hartford Financial is
substantially exposed to catastrophic events. Natural disasters
can substantially affect the bottom-line of the company and the
unpredictable nature of such events pose significant operating
risk to the company.
Also, net investment income of Hartford Financial varies
significantly with changes in market conditions, thereby
impacting the net income to a great extent. Significant
fluctuations in the fixed income or equity markets could weaken
Hartford Financial's financial condition in the future.
Furthermore, the challenging regulatory environment is adversely
impacting the company's financials and operations.
Other Stocks to Consider
Other insurers that are worth considering are
American International Group, Inc.
Eastern Insurance Holdings Inc.
FBL Financial Group Inc.
) All these stocks carry a favorable Zacks Rank #1 (Strong