We have retained our Neutral recommendation on
The Hartford Financial Services Group Inc.
) following mixed third-quarter results.
CNO FINL GRP (CNO): Free Stock Analysis
HARTFORD FIN SV (HIG): Free Stock Analysis
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Why the Reiteration?
Although Hartford Financial's third quarter operating earnings of
$1.03 improved 14.4% year over year, revenues declined 10.9% from
the prior-year figure. However, both surpassed the respective
Zacks Consensus Estimate.
This multi-line insurer with a Zacks Rank #2 (Buy) has been
selling off its non-core businesses to focus on its U.S.
operations and enhance its operating leverage. So far in 2013,
Hartford Financial divested three businesses, namely, the
Retirement Plans business, Individual Life insurance business and
its U.K. Variable Annuity Business (Hartford Life International
Limited). These efforts increased Hartford Financial's focus on
its P&C, Mutual Funds and Group Benefits segments, which not
only generate strong revenues, but also have impressive market
Following the industry trend, Hartford Financial has stabilized
significantly since mid-2010 with improved earnings performance,
positive credit trends and strengthened capital and liquidity
position. In the long run, a continuation of the stabilizing
trends is expected if the regulatory landscape becomes more
visible and credit quality continues to improve, although likely
at a slower rate. Hartford Financial's capital appreciations,
repayment of government funds and measures to de-risk its balance
sheet have increased its financial strength. The company is now
looking forward to more transactions that can increase the
release of capital, thereby executing proficient capital
management plans and creating shareholder value. Hartford
Financial also scores strongly with credit rating agencies.
However, weakness in auto and home product lines, exposure to
catastrophic events and a decline in investment income are some
headwinds for the company. Policies-in-force and policy
retentions are declining and might hamper operating performance
going forward. Catastrophe losses also remain a concern owing to
their unpredictable nature thereby posing operating risks.
The impact of the sale of Individual Life and Retirement Plans
businesses led to a decline in net investment income yield in the
third quarter of 2013. Significant fluctuations in the fixed
income or equity markets could weaken Hartford Financial's
finances in the future.
Other Stocks to Consider
Other players in the multi-line insurance space, which look
attractive at current levels, include
Old Republic International Corporation
CNO Financial Group Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).