On April 10, 2014, we issued an updated research report on
Hartford Financial Services Group Inc.
). The company's focus on core business enhancement and efficient
capital deployment positions Hartford Financial to generate
long-term growth. However, a challenging regulatory environment,
decline in investment income and exposure to catastrophe losses
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,
albeit at a slower rate.
Hartford Financial has been vending its non-core businesses to
focus on its U.S. operations and enhance its operating leverage.
Divestitures of its Retirement Plans and Individual Life
Insurance businesses and UK variable annuity (VA) business -
Hartford Life International Limited (HLIL) - in 2013 have reduced
risks and expenses associated with the VA block as well as
strengthened the operational efficiency of the Talcott Resolution
Further, the company has performed well in terms of generating
new business over the last two years. New business premiums and
policies-in-force increased across both the lines of businesses
in 2012 and 2013. Further, with the completion of the new
business quoting and issuance platform ICON and the imminent
launch of a new commercial auto product in 2014, the company
expects to expand its distribution thereby making way for new
business generation. Hartford Financial also has an efficient
capital deployment strategy that aims at boosting financial
flexibility by reducing debt (by $1 billion) and returning more
value to shareholders through share repurchase. Hartford
Financial also scores strongly with the credit rating agencies.
With respect to earnings performance, this Zacks Rank #3 (Hold)
stock also delivered positive surprises in three of the last four
quarters, with an average beat of 8.09%.
However, on the tepid side, Hartford Financial has substantial
exposure to catastrophic events and the unpredictable nature of
such weather-related events continue to raise concern for the
upcoming quarters, thereby posing operating risks. Moreover, net
investment income of Hartford Financial varies significantly with
changes in market conditions, thereby affecting the net income to
a great extent.
In addition, the Talcott Resolution segment has been a drag for
quite some time. For 2014-15 too, core earnings are expected to
decline mainly due to lower fees attributable to higher
surrenders. Hartford Financial's finances and operations are
significantly impacted by the challenging regulatory environment
and need heightened prudential requirements for combating these
Other Stocks to Consider
AmTrust Financial Services Inc.
EMC Insurance Group Inc.
) are some better-ranked stocks in the insurance space, all with
a Zacks Rank #1 (Strong Buy).
AMTRUST FIN SVC (AFSI): Free Stock Analysis
EMC INSURANCE (EMCI): Free Stock Analysis
HARTFORD FIN SV (HIG): Free Stock Analysis
ALLEGHANY CORP (Y): Free Stock Analysis
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