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Is Hartford Financial Fairly Valued?


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Hartford Financial Services Group ( HIG ) posted decent results in fiscal 2017 despite the catastrophe losses driven by hurricanes and the California wildfires. The company's top line growth of 5% was mainly driven by growth in premiums from the Group Benefits Segment. Hartford should continue to benefit from the acquisition of Aetna's Group Life and Disability business, and accordingly, we expect further growth in the Group Benefits segment. Additionally, HIG has access to Aetna's customer base to cross-sell its P&C products. Further, P&C Commercial Lines benefited from higher renewal written pricing, which provided a boost to the premiums generated per policy. We expect this trend to continue in the upcoming year.

We have a price estimate of $61 for Hartford Financial, which is around 10% higher than the current market price. Our price estimate is based on the projection of $18.5 billion revenue in FY'18, a Core Income Margin of 9%, and a P/E multiple of 13.

Our revenue estimate of $18.5 billion for 2018 is arrived at by projecting revenues for each individual segment. For both Property & Casualty segment and Group Benefits segment, revenue is the sum of earned premiums, fee income, and investment income. The expected number of in-force policies is multiplied by the premium per policy to calculate the earned premium for the P&C segment. For the Mutual Funds segment, fee income is calculated as a percentage of AUM.

Detailed steps to arrive at our price estimate and the revenue calculations are outlined in our interactive dashboard . You can modify our assumptions to arrive at your own price estimate for the company.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Stocks , US Markets , Investing Ideas
Referenced Symbols: HIG



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