A month has gone by since the last earnings report for The Hartford Financial Services Group, Inc. HIG . Shares have added about 1.6% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is HIG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Hartford Financial (HIG) Q1 Earnings Beat Estimates, Up Y/Y
The Hartford Financial Services Group, Inc. reported first-quarter 2018 adjusted operating earnings of $1.27 per share, beating the Zacks Consensus Estimate by 17.6%. The bottom line also increased 67% year over year on higher revenues.
Total operating revenues came in at $4.7 billion, up 14% year over year. This upside was primarily driven by a rise in earned premiums and higher fee revenues as well as net investment income. Quarterly Segment Results
Property & Casualty (P&C)
During the quarter under review, the segment's total revenues were $2 billion, up 1% year over year.
Net income of $298 million rose 29% year over year. Core earnings of $302 million increased 35% over the prior-year quarter on the back of a higher underwriting gain and net investment income as well as lower income taxes.
The segment's underlying combined ratio of 90.4 improved 50 basis points year over year owing to margin improvement in auto and an essentially flat expense ratio.
Current accident year catastrophe loss came in at $69 million before tax, down from $71 million in the year-ago quarter. Personal Lines
Personal Lines total revenues were $928 million, down 7.4% year over year.
This segment generated net income of $89 million, up from $33 million in the year-ago quarter. Core earnings also came in at of $89 million compared with $32 million in the first quarter of 2017. This upside was driven by lower catastrophe loss, higher favorable PYD and improved underlying auto underwriting results.
Current accident year catastrophe loss came in at $34 million before tax, down from $79 million in the year-ago quarter.
The underlying combined ratio of 89.8 improved 140 basis points from the prior-year quarter owing to an improvement in the current accident year loss ratio before catastrophes, largely on auto liability, partially offset by an increase in the expense ratio due to marketing spending. P&C Other Ops
Revenues of this segment came in at $23 million, down 35% year over year.
Net income and core earnings, both came in at $17 million, down 29% and 19%, respectively, from the year-ago quarter. Group Benefits
Group Benefits' total revenues of $1.5 billion surged 59% year over year.
This segment generated net income of $54 million, up 20% year over year. Core earnings came in at $85 million, up from $40 million in first-quarter 2018 on the back of higher premium volume, higher net investment income and the lower U.S. corporate income tax rate.
The total loss ratio of 77.4% improved 30 bps over the year-earlier quarter, driven by an improvement in the group disability loss ratio. Mutual Funds
Mutual Funds operating revenues grew 8.8% year over year to $259 million.
Hartford Financial reported Mutual Funds net income and core earnings of $34 million, each up 47% year over year, primarily driven by a higher fee income, courtesy of growth in Mutual Funds segment assets under management (AUM) and a favorable impact from lower U.S. corporate taxes.
Average AUM increased 22% to $99.1 billion. Corporate
Corporate segment operating revenues grew to $13 million from $4 million in the year-ago quarter.
Corporate net income was $105 million, up from $22 million in the year-ago quarter owing to higher income from discontinued operations.
The Corporate segment recorded core losses of $66 million, wider than core losses of $52 million in the prior-year quarter, primarily due to a lower tax benefit, partially offset by higher net investment income and lower expenses compared with the first quarter of 2017. Financial Update
Book value per share as of Mar 31, 2018 dipped 3% to $36.06 from the level as of Dec 31, 2017.
Core earnings' return on equity rose 270 bps to 7.8%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. There have been three revisions higher for the current quarter compared to one lower.
The Hartford Financial Services Group, Inc. Price and Consensus
The Hartford Financial Services Group, Inc. Price and Consensus | The Hartford Financial Services Group, Inc. Quote
At this time, HIG has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, HIG has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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