Yesterday, Hartford Financial Services Group Inc. ( HIG ) declared its 2012 core earnings guidance of $3.30-3.60 per share in an investors' meeting. The company also revealed its fourth-quarter earnings expectations of 80-85 cents per share but lowered the 2011 guidance to $3.27-3.32 per share from $3.70-3.90 per share, which was announced in February this year.
In comparison, The Zacks Consensus Estimate for the fourth quarter of 2011 is currently 84 cents per share, down 21% year over year. The Zacks Consensus Estimates for 2011 and 2012 stands at $2.13 and $3.51 , respectively.
Hartford expects the operational environment to be difficult in 2012, considering the low interest rate environment and the ongoing Euro zone crisis, whichis adversely affecting the global economy and contributing to the growth slump in the US. Consequently, the company is looking to increase its efficiency and reduce costs, thereby generating savings of $300 million.
In order to increase the returns to shareholders, the company has been regularly paying dividend apart from buying back shares. In August 2011, Hartford announced a share repurchase program authorizing a $500 million share buyback. The company revealed that it will start the buyback process soon and expects to utilize t he entire authorization by the second quarter of 2012.
Additionally, Hartford has also been employing various cost saving initiatives. The company managed to cut 1600 jobs since 2010 and has been divesting its non-core businesses to focus its manpower and financial resources on the core businesses of life insurance, property-casualty and retirement products.
On December 5, 2011, Hartford announced an agreement to sell its subsidiary, Hartfo rd Life Private Placement (HLPP) to Philadelphia Financial Group Inc. Earlier, in October 2011, the company sold its unit Trumbull Services LLC to ExlService Holdings, Inc. ( EXLS ). Further, in May 2011, the company announced an agreement to sell its subsidiary, Federal Trust Corporation to CenterState Banks, Inc. ( CSFL ).
Hartford is also trying to boost its wealth management business, which offers high growth and high return on equity. To work toward this goal, the company announced Wellington Management Co. LLP the sole sub-adviser for its mutual funds business earlier this week. Wellington Management is already the sub-advisor for 45 of The Hartford Mutual Funds' 77 funds, besides being the primary manager for the equity funds.
However, the market reacted negatively to the 2012 guidance and the news of lowered 2011 earnings growth expectation. As a result, on Thursday, the share value of the company declined 8.2% to $17.20 from $18.73, on the New York Stock Exchange.
Currently, Hartford carries a Zacks #5 Rank (short-term Strong Sell rating), which indic ates a downward pressure on the shares over the near term.