Up 19% YTD, What To Expect From Hartford Financial Stock?

Hartford Financial’s stock (NYSE: HIG) has gained approximately 19% YTD as compared to the 6% rise in the S&P500 index over the same period. Further, at the current price of $96 per share, it is trading 6% below its fair value of $102 – Trefis’ estimate for Hartford Financial’s valuation

Amid the current financial backdrop, HIG stock has seen extremely strong gains of 90% from levels of $50 in early January 2021 to around $95 now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. HIG is one of a handful of stocks that have increased their value in each of the last 3 years, but that still wasn’t enough for it to consistently beat the market. Returns for the stock were 41% in 2021, 10% in 2022, and 6% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that HIG underperformed the S&P in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including JPM, V, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could HIG face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

The insurance giant outperformed the street estimates in the fourth quarter of 2023. It posted total revenues of $6.4 billion – up 6% y-o-y, primarily driven by an 8% rise in the earned premiums. The premiums mainly benefited from a 9% growth in property & casualty (P&C) and a 6% increase in group benefits segments. On the expense front, total benefits, losses & expenses as a % of revenues declined from 87.7% to 85%. Overall, it resulted in a 30% y-o-y improvement in the adjusted net income to $766 million.

The company’s top line grew 9% y-o-y to $24.5 billion in FY2023. It was because of an 8% rise in the earned premiums figure, followed by a 6% increase in the net investment income. Further, net realized losses decreased from $627 million to $188 million. In terms of costs, total expenses as a % of revenues witnessed a favorable drop, leading to an operating margin of 12.6% vs 10.1%. Altogether, the adjusted net income was $2.48 billion – up 38% y-o-y.

Moving forward, we expect the same trend to continue in Q1. Overall, Hartford Financial’s revenues are estimated to touch $26.36 billion in FY2024. Additionally, HIG’s adjusted net income margin is likely to see some improvement in the year, resulting in an adjusted net income of $3.06 billion and an annual GAAP EPS of $10.09. This coupled with a P/E multiple of just above 10x will lead to a valuation of $102.

 Returns Mar 2024
MTD [1]
YTD [1]
Total [2]
 HIG Return 0% 19% 101%
 S&P 500 Return 0% 6% 126%
 Trefis Reinforced Value Portfolio 0% 4% 640%

[1] Returns as of 3/1/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates

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

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.