Hartford’s Earnings Wednesday Will Show Insurance Market Recovery
The Hartford Financial Services Group (NYSE:HIG) is scheduled to announce its first quarter earnings for 2012 on Wednesday. The company is recovering from a lackluster performance last year when it incurred significant losses due to calamities such as Hurricane Irene. Earnings this quarter are likely to be affected by uncertainty in the financial markets, and the general expectation is that earnings will decline from the net income of $511 million, or $1.01 per diluted common share reported in Q1 2011. Hartford is one of the largest insurance and financial services companies in the U.S. and competes with AIG (NYSE:AIG), MetLife (NYSE:MET), Prudential Financial (NYSE:PRU) and Manulife Financial (NYSE:MFC).
See our full analysis of Hartford Financial here
Split Expected in the Company
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Hartford’s largest shareholder, Paulson & Co, has advised Hartford to split its property & casualty (P&C) and life insurance divisions into two separate companies to make it easier to benchmark against competitors, many of which concentrate their operations in only one of the aforementioned businesses. (See Hedge Fund Manager Paulson Tells Hartford to Split Company in Two) Paulson believes that a split would also help in the management of the company and could increase returns on investments as investment managers of both companies could focus on the unique risks and liabilities associated with the different operations.
Recovering Insurance Markets
P&C insurance has been adversely affected with the decline of the U.S. housing market, and recovery efforts have not been as fruitful as expected. U.S Property and Casualty Insurance accounts for 28% of our price estimate for Hartford’s stock.
U.S. Retirement Plans and Annuities, which account for 25% of the Trefis price estimate for Hartford, is expected to see a boom related to the aging population, as the Baby Boomer generation approaches retirement age.
We have a price estimate of $19 on Hartford Financial’s stock, about 13% below the current market price.
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