Hartford Financial Services Group’s (NYSE:HIG) showed solid results while the company laid out its plan to focus on the Property and Casualty business, Group Health and Mutual Fund businesses.  Although the company suffered losses on hedging activities, its quarterly report a healthy position for the company with core earnings of $612 million up 7% from $574 million reported last year. Hartford’s main competitors in the insurance domain are AIG (NYSE:AIG), MetLife (NYSE:MET), Prudential Financial (NYSE:PRU) and Manulife Financial (NYSE:MFC).
Focus on Property and Casualty
Plans for sales of individual life operations and retirement plans are underway as Hartford Financial continues to divest its life insurance operations on the recommendation of hedge-fund manager and major shareholder John Paulson (See Hedge Fund Manager Paulson Tells Hartford to Split Company in Two). Last month, the company agreed to sell its individual annuity unit to Forethought, a financial services company.
Going forward Hartford will focus operations on the Property and Casualty, Group Benefits and Mutual Funds. Property and Casualty account for 28% of our price estimate. This move appears to be paying off for the company as commercial written claims rose 3% to $1.7 billion, along with a decline in catastrophe related losses. We expect the upward trend in the U.S. P&C market to continue through the Trefis forecast period as the company plans to invest more resources to grow in this sector.
Depreciating Yen Results in Losses
Hartford Financial hedges against declines in the stock market and a stronger Yen; however, as the Yen depreciated against the U.S. dollar, the company suffered significant losses. Runoff operations, which include the Japanese markets, reported a net loss of $587 million. This loss affected the net income of the company, which dropped 81% from last year to $96 million. Hartford’s operations however, were unaffected and the company insists that the hedge program continues to function as planned.
We will maintain a close eye on Hartford, and revise our model as the company continues to sell off its operations. Our current price estimate of Hartford’s stock is $18, 9% below the current market price.Notes:
- The Hartford Financial Services Group’s CEO Discusses Q1 2012 Results – Earnings Call Transcript, Seeking Alpha, 2nd May, 2012 [↩]