How Will Hartford Perform In Its Second Quarter?

Hartford Financial (NYSE: HIG), one of the leading property and casualty insurers in the U.S., had a good first quarter as both revenue and earnings beat the market expectations. The company is scheduled to announce second-quarter earnings on July 26, and we expect it to report another robust quarter, driven mainly by growth in the Commercial Lines and Group Benefits businesses. We expect Hartford to report earnings of about $1.14 per share on revenues of $4.76 billion for the quarter, based on our interactive model for Hartford Financial. Moreover, we maintain a $61 price estimate for the Hartford’s stock, which is ahead of the current market price. Below we take a look at some of the key trends that we will be watching when the company reports earnings.

Commercial Lines Business Will Likely Deliver Strong Results

Commercial Lines has been a strong contributor to the company’s top line in the past few quarters, and we expect this trend to continue in the upcoming quarter. Workers’ compensation contributes about 48% to the segment’s earned premiums and has been performing well over the past few quarters. With the declining unemployment rate and improving economic conditions in the U.S., we expect another strong contribution from this business in 2018.  Furthermore, we expect pricing improvements to drive growth in the Small Commercial, Middle Market, and Specialty Commercial business. Meanwhile, the company has made progress on the technology front by expanding the functionalities of the ICON quoting platform, which should help the company gain traction among its customers. Personal Lines, however, could experience slight pressure as conversion ratios have been on a lower-than-expected level despite the company’s marketing efforts.

Acquisition of Aetna’s Group Life & Disability Business Has Been A Sound Decision

In 2017, Hartford executed two important deals that could shape the future of the company. It got rid of Talcott, a declining business, and acquired Aetna’s group life and disability business. The Aetna acquisition has made Hartford one of the biggest players in the Life and Disability business, and has deepened Hartford’s penetration in mid-size and large companies. With complete integration, we expect the company to realize the full potential of the deal in 2018, which will drive growth in earned premiums. Meanwhile, the deal includes a multi-year collaboration to sell Hartford’s life and disability products via Aetna’s medical sales team. This will deepen Hartford’s penetration in the market. Furthermore, Aetna’s expertise in the business should help the renewal retention rate.

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