What Is The Fair Value For Hartford Financial’s Stock?

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Downside
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Market
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Trefis
HIG: Hartford Financial Services Group logo
HIG
Hartford Financial Services Group

Hartford Financial (NYSE:HIG) is global insurance giant that provides life Property & Casualty Insurance, Group Life Insurance and Mutual Fund services to its clients. Trefis estimates Hartford Financial’s valuation to be $64 per share, which is 5% ahead of the current market price. Our price estimate takes into account Hartford Financial’s earnings beat for the third quarter, where it reported total revenues of $5.3 billion – up 10% y-o-y – thanks to a 26%-jump in Commercial Property & Casualty (P&C) premiums and 10% growth in net investment income, partially offset by declines in Personal P&C premiums and Mutual Funds & Corporate revenues.

We have detailed the key components of Hartford Financial’s valuation in an interactive dashboard, along with our forecast for the full year 2019.

We Arrive At Our Stock Price Estimate Using 4 Underlying Factors:

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Stock Price = (Total revenue x Net income margin / No. of shares outstanding) x P/E Ratio

 

Hartford Financial’s Revenues Would Cross $20.3 Billion In 2019, Driven By Growth In Property & Casualty Segment

  • Total revenues have increased 19% over the last 4 years, from $16 billion in 2015 to $19 billion in 2018.
  • We expect Hartford Financial to report $20.3 billion in Total Revenues for 2019, which is 7% more than the previous year.
  • This growth would be driven by an 8% y-o-y rise in Group Life Insurance revenues followed by a 6% jump in Property & Casualty (P&C) segment revenues.
  • Also, Mutual Funds & Corporate segment is expected to increase by 14% y-o-y in 2019.

We capture the factors that have driven changes in revenues of Hartford Financial’s segments over recent years along with our forecast for the next three years in an interactive dashboard.

 

Better Operating Margin And Higher Revenues Should Boost The Net Income Figure

  • Although Hartford Financial is expected to have a Net Income of $1.9 billion in 2019 – which is 6% more than the previous year – net interest margin would decrease by 7 bps to 9.4%.
  • This decrease in Net Interest Margin would be due to higher expected Tax Rate as compared to the previous year.

 

This Lends Support To A $64 Price Estimate For Hartford Financial’s Shares

  • Hartford Financial has regularly invested in share repurchases to boost shareholder returns. Its share repurchase is likely to touch $340 million for full-year 2019.
  • Lower outstanding shares coupled with a higher Net Income figure should result in Hartford’s EPS figure increasing to $5.44 in 2019.
  • Using a 11.8x P/E Multiple on expected 2019 EPS of $5.44, this works out to our price estimate of $64 for Hartford Financial’s Stock

 

Details about how Hartford Financial’s P/E multiple compares with peers MetLife, AIG and Prudential Financial is available in our interactive dashboard.

 

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Like our charts? Explore example interactive dashboards and create your own.