Is Hartford Financial Stock Fairly Priced?

+12.37%
Upside
75.97
Market
85.37
Trefis
HIG: Hartford Financial Services Group logo
HIG
Hartford Financial Services Group

Hartford Financial’s stock (NYSE: HIG) has lost approximately 9% YTD as compared to the 24% drop in the S&P500 index over the same period. Further, at its current price of $63 per share, it has an upside potential of 36% to its fair value of $85 – Trefis’ estimate for Hartford Financial’s valuationThe property & casualty (P&C) insurance giant posted better than expected results in the second quarter of 2022, despite revenues decreasing by 4% y-o-y to $5.4 billion. The drop was mainly due to a drop in net realized gains from $147 million to -$338 million and a 7% decline in net investment income (NII). That said, earned premiums increased 8% y-o-y to $4.8 billion driven by a 12% growth in the commercial P&C segment and a 7% rise in the group insurance unit. On the cost front, total benefits, losses, and expenses increased 8% y-o-y, which coupled with lower revenues resulted in a 51% decrease in the adjusted net income to $437 million.

The company’s top line grew 9% y-o-y to $22.4 billion in 2021. However, the trend changed in the first half of 2022, with total revenues witnessing a marginal drop to $10.76 billion. It was because of lower NII and a decrease in net realized gains, partially offset by higher earned premiums. Further, total benefits, losses & expenses as a % of revenues increased in the first half. Overall, it led to a 23% y-o-y drop in the adjusted net income to $877 million. 

Moving forward, we expect the premiums to continue their growth trajectory over the subsequent quarters. The consensus estimates for Q3 revenues and earnings are $5.59 billion and $1.59 respectively. Overall, Hartford Financial’s revenues are estimated to remain around $22.4 billion in FY2022. Additionally, HIG’s adjusted net income margin is likely to see some improvement in the year, resulting in an adjusted net income of $2.52 billion and an annual GAAP EPS of $7.59. This coupled with a P/E multiple of just above 11x will lead to the valuation of $85.

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 Returns Sep 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 HIG Return -3% -9% 31%
 S&P 500 Return -8% -24% 63%
 Trefis Multi-Strategy Portfolio -12% -26% 195%
Relevant Articles
  1. Is Hartford Financial Stock Attractive At The Current Levels?
  2. Is Hartford Financial Stock Fairly Priced?
  3. Hartford Financial To Report Mixed Results In Q4, Is It A Buy?
  4. Is Hartford Financial Stock Undervalued?
  5. Hartford Financial Stock To Post Strong Q3 Results?
  6. Hartford Financial Stock Has A Limited Upside

[1] Month-to-date and year-to-date as of 9/30/2022
[2] Cumulative total returns since the end of 2016

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