Is Hartford Financial Stock Fairly Priced?

+7.75%
Upside
102
Market
110
Trefis
HIG: Hartford Financial Services Group logo
HIG
Hartford Financial Services Group

Hartford Financial’s stock (NYSE: HIG) has lost approximately 13% YTD as compared to the 3% rise in the S&P500 index over the same period. Further, at its current price of $66 per share, it has an upside potential of 32% to its fair value of $87 – Trefis’ estimate for Hartford Financial’s valuationThe property & casualty (P&C) insurance giant posted better-than-expected results in the fourth quarter of 2022, with revenues increasing by 3% y-o-y to $6.02 billion. It was mainly due to an 8% rise in earned premiums and a 12% increase in net investment income (NII). The earned premiums figure benefited from growth in the property & casualty (P&C) commercial lines and group benefits insurance segments. Similarly, the NII improved due to higher yield on variable rate securities and reinvesting at higher rates. On the cost front, the benefits, losses & expenses as a % of revenues increased in the quarter, leading to a 19% y-o-y drop in the adjusted net income to $584 million.

The company’s top line marginally decreased to $22.36 billion in 2022. It was driven by lower net investment income, a drop in fee income, and a net realized loss of -$627 million (as compared to $509 million in 2021), which nullified the 8% y-o-y growth in the earned premiums. Further, total benefits, losses & expenses as a % of revenues increased in the year. This resulted in a 23% y-o-y reduction in the adjusted net income to $1.79 billion. 

Moving forward, we expect the premiums to continue their growth trajectory over the subsequent quarters. Overall, Hartford Financial’s revenues are forecast to remain around $23.74 billion in FY2023. Additionally, HIG’s adjusted net income margin is likely to improve in the year, resulting in an adjusted net income of $2.41 billion and an annual GAAP EPS of $7.49. This coupled with a P/E multiple of just below 12x will lead to a valuation of $87.

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 Returns Mar 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 HIG Return -16% -13% 38%
 S&P 500 Return -1% 3% 76%
 Trefis Multi-Strategy Portfolio -3% 4% 226%
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[1] Month-to-date and year-to-date as of 3/24/2023
[2] Cumulative total returns since the end of 2016

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