Hartford Financial Stock Lost 4% YTD, Is Correction In The Cards?

HIG: Hartford Financial Services Group logo
Hartford Financial Services Group

Hartford Financial’s stock (NYSE: HIG) has lost approximately 4% YTD as compared to the 12% rise in the S&P500 index over the same period. Further, at the current price of $73 per share, it is trading 14% below its fair value of $85 – Trefis’ estimate for Hartford Financial’s valuation

HIG stock has seen extremely strong gains of 50% from levels of $50 in early January 2021 to around $75 now, vs. an increase of about 15% for the S&P 500 over this roughly 3-year period. However, the increase in HIG stock has been far from consistent. Returns for the stock were 41% in 2021, 10% in 2022, and -4% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 12% in 2023 (YTD) – indicating that HIG underperformed the S&P in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financial sector including V, JPM, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could HIG face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

The insurance giant posted mixed results in the first quarter, with earnings beating the consensus but revenues marginally missing the mark. It posted total revenues of $6.05 billion – up 13% y-o-y, primarily driven by a 9% rise in the earned premiums and an 81% decline in the net realized losses. The premiums mainly benefited from a 10% growth in the property & casualty (P&C) commercial lines and a 7% rise in the group benefits insurance divisions. On the cost front, total benefits, losses & expenses as a % of revenues slightly decreased in the quarter, leading to a 23% y-o-y increase in the adjusted net income to $542 million.

Relevant Articles
  1. Hartford Financial Stock Is Undervalued
  2. Is Hartford Financial Stock Fairly Priced?
  3. Hartford Financial Stock Lost 1.2% In One Week, What’s Next?
  4. Is Hartford Financial Stock Fairly Priced?
  5. Is Hartford Financial Stock Attractive At The Current Levels?
  6. Is Hartford Financial Stock Fairly Priced?

The company’s top line grew 11% y-o-y to $11.96 billion in the first half of FY2023, driven by growth in net premiums and lower net realized losses. Further, the expenses as a % of revenues decreased over the same period. Overall, the net income improved 22% y-o-y to $1.07 billion. 

Moving forward, we expect the premiums to drive the third-quarter results. Notably, the consensus estimates for Q3 revenues and earnings are $6.17 billion and $1.98 respectively. Overall, Hartford Financial’s revenues are forecast to touch $24.01 billion in FY2023. Additionally, HIG’s adjusted net income margin is likely to be around 10%, resulting in an adjusted net income of $2.45 billion and an annual GAAP EPS of $7.58. This coupled with a P/E multiple of just above 11x will lead to a valuation of $85.

 Returns Oct 2023
MTD [1]
YTD [1]
Total [2]
 HIG Return 3% -4% 53%
 S&P 500 Return 1% 12% 93%
 Trefis Reinforced Value Portfolio 0% 23% 533%

[1] Month-to-date and year-to-date as of 10/19/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios

See all Trefis Price Estimates