Will The Hartford's Strong Capital Position Offset Macro Risks?

On Sep 27, 2016, we have issued an updated research report on The Hartford Financial Services Group, Inc. (NYSE:HIG) .

The Connecticut-based multi-line insurance and investment company is one of the major providers of investment products, group life and group disability insurance, property and casualty (P&C) insurance and mutual funds in the U.S. The company’s strong market position, good margins with excess capital generation and low capital market sensitivity lends it a competitive edge.

Over the past few years, the company has witnessed substantial improvement in its earnings performance, positive credit trends. It has also strengthened its capital and liquidity position.

The insurer has been efficiently maintaining margins and underwriting discipline in its Commercial Lines and Group Benefits segments. The Hartford strives to deliver strong margin in its personal lines as well. To this end, it has undertaken several pricing, underwriting, and distribution strategies in recent times.

The Harford remains focused on growing book value per diluted share along with enhancing shareholders’ value through several capital deployment activities. Frequent increase in dividends and share repurchases on regular intervals has helped it cement investors’ confidence. The company has also been very particular on timely repayment of its debt and other liabilities. The insurer’s strong capital management is reflected by its ability to the return capital to investors from Talcott Resolution during its run-off.

However, the persistently soft interest rate has spelt doom for several insurance sector bigwigs like CNO Financial Group Inc (NYSE:CNO) , James River Group Holdings Ltd (NASDAQ:JRVR) , ageas SA/NV (OTC:AGESY) to name a few. This weak interest rates have drastically lowered net investment income of these companies and The Hartford is no exception to the trend.

Decrease in income from fixed maturities and limited partnerships is another cause of concern. The Hartford is a property and casualty insurer and hence, remains exposed to numerous catastrophic events, which often results in loss of earnings.

In addition to this, the company’s Personal lines segment has incurred considerable amount of auto liability loss. Although the company has taken several initiatives to boost the margin of this segment, these efforts have not been sufficient to mitigate the negatives. As a result, the base of this business has weakened significantly.

The Hartford presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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