A month has gone by since the last earnings report for The Hartford (HIG). Shares have added about 1.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is The Hartford due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Hartford Financial Q4 Earnings Beat Estimates, Down Y/Y
Hartford Financial reported fourth-quarter 2018 adjusted operating earnings of 78 cents per share, beating the Zacks Consensus Estimate by 20%. The upside was primarily backed by higher core earnings in Group Benefits and Hartford Funds, lower tax rate, better Commercial Lines underlying results and higher net investment income in Property &Casualty and Corporate. However, the bottom line decreased 3.7% year over year mainly due to higher P&C catastrophe losses.
Total operating revenues came in at $4.63billion, up 1% year over year. This upside was primarily driven by a rise in earned premiums as well as higher net investment income.
Total operating expenses of $4.47 billion rose 7.2% year over year, led by higher benefits and cost, amortization and insurance operating cost.
Quarterly Segment Results
Property & Casualty (P&C) segment’s total revenues of $2.85 billion declined 5.3% year over year due to lower revenues from all the business line – Commercial, Personal as well as Other. The segment suffered an underwriting loss of $126 million compared with an underwriting gain of $43 million in the year ago quarter, due to rise in current accident year catastrophes.
Group Benefits
Group Benefits’ total revenues of $1.5 billion rose 15% year over year.
Core earnings were $136 million, up 103% year over year, mainly due to higher premiums and net investment income, expense ratios and a lower U.S. corporate tax rate.
The total loss ratio of 72.6% improved 350 bps over the year-earlier quarter’s tally due to better group disability and group life loss ratios.
Hartford Funds
The company has renamed its Mutual Fund segment to Hartford funds.
Mutual Funds operating revenues down 5% year over year to $245 million.
Hartford Financial reported core earnings of $38 million up 2.7% year over year.
Average AUM decreased 9% year over year to $105 billion due to a decline in equity and bond market values.
Corporate
Corporate segment operating revenues rose 240% year over year to $34 million.
The Corporate segment suffered core losses of $46 million, narrower than $51 million incurred in the prior-year quarter, backed by higher net investment income and lower interest expenses, partly offset by lower U.S. corporate tax rate.
Financial Update
As on Dec 31, 2018, debt of the company stands at $4.6 billion, down 6.4% year over year. As on Dec 31, 2018, cash stands at $121 million, down 32.8% year over year.
Book value per share as of Dec 31, 2018 dropped 6% to $35.06 from the level as of Dec 31, 2017.
The company also announced a $1.0 billion share repurchase authorization, effective through Dec 31, 2020.
2019 Outlook
For 2019, Commercial Lines and Personal Lines underlying combined ratio is expected to be in between 91% and 93%.
P&C current accident year catastrophe loss ratio is projected to be 4.2%.
Group Benefits net income margin and core earnings margin is estimated to be in the band of 5.5% and 6.5%, and 6% and 7% respectively.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, The Hartford has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
The Hartford has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
The Hartford Financial Services Group, Inc. (NYSE:HIG): Free Stock Analysis Report
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