The Hartford Financial Services Group, Inc. HIG has been in investors’ good books owing to strategic initiatives and financial strength.
The stock carries a VGM Score of A. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
Its return-on-equity (ROE) reflects growth potential. The company’s trailing 12-month ROA of 13.6% compares favorably with the industry average of 9.3%, reflecting its efficiency in utilizing its shareholders’ funds.
Now let’s see what has been working in the stock’s favor.
The company’s net investment income bounced back after suffering low interest rates from the past many years. In 2018 and 2019, the metric rose 11% and 10% year over year. The 2019 buyout of the Navigators, higher income from make-whole payments and mortgage loan prepayments led to this upside.
Moreover, the company has been gaining traction from several strategic initiatives meant to improve its risk profile from a number of well-executed dispositions of its legacy run-off businesses. Hartford Financial has been vending non-core businesses to concentrate on its U.S. operations and enhance its operating leverage. Apart from lowering expenses, boosting profitability and improving returns to shareholders, these divestitures are strengthening financial flexibility of the company by freeing up more capital.
The company has been making consistent efforts to boost its portfolio through acquisitions. In May 2019, it closed the Navigators Group buyout for $2.1 billion. The transaction helped it expand its product offerings and geographic reach plus consolidate its commercial business lines. The move is also expected to reinforce the company’s underwriting strength in product capabilities.
Hartford Financial expects its underlying combined ratio for Commercial Lines in the range of 92-94% for 2020.
The company’s capital position should instil investor’s confidence in the stock. Its capital appreciations, repayment of government funds and measures to de-risk its balance sheet drove its financial potency. It also has an intelligent capital management strategy to deploy funds for share buybacks and dividend hikes.
The company has an impressive surprise history. Its earnings managed to beat estimates in all the trailing four quarters, the average being 14.4%.
Zacks Rank and Price Performance
In a year's time, shares of this Zacks Rank #3 (Hold) company have lost 29.2%, wider than its industry's decline of 24%. This looks paler when compared with the stock movement of the companies in the same space, such as Kemper Corporation KMPR, Assurant, Inc. AIZ and EverQuote, Inc. EVER, which have lost 4.1%, gained 11.2% and risen 277.9%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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