Hartford has growth covered

Recent Price $99
Dividend $1.88
Yield 1.9%
P/E Ratio 11
Shares (millions) 311.5
Long-Term Debt as % of Capital 22%
52-Week Price Range $103.64 - $67.02

 

Like many financial stocks, Hartford Financial Services ($99; HIG) has performed well this year, delivering a total return of 24%. But unlike some of those stocks, Hartford shares remain attractively valued.

The stock trades at 11 times trailing earnings and 10 times projected 2024 earnings, more than 30% below the median for property-and-casualty insurers.

For that attractive price, you can acquire a company capable of consistent double-digit profit growth — performance that the market routinely underestimates. We added Hartford to our Buy List in the March 4 issue and upgraded it to the Focus List in the March 11 issue.

Business breakdown

Hartford has slimmed down its business mix in recent years. These days, the company generates almost all of its revenue from insurance.

• Commercial lines (53% of revenue) includes workers’ compensation, general business, auto, property, and personal-liability coverage aimed at business customers. Last year, written premiums rose 10%.

• Group benefits (28% of revenue) does what the name implies, providing life, disability, and accident coverage, as well as some specialty products to company employees and members of other groups. In 2023, ongoing premiums increased 7%.

• Personal lines (14%) covers automobiles and homes for individuals, mostly via a program designed for members of the American Association of Retired Persons. Written premiums rose 8% last year.

• Most of the rest of Hartford’s revenue comes from a mutual-fund unit that sells to retail investors. At the end of 2023, Hartford had $131 billion under management, up 6% from 2022 levels.

We appreciate that all of Hartford’s business units contribute to the company’s consistent corporate growth. Hartford’s profits have increased in each of the last six years. Consensus estimates project per-share-profit growth of 12% to 14% in each of the next three years, supported by revenue growth of 9% this year and 4% to 5% in 2025 and 2026.

Hartford has met or exceeded the consensus in eight straight quarters, most recently a 27% surprise in the December quarter and 17% in the September quarter. Insurance premiums are on the rise, pricing power that boosts our confidence in Hartford’s ability to meet or exceed growth targets.

Profit margins have trended higher in recent quarters, driven by a combination of premium growth and strict expense management.

Giving back

Hartford has increased its dividend at an annualized rate of 12% over the last decade, most recently an 11% hike in November. The stock yields 1.9%. Hartford has also reduced its share count by 5% over the last three years.

Hartford Financial Services Group Inc., 1 Hartford Plaza, Hartford, CN 06155, (860) 547-5000, www.thehartford.com.

 

 

Quarter Per-Share Earnings* Sales Change Quarterly Price Range P/E Ratio
Range
Dec '23 $3.06 vs. 2.31 6% $81.07 - $68.82 10 - 8
Sep '23 2.29 vs. 1.44 11% 76.83 - 70.26 11 - 10
Jun '23 1.88 vs. 2.15 13% 72.49 - 67.02 10 - 9
Mar '23 1.68 vs. 1.66 10% 79.44 - 64.25 11 - 8

 

Year
(Dec.)
Sales
(Bil.)
Per-Share Earnings* Per-Share
Dividend
52-Week Price Range P/E Ratio
Range
2023 $24.5 $8.88 $1.70 $81.07   $64.25 9 - 7
2022 22.4 7.56 1.54 76.97 - 60.17 10 - 8
2021 22.4 6.15 1.38 78.17 - 47.47 13 - 8
2020 20.5 5.78 1.28 61.32 - 19.04 11 - 3

 

Quadrix Scores
Overall Momen-
tum
Value Quality Financial
Strength
Earnings
Estimates
Perform-
ance
Reversion
97 95 73 74 58 89 93 13

 

* Earnings exclude special items.
NA Not Available.
Quadrix® scores are percentile ranks, with 100 the best.
e Dividend and yield estimated.