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The Hartford Financial Services Group, Inc.’s HIG board of directors recently authorized a share buyback program in a bid to return more value to shareholders. The latest program, which will come into effect from Jan 1, 2021 and expire through Dec 31, 2020, will enable the company to buy back shares of up to $1.5 billion.
The company has an impressive history of returning value to shareholders through share buybacks. However, it is worth mentioning that time and again, the company has resorted to putting their share repurchase activities on hold temporarily. Such decisions were taken as and when the company decided to prioritize usage of funds for undertaking numerous growth initiatives including buyouts over share buybacks.
It has to be noted that the COVID-19 induced market volatilities had compelled most insurance companies to temporarily halt their share buyback programs and Hartford Financial was no exception to the trend. As a result, the company did not indulge in buying back shares from April 1 to October 27 of this year.
During the first nine months of 2020, Hartford Financial bought back 2.7 million shares worth $150 million. Once the market stabilizes, the company intends to buy back the remaining shares under the share repurchase program, which was approved on February 2019. It also aims to commence the latest buyback program worth $1.5 billion once the insurer reports fourth-quarter 2020 earnings.
Other insurers, namely MetLife, Inc.’s MET board of directors approved a share repurchase program valued at $3 billion in this month itself. While the board of directors at Aon plc’s AON approved a $5 billion share buyback program last month, Chubb Limited CB approved a buyback program worth $1.5 billion in November.
Not only share buybacks, Hartford Financial also remains committed to rewarding shareholders via dividend hikes. This multiline insurer has increased dividends for eight consecutive years except 2012 and 2019, with the latest hike of 8% being announced this year in February concurrent with the company’s fourth-quarter 2019 results. Notably, its dividend yield of 2.8% is higher than the industry average of 2.2%.
Moreover, a robust financial position driven by a strong balance sheet and adequarte cash generation capabilities over the years has paved the way for Hartford Financial to not only undertake growth initiatives such as buyouts but also paved the way for accelerated and prudent capital deployment measures. Notably, the company’s cash flow from operations during the nine months of 2020 increased 8.5% from the prior-year comparable period.
Also, its return on equity — a profitability measure of how tactically the company is utilizing its shareholders funds — is 12.2%, higher than the industry average of 7.8%.
Shares of this Zacks Rank #3 (Hold) multiline insurer have gained 17% in the past six months compared with the industry’s growth of 18.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Nevertheless, we believe the company is well-poised to gain from numerous growth initiatives, divestitures aimed at intensifying focus on its U.S. operations and strong capital position.
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The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report
Aon plc (AON) : Free Stock Analysis Report
Chubb Limited (CB) : Free Stock Analysis Report
MetLife, Inc. (MET) : Free Stock Analysis Report
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