We have retained our Underperform recommendation on Hartford Financial Services Group Inc. (HIG) based on its disappointing fourth quarter and full year 2012 results. The company is highly exposed to catastrophe losses. The low home and auto renewal rates are also worrisome.
Hartford Financial reported fourth-quarter 2012 operating earnings of $265 million or 54 cents per share, beating the Zacks Consensus Estimate of 30 cents. However, operating earnings lagged the year-ago earnings of $301 million or 61 cents per share.
High catastrophe loss due to Hurricane Sandy was the chief reason for the decline in earnings. As a Property & Casualty insurer, Hartford Financial is substantially exposed to catastrophic events. The company incurred gross losses of $370 million due to the Super storm in 2012.
Moreover, Hartford Financial has been witnessing weakness in its auto and home product lines over the past few years. A decline in renewal written premium offset the increase in auto and home new business written in 2012, leading to lower earned premium as well as reduced number of policies-in-force as of Dec 31, 2012.
Further, the operating earnings of Hartford Financial are expected to decline 37% year-over-year in the first quarter of 2013. The Zacks Consensus Estimate for the first quarter earnings stands at 79 cents.
Other Stocks to Consider
Hartford Financial currently carries a Zacks Rank #3 (Hold). Other multi-line insurance companies worth considering are Assured Guaranty Ltd. (AGO), AXA Group (AXAHY) and CNO Financial Group Inc. (CNO). All these are Zacks Rank #1 (Strong Buy) stocks.
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