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Hartford Financial's (HIG) Q4 Earnings: What's in the Cards?

Zacks Equity Research

The Hartford Financial Services Group, Inc. HIG will release fourth-quarter 2018 financial results on Feb 5, after the closing bell. In the last reported quarter, the company came up with adjusted operating earnings of $1.15 per share.

The bottom line shot up nearly 92% year over year, backed by better property & casualty underwriting results. This upside was driven by lower current accident year catastrophe loss and higher favorable prior-year development.

In the third quarter, the company delivered a positive surprise of 10.5%. 

Let’s see how things are shaping up for this announcement.

Q4 Expectations

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 65 cents, down by nearly 20%, mainly due to weather related losses. This is because the company expected the four-quarter to reflect results of full three months including the impact of cat loss.

The fourth quarter was marked by Hurricane Michael and California wildfire. The company’s exposure to cat loss will likely induce volatility in its underwriting profit in the fourth-quarter. The Hartford Financial expects fourth-quarter 2018 net catastrophe impacts to be around $350-$365 million before tax including the Camp and Woolsey fires in California and Hurricane Michael. After tax, net catastrophe impacts are projected to be around $275-$290 million.

Accelerated pace in interest rate hikes should continue to support higher net investment income of the company.

Rate increase across all business lines, except for worker's compensation, will likely drive premium improvement.

However, the company’s escalating expenses will weigh on margins.

Nonetheless, lower share count owning to continued buybacks should provide additional boost to the bottom-line.

What the Quantitative Model States

Our proven model does not conclusively show that Hartford Financial is likely to beat on earnings this quarter to be reported. This is because the stock needs to have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen, which is not the case here.

Earnings ESP: Hartford Financial has an Earnings ESP of -2.65% as the Most Accurate Estimate of 63 cents is pegged lower than the Zacks Consensus Estimate of 65 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

The Hartford Financial Services Group, Inc. Price and EPS Surprise

The Hartford Financial Services Group, Inc. Price and EPS Surprise | The Hartford Financial Services Group, Inc. Quote

Zacks Rank: Hartford Financial carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative ESP leaves surprise prediction inconclusive as only a positive ESP in the combination could increase the odds of a likely earnings surprise.

We caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Performance of Other Insurers

Among the insurance industry players that have delivered fourth-quarter earnings so far, The Travelers Companies, Inc. TRV, Arthur J. Gallagher & Co. AJG and RLI Corp.’s RLI bottom lines beat the respective Zacks Consensus Estimate. You can see the complete list of today’s Zacks #1 Rank stocks here.

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