Will High Cat Losses Mar Hartford Financial's (HIG) Q2 Earnings?
The Hartford Financial Services Group, Inc. HIG is slated to report second-quarter 2023 results on Jul 27, after the closing bell.
Q2 Estimates
The Zacks Consensus Estimate for Hartford Financial’s second-quarter earnings per share is pegged at $1.85, which indicates a decline of 14% from the prior-year quarter’s reported figure.
The consensus mark for revenues stands at $4,088 million, suggesting 8.6% growth from the year-ago quarter’s reported number.
Earnings Surprise History
Hartford Financial boasts a decent earnings surprise history. Its bottom line beat estimates in three of the trailing four quarters and matched the mark once, the average surprise being 19.32%. This is depicted in the chart below:
The Hartford Financial Services Group, Inc. Price and EPS Surprise
The Hartford Financial Services Group, Inc. price-eps-surprise | The Hartford Financial Services Group, Inc. Quote
Factors to Note
The top line of Hartford Financial is likely to have benefited on the back of growing premiums across its Commercial Lines, Personal Lines and Group Benefits businesses in the second quarter. We expect earned premiums of HIG to improve 6.8% year over year to $5,136.3 million.
Additionally, higher fixed-income portfolio yields and solid reinvestment rates are expected to have driven the investment results of Hartford Financial in the to-be-reported quarter.
The Commercial Lines business is expected to have gained from prudent rate increases, new business growth and consistent exposure growth. Our estimate for Commercial Lines’ earned premiums is pegged at $2,885.8 million, suggesting 10.4% growth year over year.
Robust renewal written price increases within auto and homeowners insurance business are likely to have boosted the quarterly performance of the Personal Lines unit of Hartford Financial in the second quarter. Increased net rate and insured value increases are expected to have driven the results of the homeowners insurance business. However, continued incidence of auto losses as well as inflationary pressure leading to escalating repair costs and an uptick in used car prices are likely to have acted as a partial offset for the underwriting results of the Personal Lines business.
Our estimate for Personal Lines’ earned premiums is pegged at $747.5 million, up 3% year over year. However, we expect the segment’s combined ratio to deteriorate 90 basis points year over year at 102.7% in the second quarter.
The Group Benefits business of HIG is expected to have been aided by improved fully insured premiums, new business growth, robust sales and, reduced group life and disability loss ratios. Our estimate for the segment’s earned premiums is $1,502.9 million, which indicates a rise of 2.3% year over year.
However, the overall underwriting results of Hartford Financial are likely to have suffered a blow due to higher catastrophe losses in the to-be-reported quarter.
Its margins are likely to have suffered a setback from increased benefits, losses and loss adjustment expenses as well as higher insurance operating costs. We expect benefits, losses and loss adjustment expenses to escalate 14.1% year over year to $3,507.4 million in the second quarter.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Hartford Financial this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here, as you see below.
Earnings ESP: Hartford Financial has an Earnings ESP of +1.83% because the Most Accurate Estimate of $1.88 is pegged higher than the Zacks Consensus Estimate of $1.85. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: HIG currently has a Zacks Rank #4 (Sell).
Stocks to Consider
While an earnings beat looks uncertain for Hartford Financial, here are some companies from the insurance space, which according to our model, have the right combination of elements to beat on earnings this time around:
American Equity Investment Life Holding Company AEL has an Earnings ESP of +1.70% and a Zacks Rank of 1, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for AEL’s second-quarter 2023 earnings is pegged at $1.67 per share, indicating a surge of 70.4% from the prior-year quarter’s reported figure.
American Equity’s bottom line beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 13.01%.
Aon plc AON has an Earnings ESP of +2.56% and a Zacks Rank of 3 at present. The Zacks Consensus Estimate for AON's second-quarter 2023 earnings is pegged at $2.82 per share, indicating an increase of 7.2% from the year-ago quarter’s reported figure.
Aon’s earnings beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 1.64%.
Brighthouse Financial, Inc. BHF has an Earnings ESP of +0.42% and a Zacks Rank of 3, currently. The Zacks Consensus Estimate for BHF’s second-quarter 2023 earnings is pegged at $3.55 per share, suggesting 7.9% growth from the prior-year quarter’s reported figure.
Brighthouse Financial has witnessed three upward estimate revisions for second-quarter earnings compared to two downward estimate revisions in the past 30 days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report
Aon plc (AON) : Free Stock Analysis Report
American Equity Investment Life Holding Company (AEL) : Free Stock Analysis Report
Brighthouse Financial, Inc. (BHF) : Free Stock Analysis Report
