Will Rate Hikes Aid Hartford Financial's (HIG) Q3 Earnings?
The Hartford Financial Services Group, Inc. HIG is scheduled to release third-quarter 2023 results on Oct 26, after the closing bell.
Q3 Estimates
The Zacks Consensus Estimate for Hartford Financial’s third-quarter earnings per share is pegged at $1.95, which indicates an improvement of 35.4% from the prior-year quarter’s reported figure.
The consensus mark for revenues is $4,207 million, suggesting 9.8% growth from the year-ago quarter’s reported number.
Earnings Surprise History
Hartford Financial’s bottom line beat estimates in three of the trailing four quarters and matched the mark once, the average surprise being 9.36%. 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
What Our Quantitative Model Unveils
Our proven model predicts 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, which is the case here.
Earnings ESP: Hartford Financial has an Earnings ESP of +1.61% because the Most Accurate Estimate of $1.98 is pegged higher than the Zacks Consensus Estimate of $1.95. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: HIG carries a Zacks Rank of 2.
Factors at Play
Hartford Financial’s revenues are expected to have benefited on the back of improved premiums across its Commercial Lines, Personal Lines and Group Benefits businesses in the third quarter. Our estimate for overall earned premiums is $5,369.9 million, which indicates an improvement of 9.4% year over year.
Persistent rate increases, new business growth, expanding policies in force and higher retention rates are likely to have aided the Commercial Lines business in the to-be-reported quarter. However, the upside is likely to have been partly offset by the continued incidence of catastrophe losses, which in turn, are expected to have inflicted some adversities on the underwriting results.
We anticipate Commercial Lines’ earned premiums to improve 10.1% year over year to $2,976.7 million in the third quarter. Our estimate for the unit’s underwriting gain is $193.2 million, up 26.2% year over year.
The Personal Lines business is expected to have benefited on the back of renewal written price increases in the third quarter. The homeowners insurance business is likely to have been aided by favorable net rates and insured value increases. However, the auto insurance business is likely to have suffered a setback from elevated severity losses and the continued inflationary headwinds.
We expect earned premiums of the Personal Lines unit to be $832.4 million, which implies an 11.1% rise from the prior-year quarter’s reported number.
The Group Benefits business is expected to have been driven by higher premiums, solid sales and improved long-term disability results in the to-be-reported quarter. Our estimate for earned premiums of the segment is $1,560.7 million, which indicates an improvement of 7% from the prior-year quarter’s reported figure.
Additionally, increased returns from the fixed-income portfolio of Hartford Financial, attributable to higher interest rates, are likely to have aided its third-quarter investment results. We expect net investment income to be $497.6 million, up 2.2% year over year.
However, its bottom line is expected to have suffered a blow due to escalating benefits, losses and loss adjustment expenses as well as higher insurance operating costs. We expect total benefits, losses and expenses to increase 5.3% year over year to $5,421.1 million in the third quarter. HIG’s margins are also likely to have been hurt by expenses linked with investments to boost digital, analytics and data science capabilities.
Other Stocks to Consider
Here are some other companies from the insurance space, which according to our model, also have the right combination of elements to beat on earnings this time around:
Cincinnati Financial Corporation CINF currently has an Earnings ESP of +3.00% and sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CINF’s third-quarter 2023 earnings is pegged at $1.07 per share, indicating a surge of 46.6% from the prior-year quarter’s reported number.
Cincinnati Financial’s earnings beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 25.25%.
American International Group, Inc. AIG has an Earnings ESP of +4.02% and a Zacks Rank of 2 at present. The Zacks Consensus Estimate for AIG’s third-quarter 2023 earnings is pegged at $1.55 per share, which has more than doubled from the prior-year quarter’s reported figure.
American International’s earnings beat estimates in each of the trailing four quarters, the average surprise being 13.45%.
Arch Capital Group Ltd. ACGL has an Earnings ESP of +1.37% and a Zacks Rank of 2 at present. The Zacks Consensus Estimate for ACGL’s third-quarter 2023 earnings is pegged at $1.48 per share, which indicates an increase of more than five-fold from the prior-year quarter’s reported figure.
Arch Capital’s earnings beat estimates in each of the trailing four quarters, the average surprise being 26.83%.
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The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report
American International Group, Inc. (AIG) : Free Stock Analysis Report
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
