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Hartford Financial (HIG) Q3 Earnings Beat on Commercial Lines Unit
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The Hartford Financial Services Group, Inc. (HIG - Free Report) reported third-quarter 2023 adjusted operating earnings of $2.29 per share, which outpaced the Zacks Consensus Estimate by 17.4%. The bottom line rose 57.9% year over year.
Operating revenues of HIG rose 10% year over year to $4,213 million in the quarter under review. The top line beat the consensus mark by a whisker.
The quarterly results benefited from well-performing Commercial Lines and Group Benefits businesses. While the Commercial Lines unit benefited on the back of higher premiums written, the Group Benefits business gained from improved fully insured ongoing premiums and sound core earnings margin. However, the upside was partly offset by an increased expense level and poor performance in the Hartford Funds segment.
The Hartford Financial Services Group, Inc. Price, Consensus and EPS Surprise
Net earned premiums of Hartford Financial amounted to $5,310 million, which improved 8.1% year over year in the third quarter but missed our estimate of $5,369.9 million.
Net investment income rose 22.6% year over year to $597 million in the third quarter and surpassed our estimate of $497.6 million. The year-over-year growth was due to higher returns from the fixed-income portfolio. Net investment income witnessed year-over-year growth in all the segments.
Total benefits, losses and expenses of $5,355 million increased 4% year over year in the quarter under review, lower than our estimate of $5,421 million.
HIG reported a pretax income of $813 million, which jumped 88.2% year over year and surpassed our estimate of $734.4 million.
Segmental Update
P&C
Commercial Lines
The segment recorded revenues of $3,318 million in the third quarter, which rose 13.1% year over year. Core earnings rose 49.3% year over year to $542 million due to lower catastrophe losses, an increase in net favorable prior accident year development within core earnings and improved net investment income. Yet, the metric came higher than our estimate of $407.6 million.
The underlying combined ratio of 87.8% improved 150 basis points (bps) year over year due to a decrease in the underlying loss and loss adjustment expense ratio.
Personal Lines
Revenues of $854 million grew 7.2% year over year in the third quarter. The segment reported a core loss of $8 million compared with the prior-year quarter’s core loss of $28 million. Higher severity of auto liability and physical damage dampened the metric.
The underlying combined ratio deteriorated 310 bps year over year to 99% in the quarter under review.
P&C Other Ops
The segment’s revenues of $16 million improved 60% year over year in the third quarter.
Group Benefits
The segment reported revenues of $1,719 million in the quarter under review, which improved 8.5% year over year but missed our estimate of $1,724.5 million. Core earnings improved 45.3% year over year to $170 million due to improving fully insured ongoing premiums and better disability results. The metric surpassed our estimate of $140.7 million.
The loss ratio was 70.2%, which improved 260 bps year over year due to a better mortality experience.
Hartford Funds
Revenues of $248 million improved 0.4% year over year in the third quarter and came higher than our estimate of $236.5 million. Core earnings declined 4.3% year over year at $45 million but were higher than our estimate of $43.5 million. Improved net investment income in the unit was partly offset by reduced fee income net of variable expenses.
The segment’s daily average assets under management decreased 1% year over year to $128.8 billion on the back of higher net outflows in the trailing 12 months.
Corporate
The segment’s revenues of $13 million improved 62.5% year over year but missed our estimate of $33.9 million. The unit reported a core loss of $52 million in the quarter under review, wider than the year-ago quarter’s loss of $37 million, attributable to higher expenses.
Financial Update (as of Sep 30, 2023)
Hartford Financial exited the third quarter with cash of $111 million, which decreased 51.5% from the figure at 2022-end. Total investments of $53.3 billion inched up 1.4% from the 2022-end level.
Total assets of $74.5 billion increased 2.1% from the figure at 2022-end.
Debt amounted to $4,361 million, which inched up marginally from the figure as of Dec 31, 2022.
Total stockholders’ equity inched up marginally from the 2022-end level to $13,679 million.
Book value per share came in at $43.5 during the third quarter, up 11.2% year over year.
Core earnings’ return on equity in the trailing 12 months improved 60 bps year over year to 14.9% at the third-quarter end.
Capital-Deployment Update
Hartford Financial returned $481 million to shareholders, which included $350 million in share buybacks and $131 million in common dividends. Under its $3-billion share repurchase program, HIG had a leftover buyback capacity of $1.7 billion as of Sep 30, 2023.
The company increased the quarterly dividend per share by 11% to 47 cents. This will be payable on Jan 3, 2024, to shareholders of record as of Dec 1, 2023.
Outlook
Management reaffirmed its previous outlook to achieve cumulative savings of $625 million in 2023 from the Hartford Next program.
Zacks Rank & Other Key Picks
Hartford Financial currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Trupanion’s current-year earnings has improved by a penny in the past 30 days. It beat earnings estimates twice in the past four quarters and missed on two occasions. Also, the consensus mark for TRUP’s revenues in 2023 suggests 20.1% year-over-year growth.
The consensus mark for Employers Holdings’ current-year earnings indicates a 17.1% year-over-year increase. It beat earnings estimates in each of the past four quarters, with an average surprise of 26.5%. Furthermore, the consensus estimate for EIG’s revenues in 2023 suggests 20.5% year-over-year growth.
The Zacks Consensus Estimate for Aflac’s current-year earnings indicates 13% year-over-year growth. In the past 30 days, AFL has witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates in each of the past four quarters, with an average surprise of 7.8%.
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Hartford Financial (HIG) Q3 Earnings Beat on Commercial Lines Unit
The Hartford Financial Services Group, Inc. (HIG - Free Report) reported third-quarter 2023 adjusted operating earnings of $2.29 per share, which outpaced the Zacks Consensus Estimate by 17.4%. The bottom line rose 57.9% year over year.
Operating revenues of HIG rose 10% year over year to $4,213 million in the quarter under review. The top line beat the consensus mark by a whisker.
The quarterly results benefited from well-performing Commercial Lines and Group Benefits businesses. While the Commercial Lines unit benefited on the back of higher premiums written, the Group Benefits business gained from improved fully insured ongoing premiums and sound core earnings margin. However, the upside was partly offset by an increased expense level and poor performance in the Hartford Funds segment.
The Hartford Financial Services Group, Inc. Price, Consensus and EPS Surprise
The Hartford Financial Services Group, Inc. price-consensus-eps-surprise-chart | The Hartford Financial Services Group, Inc. Quote
Q3 Operations
Net earned premiums of Hartford Financial amounted to $5,310 million, which improved 8.1% year over year in the third quarter but missed our estimate of $5,369.9 million.
Net investment income rose 22.6% year over year to $597 million in the third quarter and surpassed our estimate of $497.6 million. The year-over-year growth was due to higher returns from the fixed-income portfolio. Net investment income witnessed year-over-year growth in all the segments.
Total benefits, losses and expenses of $5,355 million increased 4% year over year in the quarter under review, lower than our estimate of $5,421 million.
HIG reported a pretax income of $813 million, which jumped 88.2% year over year and surpassed our estimate of $734.4 million.
Segmental Update
P&C
Commercial Lines
The segment recorded revenues of $3,318 million in the third quarter, which rose 13.1% year over year. Core earnings rose 49.3% year over year to $542 million due to lower catastrophe losses, an increase in net favorable prior accident year development within core earnings and improved net investment income. Yet, the metric came higher than our estimate of $407.6 million.
The underlying combined ratio of 87.8% improved 150 basis points (bps) year over year due to a decrease in the underlying loss and loss adjustment expense ratio.
Personal Lines
Revenues of $854 million grew 7.2% year over year in the third quarter. The segment reported a core loss of $8 million compared with the prior-year quarter’s core loss of $28 million. Higher severity of auto liability and physical damage dampened the metric.
The underlying combined ratio deteriorated 310 bps year over year to 99% in the quarter under review.
P&C Other Ops
The segment’s revenues of $16 million improved 60% year over year in the third quarter.
Group Benefits
The segment reported revenues of $1,719 million in the quarter under review, which improved 8.5% year over year but missed our estimate of $1,724.5 million. Core earnings improved 45.3% year over year to $170 million due to improving fully insured ongoing premiums and better disability results. The metric surpassed our estimate of $140.7 million.
The loss ratio was 70.2%, which improved 260 bps year over year due to a better mortality experience.
Hartford Funds
Revenues of $248 million improved 0.4% year over year in the third quarter and came higher than our estimate of $236.5 million. Core earnings declined 4.3% year over year at $45 million but were higher than our estimate of $43.5 million. Improved net investment income in the unit was partly offset by reduced fee income net of variable expenses.
The segment’s daily average assets under management decreased 1% year over year to $128.8 billion on the back of higher net outflows in the trailing 12 months.
Corporate
The segment’s revenues of $13 million improved 62.5% year over year but missed our estimate of $33.9 million. The unit reported a core loss of $52 million in the quarter under review, wider than the year-ago quarter’s loss of $37 million, attributable to higher expenses.
Financial Update (as of Sep 30, 2023)
Hartford Financial exited the third quarter with cash of $111 million, which decreased 51.5% from the figure at 2022-end. Total investments of $53.3 billion inched up 1.4% from the 2022-end level.
Total assets of $74.5 billion increased 2.1% from the figure at 2022-end.
Debt amounted to $4,361 million, which inched up marginally from the figure as of Dec 31, 2022.
Total stockholders’ equity inched up marginally from the 2022-end level to $13,679 million.
Book value per share came in at $43.5 during the third quarter, up 11.2% year over year.
Core earnings’ return on equity in the trailing 12 months improved 60 bps year over year to 14.9% at the third-quarter end.
Capital-Deployment Update
Hartford Financial returned $481 million to shareholders, which included $350 million in share buybacks and $131 million in common dividends. Under its $3-billion share repurchase program, HIG had a leftover buyback capacity of $1.7 billion as of Sep 30, 2023.
The company increased the quarterly dividend per share by 11% to 47 cents. This will be payable on Jan 3, 2024, to shareholders of record as of Dec 1, 2023.
Outlook
Management reaffirmed its previous outlook to achieve cumulative savings of $625 million in 2023 from the Hartford Next program.
Zacks Rank & Other Key Picks
Hartford Financial currently has a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader Finance space are Trupanion, Inc. (TRUP - Free Report) , Employers Holdings, Inc. (EIG - Free Report) and Aflac Incorporated (AFL - Free Report) . Each stock presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Trupanion’s current-year earnings has improved by a penny in the past 30 days. It beat earnings estimates twice in the past four quarters and missed on two occasions. Also, the consensus mark for TRUP’s revenues in 2023 suggests 20.1% year-over-year growth.
The consensus mark for Employers Holdings’ current-year earnings indicates a 17.1% year-over-year increase. It beat earnings estimates in each of the past four quarters, with an average surprise of 26.5%. Furthermore, the consensus estimate for EIG’s revenues in 2023 suggests 20.5% year-over-year growth.
The Zacks Consensus Estimate for Aflac’s current-year earnings indicates 13% year-over-year growth. In the past 30 days, AFL has witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates in each of the past four quarters, with an average surprise of 7.8%.