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Can Hartford Financial (HIG) Counter Rising Costs in Q2 Earnings?
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The Hartford Financial Services Group, Inc. (HIG - Free Report) is slated to release second-quarter 2024 results on Jul 25, after the closing bell.
Q2 Estimates
The Zacks Consensus Estimate for HIG’s second-quarter earnings per share is pegged at $2.26, which indicates an improvement of 20.2% from the year-ago quarter’s reported figure. The estimate was revised downward by six analysts in the past month against no movement in the opposite direction, resulting in a decrease of 8 cents from $2.34 per share.
The consensus mark for revenues is $4.5 billion, indicating 10.1% growth from the prior-year quarter’s actual.
Image Source: Zacks Investment Research
Earnings Surprise History
Hartford Financial’s bottom line beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 10.85%. This is depicted in the chart below:
The Hartford Financial Services Group, Inc. Price and EPS Surprise
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 is not the case here, as you see below.
Earnings ESP: Hartford Financial has an Earnings ESP of -1.94%. This is because the Most Accurate Estimate currently is $2.22 per share, lower than the Zacks Consensus Estimate of $2.26. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Zacks Rank: HIG currently has a Zacks Rank of 3.
Now, let us see how things have shaped up before the second-quarter earnings announcement.
Factors to Note
The top line of Hartford Financial is likely to have gained from higher premiums across its Commercial Lines, Personal Lines and Group Benefits businesses in the second quarter. The Zacks Consensus Estimate for overall net premiums earned is pegged at $5.6 billion, which implies a 7.8% rise from the prior-year quarter’s reported figure.
Consistent rate hikes, new business growth, steady retention rates and robust submission flows are likely to have supported the Commercial Lines business. However, this growth is expected to have been partially offset by continued catastrophe losses, which are likely to adversely affect underwriting results. The consensus estimate for Commercial Lines’ earned premiums is $3.2 billion, indicating 9.9% growth from the year-ago quarter’s figure.
The Personal Lines business is anticipated to have gained from strategic rate hikes and renewal written price increases. The homeowners insurance business is likely to have benefited from favorable net rates and increased insured values. However, underwriting results are likely to be impacted by continued severity losses and ongoing inflationary pressures in the auto insurance sector.
The Zacks Consensus Estimate for earned premiums of the Personal Lines business is pegged at $836.4 million, which indicates a 10% increase from the prior-year quarter’s reported figure.
The Group Benefits business is likely to have been driven by improved fully insured ongoing premiums, favorable mortality trends and persistent strength in long-term disability claim recoveries. The consensus mark for the unit’s revenues is $1.7 billion, indicating a 1.4% rise from the prior-year quarter's figure.
Additionally, Hartford Financial's second-quarter investment results are likely to be bolstered by increased returns from its private equity portfolio. Management expects limited partnership returns to stay consistent with the first-quarter level.
However, the bottom line is expected to have been pressured by rising benefits, losses and loss adjustment expenses, as well as higher insurance operating costs. HIG’s margins are also likely to have been impacted by ongoing investments in digital, analytics and data science capabilities.
Price Performance
Hartford Financial's stock has exhibited an upward movement, gaining a notable percentage in the year-to-date period. It has jumped 27% compared with the industry’s 15.7% growth. Additionally, the stock has outperformed the Finance sector and S&P 500 Index, which rallied 10.8% and 17.1%, respectively, during the same period.
Image Source: Zacks Investment Research
Conclusion
While Hartford Financial's strategic rate hikes, new business growth and investment in digital capabilities position it well for growth, investors should weigh these against the ongoing cost pressures and inflationary headwinds. Investors who already have the stock in their portfolio may want to hold on to the stock for now and monitor the upcoming earnings results closely. Meanwhile, new investors may want to wait for a more favorable entry point.
Stocks to Consider
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:
The Zacks Consensus Estimate for PLMR’s second-quarter 2024 earnings is pegged at $1.11 per share, which indicates an improvement of 29.1% from the year-ago quarter’s reported figure.
Palomar’s earnings beat estimates in each of the trailing four quarters, the average surprise being 15.10%.
Reinsurance Group of America, Incorporated (RGA - Free Report) has an Earnings ESP of +2.81% and a Zacks Rank of 2 at present. The Zacks Consensus Estimate for RGA’s second-quarter earnings is pegged at $4.94 per share, which implies a 12.3% rise from the year-ago quarter’s reported figure.
Reinsurance Group’s earnings beat estimates in each of the trailing four quarters, the average surprise being 19.48%.
Prudential Financial, Inc. (PRU - Free Report) has an Earnings ESP of +0.11% and a Zacks Rank of 3, at present. The Zacks Consensus Estimate for PRU’s second-quarter earnings is pegged at $3.43 per share, which indicates an improvement of 16.7% from the year-ago quarter’s reported figure.
Prudential Financial’s earnings beat estimates in one of the trailing four quarters and missed the mark thrice, the average surprise being 0.23%.
Image: Bigstock
Can Hartford Financial (HIG) Counter Rising Costs in Q2 Earnings?
The Hartford Financial Services Group, Inc. (HIG - Free Report) is slated to release second-quarter 2024 results on Jul 25, after the closing bell.
Q2 Estimates
The Zacks Consensus Estimate for HIG’s second-quarter earnings per share is pegged at $2.26, which indicates an improvement of 20.2% from the year-ago quarter’s reported figure. The estimate was revised downward by six analysts in the past month against no movement in the opposite direction, resulting in a decrease of 8 cents from $2.34 per share.
The consensus mark for revenues is $4.5 billion, indicating 10.1% growth from the prior-year quarter’s actual.
Image Source: Zacks Investment Research
Earnings Surprise History
Hartford Financial’s bottom line beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 10.85%. 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 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 is not the case here, as you see below.
Earnings ESP: Hartford Financial has an Earnings ESP of -1.94%. This is because the Most Accurate Estimate currently is $2.22 per share, lower than the Zacks Consensus Estimate of $2.26. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Zacks Rank: HIG currently has a Zacks Rank of 3.
Now, let us see how things have shaped up before the second-quarter earnings announcement.
Factors to Note
The top line of Hartford Financial is likely to have gained from higher premiums across its Commercial Lines, Personal Lines and Group Benefits businesses in the second quarter. The Zacks Consensus Estimate for overall net premiums earned is pegged at $5.6 billion, which implies a 7.8% rise from the prior-year quarter’s reported figure.
Consistent rate hikes, new business growth, steady retention rates and robust submission flows are likely to have supported the Commercial Lines business. However, this growth is expected to have been partially offset by continued catastrophe losses, which are likely to adversely affect underwriting results. The consensus estimate for Commercial Lines’ earned premiums is $3.2 billion, indicating 9.9% growth from the year-ago quarter’s figure.
The Personal Lines business is anticipated to have gained from strategic rate hikes and renewal written price increases. The homeowners insurance business is likely to have benefited from favorable net rates and increased insured values. However, underwriting results are likely to be impacted by continued severity losses and ongoing inflationary pressures in the auto insurance sector.
The Zacks Consensus Estimate for earned premiums of the Personal Lines business is pegged at $836.4 million, which indicates a 10% increase from the prior-year quarter’s reported figure.
The Group Benefits business is likely to have been driven by improved fully insured ongoing premiums, favorable mortality trends and persistent strength in long-term disability claim recoveries. The consensus mark for the unit’s revenues is $1.7 billion, indicating a 1.4% rise from the prior-year quarter's figure.
Additionally, Hartford Financial's second-quarter investment results are likely to be bolstered by increased returns from its private equity portfolio. Management expects limited partnership returns to stay consistent with the first-quarter level.
However, the bottom line is expected to have been pressured by rising benefits, losses and loss adjustment expenses, as well as higher insurance operating costs. HIG’s margins are also likely to have been impacted by ongoing investments in digital, analytics and data science capabilities.
Price Performance
Hartford Financial's stock has exhibited an upward movement, gaining a notable percentage in the year-to-date period. It has jumped 27% compared with the industry’s 15.7% growth. Additionally, the stock has outperformed the Finance sector and S&P 500 Index, which rallied 10.8% and 17.1%, respectively, during the same period.
Image Source: Zacks Investment Research
Conclusion
While Hartford Financial's strategic rate hikes, new business growth and investment in digital capabilities position it well for growth, investors should weigh these against the ongoing cost pressures and inflationary headwinds. Investors who already have the stock in their portfolio may want to hold on to the stock for now and monitor the upcoming earnings results closely. Meanwhile, new investors may want to wait for a more favorable entry point.
Stocks to Consider
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:
Palomar Holdings, Inc. (PLMR - Free Report) currently has an Earnings ESP of +3.00% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for PLMR’s second-quarter 2024 earnings is pegged at $1.11 per share, which indicates an improvement of 29.1% from the year-ago quarter’s reported figure.
Palomar’s earnings beat estimates in each of the trailing four quarters, the average surprise being 15.10%.
Reinsurance Group of America, Incorporated (RGA - Free Report) has an Earnings ESP of +2.81% and a Zacks Rank of 2 at present. The Zacks Consensus Estimate for RGA’s second-quarter earnings is pegged at $4.94 per share, which implies a 12.3% rise from the year-ago quarter’s reported figure.
Reinsurance Group’s earnings beat estimates in each of the trailing four quarters, the average surprise being 19.48%.
Prudential Financial, Inc. (PRU - Free Report) has an Earnings ESP of +0.11% and a Zacks Rank of 3, at present. The Zacks Consensus Estimate for PRU’s second-quarter earnings is pegged at $3.43 per share, which indicates an improvement of 16.7% from the year-ago quarter’s reported figure.
Prudential Financial’s earnings beat estimates in one of the trailing four quarters and missed the mark thrice, the average surprise being 0.23%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.