Hartford trades at $145.37 and has moved in lockstep with the market. Its shares have returned 7.6% over the last six months while the S&P 500 has gained 7.1%.
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Why Is Hartford Not Exciting?
We’re sitting this one out for now. Here are three reasons you should be careful with HIG, plus one stock we’d rather own.
1. Net Premiums Earned Point to Soft Demand
Net premiums earned are net of what’s paid to reinsurers (insurance for insurance companies), which are used by insurers to protect themselves from large losses.
Hartford’s net premiums earned has grown at a 5.2% annualized rate over the last two years, worse than the broader insurance industry and slower than its total revenue.
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Hartford’s revenue to rise by 2.4%, a deceleration versus its 6.2% annualized growth for the past two years. This projection is underwhelming and implies its products and services will see some demand headwinds.
3. Steady Increase in BVPS Highlights Solid Asset Growth
We consider book value per share (BVPS) a critical metric for insurance companies. BVPS represents the total net worth per share, providing insight into a company’s financial strength and ability to meet policyholder obligations.
Although Hartford’s BVPS increased by a meager 6.7% annually over the last five years, the good news is that its growth has recently accelerated as BVPS grew at a solid 16.7% annual clip over the past two years (from $52.20 to $71.05 per share).
Final Judgment
Hartford’s business quality ultimately falls short of our standards. That said, the stock currently trades at 1.9× forward P/B (or $145.37 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We’re fairly confident there are better investments elsewhere. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Would Buy Instead of Hartford
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