Hartford Financial’s stock (NYSE: HIG) has outperformed the S&P 500 index this year, gaining approximately 26% year-to-date compared to the index’s 11% rise. Its peer, Travelers (NYSE: TRV), saw a more modest increase of 10% YTD. Despite this strong performance, HIG is currently trading 8% below its estimated fair value of $110. The stock has shown significant growth, rising from $50 in early 2021 to around $100 currently, but it has struggled to consistently beat the market, with returns of 41% in 2021, 10% in 2022, and 6% in 2023.
The insurance giant exceeded consensus estimates in the first quarter of 2024, posting total revenues of $6.4 billion, a 6% y-o-y increase. This growth was primarily driven by an 8% improvement in earned premiums and a 15% rise in net investment income. Premiums benefited from a 10% growth in the property & casualty commercial lines segment. Total benefits, losses & expenses as a percentage of revenues also declined, leading to a 41% y-o-y increase in adjusted net income to $748 million. In FY2023, the company’s top line grew 9% y-o-y to $24.5 billion, with adjusted net income reaching $2.48 billion, a 38% y-o-y increase.
Looking ahead, the company is expected to continue its strong performance in the second quarter of 2024. Revenues for the year are forecasted to reach $25.99 billion, with adjusted net income projected to slightly improve, resulting in an adjusted net income of $3.05 billion and an annual GAAP EPS of $9.98. With a P/E multiple of 11x, this is estimated to lead to a valuation of $110 for Hartford Financial.
In recent years, individual stocks, including those in the Financials sector and even megacap companies like Google, Tesla, and Microsoft, have found it difficult to consistently beat the S&P 500. However, the Trefis High Quality Portfolio, comprising 30 stocks, has outperformed the index each year over the same period. The portfolio has provided better returns with less risk compared to the benchmark index, indicating a more stable performance. With the current uncertain economic environment marked by high oil prices and elevated interest rates, there is speculation on whether HIG will face a similar situation as in 2023 and underperform the S&P 500 or experience a strong upward movement.
Overall, Hartford Financial has shown strong growth in both revenues and net income, with expectations for continued positive performance in the future. Despite trading below its fair value, the company’s stock has proven resilient in the face of market volatility. As investors navigate the uncertain economic landscape, the insurance giant’s ability to adapt and deliver solid financial results will be key in determining its future stock performance.
