Insurance Stocks

Hartford Financial Services Group Inc Valuation – December 2016 $HIG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Hartford Financial Services Group Inc (HIG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Hartford Financial Services Group, Inc. is a holding company. The Company operates through six segments: Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits, Mutual Funds and Talcott Resolution. Commercial Lines segment provides workers’ compensation, property, automobile, liability, umbrella, marine and livestock coverages to businesses, throughout the United States. Personal Lines segment provides automobile, homeowners and personal umbrella coverages to individuals across the United States. Property & Casualty Other Operations segment includes certain property and casualty operations, which are managed by the Company. Group Benefits segment provides group life, accident and disability coverage, group retiree health and voluntary benefits to members of employer groups, associations and affinity groups. Mutual Funds segment provides investment management, administration, distribution and related services to investors through investment products.

HIG Chart

HIG data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of HIG – December 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,203,537,457 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -435.45% Fail
5. Moderate PEmg Ratio PEmg < 20 18.91 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.00 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.54
MG Growth Estimate 15.00%
MG Value $97.74
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $36.81
MG Value based on 0% Growth $21.58
Market Implied Growth Rate 5.21%
Current Price $48.01
% of Intrinsic Value 49.12%

Hartford Financial Services Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.19 in 2012 to an estimated $2.54 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.21% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Hartford Financial Services Group Inc revealed the company was trading below its Graham Number of $60.41. The company pays a dividend of $0.84 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 18.91, which was above the industry average of 18.78.

Hartford Financial Services Group Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Graham Number $60.41
PEmg 18.91
PB Ratio 1.00
Dividend Yield 1.75%
TTM Dividend $0.84
Number of Consecutive Years of Dividend Growth 4

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Long-Term Debt & Capital Lease Obligation $4,635,000,000
Total Assets $228,430,000,000
Intangible Assets $567,000,000
Total Liabilities $209,772,000,000
Shares Outstanding (Diluted Average) 390,500,000

Earnings Per Share History

Next Fiscal Year Estimate $3.30
Dec2015 $3.96
Dec2014 $1.73
Dec2013 $0.36
Dec2012 -$0.17
Dec2011 $1.40
Dec2010 $2.40
Dec2009 -$2.93
Dec2008 -$8.99
Dec2007 $9.24
Dec2006 $8.69
Dec2005 $7.44
Dec2004 $7.12
Dec2003 -$0.33
Dec2002 $3.97
Dec2001 $2.10
Dec2000 $4.34
Dec1999 $3.79
Dec1998 $4.30
Dec1997 $5.58
Dec1996 -$0.42

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.54
Dec2015 $1.92
Dec2014 $0.99
Dec2013 $0.48
Dec2012 -$0.19
Dec2011 -$0.06
Dec2010 $0.03
Dec2009 $0.13
Dec2008 $2.67
Dec2007 $7.81
Dec2006 $6.53
Dec2005 $4.98
Dec2004 $3.65
Dec2003 $2.20
Dec2002 $3.54
Dec2001 $3.56
Dec2000 $4.03

Recommended Reading:

Other ModernGraham posts about the company

Hartford Financial Services Analysis – 2015 Annual Update $HIG
15 Companies in the Spotlight This Week – 5/31/14
Hartford Financial Services 2014 Annual Valuation $HIG

Other ModernGraham posts about related companies

Arthur J Gallagher & Co Valuation – December 2016 $AJG
Aspen Insurance Holdings Limited Valuation – December 2016 $AHL
MetLife Inc Valuation – December 2016 $MET
Travelers Companies Inc Valuation – November 2016 $TRV
Allstate Corp Valuation – November 2016 $ALL
Unum Group Valuation – August 2016 $UNM
Principal Financial Group Inc Valuation – August 2016 $PFG
Assurant Inc Valuation – August 2016 $AIZ
American International Group Inc Valuation – August 2016 $AIG
Humana Inc Valuation – August 2016 $HUM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top