Hartford Financial Services (HIG), better known as The Hartford, has been hit by significant insurance losses, resulting in a poor quarterly performance and an apparent dumping of the stock, although the overall market did not do well during the same period.
The Hartford divides its business lines into commercial property and casualty insurance plus employee benefits, individual property and casualty, and wealth management. Wealth management includes life insurance, annuities, mutual funds, and retirement plans.
The Hartford management reports both GAAP earnings per share and what they refer to as core earnings per share each quarter. The core earnings are what the company earns from its lines of business. An insurance company has a large amount of invested assets, gains or losses on the investment portfolio may skew the earnings results for a quarter or longer. The core earnings reported by The Hartford filter out results from the investment portfolio.
Over the recent four to five quarters, HIG has reported earnings per share in the range of 80 cents to $1. For the second quarter of 2011 the net came in at 3 cents per share with core earnings of zero. The result was steep decline in the HIG stock price, with the company losing almost half of its market value. It did not help that the overall market went into correction mode at about the same time. Wall Street estimates forecast The Hartford earnings to return to around 90 cents per share per quarter for the remaining half of 2011.
An interesting bit of history: Before the financial crisis, back in 2007 and 2008, The Hartford was generating annual core earnings in the range of $9 to $11 per share. In those days HIG was trading for more than $100 per share.
Since the poor earnings report, analysts of several firms have reiterated or upgraded positive ratings on HIG. UBS has a buy rating on the stock with a target price of $42. FBR Capital upgraded the stock to outperform with a target price at double the market price and the analysts at Argus Capital Partners confirmed their buy rating but lowered their target price to $10 above the current share price. The company reports next on Nov. 2.
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