Thursday, July 23, 2009

Hartford Insurance on the Launch Pad Today

Hartford's (HIG) stock is just soaring up 15% today on a combination of the breakout in the stock market in general and the news from an analyst that it's book value likely increased by 40% in Q2 due to a increase in investments that were unrealized loses. Anybody following HIG should know that around S&P500 900 is where they run into issues of investment losses going from unrealized to potentially realized. If the market bounces back, HIG then wouldn't have the losses to report and instead a $10 stock would have a book value of $40-50. Thats an incredible valuation difference and why HIG might be the biggest gainer in the S&P500 in Q3 if the market continues on a path towards and above 1,000.

HIG clearly faces hurdles with potential declines in business, but based on the news from E*Trade (ETFC) last night it doesn't appear that customers are that concerned about doing business with a company in financial trouble, but has a solid business platform. Analysts expect them to earn $1.16 in Q2 which would be more icing on the cake for a $13 stock. This number seems murky to me considering the TARP funds and such, but its apparent that HIG should report positive earnings. Something the market should know but clearly hasn't been counting on.

  • "On the unrealized side, you are going to see a reversal of some of the losses that were taken in the fourth and first quarters," said Hexagon Securities analyst David Havens. "These will be fairly substantial numbers."
  • Bault estimates unrealized investment gains could drive up book value by 40 percent at Hartford Financial Services Group Inc (NYSE:HIG - News), a life and property insurer that took bailout funding from the U.S. government.

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