IB Net Payout Yields Model

Hartford Financial Reports Huge Q3 Beat, Book Value up 11% Sequentially

Leading insurance provider Hartford Financial (HIG) reported an 11% sequential increase in Book Value to $45.80 on a $.46 earnings beat of $1.43. Yes, that is correct a company that continues to report solid earnings quarter after quarter now trades at 50% of Book Value. Thats difficult to grasp. Companies shouldn't trade below book value if they are very profitable. Usually they trade at multiples of BV commensurate with profits and growth.

Analysts expect HIG to make $3.6+ next year after all. HIG repaid TARP earlier this year. Very difficult to tell what is holding back investors. Heck even mega financial investor John Paulson invested back in August and that hasn't gotten the stock going. What is it going to take?

No reason to sweat that as an opportunistic investor willing to wait out the market. HIG provides one of the better values in the market.

Via Bloomberg:

  • Chief Executive Officer Liam McGee, hired in October 2009, returned Hartford to profit last year as stock and bond rallies boosted the value of holdings and reduced liabilities to customers on equity-linked retirement products. The firm posted more than $4 billion in net losses in the five quarters before McGee’s arrival. Hartford’s rating was upgraded to “neutral” from “sell” last week by Goldman Sachs Group Inc. on the “greater command” managers had on the insurer’s capital needs.
  • “Especially compared to how it has been in the past, the equity markets strengthened, which helps Hartford in both their variable annuities business and their investments,” said Drew Woodbury, a Morningstar Inc. analyst in Chicago. “They’re trying to right the ship and make some good steps.”

Interesting analyst comments. Considering the book value and string of earnings it appears that the ship has been righted but the analyst community is still acting like this is March 2009. 

Via PR:

  • Core earnings* of $710 million, or $1.43 per diluted share
  • Investment portfolio continues to improve, with a net unrealized gain of $1.2 billion at end of third quarter, compared to a net unrealized loss of $1.5 billion at June 30, 2010
  • Book value per common share of $45.80, up 11% sequentially and 21% year-over-year
  • P&C Commercial written premium* up 4% over the prior year period

Disclosure: Long HIG


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