Hartford Financial Services Repositioned For Better Returns

The sell-side had long been waiting for Hartford (HIG) to “do something” on the M&A front, with widespread expectations that the company would eventually sell its Talcott run-off annuity business as well as rumors that Hartford could be a buyer or a seller in other areas of insurance. The last couple of months have seen most of these expectations come true, as the company sold its Talcott business and acquired Aetna’s (AET) group insurance business.

These deals leave Hartford better-positioned to reach and exceed that elusive 10% ROE threshold and shrink the valuation gap with peers like Travelers (TRV) and Chubb (CB). To that end, the shares are up about 25% since my last write-up, more or less running in line with Travelers and Chubb over that time.

At this point, I would consider Hartford more of a strong hold than a buy. The company has improved itself over the past two years and is active in attractive segments of the market, but there are increasing competitive risks and opportunities to improve returns that management may or may not be able to execute.

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Hartford Financial Services Repositioned For Better Returns