The commercial P&C market continues to enjoy a rare period of profitable underwriting, but shares of The Hartford Financial Services Group (NYSE:HIG) ("Hartford") aren't really reflecting that. Up about 5% since my last update, Hartford has outpaced the S&P 500 but come in well short of peers/comps like Allianz (OTCPK:ALIZY), Chubb (CB), Travelers (TRV), W. R. Berkley (WRB), and Zurich (OTCQX:ZURVY).
I believe at least some of the underperformance can be tied to Hartford's business mix - while the company's strong exposure to small commercial is a positive over a full cycle, it hasn't benefited as much from this hard market. I also think Hartford's large exposure to workers' comp is an issue; pricing is weak here and Hartford doesn't have the same strength in specialty lines that Berkley has to offset that pressure.
I still like Hartford shares, but this is more of a "slow and steady wins the race" sort of call. I believe there will be slow improvement in the personal lines business from here, and I would expect to see management try to drive more specialty growth in the years to come. Hartford Next, a cost-saving program, still has more to contribute, and I continue to expect solid core earnings growth for years to come.
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Hartford's Consistent Performance Not Quite In Step With The Hard Commercial P&C Market
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