This is a challenging time for insurers as far as valuations go, and there are good reasons why. Rising claim costs/losses were already an issue, and COVID-19 has only magnified that issue, and weak rates are sapping a vital income source. On top of that, it remains to be seen whether a recent trend towards a harder market (higher rates) will persist, and there are serious questions as to how much the industry may have to pay out for workers comp and business interruption claims that would otherwise seem to be secure from COVID-19.
I was neutral on Hartford Financial Services (HIG) back in December, more for valuation reasons that core company quality issues. Nobody had the COVID-19 pandemic in their models at this point, and it has indeed had a significant impact on Hartford's outlook, as has the drop in rates that have come along with the COVID-19 economic carnage. Although my estimates for Hartford are now indeed lower, even a low single-digit long-term core earnings growth rate can support the shares now, not to mention the double-digit adjusted ROE that the company is likely to report this year and next.
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Amid COVID-19 Uncertainties And Low Rates, Hartford Financial Looks Too Cheap
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