Hartford has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 8.2% to $121.22 per share while the index has gained 4.1%.
Is now the time to buy Hartford, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Hartford Not Exciting?
We're sitting this one out for now. Here are three reasons why there are better opportunities than HIG and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Insurance companies generate revenue three ways. The first is the core insurance business itself, represented in the income statement as premiums earned. The second source is investment income from investing the “float” (premiums collected but not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from policy administration, annuities, and other value-added services.
Unfortunately, Hartford’s 5.3% annualized revenue growth over the last five years was tepid. This was below our standard for the insurance sector. 
2. Net Premiums Earned Points to Soft Demand
Net premiums earned commands greater market attention due to its reliability and consistency, whereas investment and fee income are often seen as more volatile revenue streams that fluctuate with market conditions.
Hartford’s net premiums earned has grown at a 7% annualized rate over the last four years, slightly worse than the broader insurance industry.
3. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Hartford’s EPS grew at an unimpressive 15.8% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 8.5% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
Hartford isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 2× forward P/B (or $121.22 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. We’d suggest looking at one of Charlie Munger’s all-time favorite businesses.
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