Hartford Financial Services vs. American International: Which Insurance Stock is a Better Buy?

NYSE: HIG | Hartford Financial Services Group Inc. News, Ratings, and Charts

HIG – he U.S. property and casualty insurance market witnessed a lower claims frequency during the pandemic, leading to further reported redundancies going forward. So, Hartford Financial Services (HIG) and American International (AIG) should benefit. But which of these two stocks is a better buy now? Read more to find out.

Even though prolonged high inflation would materially increase the risks of significant pricing errors and reserve deficiencies, the ongoing positive pricing environment and potential for further redundancies from declining claims frequency positions the property and casualty insurance industry for fruitful gains. Moreover, the workers’ compensation line remains the largest source of favorable development for the industry. According to a Mordor Intelligence report, the U.S. property and casualty insurance market is expected to grow at a CAGR of 6% by 2025. Therefore, both Hartford Financial Services Group (HIG) and American International Group (AIG) should benefit.

HIG provides insurance and financial services to individual and business customers. The company operates through five segments: Commercial Lines; Personal Lines; Property & Casualty Other Operations; Group Benefits; and Hartford Funds. AIG offers commercial, institutional, and individual insurance products. The company operates through two segments: General Insurance and Life and Retirement.

AIG has gained 1.4% year-to-date, while HIG has returned 1.3%. Also, AIG’s 20.9% gains over the past nine months are significantly higher than HIG’s 12.9% returns. Moreover, AIG is the clear winner with 21.3% gains versus HIG’s 1.8% returns in terms of the past year’s performance.

But which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On February 16, 2022, HIG’s Board of Directors declared a dividend of $0.385 per share of common stock, payable April 4 to common stock shareholders of record at the close of business on March 1.

On April 08, 2022, AIG announced that it would redeem all of its outstanding 1.5% Notes Due 2023 on May 10, 2022.

Recent Financial Results

HIG’s total revenue increased 9.2% year-over-year to $5.82 billion for the fiscal fourth quarter ended December 31, 2021. The company’s net income came in at $724 million, representing a 36% year-over-year increase. Also, its EPS came in at $2.10, up 43% year-over-year.

AIG’s net investment income declined 9.9% year-over-year to $3.57 billion for the fiscal fourth quarter ended December 31, 2021. However, its net income came in at $3.74 billion, compared to a loss of $60 million in the prior-year quarter. Also, its EPS came in at $4.38 compared to a loss of $0.07 in the year-ago period.

Past and Expected Financial Performance

HIG’s revenue and total assets grew at CAGRs of 5.7% and 7.1%, respectively, over the past three years. Analysts expect HIG’s revenue to decrease 0.1% in fiscal 2022 but increase 3.6% in fiscal 2023. The company’s EPS is expected to grow 11.5% in fiscal 2022 and 16.8% in fiscal 2023. Moreover, its EPS is expected to grow at a rate of 13% per annum over the next five years.

On the other hand, AIG’s revenue and total assets grew at CAGRs of 3% and 6.6%, respectively, over the past three years. The company’s revenue is expected to decrease 8% in fiscal 2022 but increase 3.9% in fiscal 2023. Its EPS is expected to grow 1.1% in fiscal 2022 and 20.2% in fiscal 2023. AIG’s EPS is expected to grow at a rate of 30.7% per annum over the next five years.

Profitability

AIG’s trailing-12-month revenue is 2.33 times what HIG generates. AIG is also more profitable, with a gross profit margin and net income margin of 37.52% and 18.04%, compared to HIG’s 35.53% and 10.58%, respectively.

However, HIG’s ROA and ROTC of 2.59% and 8.44% are higher than AIG’s 1.18% and 6.78%, respectively.

Valuation

In terms of trailing-12-month non-GAAP P/E, AIG is currently trading at 11.13x, 9.1% higher than HIG’s 10.20x. Moreover, AIG’s trailing-12-month EV/S ratio of 1.68x is 30.2% higher than HIG’s 1.29x.

So, HIG is relatively affordable here.

POWR Ratings

HIG has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, AIG has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

HIG has a B grade for Growth and Sentiment, consistent with analysts’ expectations that its revenue will increase in the upcoming months. On the other hand, AIG has a C grade for Growth and Sentiment, in sync with analysts’ expectations that its revenue will decline in the near term.

Moreover, HIG has a B grade for Stability, in sync with its beta of 0.99. In comparison, AIG has a C grade for Stability, in sync with its beta of 1.27.

Of the 56 stocks in the B-rated Insurance – Property & Casualty industry, HIG is ranked #1. In comparison, AIG is ranked #29.

Beyond what I’ve stated above, we have also rated the stocks for Quality, Momentum, and Value. Click here to view all the HIG ratings. Also, get all the AIG ratings here.

The Winner

The property and casualty insurance industry is well-positioned to grow with the continued economic recovery. While both HIG and AIG should benefit, HIG is a better buy because of its lower valuation, higher profitability, and better growth prospects.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Insurance – Property & Casualty industry here.


HIG shares were trading at $70.73 per share on Wednesday afternoon, up $0.79 (+1.13%). Year-to-date, HIG has gained 3.01%, versus a -11.09% rise in the benchmark S&P 500 index during the same period.


About the Author: Nimesh Jaiswal


Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
HIGGet RatingGet RatingGet Rating
AIGGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Updated 2024 Stock Market Outlook

The bull market continues to rage on with the S&P 500 (SPY) making new highs. That is the past...the question is what does the future hold? That is why 44 year investment veteran Steve Reitmeister provides this updated 2024 Stock Market Outlook to help you carve a path to outperformance the rest of the year. Read on below for the full story...

3 Energy Stocks Set to Soar Beyond Expectations

Given the geopolitical tensions, increasing global oil demand, and supply adjustments, the energy sector is poised for robust growth. Therefore, investors might consider investing in energy stocks TechnipFMC (FTI), Weatherford International (WFRD), and ChampionX (CHX), which are poised to exceed expectations. Keep reading…

Has Carnival (CCL) Stock Turned Into a Buy After Earnings Release?

Carnival Corporation (CCL) reported record revenue in its most recent quarter but still faces a negative bottom line. The collapse of Francis Scott Key Bridge brings more uncertainty to its financials. Given these events, what stance should one take with CCL stock? Read more to find out…

3 China Stocks Positioned for Long-Term Growth

Despite facing challenges, the Chinese economy has demonstrated resilience, as evidenced by recent robust industrial output and retail sales data. Given this outlook, it might be an opportune time to own three top-notch China stocks, JD.com, Inc. (JD), China Automotive Systems (CAAS), and Youdao, Inc. (DAO). Read on…

Investor Alert: “Buy the Rumor, Sell the News!”

Everyone knows that the Fed is going to cut rates at some point this year. That is the worst kept secret on the planet helping to explain how we keep making new highs for the for the S&P 500 (SPY). Unfortunately that creates an interesting predicament for stocks after rates are cut. Plus another hurdle in the 2024 Presidential election. Steve Reitmeister is here to share his insights on the market outlook along with a preview of his top 12 stocks to outperform. Read on for more...

Read More Stories

More Hartford Financial Services Group Inc. (HIG) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All HIG News