Among large-cap insurance companies, FBR Capital Markets Analyst Randy Binner says he is looking for “capital return stories” that have good cash generation to be returned to shareholders as buybacks and dividends. He says Hartford Financial Services Group Inc (HIG) fits that bill.
“In the case of Hartford, they are winding down an annuity business that has caused uncertainty in the stock,” Binner says. “We think they are doing a great job and are going to get a lot of cash out of there.”
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Binner says Hartford’s stock is inexpensive. It currently trades at right about its GAAP book value, he says, and has an attractive rate of capital return.
“If I was going to measure their total capital return as a percentage of market cap…Hartford is in the roughly 10% annual range,” Binner says. “These are our estimates over the next two years. So that’s a rate of capital return, which we define as buyback and dividends as a percentage of market cap. That’s much higher than banks or other insurance companies.”
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