Hartford Financial announces $500 million share buyback (HIG, LNC)

Stone Fox CapitalAuthor: Mark Holder

Covestor model: Net Payout YieldsOpportunistic Arbitrage and Opportunistic Arbitrage – Long Only

Disclosure: Long HIG, LNC

Hartford Financial (NYSE: HIG) reported earnings basically in line with expectations following the tornado disasters in the US during Q2. More importantly though, HIG announced plans for a $500M share buyback equaling approximately 5% of their current market cap of $9.95B (as of 8/3). HIG could rebound higher before it gets the opportunity to complete this buyback, but if not, 22M shares will be removed from the market.

This always begs the question of why the stocks of insurers such as HIG and Lincoln National (NYSE: LNC) remain so weak. HIG trades at a PE of sub 7 (as of 8/3). Sure they are financials, but they don’t face the same regulatory issues as banks.

Per HIG earnings release:

  • Board of Directors authorizes a $500 million repurchase program
  • Second quarter core earnings* of $12 million and net income of $24 million, as previously announced on July 13, 2011
  • Book value per diluted common share increased 13% to $43.11 as of June 30, 2011 compared with June 30, 2010
  • Total P&C current accident year catastrophe losses of 18.2 points, or $290 million after tax, the highest level of second quarter catastrophe losses in The Hartford’s history
“The Hartford Reports Second Quarter 2011 Results and Announces $500 Million Share Repurchase Authorization” HNC Press Release. https://finance.yahoo.com/news/The-Hartford-Reports-Second-bw-526312634.html?x=0&.v=1