Thursday, September 15, 2011

HIG: Upgraded, Despite Irene

Yesterday, both Stern Agee and Credit Suisse upgraded The Hartford (HIG) to buy from neutral.

John Nadel, who has been critical of the stock in past, upgraded HIG because, “Subtracting net debt from the holding company, net statutory capital stands at $14.3 billion as of the second quarter, 2011, or $32.05 per actual common share outstanding,” the analyst said. “If we assumed all warrants/converts that were in the money and were fully exercised, net statutory capital per fully diluted share would total $29.33, again as of the second quarter.” Nadel’s new target price is $29.

Credit Suisse added, “life insurance stocks have traded very poorly thus far in 2011, despite the fact that they don’t face the same level of capital, liquidity, and regulatory constraints as the large banks.”

These upgrades come after HIG announced that Q3 EPS would be impacted by the cost of hurricane Irene. The Hartford “expects pretax catastrophe losses for July and August of $150 million to $250 million, of which $75 million to $175 million comes from Irene. An increase from the third quarter of 2010, in which no hurricanes made landfall in the United States and catastrophe losses were $13 million.”

HIG closed at $18.92, up 16.2% in the four days since its 52-week low on 9/12.


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