Smart Dividend Portfolio Edition #60: Insurance Innovator
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Dear Investor,
Welcome to the 60th edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
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Market-Moving News: May 12, 2025
Stocks snapped their winning streak, ending the week slightly lower. The Dow Jones Industrial Average (DJIA) declined by 0.16%, the S&P 500 (SPX) fell by 0.47%, and the tech-heavy Nasdaq-100 (NDX) was down by 0.20% for the week.
Stock indexes started the week lower, with the S&P 500 ending its nine-day winning streak on Monday as nervous investors took some profits ahead of a headline-heavy week. Markets extended their slide on Tuesday, continuing to consolidate after a robust run while awaiting the Federal Reserve’s rate decision. But a rebound followed on Wednesday and Thursday, buoyed by both Fed Chair Jerome Powell and President Trump.
The Fed held rates steady on Wednesday, citing increased macroeconomic uncertainty tied to tariffs and signaling a continued “wait and see” approach. While this stance – and the emphasis on “uncertainty” – were widely expected, Powell’s accompanying statement that the economy remains in a “solid position” helped calm some investor concerns and sparked a market rebound. In essence, investors read between the lines: the economy is resilient enough to give the Fed room to maneuver without being rushed into action.
Meanwhile, optimism grew on news that U.S. and Chinese officials plan to meet in Switzerland for trade talks, reviving hopes for a de-escalation of the tariff tit-for-tat. Thursday brought more tariff-driven enthusiasm, with the announcement of a broad U.S.-U.K. trade agreement – the first since the Trump administration unveiled reciprocal tariffs on April 2. However, despite the optimism about resumed dialogue, investors quickly grasped that a swift resolution to U.S.-China trade tensions remains unlikely.
Adding to the long-term uncertainty, reports emerged about the Trump administration’s list of roughly 20 countries prioritized for early trade negotiations. The list includes key partners like Japan, South Korea, and Vietnam, along with several minor trade contributors – highlighting the bumpy and prolonged path ahead as global trade relations undergo a major reset.
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This Week’s Quality Dividend Stock Idea
The Hartford Financial Services Group, Inc. (HIG), aka The Hartford, is a U.S.-based insurance and financial services company offering property and casualty insurance, group benefits, and mutual funds. It serves businesses and individuals through its commercial and personal lines, with a strong focus on small business insurance and employee benefits. HIG is a leading insurer, known for its financial stability and customer-centric solutions.
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Insurance Innovator
Founded in 1810 as The Hartford Fire Insurance Company in Hartford, Connecticut, HIG initially focused on fire insurance, building a reputation for reliability in an emerging industry. Over time, the company evolved into a diversified insurance holding company, expanding its offerings to include property and casualty insurance, group benefits, mutual funds, and ETFs, serving clients in the U.S., U.K., and other international markets.
A turning point came in 1970 when ITT Corporation acquired The Hartford for $1.4 billion, forming ITT-Hartford Group. However, the company regained its independence in 1995, listing on the New York Stock Exchange under the ticker “HIG” – marking a new era of strategic growth.
The Hartford’s modern growth trajectory accelerated through a series of strategic acquisitions. In 2004, it acquired CNA Financial’s Group Benefits Division, establishing its #1 position in the U.S. disability insurance market and significantly strengthening its Employee Benefits segment.
In 2018, HIG sharpened its focus on high-margin segments by divesting non-core businesses like Talcott Resolution, allowing it to concentrate on core insurance lines. The following year, HIG acquired The Navigators Group, adding specialty insurance products to its portfolio and expanding its global footprint. This acquisition enhanced its commercial lines portfolio, contributing to strong premium growth.
The Hartford also launched the “Hartford Next” cost-cutting initiative in the 2010s, which improved profit margins and operational efficiency. Strategic investments in technology and data analytics further strengthened its competitive position in the small commercial lines market, supporting long-term growth.
Today, The Hartford Financial Services Group is a leading U.S. provider of property, casualty, group benefits, and mutual funds with annual revenues of nearly $27 billion and a market capitalization of around $36 billion, with a ranking of #167 on the Fortune 500 list.
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Strategic Expansion
The Hartford has strategically expanded its business through targeted acquisitions, enhancing its product offerings and geographic reach. In December 2018, HIG acquired Y-Risk, a managing general underwriter specializing in sharing-economy risks, for an undisclosed amount. This move strengthened the company’s ability to address emerging markets and reinforced its commercial lines capabilities, aligning with the growing demand for innovative risk solutions.
In May 2019, HIG executed a transformative $2.1 billion acquisition of The Navigators Group, a global specialty insurer. This significant deal expanded HIG’s commercial lines portfolio by adding 22 vertical markets and extending its footprint into the U.K., Continental Europe, and Asia.
However, HIG also took steps to optimize its operations. In July 2020, it sold the renewal rights for a European book of business from Navigators to Castel Underwriting Europe B.V., allowing it to focus on higher-margin U.S. markets and streamline its specialty portfolio.
This was followed by further divestitures of Navigators’ European operations: in December 2021, HIG sold Navigators Holdings (Europe) NV, including Assurances Continentales NV (ASCO) in Belgium and Canal Re S.A. in Luxembourg, to Premia Holdings Ltd. Then, in June 2023, HIG divested Navigators International Insurance Co. Ltd. to Marco Capital Holdings Ltd. These actions reflect HIG’s continued effort to exit non-core international markets and sharpen its focus on U.S.-based, higher-return lines of business.
These strategic moves have been instrumental in diversifying HIG’s product mix, leading to operational synergies and improved underwriting discipline.
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Diversified Strength
HIG is a diversified insurance holding company offering property and casualty insurance, group benefits, mutual funds, and ETFs to individuals and businesses in the U.S., U.K., and other international markets. Its operations are organized into five reportable segments: Business Insurance (Commercial Lines), Personal Insurance (Personal Lines), Employee Benefits (Group Benefits), Hartford Funds, and Corporate.
In Q1 FY25, the Commercial Lines segment – primarily serving small and midsize businesses and accounting for roughly 55% of Hartford’s consolidated top line – generated $3.75 billion in revenue, up 10% year-over-year. This segment has benefited from advanced data analytics and disciplined underwriting, driving strong premium growth.
Over the quarter, small businesses – a critical component of this segment – delivered 9% premium growth, supported by a 29% surge in excess and surplus (E&S) binding premiums. E&S insurance covers high-risk or unique exposures that standard insurers often avoid, reflecting HIG’s ability to underwrite complex risks. This segment is on track to surpass $6 billion in annual written premiums by end-2025, leveraging AI tools and a competitive edge in the small and medium enterprise (SME) space.
The middle and large market segments saw its written premiums grow 9%, with record new business of $188 million, driven by strong renewal pricing growth of 9.9% (excluding workers’ compensation). However, HIG has been deliberately reducing its workers’ compensation exposure due to pricing pressures, resulting in lower customer retention as it prioritizes margin over volume. In the insurance industry, small, middle, and large businesses are subject to rate regulation, with pricing adjustments reflecting changing loss cost trends. Workers’ compensation rates, influenced by loss experience and National Council on Compensation Insurance (NCCI) data, have faced downward pressure in recent years due to favorable trends.
Global specialty provides a variety of customized insurance products, including property, general liability, marine, professional liability, and bond. This business delivered strong results, with an underlying combined ratio1 of 84 and over $1 billion in quarterly written premiums – reflecting a competitive position, diverse offerings, and solid renewal pricing. Wholesale business saw an 11% premium increase, driven by U.S. inland marine, auto, casualty, and double-digit growth in global reinsurance.
HIG expects sustained growth in this segment, capitalizing on favorable pricing of 6.2% and a disciplined approach to the company’s strategic initiative to grow its property insurance portfolio within its specialty lines, both in the U.S. and internationally – resulting in a 15% written premium growth in its Business Insurance segment.
Personal Insurance, which offers auto and home coverage primarily through a long-standing American Association of Retired Persons (AARP) partnership, accounted for 14.4% of revenue and delivered strong performance in Q1 FY25. Auto insurance saw written pricing up 15.8% in Q1, and an 8.3-point improvement in the auto insurance underlying combined ratio to 96.1%. Homeowners insurance also performed strongly, with a 75.1% combined ratio and 12.3% pricing growth driven by the Prevail platform. The Prevail platform, a cloud-based solution for auto and home insurance, is available in 44 states and has supported rapid growth, handling 75% of new personal insurance business.
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1– Combined ratio is a key performance metric in the insurance industry that measures underwriting profitability. It is defined as the sum of losses incurred and operating expenses expressed as a percentage of premiums earned.
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Risk Resilience
Despite these gains, HIG faces ongoing challenges from social inflation, driven by rising litigation costs, larger jury awards, and expanding liability interpretations – factors that continue to pressure the insurance industry. These trends have pushed up loss costs, particularly in casualty lines like general liability. To stay ahead, HIG has incorporated low double-digit loss cost inflation into its 2025 pricing models. In Q1 2025, general liability pricing rose 10.5%, while business insurance (excluding workers’ compensation) saw a 9.9% increase in renewal written pricing, comfortably outpacing inflationary pressures.
However, social inflation remains a persistent risk, and HIG is addressing this through disciplined underwriting, data-driven pricing, and investments in AI to better predict the cost of claims. This approach, combined with a diversified product mix, positions HIG to manage the impact of social inflation while maintaining strong underwriting profitability.
Additionally, tariffs pose further challenges. Tariffs could increase repair costs for commercial auto and property claims, potentially squeezing margins. HIG is actively responding to these cost pressures in 55% of its personal lines markets, where file-and-use pricing allows near-immediate rate adjustments after regulatory filing – avoiding the delays of prior-approval states. File-and-use pricing, used in certain U.S. jurisdictions, enables insurers like HIG to implement new rates immediately upon filing with the state insurance department, without waiting for pre-approval.
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Underwriting Excellence
The company has delivered steady financial growth over the past five years, with revenue and core EPS growing at a CAGR of approximately 2.6% and 5.8%, respectively. This growth reflects the company’s disciplined underwriting, strategic acquisitions, and technology-driven efficiencies, which have enabled it to navigate the competitive insurance landscape while focusing on high-margin segments and cost optimization.
In Q1 FY25, The Hartford reported core earnings of $639 million, or $2.20 per diluted share, representing a 10% year-over-year decline, despite $467 million in pre-tax catastrophe losses from California wildfires and Midwest storms – significant but often unpredictable financial impacts resulting from severe natural or man-made disasters. Despite these losses, HIG’s core earnings exceeded consensus estimates, underscoring the resilience of its diversified business model.
Total revenue reached $6.81 billion, up 6.1% year over year, in line with analyst expectations, driven by a 10% written premium growth in Business Insurance and 8% growth in Personal Insurance. The Business Insurance segment, which represents approximately 55% of HIG’s total revenues, maintained a flat underlying combined ratio of 88.4%, reflecting stable underwriting profitability. Personal Insurance, contributing 14.4% of revenues, improved its underlying combined ratio by 6.4 points to 89.7%, indicating enhanced underwriting discipline and pricing precision.
The Group Benefits segment – which delivers life, disability, and supplemental health insurance to employers – accounted for 26.3% of Q1 revenues and achieved a 7.6% core earnings margin, exceeding long-term targets. This performance was bolstered by persistency rates above 90% and continued investment in digital platforms like Leave Lens and Workday integrations, which enhance customer experience and operational efficiency. Persistency rate measures the percentage of policyholders who renew their coverage over a specific period and is a key metric for long-term profitability.
The Leave Lens platform – a patented solution – allows employees to manage leaves of absence by providing a comprehensive view of benefits, available time, and expected pay, reinforcing HIG’s #1 market position in disability coverage. HIG has also partnered with Workday to co-develop a wellness and benefits integration platform, enabling real-time data exchange and faster implementation. With over 160 HR system integrations, HIG seamlessly connects its group benefits offerings to employer platforms, improving data flow, enrollment, and plan administration.
Meanwhile, HIG’s investment portfolio delivered a 4.4% annualized yield (excluding limited partnerships) – up 10 basis points year-over-year – supporting $656 million in net investment income. The company expects this figure to remain strong throughout FY25 as higher reinvestment yields help offset lower returns from variable-rate securities.
Despite its strong financial foundation, HIG’s debt-to-equity ratio stands at 0.26, slightly above the insurance sector median of 0.22. Still, it maintains a solid credit profile, with investment-grade ratings of “BBB” from S&P and “Baa1” from Moody’s reflecting a stable outlook and ongoing balance sheet strength.
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Shareholder Strength
The Hartford has shown a strong commitment to enhancing shareholder value through consistent dividend growth and an active share repurchase program. The company has increased its dividend for 12 consecutive years, with an average annual growth rate of over 10% in the past decade.
In the most recent quarter, HIG paid a dividend of $0.52 per share, translating into an annualized dividend of $2.08 per share and a yield of 1.55%, above the financial sector average. The company’s payout ratio stands at 19.5%, indicating a conservative approach that allows for significant earnings retention to support reinvestment and other capital allocation strategies. The company’s strong capital position – exemplified by an ROE of 18.3%, ranking in the top 20% of the industry – combined with robust cash flow generation, supports analysts’ expectations for continued meaningful dividend growth.
Complementing its dividend policy, the company maintains an active stock buyback program. The Board authorized a $3.3 billion share repurchase program, effective from August 1, 2024, through December 31, 2026. During the first quarter of 2025, HIG repurchased 3.5 million shares for $400 million, and as of March 31, 2025, $2.75 billion remains available under the current authorization. From April 1 to April 23, The Hartford repurchased an additional 1.1 million common shares $124 million.
This dual approach of dividend growth and share repurchasing underscores HIG’s financial strength and strategic focus on delivering value to shareholders, backed by strong performance in its insurance and financial services segments.
Over the past year, HIG’s stock has appreciated by 29%, driven by strong financial results, disciplined execution, effective capital management, and favorable market conditions in its core insurance segments. The stock is currently trading at a P/E ratio of 12.6, lower than its peers like AIG and W.R. Berkley, and slightly below the financial sector average. On a price-to-cash flow basis, HIG is trading at a ~35% discount to its sector median, suggesting potential undervaluation.
Analysts remain generally positive about HIG, projecting an upside of about 4% in the next 12 months. Some analysts are projecting a 19% upside at current levels. Furthermore, discounted cash flow models suggest that HIG stock is undervalued by around 37%, signaling further upside.
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Investing Takeaway
The Hartford Financial Services Group stands out as a compelling dividend-focused investment, backed by a long track record of consistent dividend growth. The company has demonstrated a strong commitment to returning capital to shareholders, increasing its dividend annually for over a decade. In addition to steady payouts, HIG maintains a disciplined capital allocation strategy, including regular share repurchases. This approach reflects the company’s robust cash flow generation and effective capital management, positioning it well for sustained shareholder value creation. For income-focused investors, HIG’s combination of reliable dividend growth and active capital returns presents a compelling long-term opportunity.
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Dividend Investor Portfolio
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Portfolio News
▣ Amgen (AMGN) announced that the UK’s Medicines and Healthcare products Regulatory Agency has granted marketing authorization for Tepezza as the first therapy specifically approved for moderate-to-severe Thyroid Eye Disease (TED) in adults.
▣ BlackRock’s (BLK) spot Bitcoin ETF (IBIT) has drawn more inflows this year than the world’s largest gold fund. Through the first four months of 2025, the IBIT ETF has attracted $6.96 billion in net inflows, surpassing the $6.50 billion seen by the SPDR Gold Trust according to Bloomberg data. This is notable given that gold has surged nearly 30% this year, compared to a 4% gain in Bitcoin, but renewed investor appetite for risk has driven recent interest in digital assets.
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Recent Trades
None at the moment, although we are considering adding a stock to our portfolio when the market conditions allow for an attractive entry point. Stay tuned.
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Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 4.01% | +8.27% | $5,926.57 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Jun 12, 2025 | Jul 01, 2025 | 2.46% | $6.16 |
| Allianz SE ADR (ALIZY) | May 12, 2026 | May 28, 2026 | 6.09% | $1.52 |
| Amgen (AMGN) | May 16, 2025 | Jun 09, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Jun 09, 2025 | Jun 26, 2025 | 2.61% | $20.84 |
| Bank of Nova Scotia (BNS) | Jul 03, 2025 | Jul 29, 2025 | 5.98% | $2.97 |
| EOG Resources (EOG) | Jul 17, 2025 | Jul 31, 2025 | 3.05% | $3.90 |
| IBM (IBM) | Aug 11, 2025 | Sep 10, 2025 | 3.14% | $6.72 |
| JPMorgan Chase (JPM) | Jul 08, 2025 | Jul 31, 2025 | 3.2% | $5.60 |
| Kroger (KR) | May 15, 2025 | Jun 02, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Jun 03, 2025 | Jun 10, 2025 | 5.62% | $5.36 |
| PepsiCo (PEP) | Jun 09, 2025 | Jun 26, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Jun 23, 2025 | Jul 17, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | May 29, 2025 | Jun 26, 2025 | 2.36% | $3.56 |
| VICI Properties (VICI) | Jun 18, 2025 | Jul 03, 2025 | 5.22% | $1.73 |
| ExxonMobil (XOM) | May 15, 2025 | Jun 10, 2025 | 3.64% | $3.96 |
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Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
