Dj Hartford Financial Services Group Inc. Stock Outperforms Competitors Despite Losses On The Day

Financial stocks are basking in a post-election rally after Donald Trump's election win as investors anticipate a friendlier regulatory landscape for banks, brokers and consumer finance companies.

With expectations of deregulation and possible tax cuts, traders are piling into financials at levels not seen in years.

The Financials Select Sector SPDR Fund jumped over 5% last week, hitting fresh record highs, while weekly inflows surged to $1.573 billion—the highest in over two years.

Regional banks, in particular, were on fire, with the SPDR S&P Regional Banking ETF skyrocketing nearly 11% and seeing $1.09 billion in inflows, marking its largest influx of money since March 2023.

Key Drivers: Deregulation, Tax Cuts Fuel Investor Optimism

Investors are betting on a wave of Trump-favored financial reforms that could benefit the sector.

Richard Ramsden, a Goldman Sachs analyst, highlighted that "the market is pricing in the potential for changes to a number of proposed regulations, a step up in capital markets activity, as well as the potential for a reduction in the corporate tax rate."

Potential regulatory changes under Trump could include:

• 401K Reform: Opening up retirement plans to private investments could attract a flood of new capital.
• Relaxed Antitrust Regulations: A more lenient antitrust stance may spark increased mergers and acquisitions (M&A) activity.
• Reduced SEC Oversight: There is limited clarity on whether the SEC will continue probing brokers' sweep pricing practices.
• Crypto-Friendly Policies: Financial firms with crypto exposure may benefit from a more favorable regulatory environment and higher digital asset prices.

Goldman Sachs's Top Picks Among Financials Stocks

In anticipation of these shifts, Ramsden and his team have identified several top picks across the financial sector.

Here's where they see the biggest potential gains:

• Large Banks: Citigroup Inc. , JPMorgan Chase & Co. , and Wells Fargo & Co. .
• Consumer Finance: Bread Financial Holdings , Synchrony Financial , and Capital One Financial Corp. .
• Capital Markets: Blackstone Inc. , Apollo Global Management Inc. , KKR & Co. Inc. , LPL Financial Holdings , Tradeweb Markets Inc. , Evercore Inc. , and PJT Partners Inc. .

Steeper Yield Curve Expected to Boost Regional Banks

As markets react to potential economic stimulus and reduced regulatory pressure, analysts anticipate a steeper yield curve, which could be a windfall for banks with heavy exposure to fixed-rate assets.

Around 60% of both regional and large banks' balance sheets consist of fixed-rate holdings, positioning them to profit as long-term rates rise.

Ramsden's picks for banks that stand to gain the most from a steeper yield curve include:

Regional Banks:

• Citizens Financial Group Inc.
• Comerica Inc.
• First Hawaiian Inc.
• Zions Bancorporation
• Truist Financial Corp.
• Huntington Bancshares Inc.
• Regions Financial Corp.
• PNC Financial Services Group Inc.
• Ally Financial Inc. .

Surge in Capital Velocity: M&A and Trading Boost Expected

Trump's pro-business stance is also expected to accelerate capital velocity in the M&A and equity capital markets, providing a strong backdrop for trading activity.

According to Ramsden, large banks like Morgan Stanley could be the biggest beneficiaries, while among regional banks, KeyCorp and Citizens Financial Group Inc. stand out.

Investment banks could also see a boost, with Jefferies Financial Group Inc. , Moelis & Co. , PJT Partners Inc. , and Piper Sandler Companies positioned to capitalize on a more active M&A market.

In the alternative asset management space, Carlyle Group Inc. , KKR, Apollo, TPG Inc. , and Ares Management Corp. are expected to benefit from an uptick in private equity deal flow.

Tax Cut Hopes Could Supercharge Regional Banks

Financial stocks are uniquely positioned to benefit from any corporate tax reductions, given that 90% of their earnings come from the U.S. and are currently taxed at an average rate of 23%. After the 2017 tax reform slashed the corporate tax rate from 35% to 21%, financials saw their effective tax rate drop by 10 percentage points.

Ramsden estimates that if the Trump administration pursues another tax cut, regional banks would likely see the most significant upside.

His top tax-cut beneficiaries include Moelis & Co. , American Express Co. , Evercore Inc., Bread Financial Holdings, Piper Sandler, First Citizens BancShares Inc. , Synovus Financial Corp. , and Western Alliance Bancorporation .

Insurers to Benefit from Steeper Curve, P&C Pricing Power

The insurance sector may also stand to gain under Trump's pro-business policies. Ramsden expects potential increases in claim costs but sees positive momentum for property and casualty pricing.

Insurers with substantial U.S. exposure and a favorable position on the yield curve could see tailwinds.

Ramsden's picks in the insurance space include W.R. Berkley Corp. , Hartford Financial Services Group Inc. , and The Travelers Companies Inc. , which he believes are better positioned than brokers to benefit from these trends.

Read Next:

• EXCLUSIVE: Trump Victory Triggers ‘Reshoring’ Rally As Supply Chain Security Outweighs Cost

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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

RLI Corp.’s RLI board of directors approved a special cash dividend of $4.00 per share. This specialty property-casualty insurer has been paying special dividends since 2011. The latest approval marks the 15th straight special dividend.

RLI expects to pay $183 million as a special dividend. Concurrently, the board of directors announced a regular quarterly cash dividend of 29 cents per share. The special and the quarterly dividends will be paid out on Dec. 20 to shareholders of record as of Nov. 29, 2024.

The board also announced a two-for-one stock split. The two-for-one stock split will be distributed out on Jan. 15, 2025, to shareholders of record as of Dec. 31, 2024. Trading of the shares will begin post-split on Jan. 16, 2025. Both the regular and special dividends will be paid on the pre-split shares.

RLI’s Impressive Dividend History

RLI has been paying dividends for 187 consecutive quarters and increased regular dividends in the last 49 straight years. Its dividends witnessed a five-year (2019-2024) CAGR of 8.8%. Based on the stock’s Nov. 7 closing price of $166.34, the new dividend will yield 0.7%, which is better than the industry average of 0.2%.

Financial Strength and Capital Management

This insurer is one of the industry’s most profitable P&C writers, with an impressive track record of delivering 28 consecutive years of underwriting profitability. This insurer stays focused on maintaining long-term industry-leading combined ratios and book value growth. RLI’s diversified product portfolio, strong local branch-office network, focus on specialty insurance lines growth via organic opportunities and acquisitions and financial strength should continue to help boost shareholders’ returns.

The underwriter maintains a solid balance sheet with sufficient liquidity and strong cash flow, helping it meet the interests of its policyholders, enhance operations in the insurance sector and aid growth in its book value for the long term. RLI maintains a conservative underwriting and reserving policy and continues to achieve favorable reserve releases from the prior years. Return on equity, a profitability measure of how efficiently a company utilizes its shareholders' money, was 19.03% in the trailing 12 months, which compared favorably with the industry average of 7.9%.

Zacks Rank and Price Performance

Shares of this Zacks Rank #3 (Hold) property and casualty insurer have gained 25% in the year-to-date period compared with the industry’s return of 30.8%. Superior underwriting discipline and sound capital structure should help shares trend higher. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Insurers on the Same Path

Given a solid capital level in the insurance industry and an improving operating backdrop favoring strong operational performance, insurers like Selective Insurance Group, Inc. SIGI, American Financial Group, Inc. AFG and The Hartford Financial Services Group, Inc. HIG have resorted to effective capital deployment to enhance shareholders’ value.

The board of directors of Selective Insurance authorized a 9% increase in the quarterly cash dividend to 38 cents per share in October 2024. Such steadfast endeavors buoy confidence among investors, making it an attractive pick for yield-seeking investors. Its dividend yield of 1.4% appears attractive compared with the industry average of 0.2%.

In November 2024, American Financial declared a special cash dividend of $4.00 per share in the third quarter, the aggregate amount of this special dividend will be approximately $335 million. American Financial Group’s 2.3% dividend yield is better than the industry average of 0.2%, making the stock an attractive pick for yield-seeking investors. AFG’s robust operating profitability at the property and casualty segment and effective capital management support shareholder returns.

The Hartford Financial Services increased the quarterly common dividend per share by 11% in October 2024. Its capital appreciations, repayment of government funds and measures to de-risk its balance sheet have increased its financial strength. It also has an intelligent capital management strategy, featuring share buybacks and dividend hikes.

Zacks Investment Research

Cousins Properties CUZ announced its agreement to acquire Vantage South End, a 639,000-square-foot lifestyle office property in Charlotte’s thriving South End submarket, for $328.5 million. This strategic acquisition aligns with Cousins’ Sun Belt-focused strategy and enhances its presence in one of Charlotte's most dynamic submarkets. Expected to close in December 2024, the transaction provides immediate financial and operational advantages, making it a highly accretive investment.

Located two blocks from Cousins’ existing RailYard property and South End Station development site, Vantage South End strengthens Cousins’ positioning within Charlotte’s South End submarket. This property enjoys a diverse rent roll, including several corporate headquarters, with strong lease terms. Its major customers include Lending Tree, Alston & Bird, Hartford Insurance HIG, CBRE CBRE, Allspring Global Investments and Grant Thornton. Also, it offers easy accessibility to Charlotte light rail and major traffic arteries/highways.

Built in 2021/2022, Vantage South End is currently 97% leased, with a weighted average lease term exceeding nine years, offering Cousins scope for generating stable, predictable cash flows. This high occupancy level, combined with long-term lease commitments, suggests a healthy demand for this property.

Cousins is acquiring Vantage South End in an off-market transaction at a meaningful discount to replacement cost and at a price that will be immediately accretive to earnings. This acquisition price enhances Cousins’ yield. To finance the acquisition, Cousins announced a public offering of 6 million shares.

Final Thoughts on CUZ

The acquisition of Vantage South End strengthens Cousins’ position in a high-demand submarket, offers immediate earnings accretion and aligns with its long-term focus on high-quality, amenity-rich office properties in the Sun Belt. This acquisition not only increases Cousins' market footprint but also improves the quality and stability of its cash flow, providing a compelling value proposition for shareholders.

Last month, Cousins reported third-quarter 2024 funds from operations (FFO) per share of 67 cents, in line with the Zacks Consensus Estimate. The figure improved by 3.1% on a year-over-year basis. Results reflected strong leasing activity and higher rent realizations amid rising demand for office spaces. CUZ also raised its 2024 outlook for FFO per share. The increase in FFO was due to lower short-term interest rates, lower real estate taxes and new investment activity.

Going forward, Cousins Properties’ high-quality office portfolio, impressive tenant roster, opportunistic investments and developments in best sub-markets and strong balance sheet are expected to drive its growth. However, a continuation of the hybrid work environment and high supply in the office real estate market is expected to adversely impact its pricing power.

Over the past three months, shares of this Zacks Rank #2 (Buy) company have risen 15.9%, well ahead of the industry’s upside of 1.1%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

Zacks Investment Research

Assurant, Inc. AIZ reported third-quarter 2024 net operating income of $3.00 per share, which beat the Zacks Consensus Estimate by 20%. However, the bottom line declined 30.7% year over year.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

The quarterly results reflected solid performance at Global Housing with growing revenues and expense discipline. Global Lifestyle performed in line with expectations, as AIZ prioritized strategic investments for growth in new and expanded Connected Living partnerships and saw further signs of stabilization within Global Automotive.

Total revenues increased 7.6% year over year to nearly $3 billion, driven by higher net earned premiums, fees and other income and net investment income. The top line beat the Zacks Consensus Estimate by 2.6%.

Assurant, Inc. Price, Consensus and EPS Surprise

Assurant, Inc. price-consensus-eps-surprise-chart | Assurant, Inc. Quote

Net earned premiums, fees and other income increased 7% year over year to $2.9 billion, driven by growth across both segments. Our estimate was $2.8 billion.

Net investment income was down 10.9% year over year to $129.7 million. Our estimate was $130.7 million. The Zacks Consensus Estimate was pegged at $127 million.

Total benefits, loss and expenses increased 2.2% to $2.8 billion, mainly due to higher policyholders benefit. Our estimate was $2.5 billion.

Adjusted EBITDA, excluding reportable catastrophes, increased 31.6% to $ 246.9 million. Our estimate was $397.7 million.

Segmental Performance

Revenues at Global Housing increased 9.7% year over year to $635.5 million, primarily driven by higher net earned premiums and net investment income. The figure was higher than our estimate of $577 million. The Zacks Consensus Estimate was $621 million.

Net earned premiums, fees and other income increased 9% year over year, driven by Homeowners’ top-line growth, including growth in policies in force and higher average premiums within lender-placed.

Adjusted EBITDA, excluding catastrophes, increased 10.2% year over year to $229.2 million on continued top-line growth within Homeowners, including higher policies in force from new lender-placed programs and portfolios. The figure was higher than our estimate of $167.7 million. The Zacks Consensus Estimate was $169 million.

Revenues at Global Lifestyle declined 3% year over year to $2.3 billion, owing to a drop in net investment income. Revenues matched the Zacks Consensus Estimate and our estimate.

Adjusted EBITDA, excluding catastrophes, of $184.3 million decreased 10% year over year, attributable to unfavorable foreign exchange and modestly lower results within Global Automotive, where elevated losses within select ancillary products. The figure was lower than our estimate of $258 million. The Zacks Consensus Estimate was pegged at $229 million.

Adjusted EBITDA loss at Corporate & Other was $29.8 million, narrower than the year-ago quarter’s adjusted EBITDA loss of $29.9 million. The narrower loss was attributable to higher net investment income from higher asset levels and yields. The Zacks Consensus Estimate was pegged at a loss of $27 million.

Financial Position

Liquidity was $638 million as of Sept. 30, 2024, which was $411 million higher than the company’s current targeted minimum level of $225 million.

Total assets increased 5.1% to $35.3 billion as of Sept. 30, 2024, from the end of 2023.

Total shareholders’ equity came in at $5.3 billion, up 9.3% year over year.

Debt-to-total capital ratio of 28.4 improved 180 bps from the 2023 end level.

Share Repurchase and Dividend Update

In the third quarter, Assurant returned $138 million to shareholders, comprising $100 million in buybacks and $38 million in dividends. Through Nov. 2, the insurer bought back another $20 million worth of shares and now has $475 million remaining under the current repurchase authorization.

2024 Guidance Raised

Assurant expects adjusted EBITDA to increase in low double digits, led by strong growth in Global Housing and modest growth in Global Lifestyle. It expected the same to increase in high single digits earlier.

Global Housing adjusted EBITDA, excluding reportable catastrophes, is expected to increase and deliver strong growth, mainly driven by top-line growth in Homeowners, favorable non-catastrophe loss experience, benefits from expense leverage and lower catastrophe reinsurance premiums.

Global Lifestyle adjusted EBITDA is expected to increase modestly. The company continues to expect organic growth and improved profitability in Connected Living programs, partially offset by investments to support growth, including new client and program implementation expenses. It now expects Global Automotive to be down due to continued loss pressure from inflation and elevated losses in select ancillary products.

Corporate and Other adjusted EBITDA loss is expected to approximate $115 million.

The company now expects a lower effective tax rate of approximately 18% to 20%. It continues to expect depreciation expense of approximately $135 million, interest expense of approximately $107 million and amortization of purchased intangible assets of approximately $70 million.

Adjusted earnings per share are expected to grow in mid- to high-teens, excluding reportable catastrophes. It earlier expected adjusted earnings per share, excluding reportable catastrophes, to grow in low double digits.

The insurer expects share repurchases worth $300 million, reflecting a strong capital position and a comprehensive catastrophe reinsurance program.

Zacks Rank

AIZ currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Multiline Insurers

MetLife, Inc. MET reported third-quarter 2024 adjusted operating earnings of $1.93 per share, which missed the Zacks Consensus Estimate by 10.7%. The bottom line declined 1% year over year. Adjusted operating revenues of $17.6 billion decreased 3.4% year over year. The top line missed the consensus mark by 4.7%.

Earlier, management estimated a variable investment income of $1.5 billion for 2024. Corporate & Other adjusted losses are anticipated between $750 million and $850 million. The effective tax rate is projected to be in the range of 24-26%.

MetLife Holdings segment’s adjusted PFOs are expected to witness a year-over-year decline of 13-15%. The unit’s adjusted earnings are forecast to be $700-$900 million.

Adjusted earnings in the Asia segment are anticipated to grow 20%. Adjusted earnings in the EMEA unit are likely to be in the range of $60-$65 million for the remaining quarters of 2024.

Prudential Financial, Inc. PRU reported third-quarter 2024 adjusted operating income of $3.48 per share, which beat the Zacks Consensus Estimate by 0.2%. However, the bottom line decreased 3.8% year over year. Total revenues of $19.5 billion surged 94% year over year and beat the Zacks Consensus Estimate by 33.7%. The increase in revenues was due to higher premiums, policy charges and fee income and net investment income.

The Hartford Financial Services Group, Inc. HIG reported third-quarter 2024 adjusted operating earnings of $2.53 per share, which beat the Zacks Consensus Estimate by 1.6%. The bottom line increased 10.5% year over year.

Operating revenues of HIG amounted to $4.7 billion, which improved 10.9% year over year in the quarter under review. The top line beat the consensus mark by 1.1%.

Zacks Investment Research