Hartford Financial Services Group Inc. (HIG) has announced Wellington Management Co. LLP the sole sub-adviser for its mutual funds business. Wellington Management will commence its role once the company’s mutual fund board of directors is done with fund-by-fund review.
The announcement pertains to Hartford’s initiatives to augment its mutual fund business. Wellington Management presently is the sub-advisor for 45 of The Hartford Mutual Funds’ 77 funds, besides being the primary manager for the equity funds. Following the review process, Hartford plans to hand over the management of all fixed income mutual funds to Wellington Management. The Hartford Mutual Funds presently has $100 billion in assets under management.
Besides this consolidation, Hartford also plans to add 50 employees to the distribution team over the next several months. The company stated that mutual fund business offers high growth and high return on equity. Hence, these initiatives will further enable the company to boost shareholder return over a longer term.
Further, strong results at mutual fund business will in turn help the Wealth management segment to post better numbers going forward. Core earnings of Wealth management increased 2% year over year in the third quarter of 2011.
Hartford remains focused on improving its operating performances. As such it is also vending off its non core business. Recently, Hartford agreed to divest its subsidiary Hartford Life Private Placement (HLPP) to Philadelphia Financial Group Inc. for $117.5 million.
The market has reacted positively to the initiatives taken by company to boost investors’ confidence. The share price of Hartford inched up 1.1% to close at $18.73 as on Wednesday.
There was no earnings momentum in the stock over the last 7 days. These new developments might encourage analysts to pull their estimates upward. The Zacks Consensus Estimate for fourth-quarter 2011 is 84 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $2.13 per share and $3.51 per share.
We retain our long term Underperform recommendation. The quantitative Zacks #5 Rank (short-term Strong Sell rating) for the company indicates downward pressure on the shares over the near term.
Headquartered in Connecticut, the Hartford Financial Services Group is one of the largest multi-line insurance and investment companies.
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