The Hartford Financial Services Group, Inc.HIGNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $349.27 per share(market-calibrated)

+146.2%

Upside to Fair Value

Current

$141.86

Pure Model

$371.87

Fair Value

$349.27

Bull Case

$444.49

Bear Case

$308.56

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $371.87.

What's Driving This Ratingfor HIG

✓

CapEx already efficient

CapEx at 0.59% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 13.72% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $9.0B (25.01% margin).

→

Moderate revenue growth

Analyst consensus projects 5.46% revenue growth, fading to 2.50% by Year 10. Revenue reaches $35.8B (vs $28.3B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 76.97% indicates efficient cash generation. FCF reaches $7.4B by Year 10 (20.64% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.60

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.21%

Cost of Debt

Pre-tax Cost of Debt4.78%

Tax Rate19.41%

After-tax Cost of Debt3.85%

Equity Weight (E/V)90.16%

Debt Weight (D/V)9.84%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (90.16% × 7.21%) + (9.84% × 3.85%)

= 6.88%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$29.8B	$30.1B	$31.7B	$33.3B	$35.8B
EBIT	$4.1B	$4.1B	$6.0B	$7.4B	$9.0B
Tax	$794M	$803M	$1.2B	$1.4B	$1.7B
NOPAT	$3.3B	$3.3B	$4.8B	$5.9B	$7.2B
+ Depreciation	$541M	$548M	$575M	$604M	$651M
- Capex	$177M	$179M	$188M	$197M	$212M
- Δ NWC	$463M	-$267M	$232M	$243M	$262M
Free Cash Flow	$3.2B	$4.0B	$5.0B	$6.1B	$7.4B
Discount Factor	0.936	0.819	0.717	0.628	0.514
Present Value	$3.0B	$3.3B	$3.6B	$3.8B	$3.8B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$7.4B

Terminal Growth Rate2.50%

WACC6.88%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$173.0B

PV of Terminal Value$88.9B

Exit Multiple Method

Year 10 EBITDA$9.6B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$115.3B

PV of Terminal Value$59.3B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$35.2B

PV of Terminal Value$88.9B

Enterprise Value$124.1B

(-) Net Debt$4.2B

Equity Value$119.8B

Shares Outstanding282M

Price per Share$424.35

Exit Multiple Method

PV of Projected FCFs$35.2B

PV of Terminal Value$59.3B

Enterprise Value$94.4B

(-) Net Debt$4.2B

Equity Value$90.2B

Shares Outstanding282M

Price per Share$319.40

Pure Model Fair Value

$371.87

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
4.88%	$494.72	$538.45	$600.52	$662.47	$635.56
5.88%	$403.01	$426.02	$455.82	$495.96	$552.95
6.88%	$341.38	$355.06	$371.87	$393.01	$420.40
7.88%	$296.19	$305.00	$315.44	$328.03	$343.49
8.88%	$261.13	$267.12	$274.05	$282.16	$291.77

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$308.56

117.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.75

Base Case

$371.87

162.1% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.60

Bull Case

$444.49

213.3% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.51

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth5.46%

Year 3 Revenue Growth-2.87%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin13.72%

Terminal EBIT Margin28.00%

Tax Rate19.41%

Historical Capex / Rev0.59%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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