On May 9, 2014, we issued an update research report on
The Travelers Companies, Inc
With net income of $2.95 per share reported for the first quarter
of 2014, Travelers Companies outperformed the Zacks Consensus
Estimate by 38% and improved 28% year over year. The outperformance
was driven by improvement in underlying underwriting gains as well
as higher net investment income and net favorable prior-year
reserve development. Lower share count also boosted the bottom
line. First-quarter results helped it to keep the positive surprise
Travelers remains upbeat about its new product Quantum 2.0. This
low cost, lower-priced Auto insurance product helped it to improve
volumes at attractive returns and is expected to retain the
Written rate gains continued to exceed expected loss cost trends in
all segments. High retention rate, pricing gains, positive renewal
rate changes and a strong capital position are among the positives
for this Zacks Rank #2 (Buy) insurer. Its inorganic growth story
also remains impressive with strategic acquisitions.
In its effort to improve underwriting margins and come up with more
competitively priced product, Travelers is focused on reducing
operating expenses and acquisition costs. When fully implemented,
should lead to an annualized savings of $140 million in 2015.
Travelers remain committed to enhance its shareholders' value via
share repurchases and dividends. With the recent hike of 10% in
quarterly dividend, over the last 10 years, Travelers increased
dividend at a CAGR of 9.6%. Its dividend yield also betters the
industry average. The property and casualty insurer also
continually engages in share buyback and has $4.109 billion
remaining under its authorization.
However, exposure to catastrophe events always remains a headwind
for property and casualty insurers. In addition, management expects
lower reinvestment yields from fixed maturity portfolio to lower
net investment income from that portfolio by $25 million in each of
the remaining quarters of 2014. It also estimates investment income
from the non-fixed maturity portfolio in 2014 to be lower than the
With respect to estimate revisions, Travelers has witnessed a
positive movement as most of the estimates were revised higher. For
2014, the Zacks Consensus Estimate moved north by 9.7% to $9.01 per
share and for 2015, the same moved up by 3.4% to $8.88 over the
last 30 days.
Other Stocks to Consider
Some other stocks worth mentioning in the property and casualty
insurance industry are
Allied World Assurance Company Holdings, AG
AmTrust Financial Services, Inc.
Aspen Insurance Holdings Ltd
). All these stocks sport a Zacks Rank #1 (Strong Buy).
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AMTRUST FIN SVC (AFSI): Free Stock Analysis
ASPEN INS HLDGS (AHL): Free Stock Analysis
ALLIED WORLD AS (AWH): Free Stock Analysis
TRAVELERS COS (TRV): Free Stock Analysis Report
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