Why the Upgrade?
Strong first-quarter results as well as the company's plan to acquire The Dominion of Canada General Insurance Company have led to an uptrend in Travelers' earnings estimates.
Additionally, this property and casualty insurer delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 136.4%. The long-term expected earnings growth rate for this stock is 9%.
On Jun 10, Travelers proposed the acquisition of The Dominion of Canada General Insurance Company from E-L Financial Corporation Limited in an effort to strengthen its foothold in Canada. The proposed acquisition is a testimony of Travelers' prudent investment strategy, wherein the company strives to expand in attractive and growing markets outside the United States.
Earlier on Apr 23, Travelers reported earnings of $2.31 per share in the first quarter of 2013, surpassing the Zacks Consensus Estimate of $1.99 per share and $2.01 earned in the year-ago quarter. Favorable results came on the back of higher underwriting margins and lower catastrophe losses, which more-than-offset lower net investment income and lower net favorable prior-year reserve development.
To further aid its cause, A.M. Best upgraded the outlook of Travelers and most of its subsidiaries to positive from stable in May.
The Zacks Consensus Estimate for 2013 increased 0.7% to $7.52 per share as 3 of 18 estimates were revised higher over the last 60 days. For 2014, 5 of 18 estimates were revised higher over the same period, lifting the Zacks Consensus Estimate by 1.8% to $7.74 per share.
Other Stocks to Consider
Property and casualty insurers The Hanover Insurance Group Inc . ( THG ), HCI Group, Inc. ( HCI ) and Hilltop Holdings Inc . ( HTH ) carry favorable Zacks Rank #1 (Strong Buy) and are worth considering.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.