On Jan 13, Zacks Investment Research upgraded The Travelers Companies, Inc. (TRV) to a Zacks Rank #2 (Buy).
Why the Upgrade?
Travelers has been witnessing increases in earnings estimates following a recent acquisition. Also, its solid operational performance is an upside.
Travelers in association with J. Malucelli, its joint venture in Brazil, will acquire a majority stake in Columbia-based Cardinal Compañía de Seguros to strengthen its surety platform there. Travelers has always considered mergers and acquisitions a prudent strategy to grow inorganically. Its earlier acquisition of The Dominion of Canada General Insurance Company from E–L Financial Corporation Limited has strengthened in foothold in Canada. Moreover third-quarter 2014 net premiums written were largely benefited by the integration of acquisitions.
With respect to its operational performance, the property and casualty insurer delivered positive surprises in three of the last four quarters, with an average beat of 18.58%. The company has been benefiting from better investment results. Though the interest rate environment is still soft, strong returns in private equity returns have been favoring the results. Also, a benign catastrophe environment has helped the company’s underwriting performance.
Travelers is also focused on reducing operating expenses and acquisition costs in order to improve underwriting margins and come up with a more competitively priced product. The company’s expense reduction initiatives are expected to account for 90% of the $140 million run-rate savings target.
These positives have resulted in an upward revision in the Zacks Consensus Estimate for 2014 and 2015 over the last 60 days. The same moved up 0.8% to $10.01 for 2014 and by a penny to $9.31 for 2015. The expected long-term earnings growth rate for the company is 7.7%.
Other Stocks to Consider
Investors interested in the property and casualty industry can also consider The Allstate Corporation (ALL), W.R. Berkley Corporation (WRB) and The Chubb Corporation (CB). All these sport a Zacks Rank #1 (Strong Buy).
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