On Jun 23, 2015, Zacks Investment Research upgraded The Travelers Companies, Inc. TRV to a Zacks Rank #2 (Buy).
Travelers has witnessed increasing earnings estimates after its prudent acquisition, intention to share more profits with shareholders and rating affirmation. With respect to its performance, this Zacks Rank #2 (Buy) property and casualty insurer delivered positive earnings surprises in two of the last four quarters, with an average beat of 8.13%.
In April, Travelers announced the acquisition of a majority stake in the property casualty business of its J. Malucelli joint venture, talking the tally to 95% ownership. We expect the surety business of the company to post better numbers in the coming period as well on account of its joint venture with J. Malucelli, as the latter occupies almost 30% share in the Brazilian Surety market. The acquisition also bears testimony to Travelers’ prudent investment strategy, wherein it strives to expand in the attractive and growing market place outside the United States.
Riding on the strength of its financial position, the board of directors approved an 11% hike in the quarterly dividend to 61 cents per share marking 11 straight years of dividend increase. Over the last 11 years, the company increased dividend at a CAGR of 10%. Additionally, its dividend yield betters the industry average.
Given strong operating and underwriting performances, sturdy risk-adjusted capitalization, solid market holdings in commercial and personal lines, and financial flexibility and liquidity, A.M. Best reiterated the issuer credit rating (ICR) and senior debt ratings of ‘a+’ on Travelers and two of its holding companies. Subsequently, the credit rating agency reiterated the financial strength ratings (FSR) of A++ (Superior) and ICR of ‘aa+’ on the property/casualty subsidiaries of Travelers.
These positives resulted in an upward revision of the Zacks Consensus Estimate for 2015 and 2016 in the last 60 days. It increased by a cent each to $3.04 for 2015 and to $9.51 for 2016. The expected long-term earnings growth rate for the stock is 7.7%.
Other Stocks to Consider
Investors interested in property and casualty insurers may also look at Endurance Specialty Holdings Ltd. ENH, Markel Corp. MKL and State Auto Financial Corp. STFC. All these stocks sport a Zacks Rank #1 (Strong Buy).
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