On May 21, 2014, shares of The Travelers Companies, Inc. (TRV) crafted a new all-time 52-week high of $93.34. With about 1.7 million shares exchanging hands in the last trading session, the share price moved up 0.21% to close at $92.86 yesterday. The momentum was driven by a sustained earnings strength and continued focus on enhancement of shareholders value. The year-to-date return from the stock came in at 2.56%, ahead of the S&P’s return of 2.14%.
This Zacks Rank #2 (Buy) property and casulty insurer’s first quarter beat of 38% helped it to keep its surprise streak alive. Earnings also 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. Written rate gains continued to exceed expected loss cost trends in all segments. The company also experienced high retention rate, pricing gains and positive renewal rate changes.
Travelers’s new personal auto product – Quantum Auto 2.0 – that was rolled out in 28 states and District of Columbia helped it to enhance volumes with attractive returns.
Travelers also expects to realize savings of $140 million in 2015 with its efforts of reducing operating expenses and acquisition costs. This in turn is expected to drive improvement in margins.
With respet to enhancing shareholders’ value, the borad of directors of Travelers approved a dividend hike of 10%. With this, the Travelers increased its dividend at a CAGR of 9.6% over the last 10 years. It also engages in regulars share buyback and is left with $4.109 billion remaining under its authorization. In the last reported quarter, Travelers returned $882 million to its shareholders.
A sustained solid operational and financial performance by the Travelers helped the Zacks Consensus Estimated to move north as most of the the estimates were raised in the last 30 days. It is currently pegged at $9.11 for 2014 (up 11.2% as 15 of 17 estimates moved up) and $8.9 for 2015 (up 3.6% as 15 of 18 estimates moved up). The expected long-term growth rate of the stock is 7.7%.
Other Stocks to Consider
Some of the other property and casualty worth considering insurers include Allied World Assurance Company Holdings, AG (AWH), Aspen Insurance Holdings Ltd. (AHL) and AmTrust Financial Services, Inc. (AFSI). All these sport a Zacks Rank #1 (Strong Buy).
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