Why Travelers is a Good Investment Pick - Analyst Blog

On Jun 3, Zacks Investment Research upgraded The Travelers Companies, Inc. TRV to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Travelers has been witnessing rising earnings estimates on the back of strong first-quarter 2014 results. Moreover, this property and casualty insurer delivered positive earnings surprises in the last 4 quarters with an average beat of 28.73%.

Travelers reported first-quarter operating net earnings of $2.95 a share, outperforming the Zacks Consensus Estimate by 38.5% and improving 28% from the year-ago earnings. Higher net investment income and net favorable prior-year reserve development led to the upside.  Lower share count attributable to continued buybacks also boosted the bottom line. The last quarter also witnessed written rate gains exceeding expected loss cost trends in all segments.  The company also experienced a high retention rate, pricing gains and positive renewal rate changes.

With its efforts to reduce operating expenses and acquisition costs, Travelers expects to realize savings of $140 million in 2015. This in turn is expected to drive margins higher.

Travelers also remains committed to enhance its shareholders' value via dividend increase and share buyback. Travelers returned $882 million to its shareholders in the first quarter. In addition, the board of directors of Travelers approved a dividend hike of 10%. The insurer also has $4.109 billion remaining under its share repurchase authorization.

Travelers also scores strongly with the credit rating agencies.

Strong results prompted upward revisions in Zacks Consensus Estimate for 2014 and 2015 as 15 of 17 estimates moved north over the last 60 days. It is currently pegged at $9.11 (up 11.2%) for 2014 and $8.93 (up 4%) for 2015. The expected long-term growth rate for the stock is 7.7%.

Other Stocks to Consider

Investors interested in the property and casualty industry may also consider stocks like Aspen Insurance Holdings Ltd. AHL, AmTrust Financial Services, Inc. AFSI and Atlas Financial Holdings, Inc. AFH. All these stocks sport a Zacks Rank #1 (Strong Buy).