Why Did Barclays Just Downgrade Travelers Cos.?

In a report published Friday, analysts at Barclay downgraded

from Overweight to Equal Weight. The price target has been maintained at $117. According to the analysts, following the peak earnings reported by P&C reinsurers, the outlook appears to be weakening. "Commercial P&C pricing has turned negative, which means margins are likely to compress. Meanwhile, reinsurance industry consolidation as well as intense competition from the inflow of alternative reinsurance capital is likely to be a multi-year headwind for the traditional reinsurers," the analysts stated. Reserve releases, which had boosted earnings for this industry so far, also appears to be slowing. The analysts, therefore, expect the P&C reinsurance industry as a whole to witness tough comps, with commercial line and reinsurance EPS being flat-to-down during 2015-2016. According to Barclays, "After a decade of recommending TRV shares, we lower our rating to EW from OW based on our outlook for sustained headwinds in commercial P&C insurance and shares approaching full value. TRV has delivered outstanding fundamental performance and maintained an industry-leading ROE in part due to ongoing robust share buybacks." However, the analysts believe that the company's earnings have already peaked and that its stock is fully valued at present.