UPDATE: Guggenheim Securities Downgrades Travelers Companies to Sell, Lowers PT as Reserves are Now Likely Deficient

In a report published Thursday, Guggenheim Securities analyst Bijan Moazami downgraded the rating on

from Neutral to Sell, and lowered the price target from $87.00 to $72.00. In the report, Guggenheim Securities noted, “Loss payment for business written post 2008 is accelerating, which suggests a potential hole in reserve that most insurers haven't addressed. Industry-wide, workers' compensation insurance is the business that is proving the most deficient, especially in California. Travelers is the second largest writer of the workers' compensation insurance in the U.S. and in California. The loss payout pattern is accelerating for TRV, which we believe will lead to a reserve deficiency, particularly in the 2008 loss year. The 2008 business is 88.2% paid out as of year-end 2012, or 16.6% faster than historical average. Comparing the payout with historical average suggests that 2008's business is likely $1.7 billion deficient pre-tax, or $1.1 billion after-tax. All together, we estimate that Travelers is short in reserves by $2.2 billion pretax, or $1.5 billion on an after-tax basis. These numbers are relatively modest as compared to the size of the company's net reserves of $40 billion and nowhere close to the level of deficiencies we have seen at some smaller companies such as Tower Group.” Travelers Companies closed on Wednesday at $86.08.