Travelers' Exposure to Catastrophe Losses Raises Concern

On Jun 28, 2016, we issued an updated research report on The Travelers Companies, Inc. TRV.

Travelers, being a property and casualty insurer, remains exposed to catastrophe losses. As a result, combined ratio, which indicates the underwriting loss or profit of a company, has been deteriorating over the past several quarters. Notably, higher catastrophe losses dragged the bottom line by 69 cents per share in the first quarter. Exposure to catastrophe loss will always remain a concern as the occurrence of a natural disaster damages results.

In addition, investment income of this Zacks Rank 4 (Sell) insurer has been unstable over the past few years owing to low interest rate environment. With uncertainties in the market such as weak employment data and Brexit materializing, the Fed’s decision to raise interest rate was further delayed. Hence, we do not expect any turnaround in investment results in the short term.

The Zacks Consensus Estimate has also been revised downward in the last 60 days for 2016.

Nevertheless, Travelers’ focus on implementing pricing actions should continue to increase returns. The insurer continues to experience solid retention and a positive renewal rate change.  Its inorganic story also remains impressive. Travelers remains focused on generating sufficient capital for deployment in value accretive initiatives and shareholder friendly moves.

With respect to earnings performance, Travelers delivered positive surprise in three of the last four quarters with an average of about 12.3%.

TRAVELERS COS Price and Consensus

TRAVELERS COS Price and Consensus | TRAVELERS COS Quote

Stocks to Consider

Some better-ranked players from the same space are Markel Corp. MKL, MS&AD Insurance Group Holdings, Inc. MSADY and National General Holdings Corp. NGHC. Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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TRAVELERS COS (TRV): Free Stock Analysis Report
 
MARKEL CORP (MKL): Free Stock Analysis Report
 
NATIONAL GNL HL (NGHC): Free Stock Analysis Report
 
MS&AD INSURANCE (MSADY): Free Stock Analysis Report
 
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