Travelers (TRV) and Units' Ratings Retained by A.M. Best

The Travelers Companies, Inc. TRV and subsidiaries’ ratings were reiterated by A.M. Best. The credit rating giant has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” for Travelers’ property/casualty units. The abovementioned subsidiaries of this property and casualty (P&C) insurer are collectively referred to as Travelers Group.

This apart, the rating agency has also affirmed the FSR of A++ (Superior) and the Long-Term ICR of “aa+” for Travelers Casualty and Surety Company of America and affiliates, Travelers Casualty and Surety Company of Europe Limited plus Travelers Insurance Company of Canada.

At the same time, the credit rating giant has reiterated the Long-Term ICR and senior Long-Term Issue Credit Ratings (Long-Term IR) of “a+” for Travelers and its two wholly owned downstream holding companies — Travelers Property Casualty Corp. and Travelers Insurance Group Holdings Inc. Additionally, the other Long-Term IR and Short-Term Issue Credit Rating (Short-Term IR), assured by Travelers as well as its indicative Long-Term IRs, have also been reiterated by the rating agency. Notably, the outlook for each of the aforementioned ratings remained stable.

Further, the credit rating giant has also affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” for The Dominion of Canada General Insurance Company. The outlook for each of these ratings remained stable.

Also, the rating agency has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” for First Floridian Auto and Home Insurance Company. The outlook for these ratings also remained stable.

Furthermore, A.M. Best reiterated the FSR of A (Excellent) and the Long-Term ICR of “a+” of The Premier Insurance Company of Massachusetts — a Travelers’ arm — representing a stable outlook. However, the rating agency has withdrawn the ratings of this unit on Premier Insurance’s request of non-participation in the rating agency’s interactive rating procedure.

Ratings Representation of Travelers Group

Ratings affirmation represent Travelers Group’s strong risk-adjusted capitalization, solid operational performance and favorable underwriting results, together with outstanding market position in commercial and personal lines plus an efficient management team. Also, the ratings also recognize the group’s active and inclusive risk management, underwriting and financial discipline, improved technology and internal information systems plus product and geographic diversification to name a few. Additionally, the ratings take into account the financial flexibility and liquidity contributed by Travelers.

The current intensely competitive environment across property/casualty markets, substantial exposure to catastrophe events and disasters as well as issues faced in the company’s personal auto business might offset the aforementioned positive rating factors in its case. It is important to note that the rating agency anticipates a similar situation in 2017 in the wake of catastrophe losses pertaining to Hurricanes Harvey, Irma and Maria, likely to ail the earnings performance.

Details Behind the Ratings of Different Subsidiaries

The ratings of Travelers Casualty and Surety Company of America and its 100% reinsured affiliate (Travelers Casualty and Surety Company of Europe Limited), which in turn are also the company’s two units mainly acknowledge their robust consolidated risk-adjusted capitalization, specialized underwriting experience, positive underwriting and operational performance as well as their leading position in surety, fidelity and management liability segments.

However, Travelers Casualty and Surety Company of America’s constrained product diversification, together with the adverse effect that ongoing competitive property/casualty markets and difficult macroeconomic conditions might leave on premium and profitability levels, can partially offset the aforementioned positive rating factors of both the subsidiaries.

Talking of Travelers Insurance Company of Canada, this unit’s ratings represent its excellent risk-adjusted capitalization, positive underwriting and operating profitability plus outstanding brand recognition to name a few.

However, the ongoing soft market sentiment along with inflated expense ratio can partially offset the aforementioned positive rating aspects.

On the other hand, The Dominion of Canada General Insurance Company’s ratings reflect its strong risk-adjusted capitalization, superior brand recognition and well-established nationwide Canadian market presence to name a few.

However, the subsidiary’s inconsistent operational performance, existent intense competitive environment and continued lower investment yields can offset the positive rating factors.

Additionally, the ratings of First Floridian Auto and Home Insurance Company reflect the company’s robust risk-adjusted capitalization, local market focus as well as operational efficiencies to boot.

However, the arm’s continued yet decreasing exposure to catastrophe losses along with a single state geographic concentration in Florida, might partially offset the positive rating factors.

Lastly, The Premier Insurance Company of Massachusetts’ ratings consider its firm risk-adjusted capitalization, sustained operational performance and additional operational back up besides the financial flexibility provided by Travelers Group and the ultimate parent company, Travelers.

However, the unit’s continual underwriting losses for over time, limited line of business as well as its single-state concentration are likely to partially offset the positive rating pointers.

Rating affirmations or upgrades from credit rating agencies play a vital role in retaining investor confidence plus maintaining a stock’s credit worthiness. On the other hand, rating downgrades not only damage business but also increase the cost of future debt issuances. We believe that such ratings will help Travelers retain investors’ trust as well as write more businesses going forward.

Zacks Rank and Share Price Movement

Currently, Travelers carries a Zacks Rank #4 (Sell). Shares of the company have gained 1.7% year to date, massively underperforming the industry’s increase of 12.1%. However, we expect improving revenues, premium growth and a robust capital position to turn the stock around in the near term.

Stocks to Consider

Some better-ranked stocks from the insurance industry are FBL Financial Group, Inc. FFG, CNO Financial Group, Inc. CNO and Cincinnati Financial Corporation CINF, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

FBL Financial sells individual life insurance and annuity products. The company delivered positive surprises in three of the last four quarters with an average beat of 6.23%.

CNO Financial develops, markets and administers health insurance, annuity, individual life insurance and other insurance products for senior and middle-income markets in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.69%.

Cincinnati Financial deals in property casualty insurance business in the United States. The company delivered positive surprises in all the last four quarters with an average beat of 14.97%.

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