Tags: Travelers | Companies | costs | TRV

The Travelers Companies Focused On Costs Amid Low Rates

By Greg Brown   |   Tuesday, 28 Aug 2012 02:53 PM

The Travelers Companies (TRV) is a glass definitively half-full, analysts say, despite unusually high weather-related claims. TRV management, meanwhile, says it's focused on driving down costs as interest rates stay low.

The Travelers Companies is a holding company principally engaged, through its subsidiaries, in providing a wide range of commercial and personal property and casualty insurance products and services to businesses, government units, associations and individuals.

The company is organized into three reportable business segments: business insurance; financial, professional & international insurance; and personal insurance.

“The continued high level of weather losses, along with the continuing decline in interest rates, validates our strategy to drive improved rate, terms and conditions and therefore lift underwriting results,” Travelers Chairman and CEO Jay Fishman told analysts in a recent call.

“That strategy is on course and is now very much visible in our earnings. Net income, excluding catastrophe losses, net favorable prior-year development, improved an impressive 16 percent from the prior-year quarter, driven primarily by higher earned pricing.”

The Travelers Companies has a market cap of $25.12 billion in a sector, insurance, where the average company size is $13.16 billion. Its trailing 12-month P/E ratio is 11.68 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.09, compared to 0.98 for the sector.

Its projected earnings per share growth for the coming year is 2.24 percent, compared to a sector average of 6.84 percent.

Above average


Analysts are generally positive on TRV, with buy or outperform calls from CSFB, Lehman Brothers, RBC Capital Markets, Sandler O’Neill, and Standard & Poor’s Equity Research.

“We view TRV as a prudent underwriter with an above-average quality balance sheet. We also believe TRV's shares do not appropriately reflect the actions the company has taken in recent years to improve its underwriting results and to better capitalize on what we see as a flight to quality within the property-casualty insurance market,” S&P analysts wrote on July 25.

“We also now believe the shares have the added catalyst of an improving pricing environment and increased demand for coverage.”

The Travelers Companies next reports on Oct. 18.

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