Tags: Travelers | recovering | crisis | TRV

Travelers Recovering from Financial Crisis

By    |   Friday, 10 February 2012 08:34 AM

Travelers (TRV), the only insurer in the Dow Jones Industrial Average, is recovering well from the financial crisis.

The company is one of the country’s leading commercial and personal insurers, providing auto, homeowners, and small commercial coverage. It also has several niche offerings, including insurance for oil and gas firms, construction firms, banks, and identity theft protection.

Travelers has bounced around different owners like a pinball. It was spun off from Citigroup (C) in 2002, and Travelers shareholders must be thanking their lucky stars for the move. Over the decade, Travelers shares have generated an annualized total return of 4.77 percent, compared to negative 11.27 percent for Citi.

Travelers’ corporate culture has served it well over the years. It employs conservative risk management and investment practices which have allowed it to rebound much better from the financial crisis than its competitors.

Many of those competitors took on risk prior to the financial crash as they sought higher investment returns to compensate for weak underwriting results. That didn’t work so well when the credit markets froze up.


Travelers, meanwhile, stuck to its knitting, with a laser-like focus on its core insurance operations, and now it’s reaping the rewards. In the fourth quarter it was able to continue raising prices.

The company’s profit slipped 31 percent to $618 million in the fourth quarter from a year earlier. Revenue climbed 1 percent to $6.4 billion. The profit decline is really just a correction to prior earnings that looked stronger than they were.

Standard & Poor’s analyst Cathy Seifert has a five-star buy rating on Travelers shares. She acknowledges that the operating environment is difficult but remains upbeat.

“We 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 . . . a flight to quality within the property-casualty insurance market,” she writes.

The company next reports earnings April 24.

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Friday, 10 February 2012 08:34 AM
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