Tags: Travelers | TRV | insurance | stocks

Travelers Bowed but not Broken

By    |   Friday, 19 Aug 2011 11:55 AM

Travelers (TRV), the only insurance company in the Dow Jones Industrial Average, is weathering the spring tornadoes that put a huge dent in its bottom line. The firm took a more conservative stance than other insurers heading into the financial crisis of 2008-09, giving it plenty of room to recover from its disastrous spring. The tornado that leveled Joplin, Mo. in May was the deadliest U.S. storm in at least 60 years, killing 158 and causing as much as $3 billion in damage.

The first half of the year saw more than 1,600 tornadoes, compared with 1,282 in all of 2010, according to the National Oceanic and Atmospheric Administration. Thanks to the storms, Travelers suffered a massive $364 million loss in the second quarter, reversing a hefty profit of $670 million a year earlier.

But the storms are over now, and Travelers can rebound. Already in the second quarter, policy sales climbed 2.3 percent to $5.82 billion amid higher rates for some business insurance, including workers’ compensation coverage.

Travelers also is optimistic about its municipal bond holdings, which guarded the firm from losses during the financial crisis. “It is encouraging that more states are dealing with their own financial situations, building foundations for an improved fiscal outlook,” CEO Jay Fishman said in a recent conference call with analysts and investors.

Positive analysts

Many analysts are bullish on Travelers, with 10 of the 21 tracked by Thomson/First Call rating the company’s shares a buy or strong buy.

Cathy Seifert of Standard & Poor’s has a five-star buy rating on the stock.

“While we think the underwriting and investment environments will remain challenging in 2011, 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 what we see as a flight to quality within the property-casualty insurance market,” she writes.

“We also view TRV as a prudent underwriter with an above-average quality balance sheet.” The company next reports around Oct. 21.

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Travelers (TRV), the only insurance company in the Dow Jones Industrial Average, is weathering the spring tornadoes that put a huge dent in its bottom line. The firm took a more conservative stance than other insurers heading into the financial crisis of 2008-09, giving it...
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Friday, 19 Aug 2011 11:55 AM
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