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Analyst Blog

On Mar 20, 2013, the shares of The Travelers Companies, Inc. (TRV - Analyst Report) hit a 52-week high of $84.10. Previously, the company generated a 500% earnings surprise in the fourth quarter of 2012. The company generated positive earning surprise in 6 out of the past 10 quarters.

Travelers reported operating earnings of 72 cents per share in the fourth quarter of 2012, which surpassed the Zacks Consensus Estimate of 4 cents. Net written premiums during the quarter were $5.4 billion, up 2% year over year.

Total revenue also increased 2% year over year to $6.5 billion, driven by the augmentation in premiums earned and net investment income. Revenues surpassed the Zacks Consensus Estimate of $6.3 billion.

Moreover, over the last 8 years, Travelers continuously registered better returns on equity (ROE) than its peers. Further, the company’s dividend yield averaged 2.58% over the last five years, much ahead of the industry yield of 0.96%.

Travelers also has a strong balance sheet with ample statutory surplus levels. Moreover, the company is the second-largest writer of auto and homeowners’ insurance through independent agents and the sixth-largest writer of commercial U.S. property-casualty insurance.

The valuation of Travelers looks attractive. The shares are trading at a discount to peers both on price-to-book and forward price-to-earnings basis, while the return on equity of 9.6% is higher than the peer group average of 9.3%.

Travelers carries a Zacks Rank #2 (Buy). Other property & casualty insurance companies worth considering are Arch Capital Group Ltd. (ACGL - Snapshot Report), Aspen Insurance Holdings Ltd. (AHL - Snapshot Report) and Cincinnati Financial Corp. (CINF - Analyst Report). All these companies carry a Zacks Rank #1 (Strong Buy).

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