Here's Why You Should Retain Travelers (TRV) Stock Right Now

The Travelers Companies, Inc. (NYSE:TRV) has successfully catered to evolving demands and expectations of clients for years, building a solid product and service portfolio in the process. The company continues to maintain this purple patch and emerge stronger in the future.

The property and casualty (P&C) insurer is anticipated to benefit from a strong market position and reap economies of scale. The company also remains committed toward implementing pricing actions to continue the increasing returns and most importantly, boost profitability.

The company has been displaying better performance at both homeowners and auto units over a considerable period of time. To that end, both the business lines have been witnessing continued growth in policies in force as well as net written premiums over the past few years and we anticipate this momentum to sustain in the near term as well.

In addition, the Zacks Rank #3 (Hold) P&C insurer’s inorganic growth story remains impressive. Besides, the company undertakes strategic buyouts to diversify operations and drive the operational performance. These initiatives are expected to accelerate growth.

Travelers has been generating sufficient capital to engage in shareholder-friendly moves. Interestingly, through the first half of 2017, the company has effectively managed to return $1.2 billion to shareholders via dividends and share buybacks. It also has a robust liquidity position and is making efforts to improve leverage ratios.

However, exposure to catastrophe losses will continue to affect the company’s underwriting results and raise concerns in the near term.

Additionally, the company anticipates about $15-$20 million of lower after-tax net investment income on a quarterly basis in 2017 compared with 2016.

Shares of Travelers have gained 4.11% year to date, underperforming the industry’s increase of 9.14%. However, we expect top-line growth, improving premiums, higher net investment income and a strong capital position to turn the stock around in the near term.

Nonetheless, Travelers has a trailing 12-month return on equity (ROE) of 11.7%, higher than the industry average of 6.2%. Also, the company’s expected long-term earnings growth is pegged at a decent 5.90%.

Stocks to Consider

Some better-ranked stocks from the insurance industry are First American Corporation (NYSE:FAF) , CNO Financial Group, Inc. (NYSE:CNO) and Argo Group International Holdings, Ltd. (NASDAQ:AGII) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

First American Corporation provides financial services. The company delivered positive surprises in all the last four quarters with an average beat of 12.64%.

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%.

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered positive surprises in all the last four quarters with an average beat of 26.51%.

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