Travelers Rides On Inorganic Growth, Cat Loss Woe Persists
Zacks Investment Research | Jan 13, 2020 09:49PM ET
The Travelers Companies, Inc. (NYSE:TRV) is well-poised for growth driven by better pricing, growth in auto and homeowners business, inorganic growth and efficient capital deployment.
Travelers is one of the leading writers of auto and homeowners’ insurance as well as commercial U.S. property-casualty insurance. The company is optimistic about its personal lines of business as evident from the progress and growth at the auto and homeowners business. To increase returns and improve profitability, the company focuses on implementing better pricing and other strategic actions.
The company remains focused on mergers and acquisitions. The buyout of Simply Business in August 2017 enabled it to access and caters to the microbusiness market in the United States. Strong financial strength and flexibility should continue to boost strategic buyouts.
The company’s solid balance sheet and steady cash flow aid in efficient capital deployment through dividend hikes and share buybacks. In the first nine months of 2019, the company returned $590 million. It has a record of hiking dividend for 15 straight years at a CAGR of more than 9%. Its current dividend yield of 2.4% betters the industry average of 0.4%, making it an attractive pick for yield-seeking investors.
However, exposure to cat loss induces underwriting volatility. Also, a high debt level that results in increase in interest expense remains a headwind for the company.
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