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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Stock of the Week


February 6th 2009 Travelers
NYSE Symbol: TRV
Industry: insurance
Price as of 2/6: $39.72

Monday is a big day for the financials as the Treasury lays out a rescue plan to provide more support to the big banks. The financials are the root problem of this whole economic recession although the former investment banks, Morgan Stanley and Goldman Sachs are performing much better. Both reached three month highs in the last week. The insurance stocks were perking up until Hartford's dismal earnings results sank the sector except for the featured stock of the week. This week, I'll feature one of the largest commercial and life insurance providers in the U.S., Travelers.
Last week, Travelers reported fourth-quarter profits down 25% to $801 million, or $1.35 per share. Excluding one time charges, earnings easily beat estimates by 12 cents. Sales, however, dropped 10.6% to $5.8 billion, below consensus. The company also lowered guidance for the full year to a range of $4.50-4.90 vs. $5.59 consensus. Still business remains strong. Net written premiums in the quarter came in at $5.385 billion higher than last year. Overall, business retention remained at "historically" high levels and the impact of a slightly improving rate trend was partially offset by lower coverage demands from existing policyholders due to general economic conditions. New business volumes increased from the prior year driven by growth in Financial Professional & International Insurance and Personal Insurance.
This week, Soleil upgraded Travelers with a $50 target saying the firm continues to perform well with enough excess capital to continue with their share repurchase program. Very few other financials can make that claim. The valuation for Travelers remains compelling. The stock is trading for 8 times reduced earnings, less than 1 times sales, and trades for less than their book value of $43 a share. The company also provides a dividend yeild of 2.8% and goes ex-dividend in the next month.