Morningstar | We expect mean reversion in Travelers' personal auto operations.
We believe the strength of Travelers' commercial insurance operations puts a narrow economic moat around its business and that despite some recent issues, the company's personal-lines business will recover over time. Travelers, along with the rest of the property and casualty insurance industry, was buffeted by natural catastrophes in 2017, with multiple hurricanes and wildfires affecting its bottom line. Typically, the industry sees pricing firm following large catastrophes, and the early indication is that this will be the case again. However, our expectation is that the increases will be modest, and lower than what we've seen in the past, as the industry remains well-capitalized. In our view, this adds up to an underwriting environment where a cautiously managed firm such as Travelers should be able to use its competitive advantage to generate modest excess returns.Excluding catastrophes, Traveler's recent results are solid overall, but the company has faced some issues in its personal auto insurance operations. Travelers slimmed down its auto insurance offerings and reduced costs materially a few years ago to adjust to changes in industry dynamics. As a result, the recent performance of its personal lines business has been quite good in terms of top-line growth. However, this growth proved ill-timed as an industrywide uptick in claims has hit personal auto lines, with lower gas prices, distracted driving and more technology-laden vehicles combining to form a negative surprise for carriers. While this phenomenon has not been unique to Travelers, the company's spurt of growth left it particularly exposed. We expect this to be resolved in relatively short order, as the firm has been able to push through pricing increases and underwriting margins have already started to improve. However, we think it highlights the no-moat nature of Travelers' personal lines operations, which account for about 30% of the company's premiums.Travelers Companies is a holding company. Through its subsidiaries, the company is engaged in providing commercial and personal property and casualty insurance products and services to businesses, government units, associations and individuals. The company's segments include: Business Insurance, which provides property and casualty insurance and insurance-related services; Bond and Specialty Insurance, which provides surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services, and certain specialty insurance products; and Personal Insurance, which writes property and casualty insurance covering individuals' personal risks.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.