Travelers Companies (TRV) sees improving macroeconomic and industry metrics, and pricing for this insurer is expected to remain stable while the loss reserves seem to be lower than previously expected, says Amit Kumar, Vice President and Senior Analyst at Macquarie Group Limited.
“If you also look at the small business trends and look at the ADP small business survey, you will see that the small business trends are improving. Separately, if you’re looking at the market surveys, let’s say you look at the Council of Insurance Agents & Brokers or the MarketScout pricing survey, you’ll see that pricing still remains stable in the 5% range. And finally, if you look at Travelers‘ balance sheet and analyze the quality of their loss reserves, you’ll walk away saying that Travelers’ loss reserves are redundant by 5%,” Kumar said.
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Kumar also says the underwriting at TRV is reason for investor confidence, and he says Q1 saw improvement in the company, while the overall U.S. economy saw encouraging signs for the insurance industry.
“If you look at Travelers, it’s a great proxy if you wanted to stick with mostly a U.S. carrier. If you look at pricing commentary, it was very strong in Q1. Last Friday we spent some time at their Claims University looking at the underwriting process. We walked away with incremental confidence in the underwriting process. Separately, I would say that if you look at unemployment, that’s a good proxy for payrolls, and unemployment is down to 7.5% for April — that compares to 8.1% for 2012,” Kumar said.
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