(TRV) The Travelers Companies to Lower Share Buyback

The Travelers Companies Inc. (TRV) estimates the bad weather in the months of April and May might cost the company between $1 billion to $1.05 billion. Several catastrophes including tornadoes and hail storms in the Midwest and Southeast added to the costs.

Travelers, as a result has limited its share repurchase to below $250 million for the second quarter of 2011 and approximately $400 million in excess of operating income for the second half of 2010. The second quarter buyback will be almost 3.5 times lower than that of repurchases made during second quarter 2010. Travelers, in the first quarter bought back 18.9 million shares for $1.1 billion compared with 27.0 million shares for $1.40 billion in the prior year quarter.

During the first quarter, Travelers incurred significantly lower catastrophe losses compared with the year-ago quarter, partly aiding the solid results in the quarter. Catastrophe losses were $186 million compared with $471 million in first quarter 2011. Underwriting gain surged to $249 million in the quarter from $80 million in the prior year quarter reflecting a lower combined ratio of 94.7% compared with 96.4% in first quarter 2010. Lower catastrophe losses, partially offset by a decrease in net favorable prior year reserve development led to the overall improvement in combined ratio.

Travelers posted a stronger first quarter on the heels of higher underwriting gains, favorable resolution of prior year tax matters, lower catastrophe losses and lower outstanding shares helped the company to post an improved results.

We maintain our Neutral recommendation on Travelers. The quantitative Zacks #3 Rank (short-term Neutral rating) for the company indicates no clear directional pressure on the stock over the near term.

Based in New York, The Travelers Companies, through its subsidiaries, provides a wide variety of property and casualty insurance and surety products and services to businesses, organizations and individuals in the United States and in selected international markets. It competes with Hartford Financial Services Group Inc. (HIG) and W.R. Berkley Corporation (WRB).

HARTFORD FIN SV (HIG): Free Stock Analysis Report

TRAVELERS COS (TRV): Free Stock Analysis Report

BERKLEY (WR) CP (WRB): Free Stock Analysis Report

Zacks Investment Research

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