Recent news in the insurance industry hasn't been all that positive, but you wouldn't know that from the smoking-hot performance of The Travelers Companies(NYSE: TRV) over the past few days.
In fact, after reporting its latest set of quarterly results on Thursday, Travelers hit its all-time-high closing stock price. The shares were up by 12% week to date as of early Friday morning, according to data compiled by S&P Global Market Intelligence.
A monster rise in profitability
On that historic Thursday for Travelers stock, the company unveiled its third-quarter figures. These revealed that the insurer's revenue grew by 12% year over year to hit $11.9 billion, and "core" (i.e., adjusted for net realized investments) income nearly tripled to over $1.2 billion. Both headline figures easily topped the consensus analyst estimates.
While natural disasters have been prominent in the news lately, Travelers has benefited from a sharp rise in its underwriting. This, combined with strong gains in net investment income, was more than sufficient to offset a 10% rise in catastrophe losses.
That far-better-than-expected performance will only add to sentiment that had been getting more bullish even before those numbers were unveiled. In the days leading up to the earnings release several analysts following Travelers' stock raised their price targets on the shares.
Among these were Morgan Stanley's Bob Huang and UBS' Brian Meredith. The former boosted his fair value assessment of the stock to $235 per share from the preceding $215, while the latter went from $238 to $244. It must be mentioned, though, that both pundits maintained their equivalent of hold recommendations.
An underrated stock
Following that quarter's performance, which was indisputably spectacular, Travelers doesn't feel like a hold at all. It's doing extremely well in the current environment and it looks set for continued success. It seems very much more like a buy these days.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
