Can the red umbrella provide investors shelter?
Travelers Companies Inc (NYSE:TRV) Insurance is one of the largest P&C companies in the U.S. This company operates in three segments, representing $22.4 billion in premiums in 2012: personal, business, and financial, professional and international. Travlers has an operating margin of 13%, while its peers are closer to 10.5%. At the end of 2012, Travelers Companies Inc (NYSE:TRV) topped the charts in five-year total return for a financial company at 101.8%, compared to The Allstate Corporation (NYSE:ALL)’s 19.2%, and The Chubb Corporation (NYSE:CB)’s 100.6%.
Travelers Companies Inc (NYSE:TRV) has one title the others can’t claim. In 2011, it repurchased the largest percentage of shares outstanding, by repurchasing 9% of shares outstanding. In 2012, the company dealt with the ramifications of super storm Sandy and still reduced share count by 4%. Travelers was able to pass through a double-digit rate increase last year, and still resign over 93% of contracts. Travelers Companies Inc (NYSE:TRV) is utilizing its strong brand recognition to deliver superior shareholder value.
Are you in good hands?
The Allstate Corporation (NYSE:ALL) is the largest publicly traded insurer in the U.S. Last year, The Allstate Corporation (NYSE:ALL) increased its book value per share by 12.7%. Allstate continues to focus on the long term by accelerating its technology purchases and premium models to reduce costs in its standard auto policies, and improve retention rates. Currently, it is struggling to maintain an underwriting profit in this division.
The Allstate Corporation (NYSE:ALL) has the lowest operating margin of the group at 9.6%, and sports a dividend of 2%. This company is operating in the highly competitive auto and home segment, and is up against some pretty large competitors. The Allstate Corporation (NYSE:ALL) will continue to have lower margins as the property insurance industry continues to consolidate, and all of the policy options look the same to consumers.
Insurance for the wealthy
The Chubb Group is an insurance carrier that caters to the wealthy. If a home is valued at over $2 million, a lot of property and casualty companies will shy away, and that’s where The Chubb Corporation (NYSE:CB) makes its bread and butter. Last year, super storm Sandy set the record for the single largest insurance claim in the company’s history, as it has substantial market share in the New England region.
The Chubb Corporation (NYSE:CB) is continuing to diversify its lines of business as well as its geography. Currently, the insurer has written premiums of 26% from outside of the U.S., and is looking to increase that to 33% by 2016. Chubb is also diversified by segment, with 35% in personal insurance, 43% in commercial, and the remaining 22% in specialty insurance.
Net premiums written grew 4.1% in 2012 to $11.9 billion. The Chubb Corporation (NYSE:CB) has one of the highest operating margins at 16.3%, as competition in the high-end insurance business is limited. Chubb will continue to see growth opportunities in its international segment, which will even out the earnings and payouts from natural disasters.
Foolish Bottom line
Chubb group has created the largest moat of these three insurers by catering to an under-served audience – the super wealthy. It also has the greatest international presence at 25%, while Travelers Companies Inc (NYSE:TRV) only has 4% of its total premium written outside of the U.S. This international exposure will give The Chubb Corporation (NYSE:CB) less exposure to catastrophic losses due to geographic area.
Operating margins in the property and casualty insurance industry will continue to be under pressure from lower investment yields and rising losses from significant catastrophes. To make up for this, the industry, as a whole, will be increasing rates charged to consumers and businesses. Since auto insurance is becoming mandatory in more states, we will continue to see profits in these companies.
The article 1 Property & Casualty Insurance Company To Buy originally appeared on Fool.com and is written by Wes Patoka.
Wes Patoka has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Wes is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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