Compared with other big insurance names such as Allstate (ALL) , Travelers has consistently been the leader for regularly repurchasing its shares at low valuations. This has been like an extra dividend for its shareholders on top of the annual cash dividend of $2.20 the company currently offers.
For that reason shares of TRV, at around $92, look like a screaming buy. Shares are up 2.6% for the year to date while Allstate, at $61, are up over 12%, suggesting that a powerful stock buyback program like Travelers' doesn't always guarantee an outstanding share price performance year after year.
Yet, it's important to point out the magnitude of this insurance giant's buyback program. Since 2006 the number of shares outstanding was reduced by about 50%, positively impacting the stock's dilution which contributed to a 271% increase in the price-per-share since the post financial crisis lows in 2008.
According to spokesman Patrick Linehan, Travelers repurchased 9.5 million shares during the second quarter and 18 million shares for the year to date at a total cost of $876 million and $1.581 billion, respectively. Travelers has $3.234 billion of remaining capacity under its existing share repurchase authorization.
Linehan also noted CEO Jay Fishman's comments to shareholders last year. At that time Fishman said: “We will continue to take the steps that we believe will help us improve returns consistent with our long-held objective of producing mid-teens operating return on equity over time, the lens through which we view virtually every decision we make.”