Travelers (NYSE:TRV) Still Faces Challenges After Solid Quarter

Travelers (NYSE:TRV) stands in an enviable position, finishing up a strong quarter, while continuing to work from a solid base, but FBR noted they do have some concerns over the underlying dynamics of the earnings for the quarter.

FBR says, "TRV reported solid 4Q10 results, with operating EPS of $1.89 exceeding the $1.67 consensus estimate by a comfortable margin. Book value declined a modest 1.1% to $58.47/share, despite significant pressure in the bond market, reflecting TRV's high-quality fixed-income portfolio. Shares now trade at 95% of BV, a valuation many would find incredibly attractive given full-year operating ROE of 12.5%. In spite of the strong quarterly result, we continue to rate TRV at MP, as we worry about some of the dynamics underlying this quarter's earnings. In addition, the current rate of buybacks cannot continue in perpetuity...We are increasing our 2011 operating EPS estimate to $6.15 from $6.00 to account for a higher amount of expected share buybacks."

FBR Capital reiterates a "Market Perform" rating on Travelers (TRV), which closed Tuesday at $56.23, up $0.61, or 1.10 percent. FBR raised their price target on Travelers from $70 to $71.