The Travelers Companies, Inc. TRV has been gaining momentum on the back of strong net earned premiums, high levels of retention, improved pricing and sufficient liquidity.
The Zacks Consensus Estimate for 2023 earnings per share is pegged at $14.62, indicating a year-over-year increase of 11.3%.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2022 has moved 0.8% north in the past 30 days, reflecting analysts’ optimism.
Earnings Surprise History
Travelers has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 25.39%.
Zacks Rank & Price Performance
Travelers currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 14.7%, outperforming the industry’s increase of 9%.
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Travelers has a favorable VGM Score of A. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
Return on Equity (ROE)
Travelers’s ROE for the trailing 12 months is 14.3%, up 220 basis points year over year, reflecting efficiency in utilizing shareholders’ fund. TRV targets mid-teens ROE over the long term.
Riding on strong net earned premiums and an aggregate underlying combined ratio for Business Insurance and Bond & Specialty Insurance, strong underwriting results continued in the commercial businesses. High levels of retention, improved pricing, an increase in new business and a positive renewal premium change should continue to drive Travelers.
TRV expects domestic automobile renewal premium change to be in double digits in the fourth quarter and be in the mid-teens throughout 2023.
Travelers raised the outlook for fixed income net investment income (NII), including earnings from short-term securities to be around $500 million after tax in the fourth quarter of 2022. TRV also projected nearly $540 million on average per quarter in 2023, with an estimated $515 million in the first quarter. Higher average levels of invested assets, reliable results from the fixed-income portfolio, and strong returns from the non-fixed-income portfolio are likely to likely drive NII higher.
Travelers maintains a conservative balance sheet among its peers. At the end of the third quarter, statutory capital and surplus were $23.4 billion. The debt-to-capital ratio (excluding after-tax net unrealized investment gains included in shareholders’ equity) was within the insurer’s target range of 15% to 25%.
Travelers has an impressive dividend history, increasing its dividend for the last 18 years. Dividends increased at a compound annual growth rate of 9% over that period. Its current dividend yield of 2.1% is better than the industry average of 0.4%. This makes TRV an attractive pick for yield-seeking investors.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are W.R. Berkley Corporation WRB, Berkshire Hathaway (BRK.B) and American Financial Group, Inc. AFG. While W.R. Berkley sports a Zacks Rank #1 (Strong Buy), Berkshire Hathaway and American Financial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The bottom line of W.R. Berkley surpassed earnings estimates in each of the last four quarters, the average beat being 25.63%. In the past year, the insurer has gained 26.9%.
The Zacks Consensus Estimate for W.R. Berkley’s 2022 and 2023 earnings has moved 5.1% and 2.4% north, respectively, in the past 30 days.
Berkshire Hathaway delivered a four-quarter average earnings surprise of 22.18%. In the past year, Berkshire Hathaway has gained 10.1%.
The Zacks Consensus Estimate for BRK.B’s 2022 and 2023 earnings implies a respective increase of 15% and 6.2% from the year-ago reported number.
American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 28.16%. In the past year, American Financial has lost 1.6%.
The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 0.6% and 1.8% north, respectively, in the past seven days.
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