The Travelers Companies, Inc. TRV has been favored by investors on the back of strong returns from the non-fixed income portfolio, positive renewal premium change, high levels of retention and effective capital deployment.
The Zacks Consensus Estimate for Travelers’ 2023 earnings is pegged at $14.31, indicating a 15.2% increase from the year-ago reported figure on 9.9% higher revenues of $40.77 billion. The consensus estimate for 2024 earnings is pegged at $16.54, indicating a 15.6% increase from the year-ago reported figure on 8.1% higher revenues of $44.08 billion.
Northbound Estimate Revision
Estimates for 2023 and 2024 have moved up nearly 0.4% and 0.3%, respectively, in the past 30 days, reflecting investors’ 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 16.43%.
Zacks Rank & Price Performance
Travelers currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 5.7%, outperforming the industry’s increase of 5.1%.
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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.
Given an improving rate environment, the insurer raised the outlook for fixed income net investment income, including earnings from short-term securities to $530 million after tax in the second quarter, to an estimated $555 million in the third quarter and then to around $575 million in the fourth 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 drive the metric higher.
Travelers maintains a conservative balance sheet among its peers. The debt-to-capital ratio was within the insurer’s target range of 15% to 25%. TRV aims to generate increased earnings and capital, maintain a balanced approach to rightsizing capital and growing book value per share over time as part of its long-term financial strategy. Balance sheet strength driven by scale, profitability and cash flow support it to invest more than $1 billion annually on technology.
Sustained operational excellence helped generate double-digit core return on equity (ROE) in nine of the past 10 years, averaging 12.6%. Core ROE was 14.5% in the first quarter of 2023. The company aims to generate mid-teens core ROE over time.
Travelers has an impressive dividend history, increasing its dividend for the last 18 years. Its current dividend yield of 2% is better than the industry average of 0.3%. 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 Kinsale Capital Group, Inc. KNSL, RLI Corp. RLI and Axis Capital Holdings Limited AXS. While Kinsale Capital sports a Zacks Rank #1 (Strong Buy), RLI Corp. and Axis Capital carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last four quarters, the average being 14.77%. In the past year, KNSL has gained 64.3%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $10.32 and $12.41, indicating a year-over-year increase of 32.3% and 20.2%, respectively.
RLI Corp.’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 45.50%. In the past year, RLI Corp. has gained 16.4%.
The Zacks Consensus Estimate for RLI’s 2023 earnings has moved 2.9% north in the past seven days.
Axis Capital beat estimates in three of the last four quarters and missed in one, the average being 6.50%. The Zacks Consensus Estimate for 2023 has moved 2.7% north in the past 30 days.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $7.70 and $8.60, indicating a year-over-year increase of 32.5% and 11.7%, respectively. In the past year, AXS has lost 0.6%.
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