Travelers' (TRV) Earnings Beat Estimates in Q4, Surge Y/Y

The Travelers Companies, Inc.’s TRV fourth-quarter 2019 core income of $3.32 per share beat the Zacks Consensus Estimate of $3.23 by 2.8%. Moreover, the bottom line improved 55.9% year over year.

The quarter benefited from lower cat loss, better premiums and operational excellence.

Behind the Q4 Headlines    

Travelers’ total revenues rose 4% from the year-ago quarter to $8 billion.

Net written premiums grew 6% year over year to a record $7.1 billion owing to strength in each of the business segments, namely Business and International Insurance, Bond & Specialty Insurance and Personal Insurance. This marks the 12th consecutive quarter of premium growth across all the business segments.

Net investment income dipped 2% year over year to $616 million.

Travelers’ underwriting gain of $513 million soared 280% year over year.

Combined ratio contracted 510 basis points (bps) year over year to 92.4%, attributable to lower cat loss. However, the same was partially offset by low net favorable prior-year reserve development and a higher underlying combined ratio.

At the end of the fourth quarter, statutory capital and surplus were $21.33 billion. Debt-to-capital ratio (excluding after-tax net unrealized investment gains) was 21.7%, within the company’s target range of 15-25%.

Adjusted book value per share was $92.76, up 6% from the 2018-end level.

Core return on equity was 14.8%, expanding 480 bps year over year.

The Travelers Companies, Inc. Price, Consensus and EPS Surprise

The Travelers Companies, Inc. Price, Consensus and EPS Surprise

The Travelers Companies, Inc. price-consensus-eps-surprise-chart | The Travelers Companies, Inc. Quote

Segment Update

Personal Insurance: Net written premiums came in at $2.7 billion, up 6% year over year.

Combined ratio contracted 1410 bps year over year to 88.5% owing to significantly low cat loss and higher net favorable prior-year reserve development.

Segmental income of $327 million skyrocketed 922% year over year on the back of lower cat loss. Moreover, the underwriting gain saw an upside on business volumes.

Bond & Specialty Insurance: Net written premiums rose 9% year over year to $714 million, primarily backed by continued strong retention, increased levels of renewal premium change, and strong new business in management liability and a steady strong surety production.

Combined ratio expanded 1380 bps year over year to 78.6% due to lower net favorable prior-year reserve development and a higher underlying combined ratio, partially offset by lower catastrophe losses.

Segment income dropped 24.1% year over year to $167 million on lower net favorable prior-year reserve development.

Business Insurance: Net written premiums increased 5% year over year to $3.7 billion, reflecting a consistently strong retention, higher renewal premium change and higher levels of new business.

Combined ratio contracted 190 bps year over year to 97.5% owing to significantly lower cat loss.

Segment income of $448 million was up 14.6% year over year. This uptrend is attributable to significantly lower catastrophe loss. However, the same was offset by lower net favorable prior-year reserve development and a lower underlying underwriting gain.

Dividend and Share Repurchase Update

This property & casualty insurer returned $588 million in the reported quarter. It repurchased 2.9 million shares worth of $376 million.

The board approved a quarterly dividend of 82 cents per share to be paid out on Mar 31, 2020 to its shareholders of record at the close of business as of Mar 10, 2020.

Zacks Rank

Travelers currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Some stocks worth considering from the insurance industry with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:

The Allstate Corporation ALL is slated to announce fourth-quarter earnings on Feb 4. The stock has an Earnings ESP of +2.01% and a Zacks Rank #3.

RenaissanceRe Holdings Ltd. RNR has an Earnings ESP of +18.32% and a Zacks Rank of 3. The company is scheduled to release fourth-quarter earnings on Feb 4.

ProAssurance Corporation PRA is set to report fourth-quarter earnings on Feb 20. The stock has a Zacks Rank #2 and an Earnings ESP of +36.71%.

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