The Travelers Companies, Inc. TRV has been gaining momentum on the back of higher average levels of invested assets, strong returns from the non-fixed income portfolio, positive renewal premium change and effective capital deployment.
The Zacks Consensus Estimate for Travelers’ 2023 earnings is pegged at $14.09, indicating a 13.4% increase from the year-ago reported figure on 9.1% higher revenues of $40.48 billion. The consensus estimate for 2024 earnings is pegged at $16.32, indicating a 15.8% increase from the year-ago reported figure on 5.5% higher revenues of $42.74 billion.
Earnings Surprise History
Travelers has a decent earnings surprise history. It beat estimates in six of the last seven quarters.
Zacks Rank & Price Performance
Travelers currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 10.5% against the industry’s decline of 0.5%.
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Return on Equity (ROE)
Travelers’ ROE for the trailing 12 months is 13.3%, which expanded 100 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. For 2023, the insurer expects renewal premium change to continue to remain strong with the implementation of additional insured value increases.
TRV expects domestic automobile renewal premium change to be in the mid-teens throughout 2023.
Given an improving rate environment, the insurer expects after-tax fixed income net investment income, including earnings from short-term securities to average above $535 million 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 drive the metric higher.
The property and casualty insurer maintains a conservative balance sheet among its peers. The debt-to-capital ratio (excluding after-tax net unrealized investment gains included in shareholders’ equity) was within the insurer’s target of 15% to 25%.
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 Axis Capital Holdings Limited AXS, Everest Re Group, Ltd. RE and Selective Insurance Group, Inc. SIGI, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Axis Capital beat estimates in three of the last four quarters and missed in one, the average being 5.70%. The Zacks Consensus Estimate for both 2023 and 2024 has moved 0.1% north in the past seven days.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $7.53 and $8.42, indicating year-over-year increase of 29.6% and 11.7%, respectively. In the past year, AXS has gained 14.7%.
The Zacks Consensus Estimate for Everest Re’s 2023 and 2024 earnings per share is pegged at $44.68 and $51.29, indicating year-over-year increase of 64.9% and 14.7%, respectively. In the past year, RE has gained 34.2%.
RE beat estimates in each of the last four quarters, the average being 18.41%.
The Zacks Consensus Estimate for Selective Insurance’s 2023 and 2024 earnings per share is pegged at $6.57 and $7.55, indicating year-over-year increase of 30.6% and 14.9%, respectively. In the past year, SIGI has gained 21.1%.
The Zacks Consensus Estimate for SIGI’s 2023 and 2024 earnings has moved 8.9% and 9.7% north, respectively, in the past 30 days.
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