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Why Is Travelers (TRV) Down 1.4% Since Last Earnings Report?
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A month has gone by since the last earnings report for Travelers (TRV - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Travelers due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Travelers Q3 Earnings Top Estimates, Revenues Rise Y/Y
The Travelers Companies reported third-quarter 2021 core income of $2.60 per share, which beat the Zacks Consensus Estimate of $2.00. The bottom line decreased 16.7% year over year.
The decline was attributable to net unfavorable prior-year reserve development and higher catastrophe losses, partially offset by higher net investment income and a higher underlying underwriting gain.
Behind Q3 Headlines
Travelers’ total revenues increased 6% from the year-ago quarter to $8.8 billion, primarily due to higher premiums and net investment income. The top-line figure beat the Zacks Consensus Estimate of $8.5 billion.
Net written premiums increased 7% year over year to a record $8.3 billion driven by continued strong renewal rate change, exposure growth and retention across all the segments.
Net investment income increased 14.9% year over year to $771 million, primarily due to an increase in income in non-fixed income investment portfolio.
Catastrophe losses totaled $501 million pre-tax, wider than $397 million pre-tax in the prior-year quarter. Catastrophe losses primarily resulted from Hurricane Ida and severe storms in several regions of the United States.
Travelers witnessed an underwriting gain of $75 million, down 77.9% year over year. The combined ratio deteriorated 370 basis points (bps) year over year to 98.6 due to net unfavorable prior-year reserve development and higher catastrophe losses, partially offset by a lower underlying combined ratio.
At the end of the third quarter, statutory capital and surplus were nearly $23 billion. The debt-to-capital ratio (excluding after-tax net unrealized investment gains included in shareholders’ equity) was 20.4, within the company’s target range of 15-25.
Adjusted book value per share was $104.77, up 10% year over year. Core return on equity was 10.1%, down from 13.5% in the year-ago quarter
Segment Update
Business Insurance: Net written premiums increased 5% year over year to about $4 billion, benefiting from reflecting strong renewal premium change and retention.
The combined ratio improved 480 bps year over year to 97.5 attributable to due to a lower underlying combined and lower net unfavorable prior-year reserve development, partially offset by higher catastrophe losses.
Segment income of $558 million increased 52.9% year over year. The improvement was driven by higher underlying underwriting gain, lower net unfavorable prior-year reserve development and higher net investment income, partially offset by higher catastrophe losses.
Bond & Specialty Insurance: Net written premiums rose 19% year over year to $894 million, reflecting strong retention and renewal premium change in management liability and strong production in surety.
The combined ratio improved 820 bps year over year to 81.1 due to lower underlying combined ratio and net favorable prior year reserve development.
Segment income of $174 million increased 51.3% year over year, primarily due to net favorable prior year reserve development, a higher underlying underwriting gain and higher net investment income.
Personal Insurance: Net written premiums of 3.4 billion increased 7% year over year due to solid performance at Domestic Automobile and Domestic Homeowners and Other.
The combined ratio deteriorated 1820 bps year over year to 104.6 due to lower net favorable prior-year reserve development and a higher underlying combined ratio, partially offset by a smaller impact from catastrophe losses.
Segment loss of $2 million compared unfavorably with segment income of $392 million in the year-ago quarter, attributable to lower net favorable prior year reserve
Dividend and Share Repurchase Update
This property & casualty insurer returned $821 million in the reported quarter. It bought back shares worth $601 million. The company’s board also approved a 88 cents per share quarterly dividend. The dividend will be paid out on Dec 31 to shareholders of record at the close of business as of Dec 10, 2021.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, Travelers has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Travelers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Travelers (TRV) Down 1.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Travelers (TRV - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Travelers due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Travelers Q3 Earnings Top Estimates, Revenues Rise Y/Y
The Travelers Companies reported third-quarter 2021 core income of $2.60 per share, which beat the Zacks Consensus Estimate of $2.00. The bottom line decreased 16.7% year over year.
The decline was attributable to net unfavorable prior-year reserve development and higher catastrophe losses, partially offset by higher net investment income and a higher underlying underwriting gain.
Behind Q3 Headlines
Travelers’ total revenues increased 6% from the year-ago quarter to $8.8 billion, primarily due to higher premiums and net investment income. The top-line figure beat the Zacks Consensus Estimate of $8.5 billion.
Net written premiums increased 7% year over year to a record $8.3 billion driven by continued strong renewal rate change, exposure growth and retention across all the segments.
Net investment income increased 14.9% year over year to $771 million, primarily due to an increase in income in non-fixed income investment portfolio.
Catastrophe losses totaled $501 million pre-tax, wider than $397 million pre-tax in the prior-year quarter. Catastrophe losses primarily resulted from Hurricane Ida and severe storms in several regions of the United States.
Travelers witnessed an underwriting gain of $75 million, down 77.9% year over year. The combined ratio deteriorated 370 basis points (bps) year over year to 98.6 due to net unfavorable prior-year reserve development and higher catastrophe losses, partially offset by a lower underlying combined ratio.
At the end of the third quarter, statutory capital and surplus were nearly $23 billion. The debt-to-capital ratio (excluding after-tax net unrealized investment gains included in shareholders’ equity) was 20.4, within the company’s target range of 15-25.
Adjusted book value per share was $104.77, up 10% year over year. Core return on equity was 10.1%, down from 13.5% in the year-ago quarter
Segment Update
Business Insurance: Net written premiums increased 5% year over year to about $4 billion, benefiting from reflecting strong renewal premium change and retention.
The combined ratio improved 480 bps year over year to 97.5 attributable to due to a lower underlying combined and lower net unfavorable prior-year reserve development, partially offset by higher catastrophe losses.
Segment income of $558 million increased 52.9% year over year. The improvement was driven by higher underlying underwriting gain, lower net unfavorable prior-year reserve development and higher net investment income, partially offset by higher catastrophe losses.
Bond & Specialty Insurance: Net written premiums rose 19% year over year to $894 million, reflecting strong retention and renewal premium change in management liability and strong production in surety.
The combined ratio improved 820 bps year over year to 81.1 due to lower underlying combined ratio and net favorable prior year reserve development.
Segment income of $174 million increased 51.3% year over year, primarily due to net favorable prior year reserve development, a higher underlying underwriting gain and higher net investment income.
Personal Insurance: Net written premiums of 3.4 billion increased 7% year over year due to solid performance at Domestic Automobile and Domestic Homeowners and Other.
The combined ratio deteriorated 1820 bps year over year to 104.6 due to lower net favorable prior-year reserve development and a higher underlying combined ratio, partially offset by a smaller impact from catastrophe losses.
Segment loss of $2 million compared unfavorably with segment income of $392 million in the year-ago quarter, attributable to lower net favorable prior year reserve
Dividend and Share Repurchase Update
This property & casualty insurer returned $821 million in the reported quarter. It bought back shares worth $601 million. The company’s board also approved a 88 cents per share quarterly dividend. The dividend will be paid out on Dec 31 to shareholders of record at the close of business as of Dec 10, 2021.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, Travelers has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Travelers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.