Back to top

Image: Bigstock

Travelers Projects Harvey Catastrophe Loss, Halts Buyback

Read MoreHide Full Article

The Travelers Companies, Inc. (TRV - Free Report) recently announced pre-tax catastrophe loss estimates stemming from Hurricane Harvey that hit Texas on Aug 25, 2017. The company projects pre-tax catastrophe loss between $375 million and $750 million or $245 million and $490 million after-tax.

Travelers being a property and casualty insurer will not escape the disaster caused by these catastrophe events since its underwriting results have severely taken a beating. The company has been witnessing high level of catastrophe losses for a considerable period of time. Notably, the last quarter marked the maximum catastrophe losses since 2011. However, this statistic might change once the damages from both the storms are estimated.

In the year-ago quarter too, Travelers experienced catastrophe losses resulting from hail storms in the Western region of the United States and floods in the Southeast region of the United States. Catastrophe losses of $89 million weighed on underwriting gains that slumped 46% and combined ratio deteriorating 330 basis points year over year.

On a positive note, shares of Travelers have gained 2.3% in yesterday’s trading session, the first trading day after Hurricane Irma struck Florida over the weekend. Satisfactory news is that the narrower-than-expected damage caused by Irma has likely helped Travelers from not losing in the session.

The Zacks Consensus Estimate for the third quarter is currently pegged at $1.77 per share, translating to a year-over-year plunge of 26.1%. We expect the estimates to move downward as analysts incorporate the impact of the catastrophe loss.

Concurrently, this Zacks Rank #4 (Sell) property and casualty insurer has also announced to halt its share repurchase program in the wake of the catastrophe activities as part of capital management strategy during a considerable catastrophic environment. Nonetheless, the company had already spent $328 million to buy back 2.6 million shares for the quarter. The company has about $4.9 billion remaining under its existing share repurchase authorization.

Shares of Travelers have nudged up 0.1% year to date, underperforming the industry’s increase of 8.1%. Estimates for 2017 have moved down 1.7% while the same for 2018 have remained unchanged in the last seven days. Catastrophes affecting underwriting results and uncertainty over next rate hike will possibly be a drag on share price.

Recently, Assurant Inc. (AIZ - Free Report) has estimated between $134 million and $140 million pre-tax of reportable catastrophe losses from Hurricane Harvey and expects that gross losses from Hurricane Irma will exceed its retention of $125 million pre-tax.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Atlas Financial Holdings, Inc. , and Markel Corporation (MKL - Free Report) , both flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Atlas Financial Holdings engages in underwriting commercial automobile insurance policies in the United States. The company’s average four-quarter surprise is 57.94%

Markel Corporation markets and underwrites specialty insurance products in the United States and internationally. The company’s average four-quarter surprise is 21.06%
 

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

 Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


The Travelers Companies, Inc. (TRV) - free report >>

Assurant, Inc. (AIZ) - free report >>

Markel Group Inc. (MKL) - free report >>

Published in