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We expect The Travelers Companies, Inc. (TRV - Analyst Report) to beat expectations when it reports first-quarter 2013 results on Apr 23.

Why a Likely Positive Surprise?

Our proven model shows that the property & casualty insurer is likely to beat earnings because it has the two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read:  Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.52%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Note that stocks with a Zacks Rank of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.  

The combination of Travelers’ Zacks Rank # 2 (Buy) and +1.52% ESP makes us expect a positive earnings beat on Apr 23.

What is Driving the Better Than Expected Earnings?

Travelers’ prudent underwriting practices, high retention rate, pricing gains and positive renewal rate changes are expected to lead to a positive earnings surprise in the upcoming quarter.

Travelers boasts a superior dividend yield and has a strong capital position.

The positive trend was seen in the trailing four-quarter’s average surprise of 140.74%, greatly aided by a whopping 500% surprise in the last-reported quarter. Prudent underwriting practices and favorable prior-year reserve development managed to arrest the higher catastrophe losses arising due to Hurricane Sandy. Higher premiums earned and net investment income aided the outperformance.

Other Stocks to Consider

Travelers is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 3 industry peers:

  • Aspen Insurance Holdings Ltd. (AHL - Snapshot Report), Earnings ESP of +13.54% and a Zacks Rank #1 (Strong Buy)
  • AXIS Capital Holdings Limited (AXS - Analyst Report), Earnings ESP of +4.31% and a Zacks Rank # 2 (Buy)
  • W.R. Berkley Corporation (WRB - Analyst Report), Earnings ESP of +2.70% and a Zacks Rank #1 (Strong Buy)

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