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Travelers (TRV) to Report Q3 Earnings: What's in Store?

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The Travelers Companies, Inc. (TRV - Free Report) is slated to report third-quarter 2020 results on Oct 20, before market open. The company reported in line earnings in the last reported quarter.

Factors at Play

Travelers’ third-quarter premiums are likely to have increased across its segments on better pricing, strong retention level and positive renewal premium change, partially offset by coronavirus-led challenges. The Zacks Consensus Estimate for premiums is pegged at $7.2 billion, indicating an upside of 0.6% from third-quarter 2019 reported figure.

Successful execution of marketplace strategies and investments are likely to have boosted commercial businesses. Continued growth at the profitable agency auto and homeowners business is likely to have aided personal lines of business.

A low interest rate environment might have weighed on investments. The company expects fixed income net investment income to decline $35 million to $40 million in the third quarter.

The company is likely to have benefited from declining claims amid a reduction in the number of vehicles plying on roads due to the COVID-19 pandemic.

The third quarter of a year generally bears the brunt of catastrophes as the hurricane season typically starts in June and lasts through November, gathering strength in August and September. Travelers had exposure in areas where Hurricane Laura made landfall. Thus, underwriting profitability might have been affected.

The company estimates its expense ratio to remain high. The Zacks Consensus Estimate for underwriting expense ratio stands at 30.87, an increase of 137 basis points.

The Zacks Consensus Estimate for earnings is pegged at $2.94, indicating 105.6% increase from the year-ago figure on 0.3% higher revenues of $8 billion.

What Our Quantitative Model Unveils

Our proven model does not show that Travelers is likely to beat on earnings in the to-be-reported quarter. This is because the stock needs to have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This is not the case as you can see below

Earnings ESP: Travelers has an Earnings ESP of -11.91%. This is because the Most Accurate Estimate is pegged at $2.59, lower than the Zacks Consensus Estimate of $2.94. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Travelers currently carries a Zacks Rank #5 (Strong Sell).

Key Picks

Some insurance stocks with the right combination of elements to come up with an earnings beat this time around are:

Arch Capital Group (ACGL - Free Report) has an Earnings ESP of +8.11% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Watford Holdings (WTRE - Free Report) has an Earnings ESP of +70.13% and a Zacks Rank #3.

CNO Financial Group (CNO - Free Report) has an Earnings ESP of +2.52% and a Zacks Rank of 3.

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