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Travelers (TRV) Expects $362M in Q4 Cat Loss, Solid Pricing
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The Travelers Companies, Inc. (TRV - Free Report) estimates fourth-quarter catastrophe loss of about $362 million ($459 million pre-tax). The loss primarily stemmed from the winter storm that impacted much of the United States and Canada in late December.
Travelers projects net income to be $819 million or $3.44 per share while core income is expected to be $810 million or $3.40 per share.
The Zacks Consensus Estimate for fourth-quarter earnings is currently pegged at $4.25 per share, which indicates a decline of 18.3% from the year-ago quarter’s reported figure. We expect estimates to move south once analysts start incorporating loss estimates into their numbers.
TRV stated fourth-quarter results should include underlying underwriting gain of $571 million ($723 million pre-tax, net investment income of $531 million after-tax ($625 million pre-tax), comprising $510 million after-tax ($601 million pre-tax) from the fixed income portfolio and net favorable prior year reserve development of $145 million ($185 million pre-tax).
While pricing momentum continued in the fourth quarter, all the business segments witnessed solid net written premium growth. Focus on implementing pricing and other actions should continue increasing returns and more importantly, improving profitability.
Being a P&C insurer, Travelers remains exposed to catastrophe loss, rendering substantial volatility to the insurer’s underwriting results. TRV has been witnessing a high level of catastrophe losses with combined ratio deterioration. Catastrophe losses in the first nine months of 2022 were $529 million. The losses in the first nine months of 2022 included the hurricanes Ian and Fiona and severe storms in several regions of the United States.
Nonetheless, Travelers has an active catastrophe reinsurance program, which should aid in absorbing losses. It entered into a reinsurance agreement in May 2022, which will provide coverage to the company through May 24, 2026 for certain losses from tropical cyclones, earthquakes, severe thunderstorms or winter storms. For the period from May 25, 2022 through May 24, 2023, the treaty provides up to $575 million part of $700 million coverage, subject to a $2.2 billion retention. From the start of the year through Sep 30, the company accumulated $1.4 billion of qualifying losses for the aggregate retention of $2 billion on the property aggregate catastrophe XOL treaty.
Underwriting profit thus jumped 54.2% in the first nine months with combined ratio improving 80 basis points.
Shares of this Zacks Rank #2 (Buy) property-casualty underwriter have gained 15.6% in a year, outperforming the industry’s increase of 2%. A compelling product portfolio, high retention rate, pricing gains, positive renewal rate changes, strong capital position, inorganic growth and prudent underwriting practices position Travelers well.
Image: Bigstock
Travelers (TRV) Expects $362M in Q4 Cat Loss, Solid Pricing
The Travelers Companies, Inc. (TRV - Free Report) estimates fourth-quarter catastrophe loss of about $362 million ($459 million pre-tax). The loss primarily stemmed from the winter storm that impacted much of the United States and Canada in late December.
Travelers projects net income to be $819 million or $3.44 per share while core income is expected to be $810 million or $3.40 per share.
The Zacks Consensus Estimate for fourth-quarter earnings is currently pegged at $4.25 per share, which indicates a decline of 18.3% from the year-ago quarter’s reported figure. We expect estimates to move south once analysts start incorporating loss estimates into their numbers.
TRV stated fourth-quarter results should include underlying underwriting gain of $571 million ($723 million pre-tax, net investment income of $531 million after-tax ($625 million pre-tax), comprising $510 million after-tax ($601 million pre-tax) from the fixed income portfolio and net favorable prior year reserve development of $145 million ($185 million pre-tax).
While pricing momentum continued in the fourth quarter, all the business segments witnessed solid net written premium growth. Focus on implementing pricing and other actions should continue increasing returns and more importantly, improving profitability.
Being a P&C insurer, Travelers remains exposed to catastrophe loss, rendering substantial volatility to the insurer’s underwriting results. TRV has been witnessing a high level of catastrophe losses with combined ratio deterioration. Catastrophe losses in the first nine months of 2022 were $529 million. The losses in the first nine months of 2022 included the hurricanes Ian and Fiona and severe storms in several regions of the United States.
Nonetheless, Travelers has an active catastrophe reinsurance program, which should aid in absorbing losses. It entered into a reinsurance agreement in May 2022, which will provide coverage to the company through May 24, 2026 for certain losses from tropical cyclones, earthquakes, severe thunderstorms or winter storms. For the period from May 25, 2022 through May 24, 2023, the treaty provides up to $575 million part of $700 million coverage, subject to a $2.2 billion retention. From the start of the year through Sep 30, the company accumulated $1.4 billion of qualifying losses for the aggregate retention of $2 billion on the property aggregate catastrophe XOL treaty.
Underwriting profit thus jumped 54.2% in the first nine months with combined ratio improving 80 basis points.
Shares of this Zacks Rank #2 (Buy) property-casualty underwriter have gained 15.6% in a year, outperforming the industry’s increase of 2%. A compelling product portfolio, high retention rate, pricing gains, positive renewal rate changes, strong capital position, inorganic growth and prudent underwriting practices position Travelers well.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are Root, Inc. (ROOT - Free Report) , Kinsale Capital Group, Inc. (KNSL - Free Report) and First American Financial Corporation (FAF - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Root delivered a trailing four-quarter average earnings surprise of 22.44%. In the past year, ROOT has lost 91.4%.
The Zacks Consensus Estimate for ROOT’s 2023 earnings indicates a year-over-year increase of 23.9%.
Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average being 15.16%. In the past year, KNSL has gained 22%.
The Zacks Consensus Estimate for KNSL’s 2023 earnings implies a year-over-year rise of 22.6%.
First American has a solid track record of beating earnings estimates in each of the last six quarters. In the past year, FAF has lost 28.6%.
The Zacks Consensus Estimate for FAF’s 2023 earnings has moved 3.9% north in the past 60 days.