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Here's Why Hold Strategy is Apt for Travelers (TRV) Stock
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The Travelers Companies, Inc. (TRV - Free Report) has been gaining momentum on the back of strong net earned premiums, high levels of retention, improved pricing, higher average levels of invested assets and sufficient liquidity.
Growth Projections
The Zacks Consensus Estimate for Travelers’ 2023 earnings is pegged at $14.24, indicating a 14.6% increase from the year-ago reported figure on 9.9% higher revenues of $40.77 billion. The consensus estimate for 2024 earnings is pegged at $16.54, indicating a 16.1% increase from the year-ago reported figure on 8.1% higher revenues of $44.08 billion.
Northbound Estimate Revision
Estimates for 2023 and 2024 have moved up nearly 1.2% and 0.3%, respectively, in the past 60 days, reflecting investors’ optimism.
Earnings Surprise History
Travelers has a decent earnings surprise history. It beat estimates in each of the last four quarters with the average being 16.43%.
Zacks Rank & Price Performance
Travelers currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 9.2%, outperforming the industry’s increase of 20.8%.
Image Source: Zacks Investment Research
Business Tailwinds
Riding on strong net earned premiums and an aggregate underlying combined ratio for Business Insurance and Bond & Specialty Insurance, strong underwriting results continued in the commercial businesses. High levels of retention, improved pricing, an increase in new business and a positive renewal premium change should continue to drive Travelers.
Travelers’ commercial businesses continue to perform well on the back of stability in the markets where it operates as well as the execution of its strategies. For 2023, the insurer expects renewal premium change to be modestly at a higher level throughout the remainder of 2023. In domestic homeowners and other, TRV expects renewal premium change to remain at an elevated level through the end of the year.
Higher average levels of invested assets, reliable results from the fixed-income portfolio and strong returns from the non-fixed income portfolio are likely to drive the metric higher. Travelers raised the outlook for fixed income net investment income, including earnings from short-term securities to $530 million after tax in the second quarter, to an estimated $555 million in the third quarter and then to around $575 million in the fourth quarter.
Travelers maintains a conservative balance sheet among its peers. TRV aims to generate increased earnings and capital, maintain a balanced approach to rightsizing capital and growing book value per share over time as part of its long-term financial strategy. Balance sheet strength driven by scale, profitability and cash flow support it to invest more than $1 billion annually on technology.
Sustained operational excellence helped generate double-digit core return on equity (ROE) in nine of the past 10 years, averaging 12.6%. The company aims to generate mid-teens core ROE over time.
Travelers has an impressive dividend history, increasing its dividend for the last 18 years. Its current dividend yield of 2.2% is better than the industry average of 0.3%. This makes TRV an attractive pick for yield-seeking investors.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 14.77%. In the past year, KNSL has gained 71.7%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $10.37 and $12.41, indicating a year-over-year increase of 32.9% and 19.6%, respectively.
RLI Corp. beat estimates in each of the last four quarters, the average being 43.50%. In the past year, RLI has gained 20.6%.
The Zacks Consensus Estimate for RLI’s 2023 and 2024 earnings has moved 10.1% and 3.7% north, respectively, in the past 60 days.
Root beat estimates in each of the last four quarters, the average being 18.24%. In the past year, the insurer has lost 71.9%.
The Zacks Consensus Estimate for ROOT’s 2023 and 2024 earnings per share indicates a year-over-year increase of 43.8% and 42.5%, respectively.
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Here's Why Hold Strategy is Apt for Travelers (TRV) Stock
The Travelers Companies, Inc. (TRV - Free Report) has been gaining momentum on the back of strong net earned premiums, high levels of retention, improved pricing, higher average levels of invested assets and sufficient liquidity.
Growth Projections
The Zacks Consensus Estimate for Travelers’ 2023 earnings is pegged at $14.24, indicating a 14.6% increase from the year-ago reported figure on 9.9% higher revenues of $40.77 billion. The consensus estimate for 2024 earnings is pegged at $16.54, indicating a 16.1% increase from the year-ago reported figure on 8.1% higher revenues of $44.08 billion.
Northbound Estimate Revision
Estimates for 2023 and 2024 have moved up nearly 1.2% and 0.3%, respectively, in the past 60 days, reflecting investors’ optimism.
Earnings Surprise History
Travelers has a decent earnings surprise history. It beat estimates in each of the last four quarters with the average being 16.43%.
Zacks Rank & Price Performance
Travelers currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 9.2%, outperforming the industry’s increase of 20.8%.
Image Source: Zacks Investment Research
Business Tailwinds
Riding on strong net earned premiums and an aggregate underlying combined ratio for Business Insurance and Bond & Specialty Insurance, strong underwriting results continued in the commercial businesses. High levels of retention, improved pricing, an increase in new business and a positive renewal premium change should continue to drive Travelers.
Travelers’ commercial businesses continue to perform well on the back of stability in the markets where it operates as well as the execution of its strategies. For 2023, the insurer expects renewal premium change to be modestly at a higher level throughout the remainder of 2023. In domestic homeowners and other, TRV expects renewal premium change to remain at an elevated level through the end of the year.
Higher average levels of invested assets, reliable results from the fixed-income portfolio and strong returns from the non-fixed income portfolio are likely to drive the metric higher. Travelers raised the outlook for fixed income net investment income, including earnings from short-term securities to $530 million after tax in the second quarter, to an estimated $555 million in the third quarter and then to around $575 million in the fourth quarter.
Travelers maintains a conservative balance sheet among its peers. TRV aims to generate increased earnings and capital, maintain a balanced approach to rightsizing capital and growing book value per share over time as part of its long-term financial strategy. Balance sheet strength driven by scale, profitability and cash flow support it to invest more than $1 billion annually on technology.
Sustained operational excellence helped generate double-digit core return on equity (ROE) in nine of the past 10 years, averaging 12.6%. The company aims to generate mid-teens core ROE over time.
Travelers has an impressive dividend history, increasing its dividend for the last 18 years. Its current dividend yield of 2.2% is better than the industry average of 0.3%. This makes TRV an attractive pick for yield-seeking investors.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Kinsale Capital Group, Inc. (KNSL - Free Report) , RLI Corp. (RLI - Free Report) and Root, Inc. (ROOT - Free Report) . While RLI Corp. sports a Zacks Rank #1 (Strong Buy), Kinsale Capital and Root carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 14.77%. In the past year, KNSL has gained 71.7%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $10.37 and $12.41, indicating a year-over-year increase of 32.9% and 19.6%, respectively.
RLI Corp. beat estimates in each of the last four quarters, the average being 43.50%. In the past year, RLI has gained 20.6%.
The Zacks Consensus Estimate for RLI’s 2023 and 2024 earnings has moved 10.1% and 3.7% north, respectively, in the past 60 days.
Root beat estimates in each of the last four quarters, the average being 18.24%. In the past year, the insurer has lost 71.9%.
The Zacks Consensus Estimate for ROOT’s 2023 and 2024 earnings per share indicates a year-over-year increase of 43.8% and 42.5%, respectively.