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Travelers (TRV) Q2 Earnings Miss Estimates on Higher Cat Loss
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The Travelers Companies (TRV - Free Report) reported second-quarter 2023 core income of 6 cents per share, which missed the Zacks Consensus Estimate of $2.27. The bottom line decreased 97.7% year over year, primarily attributable to higher-than-expected catastrophe loss.
The Travelers Companies, Inc. Price, Consensus and EPS Surprise
Travelers’ total revenues increased 9.8% from the year-ago quarter to $10.1 billion, primarily driven by higher premiums. The top-line figure was almost in line with the Zacks Consensus Estimate.
Net written premiums increased 14% year over year to a record $10.3 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.1 billion.
Net investment income increased 1% year over year to $712 million, primarily due to higher income in the fixed-income investment portfolio. The figure was higher than our estimate of $650.6 million. The Zacks Consensus Estimate was pegged at $712 million.
Catastrophe losses totaled $1.5 billion, wider than $0.7 billion pre-tax in the prior-year quarter. Catastrophe losses primarily resulted from severe wind and hail storms in multiple states.
Travelers witnessed an underwriting gain of $781 million, up 38% year over year, driven by record net earned premiums of $9.2 billion and a consolidated underlying combined ratio, which improved 170 basis points. The combined ratio deteriorated 820 basis points (bps) year over year to 106.5 due to higher catastrophe losses and lower net favorable prior-year reserve development, partially offset by a lower underlying combined ratio.
Core return on equity contracted 910 basis points to 0.2%. Adjusted book value per share of $115.45 increased 1% year over year. At quarter-end, statutory capital and surplus were $22.934 billion and the debt-to-capital ratio was 26.9%.
Segment Update
Business Insurance: Net written premiums increased 18% year over year to about $5.2 billion, reflecting strong renewal premium change and retention, as well as higher levels of new business. It beat our estimate of $4.5 billion.
The combined ratio deteriorated 690 bps year over year to 100.1 due to higher catastrophe losses and unfavorable prior-year reserve development. Our estimate was 95.2. The Zacks Consensus Estimate was pegged at 100.
Segment income of $402 million decreased 39.6% year over year due to unfavorable prior-year reserve development and higher cat loss. The figure was higher than our estimate of $332.5 million.
Bond & Specialty Insurance: Net written premiums increased 0.2% year over year to $964 million, reflecting strong retention and new business and positive renewal premium change in management liability, as well as strong production in surety. The figure was higher than our estimate of $943.1 million.
The combined ratio deteriorated 310 bps year over year to 77.1, attributable to a higher underlying combined ratio and higher catastrophe losses, partially offset by higher net favorable prior year reserve development. Our estimate was 77.8. The Zacks Consensus Estimate was pegged at 77.
Segment income of $230 million increased 0.9% year over year to higher net favorable prior-year reserve development and higher net investment income, partially offset by a lower underlying underwriting gain and higher catastrophe losses. The figure was higher than our estimate of $227.9 million.
Personal Insurance: Net written premiums of $4.2 billion increased 13% year over year, reflecting higher pricing in both Domestic Homeowners and Other and Domestic Automobile. The figure was higher than our estimate of $3.7 billion.
The combined ratio deteriorated 1080 bps year over year to 122 due to higher catastrophe losses. Our estimate was 107.9. The Zacks Consensus Estimate was pegged at 122
Segment loss was $538 million, wider than $193 million due to higher catastrophe losses. Our estimate was a loss of $25.9 million.
Dividend and Share Repurchase Update
This property & casualty insurer returned $633 million to shareholders in the second quarter. It bought back 2.2 million shares for $400 million in the reported quarter.
The board also approved a quarterly dividend of $1 per share. The dividend will be paid out on Sep 30, 2023, to shareholders of record at the close of business on Sep 8, 2023.
TRV had $6.205 billion remaining under authorizations as of Jun 30, 2023
Zacks Rank
Travelers currently carries a Zacks Rank #4 (Sell).
The Progressive Corporation’s (PGR - Free Report) second-quarter 2023 earnings per share of 50 cents missed the Zacks Consensus Estimate of 88 cents. The bottom line declined 47.4% year over year.
Net premiums earned grew 19% to $14.5 billion and beat our estimate of $12.9 billion as well as the Zacks Consensus Estimate of $14.3 billion. The combined ratio deteriorated 480 bps from the prior-year quarter’s level to 104.
Policies in force were solid in the Personal Auto segment, increasing 17% from the year-ago month’s figure to 19.7 million. Special Lines improved 7% to 5.8 million.
Upcoming Releases
RLI Corporation (RLI - Free Report) will report second-quarter 2023 results on Jul 24. The Zacks Consensus Estimate for the second quarter is pegged at $1.20, suggesting a decrease of 19.5% from the year-ago quarter’s reported figure.
RLI’s earnings beat estimates in the last four quarters.
Arch Capital Group (ACGL - Free Report) will report second-quarter 2023 results on Jul 26. The Zacks Consensus Estimate for the second quarter is pegged at $1.65, suggesting an increase of 23.1% from the year-ago quarter’s reported figure.
ACGL’s earnings beat estimates in the last four quarters.
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Travelers (TRV) Q2 Earnings Miss Estimates on Higher Cat Loss
The Travelers Companies (TRV - Free Report) reported second-quarter 2023 core income of 6 cents per share, which missed the Zacks Consensus Estimate of $2.27. The bottom line decreased 97.7% year over year, primarily attributable to higher-than-expected catastrophe loss.
The Travelers Companies, Inc. Price, Consensus and EPS Surprise
The Travelers Companies, Inc. price-consensus-eps-surprise-chart | The Travelers Companies, Inc. Quote
Behind Q2 Headlines
Travelers’ total revenues increased 9.8% from the year-ago quarter to $10.1 billion, primarily driven by higher premiums. The top-line figure was almost in line with the Zacks Consensus Estimate.
Net written premiums increased 14% year over year to a record $10.3 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.1 billion.
Net investment income increased 1% year over year to $712 million, primarily due to higher income in the fixed-income investment portfolio. The figure was higher than our estimate of $650.6 million. The Zacks Consensus Estimate was pegged at $712 million.
Catastrophe losses totaled $1.5 billion, wider than $0.7 billion pre-tax in the prior-year quarter. Catastrophe losses primarily resulted from severe wind and hail storms in multiple states.
Travelers witnessed an underwriting gain of $781 million, up 38% year over year, driven by record net earned premiums of $9.2 billion and a consolidated underlying combined ratio, which improved 170 basis points. The combined ratio deteriorated 820 basis points (bps) year over year to 106.5 due to higher catastrophe losses and lower net favorable prior-year reserve development, partially offset by a lower underlying combined ratio.
Core return on equity contracted 910 basis points to 0.2%. Adjusted book value per share of $115.45 increased 1% year over year. At quarter-end, statutory capital and surplus were $22.934 billion and the debt-to-capital ratio was 26.9%.
Segment Update
Business Insurance: Net written premiums increased 18% year over year to about $5.2 billion, reflecting strong renewal premium change and retention, as well as higher levels of new business. It beat our estimate of $4.5 billion.
The combined ratio deteriorated 690 bps year over year to 100.1 due to higher catastrophe losses and unfavorable prior-year reserve development. Our estimate was 95.2. The Zacks Consensus Estimate was pegged at 100.
Segment income of $402 million decreased 39.6% year over year due to unfavorable prior-year reserve development and higher cat loss. The figure was higher than our estimate of $332.5 million.
Bond & Specialty Insurance: Net written premiums increased 0.2% year over year to $964 million, reflecting strong retention and new business and positive renewal premium change in management liability, as well as strong production in surety. The figure was higher than our estimate of $943.1 million.
The combined ratio deteriorated 310 bps year over year to 77.1, attributable to a higher underlying combined ratio and higher catastrophe losses, partially offset by higher net favorable prior year reserve development. Our estimate was 77.8. The Zacks Consensus Estimate was pegged at 77.
Segment income of $230 million increased 0.9% year over year to higher net favorable prior-year reserve development and higher net investment income, partially offset by a lower underlying underwriting gain and higher catastrophe losses. The figure was higher than our estimate of $227.9 million.
Personal Insurance: Net written premiums of $4.2 billion increased 13% year over year, reflecting higher pricing in both Domestic Homeowners and Other and Domestic Automobile. The figure was higher than our estimate of $3.7 billion.
The combined ratio deteriorated 1080 bps year over year to 122 due to higher catastrophe losses. Our estimate was 107.9. The Zacks Consensus Estimate was pegged at 122
Segment loss was $538 million, wider than $193 million due to higher catastrophe losses. Our estimate was a loss of $25.9 million.
Dividend and Share Repurchase Update
This property & casualty insurer returned $633 million to shareholders in the second quarter. It bought back 2.2 million shares for $400 million in the reported quarter.
The board also approved a quarterly dividend of $1 per share. The dividend will be paid out on Sep 30, 2023, to shareholders of record at the close of business on Sep 8, 2023.
TRV had $6.205 billion remaining under authorizations as of Jun 30, 2023
Zacks Rank
Travelers currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Another Insurer
The Progressive Corporation’s (PGR - Free Report) second-quarter 2023 earnings per share of 50 cents missed the Zacks Consensus Estimate of 88 cents. The bottom line declined 47.4% year over year.
Net premiums earned grew 19% to $14.5 billion and beat our estimate of $12.9 billion as well as the Zacks Consensus Estimate of $14.3 billion. The combined ratio deteriorated 480 bps from the prior-year quarter’s level to 104.
Policies in force were solid in the Personal Auto segment, increasing 17% from the year-ago month’s figure to 19.7 million. Special Lines improved 7% to 5.8 million.
Upcoming Releases
RLI Corporation (RLI - Free Report) will report second-quarter 2023 results on Jul 24. The Zacks Consensus Estimate for the second quarter is pegged at $1.20, suggesting a decrease of 19.5% from the year-ago quarter’s reported figure.
RLI’s earnings beat estimates in the last four quarters.
Arch Capital Group (ACGL - Free Report) will report second-quarter 2023 results on Jul 26. The Zacks Consensus Estimate for the second quarter is pegged at $1.65, suggesting an increase of 23.1% from the year-ago quarter’s reported figure.
ACGL’s earnings beat estimates in the last four quarters.