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Travelers (TRV) Q2 Earnings Miss & Down Y/Y, Revenues Top
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The Travelers Companies, Inc.’s (TRV - Free Report) second-quarter 2018 core income of $1.81 per share missed the Zacks Consensus Estimate of $2.43 by 25.5%. Also, the bottom line declined 5.7% year over year.
The Travelers Companies, Inc. Price, Consensus and EPS Surprise
This year-over-year decrease in earnings can be attributed to higher level of catastrophe loss, an incremental charge (amounting to $45 million) related to a few large commercial losses as well as an $18-million assessment from the Texas Windstorm Insurance Association, pertaining to Hurricane Harvey. However, the bottom line benefited from lower U.S. corporate income tax rate. Moreover, the bottom line was boosted by share buybacks.
Behind the Q2 Headlines
Total revenues of Travelers rose nearly 4.1% from the year-ago quarter’s figure to $7.5 billion. Also, the top line beat the Zacks Consensus Estimate of $7.3 billion.
Net written premiums displayed a 7.4% year-over-year increase to $7.1 billion owing to growth in each business segment, namely Business and International Insurance, Bond & Specialty Insurance and Personal Insurance.
Net investment income slid 0.5% year over year to $595 million on lower private equity returns. Increase in fixed income returns due to higher average level of fixed maturity investments as well as short-term interest rates, led to this downside.
Travelers reported an underwriting gain of $90 million, which plunged nearly 48% from the year-ago quarter’s tally. Combined ratio deteriorated 140 basis points (bps) year over year to 98.1% due to higher catastrophe loss, lower net favorable prior-year reserve development and a higher underlying combined ratio.
At the end of the second quarter, statutory capital and surplus was $20.4 billion and the debt-to-capital ratio (excluding after-tax net unrealized investment gains) was 22.1%. This was within the company’s target range of 15-25%. Adjusted book value per share was $84.93, up 2.7% year over year.
Segment Update
Travelers’ Business Insurance unit reported net written premiums of $3.8 billion, up 6.7% year over year. This upside can be attributed to a continued strong retention, an improved renewal premium change and a rise in new business.
Combined ratio deteriorated 230 bps year over year to 98.8% due to higher underlying combined ratio as well as lower net favorable prior-year reserve development. However, lower level of catastrophe loss partially offset this downside.
Segment income of $385 million declined 10.3% from the year-ago quarter’s level.
Bond & Specialty Insurance: Net written premiums rose 9.2% year over year to $653 million, primarily driven by improvement in surety premiums, a sustained solid retention plus an increased new business in management liability.
Combined ratio improved 220 bps year over year to 66.5% owing to lower underlying combined ratio as well higher net favorable prior-year reserve development. However, higher catastrophe loss partially offset this upside.
Segment income improved 25.2% year over year to $204 million.
Personal Insurance: Net written premiums increased 7.9% year over year to about $2.7 billion.
Combined ratio deteriorated 80 bps year over year to 104.9% due to higher catastrophe loss. However, lower underlying combined ratio and net favorable prior-year reserve development partially offset the downside.
Segment loss came in at $17 million, comparing unfavorably with the year-ago quarterly income of $12 million. Lower segment income before income taxes was responsible for this result.
Dividend and Share Repurchase Update
The property & casualty (P&C) insurer returned total capital of $559 million to shareholders in the reported quarter. This included a buyback of 2.7 million shares worth $350 million. The company is now left with shares worth $3.9 billion for repurchase under its existing authorization at the end of the second quarter.
The company’s board approved a quarterly dividend of 77 cents per share in the quarter under review. The dividend will be payable Sep 28, 2018 to shareholders of record at the close of business as of Sep 10, 2018.
Among other players from the insurance industry having reported second-quarter earnings so far, the bottom line of The Progressive Corporation (PGR - Free Report) , MGIC Investment Corporation (MTG - Free Report) and RLI Corp. (RLI - Free Report) beat the respective Zacks Consensus Estimate.
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Travelers (TRV) Q2 Earnings Miss & Down Y/Y, Revenues Top
The Travelers Companies, Inc.’s (TRV - Free Report) second-quarter 2018 core income of $1.81 per share missed the Zacks Consensus Estimate of $2.43 by 25.5%. Also, the bottom line declined 5.7% year over year.
The Travelers Companies, Inc. Price, Consensus and EPS Surprise
The Travelers Companies, Inc. Price, Consensus and EPS Surprise | The Travelers Companies, Inc. Quote
This year-over-year decrease in earnings can be attributed to higher level of catastrophe loss, an incremental charge (amounting to $45 million) related to a few large commercial losses as well as an $18-million assessment from the Texas Windstorm Insurance Association, pertaining to Hurricane Harvey. However, the bottom line benefited from lower U.S. corporate income tax rate. Moreover, the bottom line was boosted by share buybacks.
Behind the Q2 Headlines
Total revenues of Travelers rose nearly 4.1% from the year-ago quarter’s figure to $7.5 billion. Also, the top line beat the Zacks Consensus Estimate of $7.3 billion.
Net written premiums displayed a 7.4% year-over-year increase to $7.1 billion owing to growth in each business segment, namely Business and International Insurance, Bond & Specialty Insurance and Personal Insurance.
Net investment income slid 0.5% year over year to $595 million on lower private equity returns. Increase in fixed income returns due to higher average level of fixed maturity investments as well as short-term interest rates, led to this downside.
Travelers reported an underwriting gain of $90 million, which plunged nearly 48% from the year-ago quarter’s tally. Combined ratio deteriorated 140 basis points (bps) year over year to 98.1% due to higher catastrophe loss, lower net favorable prior-year reserve development and a higher underlying combined ratio.
At the end of the second quarter, statutory capital and surplus was $20.4 billion and the debt-to-capital ratio (excluding after-tax net unrealized investment gains) was 22.1%. This was within the company’s target range of 15-25%. Adjusted book value per share was $84.93, up 2.7% year over year.
Segment Update
Travelers’ Business Insurance unit reported net written premiums of $3.8 billion, up 6.7% year over year. This upside can be attributed to a continued strong retention, an improved renewal premium change and a rise in new business.
Combined ratio deteriorated 230 bps year over year to 98.8% due to higher underlying combined ratio as well as lower net favorable prior-year reserve development. However, lower level of catastrophe loss partially offset this downside.
Segment income of $385 million declined 10.3% from the year-ago quarter’s level.
Bond & Specialty Insurance: Net written premiums rose 9.2% year over year to $653 million, primarily driven by improvement in surety premiums, a sustained solid retention plus an increased new business in management liability.
Combined ratio improved 220 bps year over year to 66.5% owing to lower underlying combined ratio as well higher net favorable prior-year reserve development. However, higher catastrophe loss partially offset this upside.
Segment income improved 25.2% year over year to $204 million.
Personal Insurance: Net written premiums increased 7.9% year over year to about $2.7 billion.
Combined ratio deteriorated 80 bps year over year to 104.9% due to higher catastrophe loss. However, lower underlying combined ratio and net favorable prior-year reserve development partially offset the downside.
Segment loss came in at $17 million, comparing unfavorably with the year-ago quarterly income of $12 million. Lower segment income before income taxes was responsible for this result.
Dividend and Share Repurchase Update
The property & casualty (P&C) insurer returned total capital of $559 million to shareholders in the reported quarter. This included a buyback of 2.7 million shares worth $350 million. The company is now left with shares worth $3.9 billion for repurchase under its existing authorization at the end of the second quarter.
The company’s board approved a quarterly dividend of 77 cents per share in the quarter under review. The dividend will be payable Sep 28, 2018 to shareholders of record at the close of business as of Sep 10, 2018.
Zacks Rank
Travelers carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Among other players from the insurance industry having reported second-quarter earnings so far, the bottom line of The Progressive Corporation (PGR - Free Report) , MGIC Investment Corporation (MTG - Free Report) and RLI Corp. (RLI - Free Report) beat the respective Zacks Consensus Estimate.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>