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Travelers (TRV) Rises 21% in a Year: More Room for Growth?
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The Travelers Companies, Inc. (TRV - Free Report) shares have gained 21.1% in a year, outperforming the industry’s increase of 19.9% and the Finance sector’s rise of 20.5% in the said time frame.
Strong renewal rate change, solid retention, increase in new business supported by a compelling portfolio and solid capital position continue to drive this Zacks Rank #3 (Hold) insurer. Earnings of TRV, one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance, increased 8.8% in the past five years.
Return on equity (ROE) for the trailing 12 months was 13.9%, comparing favorably with the industry’s 7.8%. This reflects its efficiency in utilizing shareholders’ funds. Sustained operational excellence helped generate double-digit core ROE in nine out of the last 10 years. Travelers aims to generate mid-teens core ROE over time.
Also, return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame. This reflects TRV’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 7.2%, better than the industry average of 5.9%.
Travelers has an impressive VGM Score of A. This style score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth and momentum.
Image Source: Zacks Investment Research
Can the Stock Retain the Bull Run?
Travelers should continue to benefit from a compelling product portfolio of coverages across nine lines of business. This, in turn, helps it maintain a solid retention level, better pricing and increase new business while achieving a positive renewal premium change.
Investment income has been gaining from higher returns from the non-fixed income portfolio. Travelers expects after-tax net investment income from the non-fixed income portfolio, including earnings from short-term securities, to be $640 million in the second quarter, $665 million in the third quarter and $690 million in the fourth quarter.
An active catastrophe reinsurance program continues to help this P&C insurer absorb losses, which otherwise induce volatility in underwriting profitability.
Travelers maintains a conservative balance sheet among its peers, continually increasing its book value for the past 10 years. It remains focused on keeping the debt-to-capital ratio between 15 and 25.
Travelers has an impressive dividend history. It increased dividends for the last 20 years, banking on solid cash flows. Its dividend yield of 1.8% appears attractive compared with the industry average of 0.3%, making it an attractive pick for yield-seeking investors. This insurer also buys back shares regularly and had $5.79 billion remaining under repurchase authorization at first-quarter 2024 end.
The Zacks Consensus Estimate for 2024 earnings stands at $17.44, suggesting an increase of 32.8% on 11.8% higher revenues of $46.4 billion. The consensus estimate for 2025 earnings stands at $20.32, suggesting an increase of 16.5% on 8% higher revenues of $50 billion.
The long-term earnings growth is expected to be 10.7%, better than the industry average of 10%. We expect the 2026 bottom line to witness a three-year CAGR of 21.6%. It has a Growth Score of B.
HCI Group earnings surpassed estimates in each of the last four quarters, the average beat being 139.15%. In the past year, HCI has rallied 45.7%.
The Zacks Consensus Estimate for HCI’s 2024 and 2025 earnings implies 57.6% and 4.3% year-over-year growth, respectively.
Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. In the past year, PLMR’s stock has surged 45.5%.
The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 26% and 18% year-over-year growth, respectively.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. In the past year, PRA’s stock has lost 28.1%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings suggests 371.4% and 72.6% year-over-year growth, respectively.
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Travelers (TRV) Rises 21% in a Year: More Room for Growth?
The Travelers Companies, Inc. (TRV - Free Report) shares have gained 21.1% in a year, outperforming the industry’s increase of 19.9% and the Finance sector’s rise of 20.5% in the said time frame.
Strong renewal rate change, solid retention, increase in new business supported by a compelling portfolio and solid capital position continue to drive this Zacks Rank #3 (Hold) insurer. Earnings of TRV, one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance, increased 8.8% in the past five years.
Return on equity (ROE) for the trailing 12 months was 13.9%, comparing favorably with the industry’s 7.8%. This reflects its efficiency in utilizing shareholders’ funds. Sustained operational excellence helped generate double-digit core ROE in nine out of the last 10 years. Travelers aims to generate mid-teens core ROE over time.
Also, return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame. This reflects TRV’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 7.2%, better than the industry average of 5.9%.
Travelers has an impressive VGM Score of A. This style score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth and momentum.
Image Source: Zacks Investment Research
Can the Stock Retain the Bull Run?
Travelers should continue to benefit from a compelling product portfolio of coverages across nine lines of business. This, in turn, helps it maintain a solid retention level, better pricing and increase new business while achieving a positive renewal premium change.
Investment income has been gaining from higher returns from the non-fixed income portfolio. Travelers expects after-tax net investment income from the non-fixed income portfolio, including earnings from short-term securities, to be $640 million in the second quarter, $665 million in the third quarter and $690 million in the fourth quarter.
An active catastrophe reinsurance program continues to help this P&C insurer absorb losses, which otherwise induce volatility in underwriting profitability.
Travelers maintains a conservative balance sheet among its peers, continually increasing its book value for the past 10 years. It remains focused on keeping the debt-to-capital ratio between 15 and 25.
Travelers has an impressive dividend history. It increased dividends for the last 20 years, banking on solid cash flows. Its dividend yield of 1.8% appears attractive compared with the industry average of 0.3%, making it an attractive pick for yield-seeking investors. This insurer also buys back shares regularly and had $5.79 billion remaining under repurchase authorization at first-quarter 2024 end.
The Zacks Consensus Estimate for 2024 earnings stands at $17.44, suggesting an increase of 32.8% on 11.8% higher revenues of $46.4 billion. The consensus estimate for 2025 earnings stands at $20.32, suggesting an increase of 16.5% on 8% higher revenues of $50 billion.
The long-term earnings growth is expected to be 10.7%, better than the industry average of 10%. We expect the 2026 bottom line to witness a three-year CAGR of 21.6%. It has a Growth Score of B.
Stocks to Consider
Some top-ranked stocks from the insurance industry are HCI Group, Inc. (HCI - Free Report) , Palomar Holdings (PLMR - Free Report) and ProAssurance (PRA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
HCI Group earnings surpassed estimates in each of the last four quarters, the average beat being 139.15%. In the past year, HCI has rallied 45.7%.
The Zacks Consensus Estimate for HCI’s 2024 and 2025 earnings implies 57.6% and 4.3% year-over-year growth, respectively.
Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. In the past year, PLMR’s stock has surged 45.5%.
The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 26% and 18% year-over-year growth, respectively.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. In the past year, PRA’s stock has lost 28.1%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings suggests 371.4% and 72.6% year-over-year growth, respectively.