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Travelers (TRV) Up 3.6% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for The Travelers Companies, Inc. (TRV - Free Report) . Shares have added about 3.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
The Travelers Companies, Inc.’s fourth-quarter 2016 operating earnings of $3.20 per share surpassed the Zacks Consensus Estimate of $2.63 by 21.7%. Moreover, the bottom line improved 10.3% year over year.
The year-over-year increase in earnings can be attributed to the settlement of a reinsurance dispute as well as higher investment income. Also, share buybacks drove bottom-line growth. However, lower underwriting gain, owing to more catastrophe losses and wider loss estimates for personal auto bodily injury liability coverages, partially offset the upside.
Full-Year Highlights
For 2016, Travelers reported earnings per share of $10.12 that beat the Zacks Consensus Estimate of $9.49, but dipped 0.9% year over year.
Total revenue of $27.6 billion was ahead of the Zacks Consensus Estimate of $26.9 billion. The top line also improved 3% year over year.
Behind the Q4 Headlines
Total revenue of Travelers improved nearly 7% from the year-ago quarter to $7.2 billion. Revenues surpassed the Zacks Consensus Estimate of $6.8 billion.
Net written premiums rose 3.3% year over year to $6.1 billion, primarily due to growth in Personal Insurance.
Net investment income grew approximately 15.9% year over year to $627 million. The upside was driven by higher returns in the non-fixed income portfolio, partially offset by lower returns in the fixed income portfolio.
Travelers’ underwriting gains plunged 23.7% to $590 million. Combined ratio deteriorated 340 basis points (bps) year over year to 90.0% due to higher underlying combined ratio, wider catastrophe losses and lower net favorable prior-year reserve development.
At the end of the fourth quarter, statutory capital and surplus was $20.76 billion and the debt-to-capital ratio (excluding after-tax net unrealized investment gains) was 22.3%. This was within the company’s target range of 15–25%.
Adjusted book value per share stood at $80.44 per share, up 6.7% year over year.
Segment Update
Travelers' Business and International Insurance unit reported net written premiums of $3.5 billion, down 0.5% year over year.
Combined ratio improved 60 bps year over year to 89.0%. The improvement was attributable to a lower underlying combined ratio, higher net favorable prior-year reserve development. The upside was partially offset by higher catastrophe losses.
Operating income of $722 million jumped 27.6% due to the settlement of a reinsurance dispute, higher underlying underwriting gain, increased net investment income and better net favorable prior-year reserve development. However, the improvement was partially offset by higher catastrophe losses.
Bond & Specialty Insurance: Net written premiums inched up 0.2% year over year to $505 million, mainly due to rise in new business volume in Surety.
Combined ratio deteriorated 60 bps year over year to 65.7% owing to lower net favorable prior-year reserve development and wider catastrophe losses, partially offset by a lower underlying combined ratio.
Operating income dipped 0.6% year over year to $161 million, owing to lower net favorable prior-year reserve development.
Personal Insurance: Net written premiums increased 11.5% year over year to $2.1 billion.
Combined ratio deteriorated 1150 bps year over year to 98.2% due to a higher underlying combined ratio and net unfavorable prior-year reserve development and more catastrophe losses.
Operating income of $97 million plummeted 56.3% due to lower underlying underwriting gain and net unfavorable prior-year reserve development, partially offset by higher net investment income.
Dividend and Share Repurchase Update
The property & casualty (P&C) insurer returned total capital of more than $3.2 billion to shareholders. This included buy back of 6.6 million shares worth $751 million in the reported quarter. The company is now left with $934 million worth of shares for repurchase under its existing authorization at the end of the fourth quarter.
The company’s board of directors declared a quarterly dividend of 67 cents per share in the reported quarter. The dividend is payable on Mar 31, 2017 to shareholders on record at the close of business as of Mar 10, 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.
At this time, Travelers' stock has a poor score of 'F' on both growth and momentum front. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Travelers (TRV) Up 3.6% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for The Travelers Companies, Inc. (TRV - Free Report) . Shares have added about 3.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Travelers Q4 Earnings & Revenues Beat, Increase Y/Y
The Travelers Companies, Inc.’s fourth-quarter 2016 operating earnings of $3.20 per share surpassed the Zacks Consensus Estimate of $2.63 by 21.7%. Moreover, the bottom line improved 10.3% year over year.
The year-over-year increase in earnings can be attributed to the settlement of a reinsurance dispute as well as higher investment income. Also, share buybacks drove bottom-line growth. However, lower underwriting gain, owing to more catastrophe losses and wider loss estimates for personal auto bodily injury liability coverages, partially offset the upside.
Full-Year Highlights
For 2016, Travelers reported earnings per share of $10.12 that beat the Zacks Consensus Estimate of $9.49, but dipped 0.9% year over year.
Total revenue of $27.6 billion was ahead of the Zacks Consensus Estimate of $26.9 billion. The top line also improved 3% year over year.
Behind the Q4 Headlines
Total revenue of Travelers improved nearly 7% from the year-ago quarter to $7.2 billion. Revenues surpassed the Zacks Consensus Estimate of $6.8 billion.
Net written premiums rose 3.3% year over year to $6.1 billion, primarily due to growth in Personal Insurance.
Net investment income grew approximately 15.9% year over year to $627 million. The upside was driven by higher returns in the non-fixed income portfolio, partially offset by lower returns in the fixed income portfolio.
Travelers’ underwriting gains plunged 23.7% to $590 million. Combined ratio deteriorated 340 basis points (bps) year over year to 90.0% due to higher underlying combined ratio, wider catastrophe losses and lower net favorable prior-year reserve development.
At the end of the fourth quarter, statutory capital and surplus was $20.76 billion and the debt-to-capital ratio (excluding after-tax net unrealized investment gains) was 22.3%. This was within the company’s target range of 15–25%.
Adjusted book value per share stood at $80.44 per share, up 6.7% year over year.
Segment Update
Travelers' Business and International Insurance unit reported net written premiums of $3.5 billion, down 0.5% year over year.
Combined ratio improved 60 bps year over year to 89.0%. The improvement was attributable to a lower underlying combined ratio, higher net favorable prior-year reserve development. The upside was partially offset by higher catastrophe losses.
Operating income of $722 million jumped 27.6% due to the settlement of a reinsurance dispute, higher underlying underwriting gain, increased net investment income and better net favorable prior-year reserve development. However, the improvement was partially offset by higher catastrophe losses.
Bond & Specialty Insurance: Net written premiums inched up 0.2% year over year to $505 million, mainly due to rise in new business volume in Surety.
Combined ratio deteriorated 60 bps year over year to 65.7% owing to lower net favorable prior-year reserve development and wider catastrophe losses, partially offset by a lower underlying combined ratio.
Operating income dipped 0.6% year over year to $161 million, owing to lower net favorable prior-year reserve development.
Personal Insurance: Net written premiums increased 11.5% year over year to $2.1 billion.
Combined ratio deteriorated 1150 bps year over year to 98.2% due to a higher underlying combined ratio and net unfavorable prior-year reserve development and more catastrophe losses.
Operating income of $97 million plummeted 56.3% due to lower underlying underwriting gain and net unfavorable prior-year reserve development, partially offset by higher net investment income.
Dividend and Share Repurchase Update
The property & casualty (P&C) insurer returned total capital of more than $3.2 billion to shareholders. This included buy back of 6.6 million shares worth $751 million in the reported quarter. The company is now left with $934 million worth of shares for repurchase under its existing authorization at the end of the fourth quarter.
The company’s board of directors declared a quarterly dividend of 67 cents per share in the reported quarter. The dividend is payable on Mar 31, 2017 to shareholders on record at the close of business as of Mar 10, 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.
The Travelers Companies, Inc. Price and Consensus
The Travelers Companies, Inc. Price and Consensus | The Travelers Companies, Inc. Quote
VGM Scores
At this time, Travelers' stock has a poor score of 'F' on both growth and momentum front. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.