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Should You Retain Travelers (TRV) Stock in Your Portfolio?

The Travelers Companies, Inc. TRV has been gaining momentum on the back of a strong renewal rate, exposure levels, higher net-earned premium and sufficient liquidity.

Northbound Estimate Revision

The Zacks Consensus Estimate for 2022 and 2023 has moved 0.6% and 0.3% north, respectively, in the past 60 days. This should instill investors' confidence in the stock.

Earnings Surprise History

Travelers has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 31.4%.

Zacks Rank & Price Performance

Travelers currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 5.3% against the industry’s decrease of 9.6%.


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Style Score

Travelers has a favorable VGM Score of A. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.

Return on Equity (ROE)

Travelers’s ROE for the trailing 12 months is 13.8%, up 410 basis points year over year, reflecting efficiency in utilizing shareholders’ fund. 

Business Tailwinds

Premiums in the Business Insurance segment of Travelers should benefit from a strong renewal rate and exposure levels as well as high retention.

In the commercial businesses of the Business Insurance segment, written pricing continues to outpace the estimated loss trend, which is likely to benefit margins.

Given the social inflation, the severity of weather-related loss activity as well as the low-interest-rate environment, the insurer expects the pricing environment to remain strong.

Considering higher net-earned premium, a significantly improved underlying underwriting margin and favorable prior-year reserve development, the Bond & Specialty segment continues to deliver better returns and growth.

Premium growth in the Personal Insurance segment continues to gain from strong retention and growth in new business.

Travelers guided fixed income net investment income to increase nearly $440 million after-tax in the second quarter of 2022, around $460 million in the third quarter and $480 million in the fourth quarter. Higher private equity partnership returns should drive the metric.

Travelers boasts a healthy balance sheet along with an impressive solvency level. Operating cash flows continued to remain strong, with capital ratios better than target levels. TRV ended the first quarter with holding company liquidity of around $1.5 billion.

Travelers has raised its dividend at an eight-year (2015-2022) CAGR of 5.4%. Its current dividend yield of 2.3% is better than the industry average of 0.4%, which makes the stock an attractive pick for yield-seeking investors. Currently, the capacity remaining under the existing share repurchase authorization is $3.5 billion.

Stocks to Consider

Some better-ranked stocks from the finance sector are W.R. Berkley Corporation WRB, HCI Group, Inc. HCI and American Financial Group, Inc. AFG, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.08%. In the past year, W.R. Berkley's stock has increased 32.4%.

The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings has moved 4.9% and 4.1% north, respectively, in the past 30 days.

The Zacks Consensus Estimate for HCI Group’s 2022 and 2023 earnings has moved 33.3% and 40% north, respectively, in the past 60 days. In the past year, HCI Group’s stock has lost 33.6%.

The Zacks Consensus Estimate for HCI’s 2022 and 2023 earnings per share indicates a year-over-year increase of 280.9% and 75%, respectively.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 41.72%. In the past year, American Financial has gained 3.8%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 9.8% and 6.9% north, respectively, in the past 30 days.


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The Travelers Companies, Inc. (TRV): Free Stock Analysis Report
 
W.R. Berkley Corporation (WRB): Free Stock Analysis Report
 
American Financial Group, Inc. (AFG): Free Stock Analysis Report
 
HCI Group, Inc. (HCI): Free Stock Analysis Report
 
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