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Travelers (TRV) Q4 Earnings, Revenues Top Estimates, Up Y/Y

The Travelers Companies TRV reported fourth-quarter 2021 core income of $5.20 per share, which beat the Zacks Consensus Estimate of $3.86. The bottom line increased 6% year over year.

The increase was attributable to higher net investment income and a higher underlying underwriting gain, partially offset by lower net favorable prior year reserve development.

Shares gained 4.5% in the pre-market trading session, reflecting the outperformance.

The Travelers Companies, Inc. Price, Consensus and EPS Surprise

Behind Q4 Headlines

Travelers’ total revenues increased 7% from the year-ago quarter to about $9 billion, primarily due to higher premiums and net investment income. The top-line figure beat the Zacks Consensus Estimate of $8.7 billion.

Net written premiums increased 10% year over year to a record $8 billion driven by a continued strong renewal rate change, exposure growth and retention across all the segments.

Net investment income increased 9.7% year over year to $743 million, primarily due to an increase in income in the non-fixed income investment portfolio.

Catastrophe losses totaled $36 million pre-tax, wider than $29 million pre-tax in the prior-year quarter. Catastrophe losses primarily resulted from tornado activity in Kentucky, windstorms in multiple states and a wildfire in Colorado.

Travelers witnessed an underwriting gain of $926 million, down 3% year over year.  The combined ratio deteriorated 130 basis points (bps) year over year to 88 due to lower net favorable prior year reserve development and higher catastrophe losses.

Segment Update

Business Insurance: Net written premiums increased 9% year over year to about $4 billion, benefiting from reflecting strong renewal premium change, retention and higher new business levels.

The combined ratio improved 280 bps year over year to 87 attributable to a lower underlying combined and higher benefit related to catastrophe losses, partially offset by lower net favorable prior year reserve development.

Segment income of $867 million increased 21.6% year over year.  The improvement was driven by higher underlying underwriting gain and higher net investment income.

Bond & Specialty Insurance: Net written premiums rose 13% year over year to $905 million, reflecting strong retention and renewal premium change in management liability and strong production in surety.

The combined ratio deteriorated 60 bps year over year to 81.5 due to lower net favorable prior year reserve development and higher catastrophe losses.

Segment income of $170 million increased 5.5% year over year, primarily due to a higher underlying underwriting gain, benefiting from higher business volumes.

Personal Insurance: Net written premiums of $3.1 billion increased 10% year over year due to solid performance at Domestic Automobile and Domestic Homeowners and Other.

The combined ratio deteriorated 700 bps year over year to 91.1 due to higher underlying combined ratio, net unfavorable prior-year reserve development and higher catastrophe losses.

Segment income of $327 million decreased 28.4%, owing to a lower underlying underwriting gain, net unfavorable prior-year reserve development and higher catastrophe losses.

Full-Year Highlights

Full-year 2021 core income of $13.94 per share beat the Zacks Consensus Estimate of $12.61. The bottom line increased 33% year over year.

Total revenues increased 9% from the year-ago quarter to $34.8 billion and beat the Zacks Consensus Estimate of $34.4 billion.

TRV reported record net written premiums of $32 billion, up 7% year over year. The underlying combined ratio improved 40 basis points year over year.

At the end of the fourth quarter, statutory capital and surplus was $23.9 billion. The debt-to-capital ratio (excluding after-tax net unrealized investment gains included in shareholders’ equity) was 21.6, within the company’s target range of 15-25.

Adjusted book value per share was $109.76, up 10% year over year.

Core return on equity was 13.7%, up 240 basis points year over year.

Dividend and Share Repurchase Update

This property & casualty insurer returned $3.1 billion in the reported quarter. It bought back shares worth $2.2 billion. It had about $4 billion of capacity remaining under its share repurchase authorization as of Dec 31, 2021

The board also approved an 88 cents per share quarterly dividend. The dividend will be paid out on Mar 31 to shareholders of record at the close of business as of Mar 10, 2022.   

Zacks Rank

Travelers currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

The Progressive Corporation PGR will report fourth-quarter 2021 results on Jan 26. The Zacks Consensus Estimate for the fourth quarter is pegged at 99 cents, indicating a decrease of 45.9% from the year-ago reported figure.

Progressive beat estimates in one of the three reported quarters of 2021 while missing in two.

Axis Capital Holdings Limited AXS is set to report fourth-quarter 2021 results on Jan 26. The Zacks Consensus Estimate for the fourth quarter is pegged at $1.35, indicating an increase of 775% from the year-ago reported figure.

Axis Capital delivered earnings surprise in all the three reported quarters of 2021.

RLI Corporation RLI will report fourth-quarter 2021 results on Jan 26. The Zacks Consensus Estimate for the fourth quarter is pegged at 93 cents, suggesting an improvement of 24% year over year.

RLI Corporation beat estimates in the three reported quarters of 2021.


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