The Travelers Companies Inc.
) has successfully managed to keep its positive surprise streak
alive with its fourth-quarter and full year 2013 earnings
results. The property and property casualty insurer reported
operating net earnings of $2.68 per share in the fourth quarter
of 2013, surpassing the Zacks Consensus Estimate by 23.5%.
Moreover, earnings improved nearly fourfold on a year-over-year
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The outperformance was driven by improvement in underlying
underwriting gains aided by benign catastrophe activities.
Travelers also witnessed higher net investment income and higher
net favorable prior-year reserve development. Lower share count
also boosted the bottom line.
Shares of Travelers gained about 1.02% in the pre-market session,
indicating that the market has taken this release positively.
Including net realized investment gains of 2 cents per share,
Travelers reported net income of $2.70 per share, comparing
favorably with net income of 78 cents a share earned in the
year-ago quarter. Net income in the prior-year quarter included
net realized investment gains of 6 cents.
For full year 2013, Travelers posted record earnings of $9.46 per
share which climbed 52% year over year and surpassed the Zacks
Consensus Estimate by 6.3%.
The top line came in at $26.2 billion, improving 2% year over
Operating return on equity was 15.5% versus 11.0% in 2012.
Net written premiums of Travelers during the quarter were $5.6
billion, up 5% year over year. The improvement stemmed from
higher net written premiums in Business Insurance and Financial,
Professional & International Insurance, that were partially
offset by lower net written premiums in Personal Insurance.
Acquisition of The Dominion of Canada General Insurance Company
also boosted the results.
Net investment income of Travelers improved 1.9% year over year
to $702 million during the quarter. The upside was attributable
to higher private equity and real estate partnership returns in
the non-fixed income portfolio, partially offset by lower
reinvestment rates in the fixed income portfolio.
Total revenue of Travelers in the quarter under review was $6.737
billion, improving 4% from the comparable year-ago period.
Revenues surpassed the Zacks Consensus Estimate of $6.29 billion.
Travelers posted underwriting gains of $689 million, rebounding
from a loss of $338 million in the prior-year quarter. Combined
ratio improved 1700 basis points (bps) year over year to 87.7% in
the reported quarter. The improvement was due to lower
catastrophe losses and higher net favorable prior year reserve
development, partially offset by lower underlying underwriting
: Net written premium increased 3% year over year to $2.87
billion in the quarter, largely driven by higher renewal rate.
Combined ratio improved 1460 bps year over year to 88.9%, owing
to higher underwriting margins and lower catastrophe losses.
Operating income surged 94% year over year to $308 million,
attributable to improved underwriting results driven by lower
catastrophe losses and a higher underlying underwriting gain.
Financial, Professional & International
: Net written premium in the quarter under review improved 29%
year over year to $1.04 billion, primarily reflecting favorable
change in a reinsurance program as well as continued strong
retention rates and renewal rate increases in management
liability along with accretion from the Dominion acquisition.
Combined ratio deteriorated 330 bps year over year to 85% in the
quarter, attributable to lower catastrophe losses and higher net
favorable prior-year reserve development, partially offset by
lower underlying underwriting margins.
Operating income improved 31% year over year to $171 million due
to better underwriting results driven by lower catastrophe losses
and higher net favorable prior-year reserve development.
: Net written premium descended 4% year over year to $1.72
billion, primarily due to lower new-business volumes.
Combined ratio improved 2830 bps year over year to 86.9% in the
fourth quarter, largely driven by lower catastrophe losses and
slightly higher net favorable prior-year reserve development,
partially offset by lower underlying underwriting margins.
Operating income was $237 million, rebounding from the year-ago
quarter operating loss of $114 million. The upside was driven by
lower catastrophe losses.
Dividend and Share Repurchase
Travelers spent $1 billion to buy back 11.4 million shares during
the quarter, taking the full year tally to $2.4 billion spent to
repurchase 28.4 million shares. The company has $4.759 billion
remaining under its authorization.
Additionally, the board of Travelers Companies approved a
dividend of 50 cents, payable on Mar 31, 2014 to shareholders of
record as of Mar 10, 2014.
Travelers Companies has carried forward its trend of delivering
positive earnings surprises. This marks the sixth consecutive
quarter of a positive surprise aided by sustained improvement in
underwriting results. Travelers Companies noted that written rate
gains continued to exceed expected loss cost trends in all
High retention rate, pricing gains, positive renewal rate
changes, and a strong capital position are among the other
positives, which will likely support Travelers Companies' growth
performance going forward.
Its new lower cost, lower-priced Auto insurance product Quantum
2.0 is also expected to improve volumes at attractive returns.
Furthermore, the company's inorganic story seems impressive. The
Dominion acquisition is a testimony of Travelers' prudent
investment strategy, wherein the company strives to expand in
attractive and growing markets outside the United States. Net
written premiums at the Financial, Professional &
International Insurance, in the reported quarter, benefitted from
the inclusion of Dominion.
Moreover, Travelers Companies' consistent share buyback strategy
has a positive impact on earnings per share and bolsters
shareholder value. The company returned more than $3 billion to
its shareholders in 2013.
Travelers presently carries a Zacks Rank #1 (Strong Buy). Other
top-ranked property & casualty insurers carrying the same
Zacks Rank -
White Mountains Insurance Group, Ltd
Platinum Underwriters Holdings Ltd
) are expected to report their earnings results in the first week