The Travelers Companies, Inc.TRV remains well-poised for growth, banking on compelling product portfolio, high retention rate, improved pricing and solid capital position. The Zacks Rank #3 (Hold) company is a leading provider of property and casualty insurance, and surety products and services.
Travelers Companies' return on equity - a profitability measure - is 10.9%, better than the industry average of 6.6%.This reflects the company's efficiency in utilizing its shareholders' funds.
The stock carries an impressive VGM Score of A. This helps identifying stocks with the most attractive value, best growth and the most promising momentum.
Travelers Companies continues to benefit from its strong market position. Going by the progress and continued growth at the agency auto and homeowners business, the company remains optimistic about the trajectory of its personal lines of business. Its commercial businesses, too, continue to perform well on the back of stability in the markets. Underlying underwriting margin is expected to remain solid.
Strengthening of economy has been supporting the Federal Reserve to consistently raise interest rates. Insurers are one of the beneficiaries of rising rate environment and thus, Travelers Companies' investment income also improved over the last few quarters. Given Fed's projection of three rate hikes in 2019, the company anticipates about $20-$25 million of higher after-tax net investment income on a quarterly basis in 2019.
Given a solid capital position, the company has been pursuing initiatives to ramp up growth. Its inorganic story remains impressive to help it expand geographically as well as add capabilities.
Exposure to catastrophe loss continues to weigh on underwriting profitability. The property and casualty insurance industry has been battered by series of catastrophe events. In the last month, Camp Fire in Butte County, CA, wreaked havoc. Travelers Companies, having exposure in California, will have to suffer the impact of these catastrophic events. The Zacks Consensus Estimate for earnings moved 2.2% south for 2018 and by a cent for 2019.
Nonetheless, management expects underlying combined ratio for fourth-quarter 2018 and full-year 2019 to trend lower from the 2017 figure at Business Insurance and Personal Insurance segments. With respect to the Bond & Specialty Insurance segment, the company projected the underlying combined ratio to be lower year over year for the last quarter of 2018, attributable to a charge for a single international surety loss in fourth-quarter 2017.
Shares of Travelers Companies have lost 10.4% year to date, wider than the industry 's 1.4% decrease.
The company boasts a solid capital management. Its dividend has been increased for 14 straight years and currently yields 2.5%, better than the industry average of 0.5%. The insurer also had $3.5 billion left under its existing share repurchase authorization as on Sep 30, 2018.
The Zacks Consensus Estimate for earnings reflects a year-over-year increase of 32.7% on 4.5% higher revenues in 2018. For 2019, the consensus mark for earnings is expected to improve 18% as revenues rise 4.6%. The expected long-term earnings growth rate is pegged at 12.7%, higher than the industry average of 13.7%. This insurer has a favorable Growth Score of B. Growth Score analyzes growth prospects for a company.
Stocks to Consider
Some better-ranked property and casualty insurers are Mercury General Corporation MCY , National General Holdings Corp. NGHC and State Auto Financial Corporation STFC , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Mercury General engages in writing personal automobile insurance in the United States. The company delivered positive surprise of 85.00% in the last reported quarter.
National General provides various insurance products and services in the United States. The company delivered positive surprise of 75.68% in the last reported quarter.
State Auto Financial engages in writing personal, business and specialty insurance products. The company pulled off a positive surprise of 62.96% in the last reported quarter.
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The Travelers Companies, Inc. (TRV): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
