On Nov 28, 2014, shares of The Travelers Companies, Inc. (TRV) scaled a 52-week high of $105.07 buoyed by a solid third-quarter earnings beat. With about 0.8 million shares exchanging hands in the last trading session, the stock closed at $104.45, gaining 0.1%.
The year-to-date return from the stock came in at 15.35%, which was ahead of the S&P’s return of 11.85%. With respect to earnings performance, this property and casualty insurer has delivered positive surprises in the three of last four quarters with an average beat of 18.58%.
In the third quarter of 2014, Travelers posted earnings of $2.61 per share, outperforming the Zacks Consensus Estimate by 18.64% and exceeding the year-ago earnings by 11%. The outperformance came on the back of higher net investment income and lower catastrophe losses.
Revenues also followed suite, surpassing the Zacks Consensus Estimate by 6% and year-ago quarter by 7%. The improvement was fueled by increased net written premiums and net investment income.
Travelers continues to witness written rate gains higher than expected, exceeding loss cost trends across all segments.
However, underwriting gains slipped in the quarter with combined ratio deteriorating 110 basis points due to lower net favorable prior-year reserve development.
Nonetheless, it inorganic story remains impressive and the inclusion of The Dominion of Canada General Insurance Company fueling record net premiums written bears testimony. In addition, Travelers’ lower cost, lower-priced Auto insurance product Quantum 2.0 is gaining momentum and adding to results.
With respect to enhancing shareholders’ value, Travelers has regularly bought back shares and paid regular dividends apart from increasing the same. Travelers returned $937 million to its shareholders in the third quarter. It also has $2.5 billion remaining under its authorization.
A solid quarterly performance has helped this Zacks Rank #2 (Strong Buy) stock to witness upward revisions in estimates over the last 60 days. For 2014, the Zacks Consensus Estimate for earnings moved north by 7% to $9.89 per share while for 2015, it increased 1.8% to $9.30 per share. The expected long-term earnings growth is 7.7%.
Stocks to Consider
Investors interested in property and casualty insurers may also look at AmTrust Financial Services, Inc. (AFSI), Arch Capital Group Ltd. (ACGL) and Navigators Group Inc. (NAVG). All the three stocks sport Zacks Rank #1 (Strong Buy).
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