Travelers Q2 Earnings Beat, Revenues Miss Estimates

The Travelers Companies TRV reported second-quarter 2024 core income of $2.51 per share, which beat the Zacks Consensus Estimate by 25.5%.

Shares gained 0.5% in the pre-market trading session to reflect the outperformance.

The bottom line skyrocketed from 6 cents earned in the year-ago quarter, driven by solid underlying results, net favorable prior year reserve development and higher net investment income, partially offset by higher catastrophe losses.

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

Behind Q2 Headlines

Travelers' total revenues increased 12.4% from the year-ago quarter to $11.3 billion, primarily driven by higher premiums. The top-line figure, however, missed the Zacks Consensus Estimate by 1%.

Net written premiums increased 8% year over year to a record $11.1 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $10.4 billion.

Net investment income increased 24.2% year over year to $885 million, primarily due to strong fixed-income returns and growth in fixed-maturity investments. The figure was higher than our estimate of $852.14 million. The Zacks Consensus Estimate was pegged at $861.2 million.

Catastrophe loss was $1.51 billion, pre-tax, wider than a loss of $1.18 million, pre-tax, incurred in the year-ago quarter.

Travelers witnessed an underwriting loss of $65 million, narrower than a loss of $640 million incurred in the year-ago quarter. The consolidated underlying combined ratio of 87.7 improved 340 basis points (bps) year over year.  The combined ratio improved 630 bps year over year to 100.2 due to an improvement in the underlying combined ratio, higher net favorable prior-year reserve development and lower catastrophe losses as a percentage of net earned premiums.  The Zacks Consensus Estimate was pegged at 97.

Core return on equity expanded 20 basis points to 8.1%. Adjusted book value per share (excludes net unrealized investment gains/losses) of $126.52 increased 3% year over year. At quarter-end, statutory capital and surplus were $25.21 billion and the debt-to-capital ratio was 24.4%.

Segment Update

Business Insurance: Net written premiums increased 7% year over year to about $5.5 billion, reflecting a 10% increase in renewal premium change, 85% retention and a 9% increase in new business. Business Insurance net written premiums beat our estimate of $5.3 billion.

The combined ratio improved 400 bps year over year to 96.1 on net favorable prior-year reserve development, lower catastrophe losses and an improvement in the underlying combined ratio.  Our estimate was 97.4. The Zacks Consensus Estimate was pegged at 96.

Segment income of $656 million increased 63.1% year over year on net favorable prior-year reserve development compared to net unfavorable prior-year reserve development in the prior year quarter, higher net investment income and a higher underlying underwriting gain. The figure was lower than our estimate of $732 million.

Bond & Specialty Insurance: Net written premiums increased 8% year over year to $1 billion, reflecting strong production in both surety and management liability. Our estimate was $987.1 million.

The combined ratio deteriorated by 1060 bps year over year to 87.7 due to lower net favorable prior-year reserve development and higher catastrophe losses.  Our estimate was 75.3. The Zacks Consensus Estimate was pegged at 82.

Segment income of $170 million decreased 26.1% year over year due to lower net favorable prior-year reserve development and higher catastrophe losses, partially offset by a higher underlying underwriting gain and higher net investment income. The figure was lower than our estimate of $244.9 million.

Personal Insurance: Net written premiums of $4.5 billion increased 9% year over year, reflecting a strong renewal premium change in both Domestic Automobile and Homeowners and Other.  Our estimate was $4 billion.

The combined ratio improved 1350 bps year over year to 108.5, driven by an improvement in the underlying combined ratio, higher net favorable prior year reserve development and lower catastrophe losses as a percentage of net earned premiums. Our estimate was 116.3. The Zacks Consensus Estimate was pegged at 102.

Segment loss was $153 million, narrower than $538 million loss incurred in the year-ago quarter, attributable to higher underlying underwriting gain, higher net favorable prior year reserve development and higher net investment income, partially offset by higher catastrophe losses. Our estimate was a loss of $394.1 million. 

Dividend and Share Repurchase Update

This property and casualty insurer returned $498 million to shareholders in the second quarter of 2024. It bought back 1.2 million shares for $253 million in the second quarter. At June end, TRV had $5.54 billion remaining under its authorization.

The board also announced a quarterly dividend of $1.05 per share. The dividend will be paid out on Sep 28, 2024, to shareholders of record at the close of business on Sep 10, 2024. 

Zacks Rank

Travelers currently carries a Zacks Rank #3 (Hold).

Performance of Another Insurer

The Progressive Corporation's PGR second-quarter 2024 earnings per share of $2.65 beat the Zacks Consensus Estimate of $1.99. The bottom line improved more than five times year over year. Operating revenues of $18.3 billion beat the Zacks Consensus Estimate by 1.4% and increased 18.9% year over year.

Net premiums earned grew 19% to $17.2 billion and beat our estimate of $16.7 billion. Combined ratio improved 850 bps from the prior-year quarter's level to 91.9.

Upcoming Releases

RLI Corporation RLI will report second -quarter 2024 results on Jul 22, after market close. The Zacks Consensus Estimate for second-quarter earnings per share is pegged at $1.35, indicating an increase of 16.4% from the year-ago quarter's reported figure.

RLI's earnings beat estimates in three of the last four quarters while missing in one.

W.R. Berkley Corporation WRB will report second-quarter 2024 results on Jul 22, before market open. The Zacks Consensus Estimate for second-quarter earnings per share is pegged at 82 cents, suggesting an increase of 7.9% from the year-ago quarter's reported figure.

WRB's earnings beat estimates in the last four reported quarters.

To read this article on Zacks.com click here.