Travelers Gears Up to Report Q3 Earnings: What's in the Cards?

The Travelers Companies, Inc. TRV is set to report third-quarter 2024 earnings on Oct. 17. TRV delivered an earnings surprise in two of the last four quarters and missed twice, the average beat being 7.47%.

Factors to Consider

Travelers' third-quarter results are likely to benefit from solid performance across its three segments.

Better pricing, solid renewal rate change, strong retention and exposure growth are likely to have aided premiums in the to-be-reported quarter. The Zacks Consensus Estimate is currently pegged at $10.5 billion, indicating an increase of 8.9% from the year-ago reported number. We estimate premiums to increase 8.6% to $10.5 billion.

Investment results are likely to benefit from a higher long-term average yield, a higher average level of fixed maturity investments, reliable terms from growing fixed income portfolio and higher returns from non-fixed income portfolio. The Zacks Consensus Estimate is currently pegged at $883 million, implying an increase of 14.8% from the year-ago reported number. We estimate net investment income to increase 13% to $868.7 million.

The Personal Insurance segment is likely to have benefited from increases in the automobile and homeowners and other product lines, strong retention rates and positive renewal premium changes. The Zacks Consensus Estimate is currently pegged at $4.2 billion, indicating an increase of 10.2% from the year-ago reported number. We estimate earned premiums at Personal Insurance to be $4 billion, suggesting an improvement of 7% from the year-ago reported figure.

An increase in net written premiums coupled with higher net investment income and other revenues is likely to have aided the top line in the to-be-reported quarter. The Zacks Consensus Estimate for revenues is currently pegged at $11.68 billion, indicating a 9.1% increase from the year-ago reported figure.

Despite catastrophe losses, better pricing and increased exposure, coupled with prudent underwriting, are expected to have aided underwriting profitability, which, in turn, is expected to have led to an improvement in the combined ratio. We estimate the combined ratio to be 100.3. The Zacks Consensus Estimate is currently pegged at 98, indicating an improvement of 300 basis points from the year-ago reported number.

However, expenses are expected to have risen on higher claims and claim adjustment expenses, amortization of deferred acquisition costs, general and administrative expenses, as well as interest expenses. We estimate expenses to increase 4.1% in the to-be-reported quarter to $10.6 billion. 
Continued share buybacks are anticipated to have provided an additional boost to the bottom line.

The Zacks Consensus Estimate for third-quarter 2024 earnings per share is pegged at $3.76, suggesting an increase of 92.8% from the year-ago reported figure.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Travelers this time around. This is because a stock needs to have the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This is not the case, as you can see below:

Earnings ESP: Travelers has an Earnings ESP of -9.26%. This is because the Most Accurate Estimate of $3.41 is pegged lower than the Zacks Consensus Estimate of $3.76.

Stocks to Consider

Here are three P&C insurance stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Arch Capital Group ACGL has an Earnings ESP of +5.14% and a Zacks Rank #3 at present. The Zacks Consensus Estimate for third-quarter 2024 earnings is pegged at $1.82, indicating a year-over-year decrease of 21.2%.

ACGL's earnings beat estimates in each of the last four reported quarters.

First American Financial FAF has an Earnings ESP of +1.77% and a Zacks Rank #3 at present. The Zacks Consensus Estimate for third-quarter 2024 earnings is pegged at $1.15, indicating a year-over-year decrease of 5.7%.

FAF's earnings beat estimates in two of the last four reported quarters while missing in the other two.

American Financial Group, Inc. AFG has an Earnings ESP of +1.91% and carries a Zacks Rank of 3 at present. The Zacks Consensus Estimate for third-quarter 2024 earnings is pegged at $2.51, implying an increase of 2.4% from the year-ago quarter's reported figure.

AFG's earnings beat estimates in two of the last four reported quarters while missing in the other two.

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