Here's Why Hold Strategy is Apt for Travelers (TRV) Stock
The Travelers Companies, Inc. TRV has been favored by investors on the back of strong net earned premiums, high levels of retention, improved pricing, higher average levels of invested assets and sufficient liquidity.
Growth Projections
The Zacks Consensus Estimate for Travelers’ 2024 earnings is pegged at $16.41 per share, indicating a 36.6% increase from the year-ago reported figure on 10.2% higher revenues of $45.29 billion.
Zacks Rank & Price Performance
TRV currently carries a Zacks Rank #3 (Hold). Year to date, the stock has lost 13.2% against the industry’s rise of 12.4%.
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Business Tailwinds
Riding on strong net earned premiums and an aggregate underlying combined ratio for Business Insurance and Bond & Specialty Insurance, strong underwriting results continued in the commercial businesses. Strong retention rates, positive renewal premium changes, higher new business premium in both Domestic Automobile and Domestic Homeowners and other across all the business segments should continue to drive Travelers.
The company’s commercial businesses continue to perform well on the back of stability in the markets where it operates as well as the execution of its strategies. For 2023, the insurer expects renewal premium change to be modestly at a higher level throughout the remainder of 2023. In domestic homeowners and other, TRV expects renewal premium change to remain at an elevated level through the end of the year.
Higher average levels of invested assets, reliable results from the fixed-income portfolio and strong returns from the non-fixed income portfolio are likely to drive net investment income (NII) higher. Given improved rate environment, Travelers raised outlook for fixed income NII, including earnings from short-term securities by $35 million for the second half of the year, to an estimated $570 million in the third quarter and then to around $590 million in the fourth quarter.
TRV aims to generate increased earnings and capital, maintain a balanced approach to rightsizing capital and growing book value per share over time as part of its long-term financial strategy. Balance sheet strength driven by scale, profitability and cash flow support it to invest more than $1 billion annually on technology.
The property & casualty insurer has an impressive dividend history, increasing its dividend for the last 18 years. Its current dividend yield of 2.4% is better than the industry average of 0.3%. This makes TRV an attractive pick for yield-seeking investors.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Arch Capital Group Ltd. ACGL, Axis Capital Holdings Limited AXS and Cincinnati Financial Corporation CINF. While Arch Capital and Axis Capital sport a Zacks Rank #1 (Strong Buy) each, Cincinnati Financial carries Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital has a decent history of delivering earnings surprises in the last four quarters, the average being 26.83%. In the past year, ACGL has gained 67.6%.
The Zacks Consensus Estimate for ACGL’s 2023 and 2024 earnings has moved 7.6% and 6.5% north, respectively, in the past 60 days, reflecting analysts’ optimism.
Axis Capital has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 9.75%. In the past year, AXS has gained 5.6%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $8.41 and $9.31, indicating a year-over-year increase of 44.7% and 10.7%, respectively.
Cincinnati Financial has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 25.25%. In the past year, CINF has gained 7%.
The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings per share is pegged at $5 and $5.88, indicating a year-over-year increase of 17.9% and 17.6%, respectively.
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The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
