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Travelers (TRV) Q2 Earnings Beat Estimates, Premiums Rise Y/Y

·5 min read

The Travelers Companies, Inc. TRV reported second-quarter 2022 core income of $2.57 per share, which beat the Zacks Consensus Estimate by 28.5%. The bottom line decreased 26% year over year.

The increase was attributable to higher net written premiums, partially offset by lower net investment income and a lower underwriting gain.

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

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

The Travelers Companies, Inc. price-consensus-eps-surprise-chart | The Travelers Companies, Inc. Quote

Behind Q2 Headlines

Travelers’ total revenues increased 7% from the year-ago quarter to $9.2 billion, primarily due to higher premiums. The top-line figure beat the Zacks Consensus Estimate by 1.8%.

Net written premiums increased 11% year over year to $9 billion, driven by strong retention rates and positive renewal premium changes across all the segments.

Net investment income decreased 14% year over year to $707 million pre-tax, primarily due to a decrease in income from the non-fixed income investment portfolio.

Underwriting gain of $113 million decreased 65% year over year in the reported quarter.  The combined ratio deteriorated 300 basis points (bps) year over year to 98.3 due to higher catastrophe losses and a higher underlying combined ratio. It was partially offset by higher net favorable prior year reserve development.

At the end of the second quarter, statutory capital and surplus were $23.8 billion. The debt-to-capital ratio (excluding after-tax net unrealized investment gains included in shareholders’ equity) was 21.5% and within the insurer’s target range of 15% to 25%.

Adjusted book value per share was $112.37, up 8% year over year.

Core return on equity was 9.3%, down 440 bps year over year.

Segment Update

Business Insurance: Net written premiums increased 10% year over year to about $4.3 billion. The upside was due to strong renewal premium change and retention.

The combined ratio improved 210 bps year over year to 93.2 due to higher net favorable prior year reserve development and a lower underlying combined ratio. It was partially offset by higher catastrophe losses.

Segment income increased 3.5% year over year to $666 million. The upside was due to higher net favorable prior year reserve development and a higher underlying underwriting gain. It was partially offset by lower net investment income and higher catastrophe losses.

Bond & Specialty Insurance: Net written premiums rose 13% year over year to $962 million, primarily driven by strong production in surety and strong renewal premium change, retention and new business in management liability.

The combined ratio improved 410 bps year over year to 74 due to higher net favorable prior year reserve development and a lower underlying combined ratio.
Segment income improved 21.9% year over year to $228 million, primarily due to higher net favorable prior year reserve development and a higher underlying underwriting gain.

Personal Insurance: Net written premiums of $3.6 billion increased 12% year over year due to higher renewal premium change and strong retention in both Auto and Homeowners.

The combined ratio deteriorated 1150 bps year over year to 111.2 due to a higher underlying combined ratio, higher catastrophe losses and lower net favorable prior year reserve development.

Segment loss was $193 million after-tax against segment income of $121 million after-tax in the prior-year quarter. The loss was primarily due to higher catastrophe losses, a lower underlying underwriting gain and lower net favorable prior year reserve development.

Dividend and Share Repurchase Update

This property & casualty insurer returned $725 million in the reported quarter. It bought back shares worth $500 million. It had about $3 billion of capacity remaining under its share repurchase authorization as of Jun 30, 2022.

Travelers’ board also declared a regular quarterly dividend of 93 cents per share. The dividend will be paid out on Sep 30 to shareholders of record at the close of business as of Sep 9, 2022.

Zacks Rank

Travelers currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

The Progressive Corporation’s PGR second-quarter 2022 earnings per share of 95 cents came in line with the Zacks Consensus Estimate. The bottom line dropped 37.1% year over year.

Net premiums written were $12.4 billion in the quarter, up 8% from $11.7 billion a year ago. Net premiums earned grew 13% to $12.1 billion. The combined ratio improved 90 bps from the prior-year quarter’s level to 95.6.

RLI Corp. RLI reported second-quarter 2022 operating earnings of $1.49 per share, beating the Zacks Consensus Estimate by 6.1%. The bottom line improved 36.7% from the prior-year quarter.

Operating revenues for the reported quarter were $301.3 million, up 16.9% year over year, driven by 17.3% higher net premiums earned and 10.5% higher net investment income. The top line beat the Zacks Consensus Estimate of $276 million by 0.9%.

Underwriting income of $56 million increased 53%, primarily due to the strong performance of the Property and Surety segments. The combined ratio improved 460 basis points (bps) year over year to 80.2.

Marsh & McLennan Companies, Inc. MMC reported second-quarter 2022 adjusted earnings per share of $1.89, which beat the Zacks Consensus Estimate by 1.6%. The bottom line improved 8% year over year.

Consolidated revenues of MMC rose 7% year over year to $5.4 billion in the quarter under review. The top line outpaced the consensus mark by 0.8%. Consolidated adjusted operating income grew 8% year over year to $1.3 billion.


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