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Travelers (TRV) to Report Q1 Earnings: What's in the Cards?

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Zacks Equity Research
·4 min read
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The Travelers Companies, Inc. TRV is set to report first-quarter 2021 earnings on Apr 20, 2020. The company delivered an earnings surprise of 63.67% in the last reported quarter.

Factors at Play

Travelers’ first-quarter premiums are likely to have increased across all three segments on strong renewal rate change broadly across the book and continued strong retention. The Zacks Consensus Estimate for premiums is pegged at $7.5 billion, indicating an upside of 1.6% from the first-quarter 2020 reported figure.

Travelers estimates after-tax fixed income net investment income (NII), including earnings from short-term securities, of $420-$430 million per quarter due to benefits from higher levels of invested assets, largely offset by a lower average yield on the portfolio in the lower interest rate environment.

The Zacks Consensus Estimate for NII is pegged at $563 million, indicating an increase of 8.5% from the year-ago reported figure.

Strong renewal premium change in the Agency Homeowners business, strong retention, and new business in both Agency Auto and Agency Homeowners are likely to have aided the Personal Insurance segment.

Higher net written premiums are likely to have aided the top line in the to-be-reported quarter. The Zacks Consensus Estimate for revenues is currently pegged at $8.2 billion, indicating a 2.5% increase from the year-ago reported figure.

Pre-tax underlying underwriting gains are likely to have been aided by higher levels of earned premium, higher margins and continued favorability in personal auto loss experience.

The company expects the underlying combined ratio to improve for the to-be-reported quarter on the back of strong rate levels.

Continued share buybacks are anticipated to have provided additional upside to the bottom line.

However, expenses are expected to have risen on higher amortization of deferred acquisition costs, general and administrative expenses.

The Zacks Consensus Estimate for first-quarter 2021 earnings per share is pegged at $2.47, indicating a decrease of 5.7% from the year-ago quarter’s reported figure.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Travelers this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Travelers has an Earnings ESP of -5.70%. This is because the Most Accurate Estimate is pegged at $2.33, lower than the Zacks Consensus Estimate of $2.47. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

The Travelers Companies, Inc. Price and EPS Surprise

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

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

Zacks Rank: Travelers currently carries a Zacks Rank #3.

Stocks to Consider

Some insurance stocks with the right combination of elements to deliver an earnings beat this time around are:

The Allstate Corporation ALL currently has an Earnings ESP of +2.37% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cincinnati Financial Corporation CINF presently has an Earnings ESP of +6.30% and a Zacks Rank #2.

Kingstone Companies, Inc. KINS currently has an Earnings ESP of +70% and is a Zacks #3 Ranked stock.

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