The Travelers Companies TRV reported fourth-quarter 2023 core income of $7.01 per share, which beat the Zacks Consensus Estimate of $5.04. The bottom line more than doubled year over year, driven by higher underlying underwriting gain, lower catastrophe losses and higher net investment income.
Behind Q4 Headlines
Travelers’ total revenues increased 13.5% from the year-ago quarter to $10.9 billion, primarily driven by higher premiums. The top-line figure beat the Zacks Consensus Estimate by 0.2%.
Net written premiums increased 13% year over year to about $10 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.7 billion.
Net investment income increased 24% year over year to $778 million, primarily due to strong fixed income returns and growth in fixed maturity investments. The figure was higher than our estimate of $776 million. The Zacks Consensus Estimate was pegged at $796 million.
Travelers witnessed an underwriting gain of $1.4 billion, up more than three-fold year over year, driven by higher business volumes. Consolidated underlying combined ratio of 85.9 improved 550 basis points (bps). The combined ratio improved 870 bps year over year to 85.8 driven by a lower underlying combined ratio and lower catastrophe losses. The Zacks Consensus Estimate was pegged at 93.
Core return on equity expanded 20 basis points to 11.5%. Adjusted book value per share (excludes net unrealized investment gains/losses) of $122.90 increased 8% year over year. At year-end, statutory capital and surplus were $25.114 billion and the debt-to-capital ratio was 24.4%.
Segment Update
Business Insurance: Net written premiums increased 14% year over year to about $5.1 billion, reflecting strong renewal premium change and retention, as well as higher levels of new business. Business Insurance net written premiums beat our estimate of $4.9 billion.
The combined ratio improved 300 bps year over year to 86.5 due to an improvement in the underlying combined ratio and lower catastrophe losses. Our estimate was 87.5. The Zacks Consensus Estimate was pegged at 98.
Segment income of $957 million increased 32% year over year on higher underlying underwriting gain, higher net investment income and lower catastrophe losses. The figure was higher than our estimate of $799.7 million.
Bond & Specialty Insurance: Net written premiums increased 7% year over year to $989 million, reflecting strong production in both surety and management liability. The figure was higher than our estimate of $969.5 million.
The combined ratio deteriorated 40 bps year over year to 77.3 due to lower net favorable prior year reserve development. Our estimate was 79.6. The Zacks Consensus Estimate was pegged at 79.
Segment income of $240 million increased 8.6% year over year on higher net investment income and a higher underlying underwriting gain. The figure was higher than our estimate of $219.3 million.
Personal Insurance: Net written premiums of $4 billion increased 13% year over year, primarily reflecting higher renewal premium change in both Domestic Homeowners and Other and Domestic Automobile. The figure was higher than our estimate of $3.8 billion.
The combined ratio improved 1850 bps year over year to 86.8 due to an improvement in the underlying combined ratio, lower catastrophe losses and higher net favorable prior year reserve development. The Zacks Consensus Estimate was pegged at 91.
Segment income was $520 million, reversing the year-ago loss of $61 million. It was driven by a higher underlying underwriting gain, lower catastrophe losses, higher net favorable prior year reserve development and higher net investment income.
Full-Year Highlights
Travelers reported 2023 core income of $13.13 per share, which beat the Zacks Consensus Estimate of $11.15. The bottom line increased 6% year over year.
Net written premiums increased 14% year over year to about $40.2 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $37.5 billion.
Underwriting income of $966 million declined 28% year over year. The combined ratio deteriorated 140 bps year over year to 97.
Dividend and Share Repurchase Update
This property & casualty insurer returned $1.944 billion to shareholders in 2023. It bought back 0.4 million shares for $66 million in the fourth quarter.
The board also approved a quarterly dividend of $1 per share. The dividend will be paid out on Mar 29, 2024, to shareholders of record at the close of business on Mar 8, 2024.
Travelers had $6.04u billion remaining under authorizations as of Dec 31, 2023
Zacks Rank
Travelers currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases
The Progressive Corporation PGR will report fourth-quarter 2023 results on Jan 24. The Zacks Consensus Estimate for the fourth quarter is pegged at $2.38, suggesting an increase of 58.7% from the year-ago quarter’s reported figure.
PGR’s earnings beat estimates in two of the last four quarters, while missing in the other two.
RLI Corporation RLI will report fourth-quarter 2023 results on Jan 24. The Zacks Consensus Estimate for the fourth quarter is pegged at $1.44, suggesting a decrease of 5.9% from the year-ago quarter’s reported figure.
RLI’s earnings beat estimates in three of the last four quarters while missing in the other one.
Arch Capital Group ACGL will report fourth-quarter 2023 results on Feb 14. The Zacks Consensus Estimate for the fourth quarter is pegged at $1.94, suggesting a decrease of 9.4% from the year-ago quarter’s reported figure.
ACGL’s earnings beat estimates in the last four quarters.
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Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.