The Travelers Companies, Inc. (TRV) recently announced its third-quarter 2023 core income of $1.95 per share, missing the Zacks Consensus Estimate by 33.4%. The company’s bottom line decreased 11.4% year over year, mainly due to higher catastrophe losses and net unfavorable prior-year reserve development. However, it was partially offset by a higher underlying underwriting gain and net investment income.
Behind Q3 Headlines
Despite the disappointing earnings, Travelers reported a 14% increase in total revenues, reaching $10.6 billion in the third quarter. This growth was primarily driven by higher premiums. Moreover, net written premiums rose 14% to a record $10.4 billion, surpassing expectations. Net investment income also saw a significant increase, rising 30% year over year to $769 million.
However, the company faced greater catastrophe losses this quarter, totaling $850 million compared to $512 million in the prior-year quarter. These losses were primarily a result of severe wind and hail storms in multiple states.
On a positive note, Travelers witnessed an underwriting gain of $868 million, representing a 43% increase from the previous year. Additionally, the company’s core return on equity contracted 100 basis points to 6.9%, and adjusted book value per share increased by 3.4% to $115.78.
Segment Update
Business Insurance: Travelers’ net written premiums in the Business Insurance segment increased 16% year over year to approximately $5 billion, driven by strong renewal premium change, retention, and high levels of new business. The segment’s combined ratio deteriorated by 280 basis points to 99.1 due to higher net unfavorable prior-year reserve development.
Bond & Specialty Insurance: Net written premiums in the Bond & Specialty Insurance segment rose 4% year over year to $1 billion, reflecting strong production in surety and positive renewal premium change in management liability. The combined ratio deteriorated by 110 basis points to 73.6 in this segment.
Personal Insurance: Travelers’ net written premiums in the Personal Insurance segment reached $4.4 billion, marking a 14% increase from the previous year. The segment’s combined ratio deteriorated 280 basis points to 110, primarily due to higher catastrophe losses.
Travelers bought back 0.6 million shares for $101 million in the third quarter and approved a quarterly dividend of $1 per share. The dividend is set to be paid out on December 29, 2023. The company had $6.105 billion remaining under authorizations as of September 30, 2023.
Performance of Another Insurer
The Progressive Corporation (PGR) reported third-quarter 2023 earnings per share of $2.09, surpassing the Zacks Consensus Estimate of $1.71. The company’s net premiums written were $15.6 billion, growing 20% from the previous year and beating expectations.
Upcoming Releases
Investors may also be interested in the upcoming third-quarter 2023 results of W. R. Berkley Corporation (WRB) and RLI Corporation (RLI) on October 23. The Zacks Consensus Estimate for W. R. Berkley Corporation is $1.14, while RLI Corporation is estimated at 29 cents per share.
Conclusion
Despite missing earnings expectations, Travelers’ total revenues exceeded estimates thanks to higher premiums. The company’s underwriting gain and net investment income also saw positive growth. However, catastrophe losses had a negative impact on the company’s bottom line. Investors should keep an eye on Travelers’ future performance in the insurance industry.
