Financial Reports are Key to Consider: The Travelers Companies (NYSE: TRV)

On Friday, Shares of The Travelers Companies (NYSE: TRV) lost -0.39% to $117.84. The stock grabbed the investor’s attention and traded 1,401,022 shares as compared to its average daily volume of 1.87M shares. The stock’s institutional ownership stands at 81.90%.

The Travelers Companies, Inc. recently stated net income of $709.0M, or $2.62 per diluted share, for the quarter ended September 30, 2018, contrast to $293.0M, or $1.05 per diluted share, in the prior year quarter. Core income in the current quarter was $687.0M, or $2.54 per diluted share, contrast to $253.0M, or $0.91 per diluted share, in the prior year quarter. Core income before income taxes increased mainly because of a decrease in catastrophe losses of $436.0M and a boost in net investment income of $58.0M. Core income benefited from a lower U.S. corporate income tax rate. Net realized investment gains of $29.0M pre-tax ($22.0M after-tax) were lower by $32.0M pre-tax ($18.0M after-tax). Per diluted share amounts benefited from the impact of share repurchases.

Third Quarter 2018 Results:
(All comparisons vs. third quarter 2017, unless noted otherwise)

Net income of $709.0M increased $416.0M because of higher core income, partially offset by lower net realized investment gains. Core income of $687.0M increased $434.0M. Core income before income taxes increased mainly because of a decrease in catastrophe losses of $436.0M and a boost in net investment income of $58.0M. Core income benefited from a lower U.S. corporate income tax rate. Net realized investment gains of $29.0M pre-tax ($22.0M after-tax) were lower by $32.0M pre-tax ($18.0M after-tax).

Net investment income of $646.0M pre-tax ($547.0M after-tax) increased 10%. Income from the fixed income investment portfolio increased because of a higher average level of fixed maturity investments and higher long-term reinvestment rates, as well as higher short-term interest rates. Private equity returns were higher than in the prior year quarter.

Net written premiums of $7.062B increased 6%, reflecting growth in all segments.

Year-to-Date 2018 Results:
(All comparisons vs. year-to-date 2017, unless noted otherwise)

Net income of $1.902B increased $397.0M because of higher core income, partially offset by lower net realized investment gains. Core income of $1.859B increased $449.0M. Core income before income taxes increased because of a decrease in catastrophe losses of $344.0M, a boost in net favorable prior year reserve development of $51.0M and a boost in net investment income of $48.0M. Core income benefited from a lower U.S. corporate income tax rate. Net realized investment gains of $54.0M pre-tax ($43.0M after-tax) were lower by $92.0M pre-tax ($52.0M after-tax).

Net investment income of $1.844B pre-tax ($1.567B after-tax) increased 3%. Income from the fixed income investment portfolio increased because of a higher average level of fixed maturity investments and higher short-term interest rates, partially offset by lower long-term reinvestment rates. Private equity returns were lower than in the prior year period.

Record net written premiums of $21.017B increased 6%, reflecting growth in all segments.

Shareholders’ Equity:

Shareholders’ equity of $22.460B reduced 5% from year-end 2017 because of the impact of higher interest rates on net unrealized investment gains/(losses). Net unrealized investment losses included in shareholders’ equity were $560.0M pre-tax ($447.0M after-tax), contrast to net unrealized investment gains of $1.414B pre-tax ($1.112B after-tax) at year-end 2017. Book value per share of $84.82 reduced 3% from year-end 2017, also because of the impact of higher interest rates on net unrealized investment gains/(losses), and adjusted book value per share of $86.51 increased 4% from year-end 2017.

The Company repurchased 3.10M shares during the third quarter at an average price of $130.22 per share for a total cost of $400.0M. Capacity remaining under the existing share repurchase authorization was $3.456B at the end of the quarter. At the end of third quarter 2018, statutory capital and surplus was $20.462B and the ratio of debt-to-capital was 22.6%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains/(losses) included in shareholders’ equity was 22.3%, within the Company’s target range of 15% to 25%.

Third Quarter 2018 Results:
(All comparisons vs. third quarter 2017, unless noted otherwise)

Segment income for Business Insurance was $410.0M, a boost of $305.0M. Segment income before income taxes benefited from significantly lower catastrophe losses, higher net investment income and a higher underlying underwriting gain, partially offset by net unfavorable prior year reserve development in the current quarter as compared to net favorable prior year reserve development in the prior year quarter. The higher underlying underwriting gain was mainly driven by normal quarterly variability in loss and expense activity, counting a lower level of non-catastrophe fire-related losses, partially offset by a higher level of non-catastrophe weather-related losses. Segment income in the current quarter benefited from a lower U.S. corporate income tax rate.

Net written premiums of $3.648B increased 6%, benefiting from continued strong retention, higher renewal premium change and higher levels of new business.

Year-to-Date 2018 Results:
(All comparisons vs. year-to-date 2017, unless noted otherwise)

Segment income for Business Insurance was $1.247B, a boost of $271.0M. Segment income before income taxes benefited from significantly lower catastrophe losses and slightly higher net investment income, partially offset by lower net favorable prior year reserve development and a slightly lower underlying underwriting gain. Segment income in the current period benefited from a lower U.S. corporate income tax rate. Segment income in the prior year period included a $15.0M benefit from the resolution of prior year tax matters.

Net written premiums of $11.423B increased 5% and benefited from the same factors discussed above for the third quarter of 2018.

Third Quarter 2018 Results:
(All comparisons vs. third quarter 2017, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $196.0M, a boost of $60.0M. Segment income before income taxes benefited from higher net favorable prior year reserve development. Segment income in the current quarter benefited from a lower U.S. corporate income tax rate.

Net written premiums of $644.0M increased 5%, reflecting continued strong retention and record new business in management liability and a boost in surety premiums.

Year-to-Date 2018 Results:
(All comparisons vs. year-to-date 2017, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $573.0M, a boost of $129.0M. Segment income before income taxes benefited from higher net favorable prior year reserve development and a higher underlying underwriting gain. The higher underlying underwriting gain mainly resulted from higher business volumes. Segment income in the current period benefited from a lower U.S. corporate income tax rate. Segment income in the prior year period included a $17.0M benefit from the resolution of prior year tax matters.

Net written premiums of $1.871B increased 7% from the prior year period and benefited from the same factors as discussed above for the third quarter of 2018.

Third Quarter 2018 Results:
(All comparisons vs. third quarter 2017, unless noted otherwise)

Segment income for Personal Insurance was $153.0M, a boost of $76.0M. Segment income before income taxes benefited from lower catastrophe losses, higher net favorable prior year reserve development and higher net investment income, partially offset by a lower underlying underwriting gain. The lower underlying underwriting gain was mainly driven by higher non-catastrophe weather-related losses in Agency Homeowners & Other, partially offset by earned pricing that exceeded loss cost trends in Agency Automobile. Segment income in the current quarter benefited from a lower U.S. corporate income tax rate.

Net written premiums of $2.770B increased 6%. Agency Automobile net written premiums grew 6%, driven by renewal premium change of 8%. Agency Homeowners & Other net written premiums grew 6%, benefiting from year-over-year policies in force growth of 6% and positive renewal premium change.

Year-to-Date 2018 Results:
(All comparisons vs. year-to-date 2017, unless noted otherwise)

Segment income for Personal Insurance was $265.0M, a boost of $87.0M. Segment income before income taxes benefited from higher net favorable prior year reserve development, a higher underlying underwriting gain and higher net investment income, partially offset by higher catastrophe losses. The higher underlying underwriting gain was mainly driven by earned pricing that exceeded loss cost trends in Agency Automobile, partially offset by normal variability in loss activity in Agency Homeowners & Other. Segment income in the current period benefited from a lower U.S. corporate income tax rate. Segment income in the prior year period included a $7.0M benefit from the resolution of prior year income tax matters.

Net written premiums of $7.723B increased 7%. Agency Automobile net written premiums grew 8%, and Agency Homeowners & Other net written premiums grew 5%, benefiting from the same factors as discussed above for the third quarter of 2018.

TRV has a market value of $31.36B while its EPS was booked as $9.42 in the last 12 months. The stock has 266.10M shares outstanding. Beta value of the company was 1.13; beta is used to measure riskiness of the security. Analyst recommendation for this stock stands at 2.80.

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