Shares of The Travelers Companies, Inc. TRV have rallied 35.4% year to date, outperforming the industry’s 30.6% growth. The insurer also outperformed the Zacks S&P 500 composite and the Finance sector’s return of 26.3% and 22.5%, respectively, year to date. With a market capitalization of $58.56 billion, the average volume of shares traded in the last three months was 1.15 million.

TRV Outperforms Industry, Sector, S&P 500 YTD

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The expected long-term earnings growth rate is 11.2%. This Zacks Rank #2 (Buy) property and casualty insurer's bottom line outpaced estimates in three of the trailing four quarters and missed in one, the average surprise being 25.40%.

TRV Trading Above 50-Day and 200-Day Moving Average

The stock is trading above its 50-day and 200-day simple moving average (SMA) of $242.90 and $222.59, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

TRV’s Growth Projection Encourages

The Zacks Consensus Estimate for Travelers’ 2024 earnings per share indicates a year-over-year increase of 41.9%. The consensus estimate for revenues is pegged at $46.46 billion, implying a year-over-year improvement of 12%.
The consensus estimate for 2025 earnings per share and revenues indicates an increase of 9.4% and 7.4%, respectively, from the corresponding 2024 estimates.

Mixed Analyst Sentiment Instills Confidence in TRV

Out of 14, 13 analysts covering the stock have raised estimates for 2024, and eight analysts have raised the same for 2025 over the past 30 days. Four has lowered the estimates for 2025.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 9.1% and 1.2% north, respectively, in the past 30 days, reflecting analysts’ optimism.

Travelers’ Favorable Return on Capital

Return on equity (ROE) for the trailing 12 months was 17.6%, comparing favorably with the industry’s 7.5%. This reflects its efficiency in utilizing shareholders’ funds. Sustained operational excellence helped generate double-digit core ROE in nine out of the last 10 years. Travelers aims to generate mid-teens core ROE over time.

Also, return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame. This reflects TRV’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 9.9%, better than the industry average of 5.7%.

Will TRV’s Rally Stay?

Travelers has been witnessing high levels of retention, improved pricing and increased new business while achieving a positive renewal premium change banking on the strength of a compelling product portfolio of coverages across nine lines of business.

Going by the progress and continued growth at the profitable agency auto and homeowners business, the company remains optimistic about the trajectory of its personal lines of business.

Travelers’ commercial businesses continue to perform well on the back of stability in the markets where it operates as well as the execution of its strategies.

Higher returns from the non-fixed income portfolio have been driving investment income over the last four years amid a low-interest rate environment. Travelers expects fixed income NII, including earnings from short-term securities, to be $700 million after tax in the fourth quarter. It also estimates NII, including earnings from short-term securities, to be $2.9 billion in 2025 with $700 million in the first quarter of 2025 and growing to approximately $760 million for the fourth quarter.

Solid Balance Sheet of TRV

Travelers maintains a conservative balance sheet among its peers. At the end of the quarter, statutory capital and surplus were $26.2 billion. The ratio of debt-to-capital was within the company’s target range of 15% to 25%. TRV ended the third quarter with holding company liquidity of approximately $1.8 billion. TRV’s balance sheet strength driven by scale, profitability and cash flow supports it to invest more than $1 billion annually in technology. As of Sept. 30, 2024, the company had $5.3 billion of capacity remaining under its share repurchase authorizations approved by the board.

TRV’s Impressive Dividend History

Travelers has been hiking dividends for the last 20 years, banking on a solid capital position. Its dividend yield of 1.6% appears attractive compared with the industry average of 0.2%, making it an attractive pick for yield-seeking investors.

Other Key Picks

Investors interested in the property and casualty insurance industry may look at some other top-ranked players like First American Financial Corporation FAF, Axis Capital Holdings Limited AXS and The Progressive Corporation PGR. While First American sports a Zacks Rank #1 (Strong Buy), Axis Capital and The Progressive carry a Zacks Rank #2 each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for First American’s 2024 and 2025 earnings indicates 5% and 32.1% year-over-year growth, respectively. In the year to date, FAF’s stock has lost 0.6%.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 2.5% and 4.3% north, respectively, in the past 30 days.

Axis Capital’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 90.26%. In the year to date, AXS’ stock has surged 51.3%.

The Zacks Consensus Estimate for AXS’ 2024 and 2025 earnings indicates 9.9% and 7.5% year-over-year growth, respectively.

The Progressive’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 19.85%. In the year to date, PGR’s stock has surged 64.7%.

The Zacks Consensus Estimate for PGR’s 2024 and 2025 earnings indicates 115.2% and 4.6% year-over-year growth, respectively.

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