Overview of Travelers Companies (TRV) 2nd quarter 2021 earnings report
Category: Travelers Companies (TRV)
Date: 20 July 2021 Stock price of Travelers (TRV): $153.09 Market Capital of Travelers Companies: $38.5 billion We take a look at the 2nd quarter 2021 earnings report of Travelers Companies (TRV) a leading provider of property casualty insurance for auto, home and business. For the quarter the group reported revenues of $8.68 billion and net income of $934 million.
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We are very pleased to report excellent underwriting and investment results, generating second quarter core income of $879 million, or $3.45 per diluted share, and core return on equity of 13.7% -Alan Schnitzer, Chairman and Chief Executive Officer"
More About Travelers Companies
The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of property casualty insurance for auto, home and business. The company’s diverse business lines offer its global customers a wide range of coverage sold primarily through independent agents and brokers. A component of the Dow Jones Industrial Average, Travelers has approximately 30,000 employees and operations in the United States and selected international markets. The company generated revenues of approximately $32 billion in 2020.
Overview of Travelers Companies 2nd quarter 2021 earnings report
- Strong second quarter net income of $934 million and core income of $879 million.
- Consolidated combined ratio of 95.3% and underlying combined ratio of 91.4%.
- Net investment income of $818 million pre-tax compared to $268 million pre-tax in the prior year quarter.
- Net written premiums of $8.135 billion, up 11% compared to the prior year quarter (8% adjusting for the personal automobile premium refunds in the prior year quarter); growth in all three segments.
- Total capital returned to shareholders of $625 million, including $401 million of share repurchases.
- Book value per share of $116.86, up 10% from June 30, 2020; adjusted book value per share of $103.88, up 13% from June 30, 2020.
- Board of Directors declares regular quarterly cash dividend of $0.88 per share
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Travelers Companies management commentary on their 2nd quarter 2020 earnings report
New York, July 20, 2021 — The Travelers Companies, Inc. today reported net income of $934 million, or $3.66 per diluted share, for the quarter ended June 30, 2021, compared to a net loss of $40 million, or $0.16 per diluted share, in the prior year quarter. Core income in the current quarter was $879 million, or $3.45 per diluted share, compared to a core loss of $50 million, or $0.20 per diluted share, in the prior year quarter.
The improvement was due to higher net investment income, lower catastrophe losses, higher net favorable prior year reserve development and a higher underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses). Net realized investment gains in the current quarter were $61 million pre-tax ($47 million after-tax), compared to $13 million pretax ($10 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.
The improvement was due to higher net investment income, lower catastrophe losses, higher net favorable prior year reserve development and a higher underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses). Net realized investment gains in the current quarter were $61 million pre-tax ($47 million after-tax), compared to $13 million pretax ($10 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.
“We are very pleased to report excellent underwriting and investment results, generating second quarter core income of $879 million, or $3.45 per diluted share, and core return on equity of 13.7%,” said Alan Schnitzer, Chairman and Chief Executive Officer. “Higher underlying underwriting income and net favorable prior year reserve development, as well as a lower level of catastrophe losses, all contributed to higher core income compared to the prior year quarter. Underlying underwriting income benefited from record net earned premiums and a strong underlying combined ratio of 91.4%. Our high-quality investment portfolio generated net investment income of $682 million after-tax, reflecting very strong returns in our non-fixed income portfolio. These results, together with our strong balance sheet, enabled us to return $625 million of excess capital to shareholders this quarter, including $401 million of share repurchases. “For the quarter, net written premiums grew 11%, or 8% adjusting for the auto premium refunds in the prior year quarter, with each of our three segments contributing. In Business Insurance, net written premiums grew by 5%, with renewal premium change of 9.5% near an all-time high, driven by continued strong renewal rate change and higher insured exposures reflecting higher levels of U.S. economic activity. At the same time, retention was higher reflecting stability in the pricing environment and we grew new business by 9%. In Bond & Specialty Insurance, net written premiums increased by 16%, driven by record renewal premium change of 12.7% in our management liability business, while retention remained strong. In Personal Insurance, net written premiums increased by 16%, or 8% adjusting for the auto premium refunds in the prior year quarter. Policies in force in both Auto and Homeowners are at record levels driven by continued strong retention and growth in new business.
“Our excellent top and bottom line results this quarter and for the first half of the year demonstrate the continued successful execution of our strategy to grow the top line at attractive returns, as well as the effectiveness of our well-defined and consistent investment philosophy. Our focused innovation agenda has been an important contributor to the growth and profitability we have achieved, and we will continue to relentlessly pursue our priorities of extending our lead in risk expertise, providing great experiences to our customers, distribution partners and employees, and improving productivity and efficiency. With the momentum we have and the best talent in the industry, we are well positioned to continue to create meaningful shareholder value over time.”
“Our excellent top and bottom line results this quarter and for the first half of the year demonstrate the continued successful execution of our strategy to grow the top line at attractive returns, as well as the effectiveness of our well-defined and consistent investment philosophy. Our focused innovation agenda has been an important contributor to the growth and profitability we have achieved, and we will continue to relentlessly pursue our priorities of extending our lead in risk expertise, providing great experiences to our customers, distribution partners and employees, and improving productivity and efficiency. With the momentum we have and the best talent in the industry, we are well positioned to continue to create meaningful shareholder value over time.”
Travelers Companies (TRV) stock price chart over the last 5 years
The image below shows the stock price history of Travelers Companies over the last 5 years. And its been a ok time for Travelers stockholders with the stock increasing by 30.2% over the last 5 years.
The stock of Travelers is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Travelers stock is positive at this point in time.
The stock of Travelers is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Travelers stock is positive at this point in time.
Latest stock valuation of Travelers Companies
So what is Travelers Companies stock worth based on their 2nd quarter 2021 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Travelers Companies at $172 a stock.
We therefore believe the stock of The BrightView is undervalued at its current price of $153
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $172, thus a good entry point into Travelers Companies would be at $154.80 or below.
We expect the stock of Travelers Companies to kick up from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is undervalued
We therefore believe the stock of The BrightView is undervalued at its current price of $153
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $172, thus a good entry point into Travelers Companies would be at $154.80 or below.
We expect the stock of Travelers Companies to kick up from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is undervalued
Next earnings release of Travelers Companies
It is expected that Travelers will release their 3rd quarter 2021 earnings report in late October 2021
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