The Travelers Companies, Inc. TRV is to report first-quarter 2019 results on Apr 18, before market open. The company delivered positive earnings surprise in each of the last four reported quarters.
Travelers is likely to report premium growth, driven by an improved pricing environment, high levels of retention, a positive renewal premium change as well as substantial growth across its businesses. The Zacks Consensus Estimate for premiums is pegged at $6.8 billion, up 3.6% from first quarter 2018.
Successful execution of marketplace strategies and strategic investments are likely to boost commercial businesses. Continued growth at the profitable agency auto and homeowners business is likely to aid personal lines of business.
The company’s net investment income is likely to rise on an improved rate environment. Higher private equity returns as well as average level of fixed maturity investments are likely to drive investment income. Travelers expects $20-$25 million of higher after-tax net investment income on a quarterly basis in 2019. The Zacks Consensus Estimate for the metric is pegged at $615 million, representing 1.5% increase on a year-over-year basis.
Improved premiums and investment income are expected to boost the top line in the first quarter of 2019. The Zacks Consensus Estimate for revenues is currently pegged at $7.6 billion, reflecting a year-over-year rise of 4.7%.
Productivity and efficiency gains coupled with improved operating leverage should continue to help the company lower its expense ratio. The Zacks Consensus Estimate for underwriting expense ratio stands at 30.23, indicating an improvement of 37 basis points year over year.
What Our Quantitative Model States
Our proven model shows that Travelers is likely to beat on earnings in the to-be-reported quarter. This is because the stock has the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP: Travelers has an Earnings ESP of +2.09%. This is because the Most Accurate Estimate is pegged at $2.81, higher than the Zacks Consensus Estimate of $2.76. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.