Travelers Pre Earnings: What To Expect

October 18th, 2017 by Trefis Team
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TRV: The Travelers Companies logo
TRV
The Travelers Companies

The Travelers Companies (NYSE: TRV), the fifth-largest property and casualty insurer in the U.S., is scheduled to report earnings for the third quarter on Thursday, October 19 and we expect its profits to decline in the quarter. Property damage caused by hurricanes and other catastrophes will likely have an impact on the company’s earnings. However, we believe that the impact of these catastrophes may be more muted for Travelers relative to many of its peers, due to its geographically diversified operations. Further, improved macroeconomic conditions should lead to some improvements in investment income and business insurance premiums for the quarter.

Hurricanes In The Quarter To Put Pressure On Margins

The 2017 Atlantic hurricane season has been extremely active, and Hurricanes Harvey, Irma, and Maria caused property damages of over $180 billion. This is bound to result in heavy losses in the commercial insurance sector, where Travelers is the second largest player in the United States. Overall, we expect Traveler’s profits to remain under pressure, and the magnitude of decline should increase this quarter. However, Travelers’ investment income has been growing of late due to improved macroeconomic conditions, which should help partially offset this pressure.

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Business Insurance Will Partially Offset The Catastrophe Losses

The company’s business and financial division includes worker’s compensation, commercial automobile, and general liability products. The worker’s compensation line, which is one of the most important product lines for Travelers, is largely dependent on employment activity in the United States. The unemployment rate has continued to decline in the U.S., and stood at 4.2% in September 2017 compared to 4.6% in September 2016. Other macroeconomic indicators have also improved, which should benefit the workers’ compensation insurance market. With a share of roughly 8% in terms of net premiums earned, Travelers is the largest player in the worker’s compensation insurance space in the U.S.

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