Shares of Travelers (TRV – Free Travelers Stock Report) were up nicely after the insurance giant posted solid March-quarter results and announced that it was raising its quarterly dividend payout. Specifically, Travelers posted share earnings of $2.99 a share, which were up 22% versus the prior-year period and were nearly $0.40 better than our estimate. The improvement was fueled by lower catastrophe losses and a higher underwriting gain (more below).
The strong start to 2019 is a positive development for the insurance industry, as the New York-based company is viewed as a bellwether for the sector. Of note was the 3% increase in net premiums written, to $7.057 billion, as well as the underwriting gain of $395 million, which was up from $258 million a year ago. Net written premiums reflected continued strong customer retention and new business in management liability, while the underwriting business was helped by earned pricing that exceeded losses in Agency Automobile. All told, the combined ratio improved 7.4 points. These gains more than made up for a modest retreat in net investment income (from $603 million last year to $582 million in the March quarter). Net investment income, which is how much the company earns from investments, is directly affected by the performance of bonds and equities.
Meantime, the Dow-30 component remains very shareholder friendly, as it returned $625 million to its shareholders in the first quarter, including $421 million through share repurchases. And, as noted, it announced that the quarterly dividend has been increased by 6.5%, to $0.82 a share.
From an investment perspective, we like this blue-chip equity. It has solid risk-adjusted total return to 2022-2024, and the aforementioned dividend hike only sweetens the pot for conservative, income-oriented investors. And for those looking to take a stake in the insurance industry, we think these high-quality shares (Safety rank of 1; Highest) are an excellent option.
About The Company: The Travelers Companies, Inc. (formerly St. Paul Travelers) is a leading provider of commercial property/casualty insurance and asset management services. Following the April 1, 2004 acquisition of Travelers, the company is now a leading underwriter of homeowners insurance and automobile insurance through independent agents. USF&G was another notable acquisition, which was purchased in April of 1998.
- Alan House
