Travelers’ stock (NYSE: TRV) has gained roughly 20% YTD, as compared to the 17% drop in the S&P500 index over the same period. Further, it is currently trading at around $188 per share, which is 2% above its fair value of $183 – Trefis’ estimate for Travelers’ valuation. The insurance giant topped the consensus estimates in the third quarter of 2022, with the revenues increasing 6% y-o-y to $9.3 billion. It was driven by a 10% rise in the total earned premiums, partially offset by a 23% decrease in the net investment income. The premiums figure was driven by growth in personal insurance and business insurance units. On the flip side, the net investment income suffered due to lower returns from private equity partnerships as compared to the previous year’s numbers. Further, the total claims & expenses as a % of revenues increased in the quarter. Overall, the adjusted net income decreased by 32% to $450 million.
The company’s top line grew 6% y-o-y to $27.2 billion in the first nine months of FY 2022. It was driven by growth in total earned premiums, partially offset by lower net investment income and a decrease in net realized investment gains from $113 million to -$211 million. On the expense front, total claims & expenses increased from 89% to 91% over the same period. Altogether, the adjusted net income was reduced by 13% y-o-y to $2 billion.
Moving forward, we expect the premiums to continue their growth momentum in Q4. All in all, Travelers’ revenues are estimated to touch $37.9 billion in FY2022. Additionally, TRV’s adjusted net income margin is likely to reduce from 10.4% to around 8%, leading to an adjusted net income of $3.1 billion and an annual EPS of $12.73. This coupled with a P/E multiple of just above 14x will lead to a valuation of $183.
|S&P 500 Return||-3%||-17%||77%|
|Trefis Multi-Strategy Portfolio||-3%||-20%||218%|
 Month-to-date and year-to-date as of 12/9/2022
 Cumulative total returns since the end of 2016