What To Expect From Travelers Stock?

-12.53%
Downside
220
Market
193
Trefis
TRV: The Travelers Companies logo
TRV
The Travelers Companies

Travelers’ stock (NYSE: TRV) has lost 6% YTD, as compared to the 1% drop in the S&P500 index over the same period. Further, it is currently trading at around $176 per share, which is 12% below its fair value of $199 – Trefis’ estimate for Travelers’ valuationWhile the insurance giant surpassed the revenue estimates in the fourth quarter, the earnings were in-line with the consensus. It posted total revenues of $9.6 billion – up 7% y-o-y, driven by a 10% rise in the net written premiums, partially offset by a 16% decline in the net investment income. The premiums figure benefited from an 11% rise in business insurance and a 13% growth in the personal insurance units. On the cost front, expenses as a % of revenues witnessed an unfavorable increase primarily due to higher catastrophe losses. Overall, it led to a 39% drop in the net income to $819 million. 

The company’s top line grew 6% y-o-y to $36.89 billion in FY 2022. It was driven by an 11% rise in the net written premiums, led by a 10% rise in business insurance, 11% in bond & specialty insurance, and 12% in personal insurance segments. On the flip side, the net investment income decreased by 16% y-o-y. Further, the expense figure increased in the year, resulting in a 22% drop in the net income to $2.8 billion.

Moving forward, the premiums are likely to maintain their growth trajectory. Further, net investment income is expected to improve over the subsequent quarters. All in all, Travelers revenues are estimated to touch $38.55 billion in FY2023. Additionally, TRV’ adjusted net income margin is likely to see a slight improvement in the year, leading to an adjusted net income of $3.3 billion and an annual EPS of $14.34. This coupled with a P/E multiple of just below 14x will lead to a valuation of $199.

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 Returns Mar 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 TRV Return -5% -6% 44%
 S&P 500 Return -3% 1% 72%
 Trefis Multi-Strategy Portfolio -4% 2% 222%
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[1] Month-to-date and year-to-date as of 3/13/2023
[2] Cumulative total returns since the end of 2016

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