Company Reports

We think Travelers had a strong start to the year, but given the industry backdrop, the market may have been looking for more. Results in business insurance are holding strong, personal auto results appear to be improving, and the company continues to see benefits from higher interest rates. Overall, these factors led to an 18% annualized return on equity in the quarter, a solid result for the narrow-moat company, in our view. We will maintain our $210 fair value estimate and see the shares as about fairly valued.

We believe the strength of Travelers' commercial insurance operations puts a narrow economic moat around its business. The coronavirus affected the company's results in 2020. However, losses stayed well within the range of historical events the industry has successfully absorbed in the past. On the positive side, Travelers had some natural hedges against COVID-19, and the pandemic was a material positive for its personal auto business, due to a falloff in miles driven.

Narrow-moat Travelers finished the year on an unexpectedly strong note, with the company seeing a sequential improvement in underlying underwriting profits and improved investment performance. We will maintain our $197 fair value estimate and see shares as about fairly valued. We think the improvement this quarter is likely temporary but still see the near-term outlook as favorable. We expect Travelers to maintain strong underwriting results in commercial lines this year and that underwriting results in personal auto will start to improve.

P&C insurers have had substantial pricing increases across lines recently, but otherwise, commercial and personal insurers are in very different places. For commercial insurers, an extended period of strong price increases has them in a hard market and realizing attractive underwriting margins. Underlying combined ratios have flattened out recently, and we don't expect any significant improvement. Still, this should leave commercial insurers in a strong position over the next couple of years. Personal auto insurers have endured a difficult period in the wake of the pandemic, due to a variety of negative claims trends, and have been pushing pricing to catch up. While they are not out of trouble yet, we think the third quarter could mark the start of a turn toward more normalized underwriting results.

We believe the strength of Travelers' commercial insurance operations puts a narrow economic moat around its business. The coronavirus affected the company's results in 2020. However, losses stayed well within the range of historical events that the industry has successfully absorbed in the past. On the positive side, Travelers had some natural hedges against COVID-19, and the pandemic was a material positive for its personal auto business, due to a falloff in miles driven.

Travelers’ third-quarter results were weighed down by relatively high catastrophe losses and a charge to add to asbestos reserves. This pushed annualized return on equity for the narrow-moat company to 8% for the quarter. Outside of those issues, the commercial side of the business continues to perform well and the personal side showed some underlying improvement. We will maintain our $194 fair value estimate and see shares as modestly undervalued.

Elevated catastrophe losses of $1.5 billion in the second quarter (representing 16.1% of net earned premiums and roughly double last year's level of losses on an absolute basis) pushed narrow-moat Travelers to a loss of $14 million in the second quarter. Excluding catastrophes, Travelers continued to see tailwinds on the commercial side of the business and headwinds on the personal side; both sides roughly maintained their recent trajectories. We will maintain our $194 fair value estimate and see the shares as modestly undervalued.

We believe the strength of Travelers' commercial insurance operations puts a narrow economic moat around its business. The coronavirus affected the company's results in 2020. However, losses stayed well within the range of historical events that the industry has successfully absorbed in the past. On the positive side, Travelers had some natural hedges against COVID-19, and the pandemic was a material positive for its personal auto business, due to a falloff in miles driven.

Travelers' result remained somewhat mixed in the first quarter, as the company continued to see tailwinds on the commercial side of its business partially offset by headwinds on the personal side. Additionally, the insurer experienced a relatively high level of catastrophe losses in the quarter, due to severe wind and hail storms across multiple states. Still, we see the annualized core return on equity of 15% as a good result for the narrow-moat firm, and this level suggests that, on balance, the operating environment is favorable for Travelers. We will maintain our $194 per share fair value estimate.

Travelers had previously announced preliminary fourth-quarter results, so the broad strokes of the quarter were already known before the full release Jan. 24. Relatively high catastrophe losses were a drag on profitability. Outside of that, Travelers continued to enjoy strong market conditions in commercial lines, partially offset by negative claims trends in personal auto. Overall, we see the adjusted annualized return on equity of 12% in the quarter as a reasonable result for the narrow-moat franchise, given the current industry backdrop. We will maintain our fair value estimate of $194 per share.

Travelers disclosed some preliminary fourth-quarter results that suggest a somewhat weak quarter. Catastrophe losses appear to be the main culprit, with the company expecting $459 million in catastrophe losses in the quarter, primarily from winter storms in late December 2022. Outside of that, Travelers provided some limited commentary that suggests underlying trends remain in place, with commercial lines enjoying strong underwriting conditions, and personal lines remaining challenged by negative claims trends. We don’t see anything in these numbers to meaningfully alter our long-term view of the narrow-moat company, and we maintain our $194 fair value estimate.

We believe the strength of Travelers' commercial insurance operations puts a narrow economic moat around its business. The coronavirus affected the company's results in 2020. However, losses stayed well within the range of historical events that the industry has successfully absorbed in the past. On the positive side, Travelers had some natural hedges against COVID-19, and the pandemic was a material positive for its personal auto business, due to a falloff in miles driven.

Given the differing states of the pricing cycle across lines and recent capital market movements, property and casualty insurers have a variety of tailwinds and headwinds at the moment. Commercial line insurers have seen strong pricing increases over the past few years, and we think the outlook for that area is relatively bright, as attractive underlying combined ratios create a solid base for strong profitability. Conversely, following a burst of abnormally high profitability in the early stage of the pandemic, personal auto insurers have struggled with a number of headwinds more recently, which has pushed most players into significant underwriting losses. Higher interest rates have reduced carrying value for fixed-income investments but offer the possibility of better investment income going forward. Finally, the bear market creates issues for insurers with an equity-heavy investment approach.

Travelers reported a solid third quarter, although catastrophe losses and mark-to-market investment losses acted as a drag on reported profitability. We consider the annualized return on equity of 9% in the quarter to be a reasonable result for the narrow-moat company in light of these factors. We will maintain our $190 fair value estimate and see the shares as modestly undervalued.

We believe the strength of Travelers' commercial insurance operations puts a narrow economic moat around its business. The coronavirus affected the company's results in 2020. However, losses stayed well within the range of historical events that the industry has successfully absorbed in the past. On the positive side, Travelers had some natural hedges against COVID-19, and the pandemic was a material positive for its personal auto business, due to a falloff in miles driven.

Despite the strong commercial insurance market, Travelers reported a somewhat weak second quarter, due to higher catastrophe losses, lower investment income, and the ongoing struggles of its personal insurance segment. The net result was an annualized ROE of 9% in the quarter. We will maintain our $178 per share fair value estimate and narrow moat rating.

Travelers faces a mix of tailwinds and headwinds at the moment, but overall the environment appears favorable for the narrow moat franchise. Travelers generated an annualized ROE of 15% in the quarter, as favorable conditions in commercial lines are more than offsetting some headaches in personal lines. We will maintain our $178 fair value estimate.

We believe the strength of Travelers' commercial insurance operations puts a narrow economic moat around its business. The coronavirus affected the company's results in 2020. However, losses stayed well within the range of historical events that the industry has successfully absorbed in the past. On the positive side, Travelers had some natural hedges against COVID-19, and the pandemic was a material positive for its personal auto business, due to a falloff in miles driven.

Travelers reported a strong quarter, as more favorable conditions in commercial lines more than offset headwinds in personal auto. Overall net written premiums increased 10% year over year, and the annualized ROE for the quarter was 19%, partially aided by good investment results. The ROE for the full year was 13%, which we consider a solid showing for the narrow-moat franchise. We will maintain our $170 fair value estimate.

We believe the strength of Travelers' commercial insurance operations puts a narrow economic moat around its business. The coronavirus affected the company's results last year. However, losses were very manageable and have stayed well within the range of historical events that the industry has successfully absorbed in the past. On the positive side, Travelers had some natural hedges against COVID-19, and the pandemic was a material positive for its personal auto business, due to a falloff in miles driven.