TRV Rises 9.5% in a Year but Lags Industry: How to Play the Stock

Shares of The Travelers Companies, Inc. TRV have risen 9.5% in the past year. It, however, underperformed the industry’s growth of 16.6%, the Finance sector’s return of 24.5% and the S&P 500 composite’s appreciation of 23.3%.

With a market capitalization of $54.02 billion, the average volume of shares traded in the last three months was 0.1 million.

TRV One Year Price Performance

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Travelers closed at $238.30 on Friday and is trading above the 200-day simple moving average (SMA) of $231.44, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

The expected long-term earnings growth rate is 11.2%, which is better than the industry average of 9.1%. This Zacks Rank #3 (Hold) property and casualty insurer's bottom line outpaced estimates in three of the trailing four quarters and missed in one, the average surprise being 25.44%.

TRV’s Growth Projection Encourages

The Zacks Consensus Estimate for Travelers’ 2025 revenues is pegged at $49.88 billion, implying a year-over-year improvement of 7.3%. 

The consensus estimate for 2026 earnings per share and revenues indicates an increase of 31.5% and 6.1%, respectively, from the corresponding 2024 estimates.

Mixed Analyst Sentiment Instills Confidence in TRV

Out of 14, nine analysts covering the stock have raised estimates for 2026 over the past 30 days. One has lowered the estimates for 2026.

The Zacks Consensus Estimate for 2026 earnings has moved 4.2% north in the past 30 days, reflecting analysts’ optimism.

Travelers’ Favorable Return on Capital

Return on equity (ROE) for the trailing 12 months was 19.1%, comparing favorably with the industry’s 7.5%. This reflects its efficiency in utilizing shareholders’ funds. Sustained operational excellence helped generate double-digit core ROE in nine out of the last 10 years. Travelers aims to generate mid-teens core ROE over time. In 2024, core return on equity expanded 570 basis points to 17.2%. 

Also, return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame. This reflects TRV’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 10.8%, better than the industry average of 5.8%.

Factors Acting in Favor of TRV

Travelers has been witnessing high levels of retention, improved pricing and increased new business while achieving a positive renewal premium change banking on the strength of a compelling product portfolio of coverages across nine lines of business. 

Going by the progress and continued growth at the profitable agency auto and homeowners business, the company remains optimistic about the trajectory of its personal lines of business. 

Travelers’ commercial businesses continue to perform well on the back of stability in the markets where they operate as well as the execution of their strategies. 

Higher returns from the non-fixed income portfolio have been driving investment income over the last four years amid a low-interest rate environment. Travelers company estimates fixed-income NII, including earnings from short-term securities, to be $3 billion in 2025, with $710 million in the first quarter of 2025. It is expected to grow to approximately $790 million in the fourth quarter. The company hopes that the $100 billion investment portfolio should continue generating a higher level of predictable and reliable net investment income. 

Solid Balance Sheet of TRV

Travelers maintains a conservative balance sheet among its peers. At the end of 2024, statutory capital and surplus were $27.7 billion. The ratio of debt-to-capital, excluding after-tax net unrealized investment gains included in shareholders’ equity was 22.4%, within the company’s target range of 15% to 25%. All capital ratios were better than the target levels. The company ended 2024 with holding company liquidity of approximately $1.8 billion. As of Dec. 31, 2024, the company had $5.04 billion of capacity remaining under its share repurchase authorizations approved by the board. 

TRV’s Impressive Dividend History

Travelers has been hiking dividends for the last 20 years, banking on a solid capital position. Its dividend yield of 1.7% appears attractive compared with the industry average of 0.2%, making it an attractive pick for yield-seeking investors.

TRV Shares Are Expensive

Its shares are trading at a premium to the Zacks Property and Casualty Insurance industry. Its price-to-book value of 1.94X is higher than the industry average of 1.63X. The company has a Value Score of A. This style score helps find the most attractive value stocks. 

Shares of other insurers like The Allstate Corporation ALL, Arch Capital Group Ltd. ACGL and The Progressive Corporation PGR are also trading at a multiple higher than the industry average.

Conclusion

Travelers has a strong market presence in auto, homeowners’ insurance and commercial U.S. property-casualty insurance with solid inorganic growth. Strong renewal rate change, retention and increase in new business supported by a compelling portfolio and solid capital position should continue to drive earnings.  
A solid VGM Score of A and its target price, which indicates a potential upside, instill confidence. It is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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