Roth/MKM has maintained a Buy rating on Travelers Companies Inc. (NYSE: NYSE:TRV) and increased the price target to $300 from $240. This adjustment comes after Travelers reported a third-quarter core EPS of $5.24, surpassing both the consensus estimate of $3.65 and Roth/MKM's estimate of $4.74. Despite higher-than-expected catastrophe losses due to Hurricane Helene, the company's underlying results exceeded analyst projections.
The firm's decision to raise the price target is based on a 1.7 multiple of the expected 2026 book value, excluding Accumulated Other Comprehensive Income (AOCI). Following the earnings report, management expressed satisfaction with the company's performance, even considering the impact of a major hurricane. They also conveyed their intention to maintain the underlying combined ratio in the high 80s for the business insurance segment.
Travelers showed robust renewal premium growth of 10.5% in its business insurance, with a renewal rate increase of 7.3%, and retention remained high at 86%. The insurance industry currently appears more focused on preserving margins over market share gains.
However, management acknowledged that there is still room for improvement in the homeowners' insurance line, targeting a reduction in the underlying combined ratio to better align with current loss trends.
In other recent news, Travelers Companies Inc. has reported strong third-quarter results, with core income surpassing $1.2 billion, or $5.24 per diluted share, and a core return on equity of 16.6%.
Notably, the company's net earned premiums reached a record $10.7 billion, marking a 10% increase year-over-year, despite incurring $939 million in pre-tax catastrophe losses primarily due to Hurricane Helene. Deutsche Bank and RBC Capital have both revised their price targets for Travelers, with Deutsche Bank raising its target to $277 from $234 and RBC Capital to $273 from $250.
Both financial institutions maintain a neutral outlook on the stock. The revised targets follow Travelers' robust quarterly performance, particularly in the Business Insurance and Personal Insurance segments.
Additionally, Travelers anticipates strong investment income for Q4 2024 and 2025, with projected earnings of approximately $2.9 billion for 2025. However, the company reported a slight decline in total auto new business premium and an intentional decrease in homeowners new business premium, particularly in high-risk areas.
InvestingPro Insights
Travelers Companies Inc. (NYSE: TRV) continues to demonstrate strong financial performance, aligning with Roth/MKM's bullish outlook. According to InvestingPro data, TRV's P/E ratio stands at 13.62, indicating that the stock may be undervalued relative to its earnings potential. This is further supported by an InvestingPro Tip highlighting that TRV is trading at a low P/E ratio relative to its near-term earnings growth.
The company's revenue growth of 13.15% over the last twelve months and a robust EBITDA growth of 95.09% in the same period underscore its strong financial position. These figures align with the company's reported renewal premium growth and management's focus on preserving margins.
Another InvestingPro Tip reveals that TRV has raised its dividend for 19 consecutive years, reflecting the company's commitment to shareholder returns. This is particularly noteworthy given the challenging environment in the insurance industry, including the impact of major hurricanes mentioned in the article.
For investors seeking more comprehensive analysis, InvestingPro offers 16 additional tips for Travelers Companies Inc., providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.