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Trefis Has A Price Estimate Of $142 For Travelers' Stock
Trefis price estimate for Travelers
Travelers provides Personal insurance, Bond & Specialty Insurance and Business Insurance services to its clients.
Its end users include Retail Customers, Small, Mid Size Businesses, and Corporates.Its business model faces stiff challenges and competition from offerings by its global competitors such as: American International Group Inc., Hartford Financial Services Group Inc, Metlife Inc., Allstate Insurance Group, State Farm Group and Berkshire Hathaway Group.
#1. Estimating Travelers' Total Revenues:
Our Interactive Dashboard Analysis, How Does Travelers Make Money?, Provides An In Depth View Of The Company's Revenues.
#1.1 Forecasting Travelers' Business Insurance Revenues
Business Insurance revenues are expected to increase by 5% y-o-y driven by 6% growth in commercial automobile and property insurance followed by 8% jump in general liability & other lines.
Further, Commercial Multi-peril segment is expected to grow 4% y-o-y and cross $3.5 billion in revenues.
Business Insurance [=A+B+C+D]
Workers' Compensation [A]
Commercial Multi-peril [B]
Commercial Automobile & Property [C]
General Liability & Other Lines [D]
#1.2 Forecasting Travelers' Total Revenues
Travelers is expected to report $31.7 billion in Total Revenues for 2019, which is 5% more as compared to the previous year.
Personal Insurance revenues are expected to increase by 5% y-o-y followed by similar growth in Business Insurance segment and 7% jump in Bond & Specialty Insurance revenues.This would be achieved on the back of higher renewal premium rates and growth in retention rates.Notably, Investment of Insurance Premiums are expected to generate $2.6 billion in 2019, which is at the same level as the 2018 figure.
Revenues for Travelers [=A+B+C+D]
Personal Insurance [A]
Bond & Specialty Insurance [B]
Business Insurance [C]
Investment of Insurance Premiums [D]
#2. Deriving Travelers' Adjusted Net Income Figure:
Travelers is expected to have a Net Income of $2.6 billion in 2019 which is 2% more than the previous year figure. This increase is mainly due to higher revenues, partially offset by higher effective Tax Rate as compared to 2018.
Net Income Margin would see a slight decrease from 8.3% in 2018 to 8.1% in 2019, mainly driven by 5% increase in total expenses due to increase in claims and claims adjustment cost.
Net Income [=A*B]
Revenues for Travelers [A]
Adj. Net Income Margin
Notably, Adjusted Net Income decreased from $3.4 billion in 2015 to $2.1 Billion in 2017, before improving to $2.5 billion in 2018.
#3. Deriving Travelers' EPS Figure:
The EPS figure has fluctuated over the last 4 years. It decreased from $10.96 in 2015 to $7.38 in 2017, before improving to $9.35 in 2018. We expect this upward movement to continue in 2019 and enable Travelers to report an EPS of $9.93.
EPS growth from 2018 can be attributed to higher Adjusted Net Income and lower Shares Outstanding.
GAAP Diluted EPS [=A/B]
Net Income [A]
Shares Outstanding [B]
Travelers has regularly invested in share repurchases to boost shareholder returns. Its share repurchase is likely to touch $1.6 billion for the full year 2019.
#4. Estimating Travelers' Share Price:
Our Price Estimate of $142 For Travelers' Stock is based on our Detailed Valuation Model, and implies a 14.3x P/E Multiple on expected 2019 EPS of $9.93
Share Price [=A*B]
Comparing Travelers' Historical P/E Multiple With That of Its Peers
P/E Multiples are based on Share Price at the end of Q3, and reported (or expected) Adjusted Earnings for the full year.
Travelers Implied P/E multiple of 14.3x in 2019 is highest among its peers
DISAGREE WITH OUR FORECASTS? CREATE YOUR OWN
1. How to save your forecasts for Travelers:
Click on the blue "Try Trefis" button in the header to create an account, then navigate back to this dashboard. Now, any changes you make to these inputs will be auto-saved as a scenario (see left panel of dashboard).
2. How to monitor your scenario vs. actual results
Once you've saved your forecast, you can "rename" your scenario by clicking on the gear icon next to the scenario (on the left panel). For more info, see this quick, 30-sec video (look at the 9 sec mark)
With your forecast saved and named, you can compare your forecasts to hundreds of other Trefis users who came up with their own forecasts. Lastly, you can share with friends and colleagues to show them how you fared and compare your forecasts to theirs.