Today we look at the third of our 6 insurance companies.  Today’s selection is The Travelers Companies, Inc. (TRV).  All six of our insurance companies share a couple of common traits: underwriting discipline and a 10 year history of growing book value per share.  TRV’s performance in those areas follow.  Combined ratio is a very strong 93.2.  Book value per share has grown 180 percent over the last decade.  A 6.05% compounded annual growth rate.  A blistering pace for a company with a 38 billion market cap.

Valuation metrics are price to sales of 1.39 and price to book of 1.27.  But there is more to this particular story.  TRV is very generous when it comes to rewarding shareholders with a combination of dividends and share repurchases.  Current yield is 2.00% (and growing).  The real story is share buybacks though.  The following table shows the indicated yield against current market cap for cash expense for distributions and buybacks.  Note the nearly 12% shareholder yield performance in the most recent year:

201220132014
$ (000s)Yield$ (000s)Yield$ (000s)Yield
Dividends           694,0002.11%      729,0002.22%      729,0002.22%
Repurchase         1,232,0003.75%2,255,0006.87%3,137,0009.55%
Total     1,926,0005.86%2,984,0009.09%3,866,00011.77%

If we combine this strong shareholder yield performance with the ten year CAGR for book value per share growth, we get 18.27% as our current pace for total returns before any potential valuation expansion.   All together, this is a tasty buy and hold forever kind of opportunity.

Devour your prey raptors!

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Insurance Part 3 of 6 The Travelers Companies, Inc. (TRV)

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2 thoughts on “Insurance Part 3 of 6 The Travelers Companies, Inc. (TRV)

  • April 24, 2015 at 1:48 am
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    TRV is a great name in the insurance space and I have recently added it to my watch list. For now i am only invested in AFL and CB in the insurance sector with TRV as another potential diversification for my portfolio. There’s no questioning the growth rate of this stock. Thanks for sharing your analysis.

    Reply
    • April 24, 2015 at 2:08 pm
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      Thanks DivHut, I hold AFL but it isn’t currently on my list of buys. CB is a long time watch list item for me. Just not at today’s price.

      Reply

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