Why Travelers Stock Is Up 30% Over The Last Year

Travelers’ stock (NYSE: TRV) has gained about 30% since the start of 2024, versus the S&P 500 which remains up by 25% over the same period.  In comparison, Travelers’ peer, Hartford Financial (NYSE: HIG) has witnessed an even stronger performance rising by about 39% over the same period.

Several trends have been driving the stock higher. Travelers Q3 results came in stronger than expected, led by higher underwriting gains and investment income which helped to more than offset an increase in catastrophe-related losses. Core income for the quarter rose nearly 3x year-over-year to $1.22 billion, or $5.24 per share, while net written premiums rose 8%. The insurer’s underlying underwriting income – which is essentially premiums earned minus the claims and related expenses – stood at $1.5 billion over the last quarter, up over 70% compared to last year reaching record levels. Insurance companies at large have been raising premiums on their policies. Travelers said the average premium on its business insurance policies rose by 10.5% in Q3 2024, as companies adjusted pricing to account for higher risks from weather-related events and other catastrophes which have become increasingly common.  Moreover, net investment income was up by nearly 18% in Q3, driven by stronger yields on its fixed-income investments as interest rates remained largely elevated.

TRV is one of a handful of stocks that have increased their value in each of the last 4 years, but that still wasn’t enough for it to consistently beat the market. Returns for the stock were 14% in 2021, 22% in 2022, 4% in 2023, and 29% in 2024. While TRV stock has seen growth over recent years, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has provided better returns with less risk versus the benchmark S&P 500 index over the last four year period; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could TRV face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?

Natural disasters have been prominent in the U.S. over 2024 with multiple hurricanes hitting Florida and Louisiana resulting in a rise in catastrophe losses. Now, TRV has managed the impact of these disasters pretty well, there is a possibility that this could help the company as regulators may be more likely to approve premium increases due to the rising frequency and severity of such events. This could also boost demand for insurance, boosting the company’s profitability. The recent election of Donald Trump to the U.S. presidency could also benefit insurers, as a potentially lower regulatory burden and tax cuts could improve margins to an extent.  Travelers has also been steadily repurchasing stock. It had about $5.3 billion in capacity remaining under its share repurchase authorizations as of the end of September. We value TRV stock at about $231 per share, which is roughly in line with the current market price. See our analysis of  Travelers’ valuation for a closer look at what’s driving the company’s valuation.

[1] Returns as of 1/7/2025
[2] Cumulative total returns since the end of 2016

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