Travelers (TRV)

Property and casualty insurer Travelers (NYSE:TRV) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 5.2% year on year to $12.47 billion. Its non-GAAP profit of $8.14 per share was 29.2% above analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1853 when it insured travelers against accidents on steamboats and railroads, Travelers (NYSE:TRV) provides a wide range of commercial and personal property and casualty insurance products to businesses, government units, associations, and individuals.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

Travelers competes with other major property and casualty insurers including Chubb (NYSE:CB), The Hartford (NYSE:HIG), Progressive (NYSE:PGR), Allstate (NYSE:ALL), and American International Group (NYSE:AIG).

Insurance companies earn revenue from three primary sources: 1) The core insurance business itself, often called underwriting and represented in the income statement as premiums 2) Income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities 3) Fees from various sources such as policy administration, annuities, or other value-added services. Over the last five years, Travelers grew its revenue at a decent 8.9% compounded annual growth rate. Its growth was slightly above the average insurance company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Travelers’s annualized revenue growth of 9.9% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Travelers reported year-on-year revenue growth of 5.2%, and its $12.47 billion of revenue exceeded Wall Street’s estimates by 1.1%.

Net premiums earned made up 90.3% of the company’s total revenue during the last five years, meaning Travelers lives and dies by its underwriting activities because non-insurance operations barely move the needle.

Our experience and research show the market cares primarily about an insurer’s net premiums earned growth as investment and fee income are considered more susceptible to market volatility and economic cycles.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Travelers’s net premiums earned has grown at a 8.7% annualized rate over the last five years, slightly better than the broader insurance industry and in line with its total revenue.

When analyzing Travelers’s net premiums earned over the last two years, we can paint a similar picture as it recorded an annual growth rate of 9.2%. This performance was similar to its total revenue.

Travelers’s net premiums earned came in at $11.14 billion this quarter, up 4% year on year and in line with Wall Street Consensus estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at the combined ratio rather than the operating expenses and margins that define sectors such as consumer, tech, and industrials.

The combined ratio sums the costs of underwriting (salaries, commissions, overhead) as well as what an insurer pays out in claims (losses) and divides it by net premiums earned. If a company boasts a combined ratio under 100%, it is underwriting profitably. If above 100%, it is losing money on its core operations of selling insurance policies.

Given the calculation, a lower expense ratio is better. Over the last four years, Travelers’s combined ratio has swelled by 3.5 percentage points, going from 96.8% to 93.4%. It has also improved by 7.6 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

In Q3, Travelers’s combined ratio was 87.3%, beating analysts’ expectations by 425.6 basis points (100 basis points = 1 percentage point). This result was 5.9 percentage points better than the same quarter last year.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Travelers’s EPS grew at a spectacular 23.7% compounded annual growth rate over the last five years, higher than its 8.9% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its combined ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Travelers, its two-year annual EPS growth of 64.3% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Travelers reported adjusted EPS of $8.14, up from $5.24 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Travelers’s full-year EPS of $25.71 to stay about the same.

Insurers are balance sheet businesses, collecting premiums upfront and paying out claims over time. Premiums collected but not yet paid out, often referred to as the float, are invested and create an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality. While other (and more commonly known) per-share metrics like EPS can sometimes be lumpy due to reserve releases or one-time items and can be managed or skewed while still following accounting rules, BVPS reflects long-term capital growth and is harder to manipulate.

Travelers’s BVPS grew at a tepid 5.2% annual clip over the last five years. However, BVPS growth has accelerated recently, growing by 27.3% annually over the last two years from $87.47 to $141.72 per share.

Over the next 12 months, Consensus estimates call for Travelers’s BVPS to grow by 21% to $151.73, elite growth rate.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Travelers currently has $9.27 billion of debt and $31.61 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.3×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on equity (ROE) serves as a comprehensive measure of an insurer's performance, showing how efficiently it converts shareholder capital into profits. Strong ROE performance typically translates to better returns for investors through a combination of earnings retention, share repurchases, and dividend distributions.

Over the last five years, Travelers has averaged an ROE of 14.9%, healthy for a company operating in a sector where the average shakes out around 12.5% and those putting up 20%+ are greatly admired. This shows Travelers has a decent competitive moat.

It was good to see Travelers beat analysts’ EPS expectations this quarter. On the other hand, its net premiums earned was just in line and book value per share, an important metric of fundamental health for this industry, missed. Overall, this print was mixed. Investors were likely hoping for more, and shares traded down 5% to $256 immediately after reporting.

Updated: December 4, 2025 at 11:22 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Travelers, you should also grasp the company’s longer-term business quality and valuation.

There are definitely a lot of things to like about Travelers. To kick things off, its revenue growth was good over the last five years. And while its projected EPS for the next year is lacking, its estimated BVPS growth for the next 12 months is great. On top of that, its spectacular EPS growth over the last five years shows its profits are trickling down to shareholders.

Travelers’s P/B ratio based on the next 12 months is 1.9x. Looking at the insurance space right now, Travelers trades at a compelling valuation. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $296.10 on the company (compared to the current share price of $282.97), implying they see 4.6% upside in buying Travelers in the short term.