Although Travelers (TRV) is widely respected as a well-run P&C company, that hasn’t really benefited shareholders all that much, as this insurer’s market returns have lagged the broader sector (and the S&P 500) for many years now, though the last 12 months have been a period of outperformance.
While I don’t believe that Travelers has the same level of risk in its 2015-2018 book, I am concerned about increased competition in the small/medium-sized commercial market where Travelers specializes, as well as the company’s relative lack of specialty lines exposure. On the other hand, this is an insurer that has generated sustained (although not continuous) double-digit ROEs and demonstrated a great deal of discipline with respect to both underwriting and capital returns. With what looks like a prospective long-term annualized return of around 8%, Travelers strikes me as an “okay, but not great” idea today.
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