TRV Market Research & Analysis Report
Updated May 27, 2015

Growth and Balance Sheet

The Travelers Companies, Inc. reported net income of $833 million, or $2.55 per diluted share, for the quarter ended March 31, 2015, compared to net income of $1.052 billion, or $2.95 per diluted share, in the prior year quarter. Operating income in the current quarter was $827 million, or $2.53 per diluted share, compared to $1.052 billion, or $2.95 per diluted share, in the prior year quarter. The decrease in net and operating income primarily resulted from the factors described above. Per diluted share amounts also benefited from the impact of share repurchases. Business and International Insurance posted a strong combined ratio of 93.3%. New business was up 16% domestically as cumulative price increases over the past four years resulted in an increase in the number of new business opportunities that met our return thresholds. Bond & Specialty Insurance results also remained very strong, producing a combined ratio of 76.1%. In Personal Insurance, TRV posted a very solid combined ratio of 83.5%. Agency Auto business continued to perform well with net written premium growth of 4% and policies in force growth of nearly 2% in the quarter.

Board of Directors announced an 11% increase in our quarterly dividend, raising it to $0.61 per share, marking 11 consecutive years of dividend increases with a compound annual growth rate of nearly 10%. The Board also authorized an additional $5 billion of share repurchases.

Valuation

TRV Inc. P/E stands at 9.88 below the industry average of 25.25, and below the S&P 500 average of 17.80 The company is currently trading below the maximum P/E ratio of 15x, and over the last five years, the company’s shares have traded in the range of 8.40x to 9.80x trailing 12-month earnings. TRV's current Price/Sales of 1.21 is below the average of its industry of 1.79. TRV’s head to head comparison to its main competitors shows that the company has gross margin below it’s peers, and one that is above the industry average. The achieved operating margin of the company is at the average operating margin of the selected competitors, and it is above the industry average. The quarterly revenue is above the industry average. The stock is currently trading below its intrinsic value of $116.27 this suggests that the stock is currently undervalued at these levels. The beta of 1.04 implies higher volatility of the stock with respect to the S&P 500. TRV has shown positive earnings consistency over the last five years. Company’s earnings have increased by 11.07% over the same period. The current quarter earnings in comparison to the same quarter last year have increased by 152.48%. TRV’s Total Debt/Equity of 25.55 is above the required maximum. TRV’s current price levels are below the maximum level, is trading  8.5% below the 52 week high of $110.49, and the technical analysis give a bearish view of the stock. The majority of analyst ratings are neutral. TRV has a dividend payout ratio of 21% and trailing annual dividend yield of 2.10%.

About TRV

The Travelers Companies, Inc. (TRV) is a holding company. The Company, through its subsidiaries, is engaged in providing a range of commercial and personal property and casualty insurance products and services to businesses, Government units, associations and individuals. The Company is organized into three business segments: Business Insurance; Financial, Professional and International Insurance, and Personal Insurance. The Business Insurance segment offers an array of property and casualty insurance and insurance-related services to its clients primarily in the United States. The Financial, Professional and International Insurance segment includes surety and financial liability coverage's, which primarily use credit-based underwriting processes, as well as property and casualty products that are marketed on a domestic basis. In November 2013, the Company completed the sale of its wholly owned subsidiary The Dominion of Canada General Insurance Company to The Travelers Companies, Inc.

Competitor Comparison

The Travelers Companies, Inc. (NYSE: TRV) N.V.

Highlights

The Company’s product line includes: Workers' Compensation, Commercial Automobile, Commercial Property, General Liability, and Commercial Multi-Peril. Commercial Multi-Peril provides the property and liability coverages. On June 17, 2011, the Company acquired a 43% interest in J. Malucelli Participacoes em Seguros e Resseguros S.A. . In November 2013, the Company completed the sale of its wholly owned subsidiary The Dominion of Canada General Insurance Company to The Travelers Companies, Inc. The stock closed yesterday’s trading session at $101.60. In the past year, the stock has hit a 52-week low of $88.81 and 52-week high of $110.49. TRV has a market cap of $32.38 billion and is part of the financial sector.

• Broad product portfolio ensuring strong market position
• Effective claims management builds customer loyalty
• Strong financial rating ensuring liquidity

• Overdependence on the US market
• Strong competition

TRV Intrinsic Value

Stock Valuation Model & Intrinsic Value Definitions

Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend. TRV's 52 week high is $110.49 current price is 101.60, is 8.5% below the 52 week high.

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. The company has a P/E ratio of 9.88 well below the average industry P/E ratio of 25.25 and is below the S&P 500 P/E ratio of 17.80.

When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders. Insiders own 0.31% of TRV stock. Management's representation is not large enough. This does not satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

TRV is trading in the range of $100.76 - $109.01 in the past 30 days. The stock has been showing support at $101.00 and resistance in the $105.00 range. The stock is trading below the 50-Day Moving Average and below the 200-Day Moving Average. The RSI(14) is 39.75. Our indicators give a bearish view on TRV.

The financial health of the company the higher the better, we evaluate all the financial ratios of the company.

Investor’s sentiment for the stock.

The model assigns a value according to analyst’s recommendation for the stock. Analyst rating on Reuters.com is 3 Buy, 1 Outperform, 21 Hold, 1 Underperform and no Sell.

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. TRV’s annual EPS for the last 5 years were 2.37, 2.56, 2.94, 3.06, 4.20 this type of earnings action is positive.

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry. TRV’s have total debt/equity ratio of 25.55% which is neutral.

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. TRV’s EPS growth for this quarter relative to the same quarter a year earlier is 152.48%, above our target.

This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%. TRV’s annual earnings growth rate over the past five years is 11.07%, at the target growth rate.

¹Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading picks on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.