Travelers Companies (The)

Methodology

This EPS-based method has significant limitations for Travelers as an insurance company, since earnings fluctuate dramatically with catastrophe losses, reserve development, and underwriting cycles unrelated to intrinsic business quality. Traditional insurance valuation emphasizes price-to-book value relative to return on equity and combined ratio trends rather than P/E multiples. Investors should focus on underwriting discipline and reserve adequacy rather than applying Peter Lynch's growth-oriented framework to cyclical insurance earnings.

Methodology

PEG ratios are problematic for Travelers because insurance earnings swing wildly based on catastrophe frequency, prior-year reserve adjustments, and hard/soft market pricing cycles that create volatile growth patterns. A low PEG during a hard market may precede margin compression, while a high PEG during elevated cat losses may represent opportunity. Price-to-book value relative to through-cycle ROE provides more reliable valuation signals for property-casualty insurers than PEG analysis.

Methodology

While Travelers pays a meaningful dividend that adds stability to PEGY calculations, the fundamental limitations of using PEG for insurers remain—earnings volatility from underwriting and catastrophe cycles makes growth rate analysis unreliable. The dividend does provide tangible returns during difficult underwriting periods, but investors should emphasize price-to-book versus ROE and combined ratio trends. PEGY works better than PEG alone for insurers, but neither captures the true drivers of insurance franchise value.