Travelers Companies, Inc (TRV) Valuation

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Company Profile (obtained from Google Finance): The Travelers Companies, Inc. (TRV) is a holding company principally engaged, through its subsidiaries, 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 & 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 & International Insurance segment includes surety and financial liability coverages, which require a primarily credit-based underwriting process. Personal Insurance writes a range of property and casualty insurance covering personal risks. In December 2008, the Company completed the sale of Unionamerica Holdings Limited.

ModernGraham Comments: None at this time.

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
6. Moderate PEmg ratio – PEmg is less than 20 – PASS
7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 3/5

1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
3. Earnings Stability – positive earnings per share for at least 5 years – PASS
4. Dividend Record – currently pays a dividend – PASS
5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary:

• Last Updated    11/2/2009
• MG Value    $208
• MG Opinion    Undervalued
• Value Based on 3% Growth    $78
• Value Based on 0% Growth    $46
• Market Implied Growth Rate    0.36%
• PEmg    9.21
• PB Ratio    0.97

Key Data:

Balance Sheet – 9/30/2009

• Total Debt    $6,528,000,000
• Total Assets    $112,617,000,000
• Intangible Assets    $612,000,000
• Goodwill    $3,365,000,000
• Total Liabilities    $84,457,000,000
• Outstanding Shares    547,900,000

Earnings Per Share – Diluted

• 2009 (estimate)    $5.29
• 2008    $4.82
• 2007    $6.86
• 2006    $5.91
• 2005    $2.95
• 2004    $1.38
• 2003    $3.80
• 2002    $0.52
• 2001    -$4.84
• 2000    $4.14
• 1999    $3.00

Earnings Per Share – Modern Graham

• 2009 (estimate)    $5.41
• 2008    $5.10
• 2007    $4.89
• 2006    $3.57
• 2005    $1.86
• 2004    $1.21

Valuation History:

• 11/2/09 – Value $208, Actual Price $49.79, Undervalued & Speculative
• 7/17/09 – Value $202, Actual Price $40.42, Undervalued & Speculative