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On Monday, Piper Sandler adjusted the price target for Travelers Companies Inc (BVMF:TRVC34) (NYSE:TRV) shares, reducing it to $259 from the previous $280 while maintaining a Neutral rating on the stock.
The revision reflects potential changes in the reinsurance market that could impact primary insurers. Piper Sandler's new price target is derived by applying a 12-times multiple to the projected 2026 earnings estimate of $21.60 per share.
The report by Piper Sandler suggests that the reinsurance market may be entering a softer phase. This development could lead to varying impacts across the insurance sector. According to the analyst, primary insurers such as Palomar Holdings Inc (NASDAQ:PLMR), Heritage Insurance Holdings Inc (NYSE:NYSE:HRTG), Universal Insurance Holdings Inc (NYSE:NYSE:UVE), and Skyward Specialty Insurance Group Inc (NASDAQ:SKWD) might see more benefits compared to others in the industry.
The price target is based on specific financial metrics and projections. By applying the multiple to the forecasted earnings, Piper Sandler has set the target at $259. This is a common method used by analysts to estimate a company's future stock price based on expected earnings and a chosen earnings multiple, which in this case is 12.0x.
Travelers Companies (NYSE:TRV), however, faces certain risks that could affect this price target. The firm highlighted that adverse asbestos reserve development poses a significant risk due to Travelers' considerable exposure. Moreover, there could be further loss reserve developments related to other lines of business that the company has not yet anticipated.
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