Under the radar

The stock in question is the Travelers Companies (NYSE:TRV). Over the past year, the stock is up 4%.

The firm isn’t exactly an AI tech superstar, and some might see it as a bit dull in terms of operations. It runs one of the largest property and casualty insurance businesses in the US. This in itself could be one reason why it has flown under the radar when it comes to valuation over the past year.

Further evidence of this can be noted from the price-to-earnings ratio. This sits at 9.31, making it the lowest of any of the constituents in the Dow Jones. The index average ratio is 25.2, highlighting just how undervalued the stock could be.

I think part of the reason for this is that some investors view insurance companies as cyclical and unexciting businesses, often assigning them lower valuation multiples than tech (as an example). However, Travelers has demonstrated that its consistent performance can generate consistently attractive returns. The company has also invested heavily in data analytics and technology, helping it select risks more effectively and improve claims management. As a result, profitability has improved while premium growth remains steady.

Why it might not stay cheap forever

In the first quarter of 2026 alone, Travelers reported core income of nearly $1.7bn, up from $443m in Q1 2025. This was driven by lower catastrophe losses and improving underwriting results. What also impressed me was that the company’s underlying combined ratio increased to 88.6%. This is a key measure of insurance profitability, and is very healthy right now for the firm.

I think it’s only a matter of time before the share price moves higher to reflect the recent momentum. Not only that, but the positive outlook also supports a higher valuation. Interest rates staying high is good for business as it supports investment income, and demand for insurance remains resilient regardless of economic conditions. Although it has competition, it has a dominant position in the market, which gives it considerable pricing power and opportunities.

In terms of risks, insurance companies are exposed to black swan events. There’s the potential at any point for a natural disaster to trigger a sharp loss for the firm, and this will always exist. Given that factor, I think it’s worth holding the stock as part of a diversified portfolio, to try and reduce this potential headache as much as possible.

I do believe Travelers is the most undervalued stock in the index, and am thinking about adding it to my portfolio. Investors who agree with my opinion could consider doing the same.

Should you invest £5,000 in Travelers Companies right now?

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Jon Smith has no positions in the shares mentioned.

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