Written premiums rose only 4% in the September quarter. I model $17.50 of 2027 earnings at twelve times, a $210 stock, a market-like return from $213.
Key points
- 4% written-premium growth in the September quarter, versus 14% a year earlier.
- 88.7 companywide combined ratio in the quarter, still well inside the 96 ceiling.
- $17.50 of 2027 earnings is my case; twelve times that is a $210 share.
The call
The $213 share needs about $17.80 of 2027 earnings at twelve times, or a 90 combined ratio with 5% premium growth. That is what the tape already asks for after today's drop.
I believe next year looks like that, not a re-rating. Competition is back, shopping is still high, and policy growth is now mid-single digits. The underwriting machine still works. It does not justify paying more than a mid-cycle P/C multiple.
Net premiums earned and combined ratio- Premiums earned
- Combined ratio (right)
Company reports through Sept 2026; 2026E and 2027E are mine.
Valuation
| Item | Figure |
|---|
| 2027 premiums earned | $90 billion |
| 2027 combined ratio | 89 |
| 2027 net income | $10.1 billion |
| 2027 EPS (575 million shares) | $17.50 |
| Multiple | 12 times |
| 12-month target | $210 |
Twelve times is a mid-cycle personal-auto multiple once growth is mid-single digits. Being right on the ratio and still holding the multiple is a few dollars of upside. Being wrong on competition is a 10-to-12 combined-ratio miss and a $180 stock.
Risks
- Combined ratio drifts toward 93 as rivals cut rates; watch monthly loss ratios.
- Catastrophe season or Florida reopenings lift property losses; watch the monthly cat load.
- Investment income falls if yields drop; watch the 4.2% book yield.
What would change my mind
Written-premium growth reaccelerating above 8% with a combined ratio still below 90 would support a higher multiple.