Core earnings near $38.50 a share next year at eleven times give a $420 stock. That is a market-like return from $390, including the dividend.
Key points
- $9.18 of core earnings in the third quarter, with an 86.8% combined ratio.
- $3.67 billion of after-tax fixed-income investment income is management’s 2027 path.
- 2.26 times adjusted book of $172.47 is the current price; eleven times next-year earnings is a fair P/C multiple.
The call
The $390 share needs about $38.50 of 2027 core earnings at eleven times, plus a $5 dividend, to deliver a market-like total return. Trailing core earnings already sit near $38, so the price is asking the underwriting engine to hold, not to expand.
I believe that is about right. Pricing is moderating (Business Insurance renewal change 4.1%) while catastrophes and asbestos remain lumpy, so I keep 2027 core earnings near this year’s run-rate rather than compounding them.
Core earnings per share, reported and my 2027 view- Core EPS
- My annual core EPS
Company releases and my estimate; as of Oct 16, 2026
Valuation
| Item | Figure |
|---|
| 2027 core EPS (mine) | $38.50 |
| Multiple | 11 times |
| Price target | $420 |
| Adjusted book (Sep 30) | $172.47 |
| Price / adjusted book | 2.3 times |
| Trailing dividend | $5.00 a share |
Eleven times is in line with large commercial P/C names after a hard-market run. Upside is extra investment income and buybacks; downside is a cat year or a liability reserve miss. That symmetry is why the rating is hold, not buy.
Risks
- A severe catastrophe quarter that lifts the combined ratio above 95% for a full year.
- Liability loss costs accelerating faster than the 4% renewal premium change.
- A further jump in rates that widens the $6.4 billion unrealized bond loss and compresses book value.
What would change my mind
A 2027 combined ratio that stays below 85% with renewal premium change still above 6% would support a higher multiple.