Primary insurance can grow mid-single digits while reinsurance contracts. I model $5.15 of 2027 operating earnings at 15 times, a $77 stock, a market-like return from $73 including the dividend.
Key points
- $5.15 is my 2027 operating earnings per share, up from about $4.78 this year.
- 15 times that earnings gives a $77 stock, 5 percent above $73.15 plus a 0.5 percent ordinary dividend.
- 90.8% combined ratio in the third quarter, with reinsurance written premiums down 11.6 percent.
The call
The $73.15 price needs about $4.88 of 2027 earnings at 15 times. Written premiums grew only 1.3 percent. Reinsurance is shrinking 10 to 20 percent. Unrealized bond losses of $928 million after tax cut book value to $25.87 a share, or 2.8 times.
I model $5.15 instead because insurance can still grow mid-single digits, the $24 billion domestic bond book reinvests 80 to 100 basis points above its 4.7 percent yield, and duration can extend toward the four-year life of reserves. The market is about right.
Earnings per share, reported and my forecastGAAP diluted through 2025; 2026E–2027E are operating EPS, my estimates. Source: company filings, Oct 19 2026.
Valuation
| Item | Figure |
|---|
| 2026E operating EPS | $4.78 |
| 2027E operating EPS | $5.15 |
| Multiple | 15 times |
| 12-month target | $77 |
| Ordinary dividend | $0.40 a year |
Fifteen times is a normal specialty-insurer multiple when the combined ratio sits near 91 percent and book is 2.8 times. Being right adds a few dollars and the dividend; being wrong on auto reserves or property rates costs more than that.
Risks
- Commercial auto and umbrella reserves could worsen; watch accident-year development in the next 10-Q.
- Property and reinsurance rates could fall more than 20 percent at January 1; watch written-premium growth in those lines.
- Higher rates could add more unrealized losses and slow buybacks; watch AOCI and share count.
What would change my mind
A combined ratio above 94 percent for two quarters, or insurance written premiums turning negative.
