Berkshire Hathaway vs. Travelers: Which Insurer Offers Better Return?

Industry Overview - The insurance industry is expected to be influenced by better pricing, growing climate-related risks, and rapid digitalization through 2025 [1] - Commercial insurance rates increased by 2.8% in Q2 2025, while personal lines saw a 4.6% rise [1] - Speculation around potential Federal Reserve rate cuts in 2025 may impact the insurance sector [2] Company Analysis: Berkshire Hathaway (BRK.B) - Berkshire Hathaway is a diversified conglomerate with over 90 subsidiaries, with insurance being a significant contributor, accounting for approximately 25% of total revenues [4] - The insurance segment is positioned for growth due to increased market exposure, disciplined underwriting, and favorable pricing trends [4] - The company has a strong cash position exceeding $100 billion, minimal debt, and a solid credit profile, reflecting financial resilience [7] - BRK.B's net margin improved by 190 basis points year-over-year, and its return on equity is 7.2%, slightly below the industry average of 7.8% [7] - Revenue for BRK.B is projected to rise by 8.6% in 2025, while EPS estimates indicate a decrease of 6.7% [13] Company Analysis: Travelers Corporation (TRV) - Travelers is a leading provider of auto, homeowners, and commercial property-casualty insurance in the U.S. [8] - The company maintains a combined ratio under 95%, indicating strong underwriting results [9] - TRV plans to invest over $1 billion annually in technology to enhance operational efficiency and capitalize on cyber insurance opportunities [10] - Despite a projected 14.9% decrease in EPS for 2025, TRV's revenue is expected to increase by 5.8% [14] - TRV's return on equity stands at 16.1%, outperforming the industry average [12] Valuation Metrics - BRK.B trades at a price-to-book multiple of 1.56, above its five-year median of 1.40 [16] - TRV's price-to-book multiple is 2.04, also above its five-year median of 1.77 [16] Conclusion - Berkshire Hathaway is seen as a dynamic addition to portfolios, especially with Warren Buffett's leadership, while the transition to Greg Abel as CEO in 2026 is a point of interest [18] - Travelers demonstrates steady profitability and strong underwriting discipline, but faces challenges from inflation and competition in the property and casualty insurance sector [19][20]