How Should Investors Feel About Travelers Companies’ (NYSE:TRV) CEO Remuneration?

Alan Schnitzer became the CEO of The Travelers Companies, Inc. (NYSE:TRV) in 2015, and we think it’s a good time to look at the executive’s compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Travelers Companies.

View our latest analysis for Travelers Companies

Comparing The Travelers Companies, Inc.’s CEO Compensation With the industry

At the time of writing, our data shows that The Travelers Companies, Inc. has a market capitalization of US$29b, and reported total annual CEO compensation of US$17m for the year to December 2019. That’s a notable increase of 15% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.0m.

On comparing similar companies in the industry with market capitalizations above US$8.0b, we found that the median total CEO compensation was US$14m. From this we gather that Alan Schnitzer is paid around the median for CEOs in the industry. What’s more, Alan Schnitzer holds US$20m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20192018Proportion (2019)
Salary US$1.0m US$1.0m 6%
Other US$16m US$14m 94%
Total CompensationUS$17m US$15m100%

On an industry level, roughly 19% of total compensation represents salary and 81% is other remuneration. Travelers Companies sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

NYSE:TRV CEO Compensation June 30th 2020
NYSE:TRV CEO Compensation June 30th 2020

A Look at The Travelers Companies, Inc.’s Growth Numbers

The Travelers Companies, Inc. has reduced its earnings per share by 3.1% a year over the last three years. Its revenue is up 3.7% over the last year.

The decline in earnings is a bit concerning. The modest increase in revenue in the last year isn’t enough to make us overlook the disappointing change in earnings per share. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Historical performance can sometimes be a good indicator on what’s coming up next but if you want to peer into the company’s future you might be interested in this free visualization of analyst forecasts.

Has The Travelers Companies, Inc. Been A Good Investment?

Given the total shareholder loss of 4.8% over three years, many shareholders in The Travelers Companies, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.

To Conclude…

As we touched on above, The Travelers Companies, Inc. is currently paying a compensation that’s close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. On the other hand, earnings growth and total shareholder return have been negative for the last three years. It’s tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.

If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Travelers Companies.

Important note: Travelers Companies is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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