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Is The Travelers Companies, Inc. (NYSE:TRV) Overpaying Its CEO?

Michael Canly

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Alan Schnitzer became the CEO of The Travelers Companies, Inc. (NYSE:TRV) in 2015. This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Travelers Companies

How Does Alan Schnitzer’s Compensation Compare With Similar Sized Companies?

According to our data, The Travelers Companies, Inc. has a market capitalization of US$34b, and pays its CEO total annual compensation worth US$15m. (This number is for the twelve months until 2017). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$1.0m. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO compensation to be US$11m. Once you start looking at very large companies, you need to take a broader range, because there simply aren’t that many of them.

As you can see, Alan Schnitzer is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean The Travelers Companies, Inc. is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see, below, how CEO compensation at Travelers Companies has changed over time.

NYSE:TRV CEO Compensation, February 21st 2019

Is The Travelers Companies, Inc. Growing?

Over the last three years The Travelers Companies, Inc. has shrunk its earnings per share by an average of 11% per year (measured with a line of best fit). It achieved revenue growth of 4.8% over the last year.

Unfortunately, earnings per share have trended lower over the last three years. The modest increase in revenue in the last year isn’t enough to make me 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. You might want to check this free visual report on analyst forecasts for future earnings.

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

The Travelers Companies, Inc. has served shareholders reasonably well, with a total return of 27% over three years. But they probably don’t want to see the CEO paid more than is normal for companies around the same size.

In Summary…

We compared the total CEO remuneration paid by The Travelers Companies, Inc., and compared it to remuneration at a group of other large companies. As discussed above, we discovered that the company pays more than the median of that group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us.

And shareholder returns are decent but not great. So we think more research is needed, but we don’t think the CEO underpaid. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Travelers Companies (free visualization of insider trades).

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.