Second Quarter 2019 Core Income per Diluted
Share of $2.02, up 12%, and Core Return on Equity of 9.2%
- Second quarter net income of $557 million and core income of
$537 million, up 6% and 9%, respectively.
- Consolidated combined ratio of 98.4%; underlying combined ratio
of 94.9%, an increase from the prior year quarter due to higher
non-catastrophe weather-related losses.
- Record net written premiums of $7.450 billion, up 4%,
reflecting growth in all segments.
- Renewal premium change in Business Insurance of 6.7% at highest
level since 2014.
- Total capital returned to shareholders of $593 million,
including $376 million of share repurchases. Year-to-date total
capital returned to shareholders of $1.218 billion, including $797
million of share repurchases.
- Book value per share of $97.26, up 12% from year-end 2018.
Adjusted book value per share of $90.05, up 3% from year-end
2018.
- Board of Directors declared quarterly dividend per share of
$0.82.
The Travelers Companies, Inc. today reported net income of $557
million, or $2.10 per diluted share, for the quarter ended June 30,
2019, compared to $524 million, or $1.92 per diluted share, in the
prior year quarter. Core income in the current quarter was $537
million, or $2.02 per diluted share, compared to $494 million, or
$1.81 per diluted share, in the prior year quarter. Core income
increased primarily due to lower catastrophe losses and higher net
investment income, partially offset by elevated non-catastrophe
weather-related losses and lower net favorable prior year reserve
development. Net realized investment gains were $25 million pre-tax
($20 million after-tax), compared to $36 million pre-tax ($30
million after-tax) in the prior year quarter. Per diluted share
amounts benefited from the impact of share repurchases.
Consolidated Highlights
($ in millions, except for per share
amounts, and after-tax, except for premiums and revenues)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
Change
2019
2018
Change
Net written premiums
$
7,450
$
7,131
4
%
$
14,507
$
13,955
4
%
Total revenues
$
7,834
$
7,477
5
$
15,505
$
14,763
5
Net income
$
557
$
524
6
$
1,353
$
1,193
13
per diluted share
$
2.10
$
1.92
9
$
5.08
$
4.35
17
Core income
$
537
$
494
9
$
1,292
$
1,172
10
per diluted share
$
2.02
$
1.81
12
$
4.85
$
4.27
14
Diluted weighted average shares
outstanding
263.7
271.1
(3
)
264.2
272.5
(3
)
Combined ratio
98.4
%
98.1
%
0.3
pts
96.1
%
96.8
%
(0.7
)
pts
Underlying combined ratio
94.9
%
93.6
%
1.3
pts
93.3
%
93.0
%
0.3
pts
Return on equity
9.0
%
9.2
%
(0.2
)
pts
11.2
%
10.3
%
0.9
pts
Core return on equity
9.2
%
8.7
%
0.5
pts
11.1
%
10.3
%
0.8
pts
As of
Change From
June 30, 2019
December 31, 2018
June 30, 2018
December 31, 2018
June 30, 2018
Book value per share
$
97.26
$
86.84
$
84.51
12
%
15
%
Adjusted book value per share
90.05
87.27
84.93
3
%
6
%
See Glossary of Financial Measures for definitions and the
statistical supplement for additional financial data.
“We are pleased to report solid second quarter core income of
$537 million, an increase of 9% over the prior year quarter, and
core return on equity of 9.2%,” said Alan Schnitzer, Chairman and
Chief Executive Officer. “The increase in earnings was driven by
the successful execution of our strategy to profitably grow our top
line and thoughtfully manage our expenses, along with strong
performance from our investment portfolio, partially offset by
lower favorable prior year reserve development. While catastrophe
losses were lower than in the prior year quarter, all-in weather
losses were modestly higher, due to higher non-catastrophe
weather-related losses which adversely impacted the underlying
combined ratio of 94.9% by nearly two points compared to the prior
year quarter. In addition and to a lesser degree, the change in the
underlying combined ratio in the quarter was impacted by a number
of favorable items, including lower large losses and improved
expense leverage, partially offset by a modest impact from
continuing challenges in the tort environment. In terms of capital
management, we returned $593 million of excess capital to our
shareholders this quarter, including $376 million through share
repurchases, bringing the total capital returned to shareholders so
far this year to more than $1.2 billion.
“We remain extremely pleased with our performance in the
marketplace. We grew net written premiums by 4% to a record $7.5
billion, marking the tenth consecutive quarter in which we
generated premium growth in all three of our business segments. In
Business Insurance, we achieved renewal premium change of 6.7%,
including renewal rate change of 3.6%, in both cases the highest
levels in five years, while maintaining historically high levels of
retention. This is the twelfth consecutive quarter of higher
year-over-year renewal premium change. In Bond & Specialty
Insurance, we once again achieved strong production in both
Management Liability and Surety. In Personal Insurance, higher net
written premiums benefited from renewal premium increases in both
our Agency Automobile and Agency Home businesses.
“Our performance this quarter and year-to-date reflect both the
successful execution of our long-term strategy and our relentless
execution in the marketplace every day. In an environment of
persistently low interest rates, ongoing uncertainty surrounding
weather-related losses and a more challenging tort environment, we
will continue to leverage the power of our franchise to meet our
return objectives, including by selectively and thoughtfully
seeking price and improved terms and conditions. With leading data
and analytics in the hands of our frontline underwriters, the best
talent in the industry and deep relationships with our agents and
brokers, we remain well positioned to continue to generate
industry-leading returns and deliver shareholder value over
time.”
Consolidated Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2019
2018
Change
2019
2018
Change
Underwriting gain:
$
74
$
90
$
(16
)
$
469
$
348
$
121
Underwriting gain
includes:
Net favorable prior year reserve
development
123
186
(63
)
174
336
(162
)
Catastrophes, net of reinsurance
(367
)
(488
)
121
(560
)
(842
)
282
Net investment income
648
595
53
1,230
1,198
32
Other income (expense), including
interest expense
(82
)
(90
)
8
(145
)
(162
)
17
Core income before income taxes
640
595
45
1,554
1,384
170
Income tax expense
103
101
2
262
212
50
Core income
537
494
43
1,292
1,172
120
Net realized investment gains after
income taxes
20
30
(10
)
61
21
40
Net income
$
557
$
524
$
33
$
1,353
$
1,193
$
160
Combined ratio
98.4
%
98.1
%
0.3
pts
96.1
%
96.8
%
(0.7
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(1.8
)
pts
(2.8
)
pts
1.0
pts
(1.3
)
pts
(2.5
)
pts
1.2
pts
Catastrophes, net of reinsurance
5.3
pts
7.3
pts
(2.0
)
pts
4.1
pts
6.3
pts
(2.2
)
pts
Underlying combined ratio
94.9
%
93.6
%
1.3
pts
93.3
%
93.0
%
0.3
pts
Net written premiums
Business Insurance
$
3,874
$
3,781
2
%
$
8,037
$
7,775
3
%
Bond & Specialty Insurance
710
653
9
1,297
1,227
6
Personal Insurance
2,866
2,697
6
5,173
4,953
4
Total
$
7,450
$
7,131
4
%
$
14,507
$
13,955
4
%
Second Quarter 2019 Results
(All comparisons vs. second quarter 2018, unless noted
otherwise)
Net income of $557 million increased $33 million due to higher
core income, partially offset by lower net realized investment
gains. Core income of $537 million increased $43 million. Core
income increased primarily due to lower catastrophe losses and
higher net investment income, partially offset by a lower
underlying underwriting gain and lower net favorable prior year
reserve development. The benefit of higher business volumes on the
underlying underwriting gain was more than offset by higher levels
of non-catastrophe weather-related losses.
Underwriting results:
- The combined ratio of 98.4% increased 0.3 points due to a
higher underlying combined ratio (1.3 points) and lower net
favorable prior year reserve development (1.0 points), partially
offset by lower catastrophe losses (2.0 points).
- The underlying combined ratio of 94.9% increased 1.3 points,
including a 0.6 point increase related to the Underlying Property
Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty entered
into effective January 1, 2019 ("the new catastrophe reinsurance
treaty"). See below for further details by segment.
- Net favorable prior year reserve development occurred in all
segments. Catastrophe losses primarily resulted from wind storms in
several regions of the United States.
Net investment income of $648 million pre-tax ($548 million
after-tax) increased 9%. Income from the fixed income investment
portfolio increased due to a higher average level of fixed maturity
investments, as well as higher long-term and short-term interest
rates. Private equity partnership returns were higher than in the
prior year quarter.
Record net written premiums of $7.450 billion increased 4%,
reflecting growth in all segments.
Year-to-Date 2019 Results
(All comparisons vs. year-to-date 2018, unless noted otherwise)
Net income of $1.353 billion increased $160 million due to
higher core income and higher net realized investment gains. Core
income of $1.292 billion increased $120 million. Core income
increased due to lower catastrophe losses and higher net investment
income, partially offset by lower net favorable prior year reserve
development. Net realized investment gains of $78 million pre-tax
($61 million after-tax) were higher by $53 million pre-tax ($40
million after-tax).
Underwriting results:
- The combined ratio of 96.1% decreased 0.7 points due to lower
catastrophe losses (2.2 points), partially offset by lower net
favorable prior year reserve development (1.2 points) and a higher
underlying combined ratio (0.3 points).
- The underlying combined ratio of 93.3% increased 0.3 points,
including a 0.6 point increase related to the new catastrophe
reinsurance treaty. See below for further details by segment.
- Net favorable prior year reserve development occurred in all
segments. Catastrophe losses included the second quarter events
described above, as well as winter storms and wind storms in
several regions of the United States in the first quarter of
2019.
Net investment income of $1.230 billion pre-tax ($1.044 billion
after-tax) increased 3%. Income from the fixed income investment
portfolio increased due to higher long-term and short-term interest
rates, as well as a higher average level of fixed maturity
investments. Private equity partnership and real estate partnership
returns were lower than in the prior year.
Record gross written premiums of $15.663 billion grew 5%,
reflecting growth in all segments. Net written premiums of $14.507
billion increased 4%. Growth in net written premiums was impacted by the new catastrophe
reinsurance treaty, the entire cost of which impacted net written premiums in the
first quarter. Accordingly, the treaty did not impact net written
premiums in the second quarter and will not impact net written
premiums in the remaining quarters of the year.
Shareholders’ Equity
Shareholders’ equity of $25.321 billion increased 11% from
year-end 2018, primarily due to the impact of lower interest rates
on net unrealized investment gains (losses). Net unrealized
investment gains included in shareholders’ equity were $2.389
billion pre-tax ($1.878 billion after-tax), compared to net
unrealized investment losses of $137 million pre-tax ($113 million
after-tax) at year-end 2018. Book value per share of $97.26
increased 12% from year-end 2018, also primarily due to the impact
of lower interest rates on net unrealized investment gains
(losses). Adjusted book value per share of $90.05 increased 3% from
year-end 2018.
The Company repurchased 2.6 million shares during the second
quarter at an average price of $145.87 per share for a total cost
of $376 million. Capacity remaining under the existing share
repurchase authorization was $2.536 billion at the end of the
quarter. Also at the end of the quarter, statutory capital and
surplus was $21.080 billion, and the ratio of debt-to-capital was
20.6%. The ratio of debt-to-capital excluding after-tax net
unrealized investment gains included in shareholders’ equity was
21.9%, within the Company’s target range of 15% to 25%.
The Board of Directors declared a quarterly dividend of $0.82
per share. The dividend is payable on September 30, 2019 to
shareholders of record at the close of business on September 10,
2019.
Business
Insurance Segment Financial Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2019
2018
Change
2019
2018
Change
Underwriting gain (loss):
$
(55
)
$
32
$
(87
)
$
2
$
105
$
(103
)
Underwriting gain
(loss) includes:
Net favorable prior year reserve
development
71
84
(13
)
50
150
(100
)
Catastrophes, net of reinsurance
(211
)
(168
)
(43
)
(306
)
(306
)
—
Net investment income
481
440
41
908
886
22
Other income
(11
)
(10
)
(1
)
(6
)
(7
)
1
Segment income before income
taxes
415
462
(47
)
904
984
(80
)
Income tax expense
64
77
(13
)
139
147
(8
)
Segment income
$
351
$
385
$
(34
)
$
765
$
837
$
(72
)
Combined ratio
101.1
%
98.8
%
2.3
pts
99.6
%
98.2
%
1.4
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(1.9
)
pts
(2.3
)
pts
0.4
pts
(0.7
)
pts
(2.1
)
pts
1.4
pts
Catastrophes, net of reinsurance
5.6
pts
4.6
pts
1.0
pts
4.1
pts
4.3
pts
(0.2
)
pts
Underlying combined ratio
97.4
%
96.5
%
0.9
pts
96.2
%
96.0
%
0.2
pts
Net written premiums by market
Domestic
Select Accounts
$
756
$
729
4
%
$
1,541
$
1,502
3
%
Middle Market
2,009
1,985
1
4,419
4,247
4
National Accounts
223
231
(3
)
527
540
(2
)
National Property and Other
588
518
14
975
898
9
Total Domestic
3,576
3,463
3
7,462
7,187
4
International
298
318
(6
)
575
588
(2
)
Total
$
3,874
$
3,781
2
%
$
8,037
$
7,775
3
%
Second Quarter 2019 Results
(All comparisons vs. second quarter 2018, unless noted
otherwise)
Segment income for Business Insurance was $351 million
after-tax, a decrease of $34 million. Segment income decreased
primarily due to higher catastrophe losses, a lower underlying
underwriting gain and lower net favorable prior year reserve
development, partially offset by higher net investment income. The
benefit of higher business volumes on the underlying underwriting
gain was more than offset by a higher underlying combined ratio, as
described below.
Underwriting results:
- The combined ratio of 101.1% increased 2.3 points due to higher
catastrophe losses (1.0 points), a higher underlying combined ratio
(0.9 points) and lower net favorable prior year reserve development
(0.4 points).
- The underlying combined ratio of 97.4% increased 0.9 points,
primarily driven by the impact in the quarter of (1) higher loss
estimates in the general liability product line for primary and excess coverages and in the commercial
automobile product line, including the re-estimation of
losses incurred in the first quarter of 2019, (2) higher
non-catastrophe weather-related losses and (3) a 0.5 point impact
from the new catastrophe reinsurance treaty, partially offset by
(4) a lower level of domestic large losses, primarily fire-related
and (5) a lower underwriting expense ratio.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the segment’s
domestic operations in the workers’ compensation product line for
multiple accident years, partially offset by higher than expected
loss experience in the segment’s domestic operations (1) in the
general liability product line for primary and excess coverages for
multiple accident years, including a $60 million increase to
environmental reserves for accident years 2009 and prior, (2) in
the commercial automobile product line for recent accident years
and (3) higher than expected loss experience in the segment’s
international operations.
Net written premiums of $3.874 billion increased 2%, benefiting
from continued strong retention and higher renewal premium
change.
Year-to-date 2019 Results
(All comparisons vs. year-to-date 2018, unless noted otherwise)
Segment income for Business Insurance was $765 million
after-tax, a decrease of $72 million. Segment income decreased
primarily due to lower net favorable prior year reserve
development, partially offset by higher net investment income.
Underwriting results:
- The combined ratio of 99.6% increased 1.4 points due to lower
net favorable prior year reserve development (1.4 points) and a
higher underlying combined ratio (0.2 points), partially offset by
the impact of catastrophe losses (0.2 points).
- The underlying combined ratio of 96.2% increased 0.2 points.
The new catastrophe reinsurance treaty resulted in a 0.5 point
increase in the underlying combined ratio.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the segment’s
domestic operations in (1) the workers’ compensation product line
for multiple accident years and (2) the commercial property product
line for recent accident years, partially offset by higher than
expected loss experience in the segment’s domestic operations in
(3) the general liability product line for primary and excess
coverages for multiple accident years, including the impact of (a)
the enactment of legislation by a number of states, which extended
the statute of limitations for childhood sexual molestation claims
and (b) a $60 million increase to environmental reserves, both of
which impacted accident years 2009 and prior, (4) the commercial
automobile product line for recent accident years and (5) the
commercial multi-peril product line for recent accident years.
Gross written premiums of $8.923 billion grew 5%, benefiting
from the same factors as discussed above for the second quarter
2019. Net written premiums of $8.037 billion increased 3%. Growth
in net written premiums was
impacted by the new catastrophe reinsurance treaty.
Bond
& Specialty Insurance Segment Financial Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2019
2018
Change
2019
2018
Change
Underwriting gain:
$
157
$
199
$
(42
)
$
269
$
343
$
(74
)
Underwriting gain
includes:
Net favorable prior year reserve
development
39
89
(50
)
42
124
(82
)
Catastrophes, net of reinsurance
—
(5
)
5
(3
)
(5
)
2
Net investment income
58
57
1
114
115
(1
)
Other income
5
3
2
10
9
1
Segment income before income
taxes
220
259
(39
)
393
467
(74
)
Income tax expense
46
55
(9
)
81
90
(9
)
Segment income
$
174
$
204
$
(30
)
$
312
$
377
$
(65
)
Combined ratio
74.9
%
66.5
%
8.4
pts
77.9
%
70.5
%
7.4
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(6.2
)
pts
(14.8
)
pts
8.6
pts
(3.4
)
pts
(10.5
)
pts
7.1
pts
Catastrophes, net of reinsurance
0.1
pts
0.8
pts
(0.7
)
pts
0.2
pts
0.4
pts
(0.2
)
pts
Underlying combined ratio
81.0
%
80.5
%
0.5
pts
81.1
%
80.6
%
0.5
pts
Net written premiums
Domestic
Management Liability
$
403
$
362
11
%
$
770
$
710
8
%
Surety
244
235
4
428
420
2
Total Domestic
647
597
8
1,198
1,130
6
International
63
56
13
99
97
2
Total
$
710
$
653
9
%
$
1,297
$
1,227
6
%
Second Quarter 2019 Results
(All comparisons vs. second quarter 2018, unless noted
otherwise)
Segment income for Bond & Specialty Insurance was $174
million after-tax, a decrease of $30 million. Segment income
decreased primarily due to lower net favorable prior year reserve
development.
Underwriting results:
- The combined ratio of 74.9% increased 8.4 points due to lower
net favorable prior year reserve development (8.6 points) and a
higher underlying combined ratio (0.5 points), partially offset by
lower catastrophe losses (0.7 points).
- The underlying combined ratio remained very strong at
81.0%.
- Net favorable prior year reserve development was driven by better than expected
loss experience in domestic general liability for management
liability coverages for multiple accident years.
Net written premiums of $710 million increased 9%, with
contributions from both management liability and surety.
Year-to-Date 2019 Results
(All comparisons vs. year-to-date 2018, unless noted otherwise)
Segment income for Bond & Specialty Insurance was $312
million after-tax, a decrease of $65 million. Segment income
decreased primarily due to lower net favorable prior year reserve
development.
Underwriting results:
- The combined ratio of 77.9% increased 7.4 points due to lower
net favorable prior year reserve development (7.1 points) and a
higher underlying combined ratio (0.5 points), partially offset by
lower catastrophe losses 0.2 points.
- The underlying combined ratio remained very strong at
81.1%.
- Net favorable prior year reserve development was driven by
better than expected loss experience in domestic general liability
for management liability coverages for multiple accident
years.
Net written premiums of $1.297 billion increased 6% and
benefited from the same factors as discussed above for the second
quarter 2019.
Personal
Insurance Segment Financial Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2019
2018
Change
2019
2018
Change
Underwriting gain (loss):
$
(28
)
$
(141
)
$
113
$
198
$
(100
)
$
298
Underwriting gain
(loss) includes:
Net favorable prior year reserve
development
13
13
—
82
62
20
Catastrophes, net of reinsurance
(156
)
(315
)
159
(251
)
(531
)
280
Net investment income
109
98
11
208
197
11
Other income
21
14
7
43
31
12
Segment income before income
taxes
102
(29
)
131
449
128
321
Income tax expense
14
(12
)
26
83
16
67
Segment income (loss)
$
88
$
(17
)
$
105
$
366
$
112
$
254
Combined ratio
100.2
%
104.9
%
(4.7
)
pts
95.2
%
101.3
%
(6.1
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(0.5
)
pts
(0.5
)
pts
—
pts
(1.6
)
pts
(1.3
)
pts
(0.3
)
pts
Catastrophes, net of reinsurance
6.1
pts
12.8
pts
(6.7
)
pts
4.9
pts
11.0
pts
(6.1
)
pts
Underlying combined ratio
94.6
%
92.6
%
2.0
pts
91.9
%
91.6
%
0.3
pts
Net written premiums
Domestic
Agency (1)
Automobile
$
1,300
$
1,258
3
%
$
2,524
$
2,441
3
%
Homeowners & Other
1,258
1,137
11
2,095
1,969
6
Total Agency
2,558
2,395
7
4,619
4,410
5
Direct to Consumer
103
99
4
198
191
4
Total Domestic
2,661
2,494
7
4,817
4,601
5
International
205
203
1
356
352
1
Total
$
2,866
$
2,697
6
%
$
5,173
$
4,953
4
%
(1) Represents business sold through agents, brokers and other
intermediaries, and excludes direct to consumer.
Second Quarter 2019 Results
(All comparisons vs. second quarter 2018, unless noted
otherwise)
Segment income for Personal Insurance was $88 million after-tax,
compared to a loss of $(17) million in the prior year quarter.
Segment income benefited primarily from lower catastrophe losses
and higher net investment income, partially offset by a lower
underlying underwriting gain. The benefit of higher business
volumes on the underlying underwriting gain was more than offset by
higher levels of non-catastrophe weather-related losses.
Underwriting results:
- The combined ratio of 100.2% improved 4.7 points due to lower
catastrophe losses (6.7 points), partially offset by a higher
underlying combined ratio (2.0 points).
- The underlying combined ratio of 94.6% increased 2.0 points,
primarily driven by the impacts of (1) higher non-catastrophe
weather-related losses in Agency Homeowners and Other and (2) a 0.8
point impact from the new catastrophe reinsurance treaty, mostly
impacting Agency Homeowners and Other, partially offset by (3) the
impact of earned pricing that exceeded loss cost trends in Agency
Automobile and (4) a lower underwriting expense ratio.
Net written premiums of $2.866 billion increased 6%. Agency
Automobile net written premiums increased 3%, driven by renewal
premium change of 5%. Agency Homeowners and Other net written
premiums increased 11%, driven by renewal premium change of 7% and
higher levels of new business.
Year-to-Date 2019 Results
(All comparisons vs. year-to-date 2018, unless noted otherwise)
Segment income for Personal Insurance was $366 million
after-tax, an increase of $254 million. Segment income increased
primarily due to lower catastrophe losses and higher net favorable
prior year reserve development.
Underwriting results:
- The combined ratio of 95.2% improved 6.1 points due to lower
catastrophe losses (6.1 points) and higher net favorable prior year
reserve development (0.3 points), partially offset by a higher
underlying combined ratio (0.3 points).
- The underlying combined ratio of 91.9% increased 0.3 points.
The new catastrophe reinsurance treaty resulted in a 0.8 point
increase in the underlying combined ratio.
- Net favorable prior year reserve development was driven by
better than expected loss experience in Agency Automobile and
Agency Homeowners and Other for recent accident years.
Gross written premiums of $5.331 billion grew 6%. Net written
premiums of $5.173 billion increased 4%. Growth in net written
premiums was impacted by the new catastrophe reinsurance
treaty.
Agency Automobile gross written premiums of $2.544 billion grew
4%, driven by renewal premium change of 5%. Net written premiums
increased 3%. Growth in net written premiums was impacted by the
new catastrophe reinsurance treaty.
Agency Homeowners & Other gross written premiums of $2.222
billion grew 10% driven by renewal premium change of 6% and higher
levels of new business. Net written premiums increased 6%. Growth
in net written premiums was impacted by the new catastrophe
reinsurance treaty.
Financial Supplement and Conference Call
The information in this press release should be read in
conjunction with the financial supplement that is available on our
website at www.travelers.com. Travelers management will discuss the
contents of this release and other relevant topics via webcast at 9
a.m. Eastern (8 a.m. Central) on Tuesday, July 23, 2019. Investors
can access the call via webcast at http://investor.travelers.com or
by dialing 1.844.895.1976 within the United States and
1.647.689.5389 outside the United States. Prior to the webcast, a
slide presentation pertaining to the quarterly earnings will be
available on the Company’s website.
Following the live event, an audio playback of the webcast and
the slide presentation will be available on the same website.
About Travelers
The Travelers Companies, Inc. (NYSE: TRV) is a leading provider
of property casualty insurance for auto, home and business. A
component of the Dow Jones Industrial Average, Travelers has
approximately 30,000 employees and generated revenues of
approximately $30 billion in 2018. For more information, visit
www.travelers.com.
Travelers may use its website and/or social media outlets, such
as Facebook and Twitter, as distribution channels of material
Company information. Financial and other important information
regarding the Company is routinely accessible through and posted on
our website at http://investor.travelers.com, our Facebook page at
https://www.facebook.com/travelers and our Twitter account
(@Travelers) at https://twitter.com/travelers. In addition, you may
automatically receive email alerts and other information about
Travelers when you enroll your email address by visiting the Email
Notifications section at http://investor.travelers.com.
Travelers is organized into the following reportable business
segments:
Business Insurance - Business Insurance offers a broad
array of property and casualty insurance and insurance-related
services to its customers, primarily in the United States, as well
as in Canada, the United Kingdom, the Republic of Ireland and
throughout other parts of the world as a corporate member of
Lloyd’s.
Bond & Specialty Insurance - Bond & Specialty
Insurance provides surety, fidelity, management liability,
professional liability, and other property and casualty coverages
and related risk management services to its customers in the United
States and certain specialty insurance products in Canada, the
United Kingdom, the Republic of Ireland and Brazil, utilizing
various degrees of financially-based underwriting approaches.
Personal Insurance - Personal Insurance writes a broad
range of property and casualty insurance covering individuals’
personal risks, primarily in the United States, as well as in
Canada. The primary products of automobile and homeowners insurance
are complemented by a broad suite of related coverages.
* * * * *
Forward-Looking Statements
This press release contains, and management may make, certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other
than statements of historical facts, may be forward-looking
statements. Words such as “may,” “will,” “should,” “likely,”
“anticipates,” “expects,” “intends,” “plans,” “projects,”
“believes,” “estimates” and similar expressions are used to
identify these forward-looking statements. These statements
include, among other things, the Company’s statements about:
- the Company’s outlook and its future results of operations and
financial condition (including, among other things, anticipated
premium volume, premium rates, renewal premium changes,
underwriting margins and underlying underwriting margins, net and
core income, investment income and performance, loss costs, return
on equity, core return on equity and expected current returns, and
combined ratios and underlying combined ratios);
- share repurchase plans;
- future pension plan contributions;
- the sufficiency of the Company’s asbestos and other
reserves;
- the impact of emerging claims issues as well as other insurance
and non-insurance litigation;
- the cost and availability of reinsurance coverage;
- catastrophe losses;
- the impact of investment (including changes in interest rates),
economic (including inflation, changes in tax law, changes in
commodity prices and fluctuations in foreign currency exchange
rates) and underwriting market conditions;
- strategic and operational initiatives to improve profitability
and competitiveness;
- the Company’s competitive advantages;
- new product offerings;
- the impact of new or potential regulations imposed or to be
imposed by the United States or other nations, including tariffs or
other barriers to international trade; and
- the impact of legislation enacted or to be enacted by states
allowing victims of sexual abuse to file or proceed with claims
that otherwise would have been time-barred.
The Company cautions investors that such statements are subject
to risks and uncertainties, many of which are difficult to predict
and generally beyond the Company’s control, that could cause actual
results to differ materially from those expressed in, or implied or
projected by, the forward-looking information and statements.
Some of the factors that could cause actual results to differ
include, but are not limited to, the following:
- catastrophe losses could materially and adversely affect the
Company’s results of operations, its financial position and/or
liquidity, and could adversely impact the Company’s ratings, the
Company’s ability to raise capital and the availability and cost of
reinsurance;
- if actual claims exceed the Company’s claims and claim
adjustment expense reserves, or if changes in the estimated level
of claims and claim adjustment expense reserves are necessary,
including as a result of, among other things, changes in the legal,
regulatory and economic environments in which the Company operates,
the Company’s financial results could be materially and adversely
affected;
- during or following a period of financial market disruption or
an economic downturn, the Company’s business could be materially
and adversely affected;
- the Company’s investment portfolio is subject to credit and
interest rate risk, and may suffer reduced or low returns or
material realized or unrealized losses;
- the Company’s business could be harmed because of its potential
exposure to asbestos and environmental claims and related
litigation;
- the intense competition that the Company faces, and the impact
of innovation, technological change and changing customer
preferences on the insurance industry and the markets in which it
operates, could harm its ability to maintain or increase its
business volumes and its profitability;
- disruptions to the Company’s relationships with its independent
agents and brokers or the Company’s inability to manage effectively
a changing distribution landscape could adversely affect the
Company;
- the Company is exposed to, and may face adverse developments
involving, mass tort claims such as those relating to exposure to
potentially harmful products or substances;
- the effects of emerging claim and coverage issues on the
Company’s business are uncertain;
- the Company may not be able to collect all amounts due to it
from reinsurers, reinsurance coverage may not be available to the
Company in the future at commercially reasonable rates or at all
and we are exposed to credit risk related to our structured
settlements;
- the Company is also exposed to credit risk in certain of its
insurance operations and with respect to certain guarantee or
indemnification arrangements that we have with third parties;
- within the United States, the Company’s businesses are heavily
regulated by the states in which it conducts business, including
licensing, market conduct and financial supervision, and changes in
regulation may reduce the Company’s profitability and limit its
growth;
- a downgrade in the Company’s claims-paying and financial
strength ratings could adversely impact the Company’s business
volumes, adversely impact the Company’s ability to access the
capital markets and increase the Company’s borrowing costs;
- the inability of the Company’s insurance subsidiaries to pay
dividends to the Company’s holding company in sufficient amounts
would harm the Company’s ability to meet its obligations, pay
future shareholder dividends and/or make future share
repurchases;
- the Company’s efforts to develop new products, expand in
targeted markets or improve business processes and workflows may
not be successful and may create enhanced risks;
- the Company may be adversely affected if its pricing and
capital models provide materially different indications than actual
results;
- the Company’s business success and profitability depend, in
part, on effective information technology systems and on continuing
to develop and implement improvements in technology, particularly
as its business processes become more digital;
- if the Company experiences difficulties with technology, data
and network security (including as a result of cyber attacks),
outsourcing relationships or cloud-based technology, the Company’s
ability to conduct its business could be negatively impacted;
- the Company is also subject to a number of additional risks
associated with its business outside the United States, such as
foreign currency exchange fluctuations (including with respect to
the valuation of the Company’s foreign investments and interests in
joint ventures) and restrictive regulations as well as the risks
and uncertainties associated with the United Kingdom’s withdrawal
from the European Union;
- regulatory changes outside of the United States, including in
Canada, the United Kingdom, the Republic of Ireland and the
European Union, could adversely impact the Company’s results of
operations and limit its growth;
- loss of or significant restrictions on the use of particular
types of underwriting criteria, such as credit scoring, or other
data or methodologies, in the pricing and underwriting of the
Company’s products could reduce the Company’s future
profitability;
- acquisitions and integration of acquired businesses may result
in operating difficulties and other unintended consequences;
- the Company could be adversely affected if its controls
designed to ensure compliance with guidelines, policies and legal
and regulatory standards are not effective;
- the Company’s businesses may be adversely affected if it is
unable to hire and retain qualified employees;
- intellectual property is important to the Company’s business,
and the Company may be unable to protect and enforce its own
intellectual property or the Company may be subject to claims for
infringing the intellectual property of others;
- changes in federal regulation could impose significant burdens
on the Company and otherwise adversely impact the Company’s
results;
- changes in U.S. tax laws or in the tax laws of other
jurisdictions in which the Company operates could adversely impact
the Company; and
- the Company’s share repurchase plans depend on a variety of
factors, including the Company’s financial position, earnings,
share price, catastrophe losses, maintaining capital levels
commensurate with the Company’s desired ratings from independent
rating agencies, changes in levels of written premiums, funding of
the Company’s qualified pension plan, capital requirements of the
Company’s operating subsidiaries, legal requirements, regulatory
constraints, other investment opportunities (including mergers and
acquisitions and related financings), market conditions and other
factors.
Our forward-looking statements speak only as of the date of this
press release or as of the date they are made, and we undertake no
obligation to update forward-looking statements. For a more
detailed discussion of these factors, see the information under the
captions “Risk Factors” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in our most
recent annual report on Form 10-K filed with the Securities and
Exchange Commission (SEC) on February 14, 2019, as updated by our
periodic filings with the SEC.
*****
GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF GAAP
MEASURES TO NON-GAAP MEASURES
The following measures are used by the Company’s management to
evaluate financial performance against historical results, to
establish performance targets on a consolidated basis, and for
other reasons as discussed below. In some cases, these measures are
considered non-GAAP financial measures under applicable SEC rules
because they are not displayed as separate line items in the
consolidated financial statements or are not required to be
disclosed in the notes to financial statements or, in some cases,
include or exclude certain items not ordinarily included or
excluded in the most comparable GAAP financial measure.
Reconciliations of these measures to the most comparable GAAP
measures also follow.
In the opinion of the Company’s management, a discussion of
these measures provides investors, financial analysts, rating
agencies and other financial statement users with a better
understanding of the significant factors that comprise the
Company’s periodic results of operations and how management
evaluates the Company’s financial performance.
Some of these measures exclude net realized investment gains
(losses), net of tax, and/or net unrealized investment gains
(losses), net of tax, included in shareholders’ equity, which can
be significantly impacted by both discretionary and other economic
factors and are not necessarily indicative of operating trends.
Other companies may calculate these measures differently, and,
therefore, their measures may not be comparable to those used by
the Company’s management.
RECONCILIATION OF NET INCOME TO CORE INCOME AND CERTAIN OTHER
NON-GAAP MEASURES
Core income (loss) is consolidated net income (loss)
excluding the after-tax impact of net realized investment gains
(losses), discontinued operations, the effect of a change in tax
laws and tax rates at enactment, and cumulative effect of changes
in accounting principles when applicable. Segment income
(loss) is determined in the same manner as core income (loss)
on a segment basis. Management uses segment income (loss) to
analyze each segment’s performance and as a tool in making business
decisions. Financial statement users also consider core income
(loss) when analyzing the results and trends of insurance
companies. Core income (loss) per share is core income
(loss) on a per common share basis.
Reconciliation of Net Income
to Core Income less Preferred Dividends
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, after-tax)
2019
2018
2019
2018
Net income
$
557
$
524
$
1,353
$
1,193
Less: Net realized investment gains
(20
)
(30
)
(61
)
(21
)
Core income
$
537
$
494
$
1,292
$
1,172
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, pre-tax)
2019
2018
2019
2018
Net income
$
665
$
631
$
1,632
$
1,409
Less: Net realized investment gains
(25
)
(36
)
(78
)
(25
)
Core income
$
640
$
595
$
1,554
$
1,384
Twelve Months Ended December
31,
($ in millions, after-tax)
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Net income
$
2,523
$
2,056
$
3,014
$
3,439
$
3,692
$
3,673
$
2,473
$
1,426
$
3,216
$
3,622
$
2,924
$
4,601
$
4,208
$
1,622
Less: Loss from discontinued
operations
—
—
—
—
—
—
—
—
—
—
—
—
—
(439
)
Income from continuing
operations
2,523
2,056
3,014
3,439
3,692
3,673
2,473
1,426
3,216
3,622
2,924
4,601
4,208
2,061
Adjustments:
Net realized investment (gains) losses
(93
)
(142
)
(47
)
(2
)
(51
)
(106
)
(32
)
(36
)
(173
)
(22
)
271
(101
)
(8
)
(35
)
Impact of TCJA at enactment (1)
—
129
—
—
—
—
—
—
—
—
—
—
—
—
Core income
2,430
2,043
2,967
3,437
3,641
3,567
2,441
1,390
3,043
3,600
3,195
4,500
4,200
2,026
Less: Preferred dividends
—
—
—
—
—
—
—
1
3
3
4
4
5
6
Core income, less preferred
dividends
$
2,430
$
2,043
$
2,967
$
3,437
$
3,641
$
3,567
$
2,441
$
1,389
$
3,040
$
3,597
$
3,191
$
4,496
$
4,195
$
2,020
(1) Tax Cuts and Jobs Act of 2017 (TCJA)
Reconciliation of Net Income
per Share to Core Income per Share on a Basic and Diluted
Basis
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Basic income per
share
Net income
$
2.11
$
1.93
$
5.12
$
4.39
Adjustments:
Net realized investment gains,
after-tax
(0.07
)
(0.10
)
(0.23
)
(0.08
)
Core income
$
2.04
$
1.83
$
4.89
$
4.31
Diluted income
per share
Net income
$
2.10
$
1.92
$
5.08
$
4.35
Adjustments:
Net realized investment gains,
after-tax
(0.08
)
(0.11
)
(0.23
)
(0.08
)
Core income
$
2.02
$
1.81
$
4.85
$
4.27
Reconciliation of Segment Income (Loss)
to Total Core Income
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, after-tax)
2019
2018
2019
2018
Business Insurance
$
351
$
385
$
765
$
837
Bond & Specialty Insurance
174
204
312
377
Personal Insurance
88
(17
)
366
112
Total segment income
613
572
1,443
1,326
Interest Expense and Other
(76
)
(78
)
(151
)
(154
)
Total core income
$
537
$
494
$
1,292
$
1,172
RECONCILIATION OF SHAREHOLDERS’ EQUITY TO ADJUSTED
SHAREHOLDERS’ EQUITY AND CALCULATION OF RETURN ON EQUITY AND CORE
RETURN ON EQUITY
Adjusted shareholders’ equity is shareholders’ equity
excluding net unrealized investment gains (losses), net of tax,
included in shareholders’ equity, net realized investment gains
(losses), net of tax, for the period presented, the effect of a
change in tax laws and tax rates at enactment (excluding the
portion related to net unrealized investment gains (losses)),
preferred stock and discontinued operations.
Reconciliation of Shareholders’ Equity
to Adjusted Shareholders’ Equity
As of June 30,
($ in millions)
2019
2018
Shareholders’ equity
$
25,321
$
22,623
Adjustments:
Net unrealized investment (gains) losses,
net of tax, included in shareholders’ equity
(1,878
)
112
Net realized investment gains, net of
tax
(61
)
(21
)
Adjusted shareholders’ equity
$
23,382
$
22,714
As of December 31,
($ in millions)
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Shareholders’ equity
$
22,894
$
23,731
$
23,221
$
23,598
$
24,836
$
24,796
$
25,405
$
24,477
$
25,475
$
27,415
$
25,319
$
26,616
$
25,135
$
22,303
Adjustments:
Net unrealized investment (gains) losses,
net of tax, included in shareholders’ equity
113
(1,112
)
(730
)
(1,289
)
(1,966
)
(1,322
)
(3,103
)
(2,871
)
(1,859
)
(1,856
)
146
(620
)
(453
)
(327
)
Net realized investment (gains) losses,
net of tax
(93
)
(142
)
(47
)
(2
)
(51
)
(106
)
(32
)
(36
)
(173
)
(22
)
271
(101
)
(8
)
(35
)
Impact of TCJA at enactment
—
287
—
—
—
—
—
—
—
—
—
—
—
—
Preferred stock
—
—
—
—
—
—
—
—
(68
)
(79
)
(89
)
(112
)
(129
)
(153
)
Loss from discontinued operations
—
—
—
—
—
—
—
—
—
—
—
—
—
439
Adjusted shareholders’ equity
$
22,914
$
22,764
$
22,444
$
22,307
$
22,819
$
23,368
$
22,270
$
21,570
$
23,375
$
25,458
$
25,647
$
25,783
$
24,545
$
22,227
Return on equity is the ratio of annualized net income
(loss) less preferred dividends to average shareholders’ equity for
the periods presented. Core return on equity is the ratio of
annualized core income (loss) less preferred dividends to adjusted
average shareholders’ equity for the periods presented. In the
opinion of the Company’s management, these are important indicators
of how well management creates value for its shareholders through
its operating activities and its capital management.
Average shareholders’ equity is (a) the sum of total
shareholders’ equity excluding preferred stock at the beginning and
end of each of the quarters for the period presented divided by (b)
the number of quarters in the period presented times two.
Adjusted average shareholders’ equity is (a) the sum of
total adjusted shareholders’ equity at the beginning and end of
each of the quarters for the period presented divided by (b) the
number of quarters in the period presented times two.
Calculation of Return on
Equity and Core Return on Equity
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, after-tax)
2019
2018
2019
2018
Annualized net income
$
2,226
$
2,094
$
2,706
$
2,385
Average shareholders’ equity
24,831
22,801
24,224
23,078
Return on equity
9.0
%
9.2
%
11.2
%
10.3
%
Annualized core income
$
2,147
$
1,978
$
2,583
$
2,344
Adjusted average shareholders’ equity
23,378
22,776
23,264
22,757
Core return on equity
9.2
%
8.7
%
11.1
%
10.3
%
Average annual core return on equity over a period is the
ratio of:
a) the sum of core income less preferred dividends for the
periods presented to b) the sum of: 1) the sum of the adjusted
average shareholders’ equity for all full years in the period
presented, and 2) for partial years in the period presented, the
number of quarters in that partial year divided by four, multiplied
by the adjusted average shareholders’ equity of the partial
year.
Calculation of Average Annual Core
Return on Equity from January 1, 2005 through June 30, 2019
Six Months Ended June
30,
Twelve Months Ended December
31,
($ in millions)
2019
2018
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Core income, less preferred dividends
$
1,292
$
1,172
$
2,430
$
2,043
$
2,967
$
3,437
$
3,641
$
3,567
$
2,441
$
1,389
$
3,040
$
3,597
$
3,191
$
4,496
$
4,195
$
2,020
Annualized core income
2,583
2,344
Adjusted average shareholders’ equity
23,264
22,757
22,814
22,743
22,386
22,681
23,447
23,004
22,158
22,806
24,285
25,777
25,668
25,350
23,381
21,118
Core return on equity
11.1
%
10.3
%
10.7
%
9.0
%
13.3
%
15.2
%
15.5
%
15.5
%
11.0
%
6.1
%
12.5
%
14.0
%
12.4
%
17.7
%
17.9
%
9.6
%
Average annual core return on equity
for the period Jan. 1, 2005 through June 30, 2019
12.9
%
RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN
ITEMS TO NET INCOME
Underwriting gain (loss) is net earned premiums and fee
income less claims and claim adjustment expenses and
insurance-related expenses. In the opinion of the Company’s
management, it is important to measure the profitability of each
segment excluding the results of investing activities, which are
managed separately from the insurance business. This measure is
used to assess each segment’s business performance and as a tool in
making business decisions. Pre-tax underwriting gain,
excluding the impact of catastrophes and net favorable
(unfavorable) prior year loss reserve development, is the
underwriting gain adjusted to exclude claims and claim adjustment
expenses, reinstatement premiums and assessments related to
catastrophes and loss reserve development related to time periods
prior to the current year. In the opinion of the Company’s
management, this measure is meaningful to users of the financial
statements to understand the Company’s periodic earnings and the
variability of earnings caused by the unpredictable nature (i.e.,
the timing and amount) of catastrophes and loss reserve
development. This measure is also referred to as underlying
underwriting margin or underlying underwriting gain.
A catastrophe is a severe loss designated a catastrophe
by internationally recognized organizations that track and report
on insured losses resulting from catastrophic events, such as
Property Claim Services (PCS) for events in the United States and
Canada. Catastrophes can be caused by various natural events,
including, among others, hurricanes, tornadoes and other
windstorms, earthquakes, hail, wildfires, severe winter weather,
floods, tsunamis, volcanic eruptions and other naturally occurring
events, such as solar flares. Catastrophes can also be man-made,
such as terrorist attacks and other intentionally destructive acts
including those involving nuclear, biological, chemical and
radiological events, cyber events, explosions and destruction of
infrastructure. Each catastrophe has unique characteristics and
catastrophes are not predictable as to timing or amount. Their
effects are included in net and core income and claims and claim
adjustment expense reserves upon occurrence. A catastrophe may
result in the payment of reinsurance reinstatement premiums and
assessments from various pools.
The Company’s threshold for disclosing catastrophes is primarily
determined at the reportable segment level. If a threshold for one
segment or a combination thereof is exceeded and the other segments
have losses from the same event, losses from the event are
identified as catastrophe losses in the segment results and for the
consolidated results of the Company. Additionally, an aggregate
threshold is applied for international business across all
reportable segments. The threshold for 2019 ranges from
approximately $19 million to $30 million of losses before
reinsurance and taxes.
Net favorable (unfavorable) prior year loss reserve
development is the increase or decrease in incurred claims and
claim adjustment expenses as a result of the re-estimation of
claims and claim adjustment expense reserves at successive
valuation dates for a given group of claims, which may be related
to one or more prior years. In the opinion of the Company’s
management, a discussion of loss reserve development is meaningful
to users of the financial statements as it allows them to assess
the impact between prior and current year development on incurred
claims and claim adjustment expenses, net and core income (loss),
and changes in claims and claim adjustment expense reserve levels
from period to period.
Components of Net
Income
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, after-tax except as
noted)
2019
2018
2019
2018
Pre-tax underwriting gain excluding the
impact of catastrophes and net favorable prior year loss reserve
development
$
318
$
392
$
855
$
854
Pre-tax impact of catastrophes
(367
)
(488
)
(560
)
(842
)
Pre-tax impact of net favorable prior year
loss reserve development
123
186
174
336
Pre-tax underwriting gain
74
90
469
348
Income tax expense on underwriting
results
22
29
110
65
Underwriting gain
52
61
359
283
Net investment income
548
507
1,044
1,020
Other income (expense), including interest
expense
(63
)
(74
)
(111
)
(131
)
Core income
537
494
1,292
1,172
Net realized investment gains
20
30
61
21
Net income
$
557
$
524
$
1,353
$
1,193
COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED
RATIO
Combined ratio: For Statutory Accounting Practices (SAP),
the combined ratio is the sum of the SAP loss and LAE ratio and the
SAP underwriting expense ratio as defined in the statutory
financial statements required by insurance regulators. The combined
ratio, as used in this earnings release, is the equivalent of, and
is calculated in the same manner as, the SAP combined ratio except
that the SAP underwriting expense ratio is based on net written
premiums and the underwriting expense ratio as used in this
earnings release is based on net earned premiums.
For SAP, the loss and LAE ratio is the ratio of incurred losses
and loss adjustment expenses less certain administrative services
fee income to net earned premiums as defined in the statutory
financial statements required by insurance regulators. The loss and
LAE ratio as used in this earnings release is calculated in the
same manner as the SAP ratio.
For SAP, the underwriting expense ratio is the ratio of
underwriting expenses incurred (including commissions paid), less
certain administrative services fee income and billing and policy
fees and other, to net written premiums as defined in the statutory
financial statements required by insurance regulators. The
underwriting expense ratio as used in this earnings release, is the
ratio of underwriting expenses (including the amortization of
deferred acquisition costs), less certain administrative services
fee income, billing and policy fees and other, to net earned
premiums.
The combined ratio, loss and LAE ratio, and underwriting expense
ratio are used as indicators of the Company’s underwriting
discipline, efficiency in acquiring and servicing its business and
overall underwriting profitability. A combined ratio under 100%
generally indicates an underwriting profit. A combined ratio over
100% generally indicates an underwriting loss.
Underlying combined ratio represents the combined ratio
excluding the impact of net prior year reserve development and
catastrophes. The underlying combined ratio is an indicator of the
Company’s underwriting discipline and underwriting profitability
for the current accident year.
Other companies’ method of computing similarly titled measures
may not be comparable to the Company’s method of computing these
ratios.
Calculation of the Combined
Ratio
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, pre-tax)
2019
2018
2019
2018
Loss and loss
adjustment expense ratio
Claims and claim adjustment expenses
$
4,821
$
4,562
$
9,263
$
8,858
Less:
Policyholder dividends
9
12
22
25
Allocated fee income
45
40
85
77
Loss ratio numerator
$
4,767
$
4,510
$
9,156
$
8,756
Underwriting
expense ratio
Amortization of deferred acquisition
costs
$
1,134
$
1,081
$
2,251
$
2,142
General and administrative expenses
(G&A)
1,125
1,113
2,182
2,175
Less:
Non-insurance G&A
50
39
97
76
Allocated fee income
71
72
140
138
Billing and policy fees and other
26
22
53
45
Expense ratio numerator
$
2,112
$
2,061
$
4,143
$
4,058
Earned premium
$
6,988
$
6,695
$
13,843
$
13,232
Combined ratio (1)
Loss and loss adjustment expense ratio
68.2
%
67.4
%
66.2
%
66.2
%
Underwriting expense ratio
30.2
%
30.7
%
29.9
%
30.6
%
Combined ratio
98.4
%
98.1
%
96.1
%
96.8
%
(1) For purposes of computing ratios, billing and policy fees
and other (which are a component of other revenues) are allocated
as a reduction of underwriting expenses. In addition, fee income is
allocated as a reduction of losses and loss adjustment expenses and
underwriting expenses. In addition, G&A include non-insurance
expenses that are excluded from underwriting expenses, and
accordingly are excluded in calculating the combined ratio.
RECONCILIATION OF BOOK VALUE PER SHARE AND SHAREHOLDERS’
EQUITY TO CERTAIN NON-GAAP MEASURES
Book value per share is total common shareholders’ equity
divided by the number of common shares outstanding. Adjusted
book value per share is total common shareholders’ equity
excluding net unrealized investment gains and losses, net of tax,
included in shareholders’ equity, divided by the number of common
shares outstanding. In the opinion of the Company’s management,
adjusted book value per share is useful in an analysis of a
property casualty company’s book value per share as it removes the
effect of changing prices on invested assets (i.e., net unrealized
investment gains (losses), net of tax), which do not have an
equivalent impact on unpaid claims and claim adjustment expense
reserves. Tangible book value per share is adjusted book
value per share excluding the after-tax value of goodwill and other
intangible assets divided by the number of common shares
outstanding. In the opinion of the Company’s management, tangible
book value per share is useful in an analysis of a property
casualty company’s book value on a nominal basis as it removes
certain effects of purchase accounting (i.e., goodwill and other
intangible assets), in addition to the effect of changing prices on
invested assets.
Reconciliation of
Shareholders’ Equity to Tangible Shareholders’ Equity, Excluding
Net Unrealized Investment Gains (Losses), Net of Tax
As of
($ in millions, except per share
amounts)
June 30, 2019
December 31, 2018
Shareholders’ equity
$
25,321
$
22,894
Less: Net unrealized investment gains
(losses), net of tax, included in shareholders’ equity
1,878
(113
)
Shareholders’ equity, excluding net
unrealized investment gains (losses), net of tax, included in
shareholders’ equity
23,443
23,007
Less:
Goodwill
3,943
3,937
Other intangible assets
335
345
Impact of deferred tax on other intangible
assets
(46
)
(44
)
Tangible shareholders’ equity
$
19,211
$
18,769
Common shares outstanding
260.3
263.6
Book value per share
$
97.26
$
86.84
Adjusted book value per share
90.05
87.27
Tangible book value per share
73.79
71.20
RECONCILIATION OF TOTAL CAPITALIZATION TO TOTAL
CAPITALIZATION EXCLUDING NET UNREALIZED INVESTMENT GAINS (LOSSES),
NET OF TAX
Total capitalization is the sum of total shareholders’
equity and debt. Debt-to-capital ratio excluding net unrealized
gain (loss) on investments, net of tax, included in shareholders’
equity, is the ratio of debt to total capitalization excluding
the after-tax impact of net unrealized investment gains and losses
included in shareholders’ equity. In the opinion of the Company’s
management, the debt-to-capital ratio is useful in an analysis of
the Company’s financial leverage.
As of
($ in millions)
June 30, 2019
December 31, 2018
Debt
$
6,558
$
6,564
Shareholders’ equity
25,321
22,894
Total capitalization
31,879
29,458
Less: Net unrealized investment gains
(losses), net of tax, included in shareholders’ equity
1,878
(113
)
Total capitalization excluding net
unrealized gain (loss) on investments, net of tax, included in
shareholders’ equity
$
30,001
$
29,571
Debt-to-capital ratio
20.6
%
22.3
%
Debt-to-capital ratio excluding net
unrealized investment gains (losses), net of tax, included in
shareholders’ equity
21.9
%
22.2
%
OTHER DEFINITIONS
Gross written premiums reflect the direct and assumed
contractually determined amounts charged to policyholders for the
effective period of the contract based on the terms and conditions
of the insurance contract. Net written premiums reflect
gross written premiums less premiums ceded to reinsurers.
For Business Insurance and Bond & Specialty Insurance,
retention is the amount of premium available for renewal
that was retained, excluding rate and exposure changes. For
Personal Insurance, retention is the ratio of the expected
number of renewal policies that will be retained throughout the
annual policy period to the number of available renewal base
policies. For all of the segments, renewal rate change
represents the estimated change in average premium on policies that
renew, excluding exposure changes. Exposure is the measure
of risk used in the pricing of an insurance product. The change in
exposure is the amount of change in premium on policies that renew
attributable to the change in portfolio risk. Renewal premium
change represents the estimated change in average premium on
policies that renew, including rate and exposure changes. New
business is the amount of written premium related to new
policyholders and additional products sold to existing
policyholders. These are operating statistics, which are in part
dependent on the use of estimates and are therefore subject to
change. For Business Insurance, retention, renewal premium change
and new business exclude National Accounts. For Bond &
Specialty Insurance, retention, renewal premium change and new
business exclude surety and other products that are generally sold
on a non-recurring, project specific basis.
Statutory capital and surplus represents the excess of an
insurance company’s admitted assets over its liabilities, including
loss reserves, as determined in accordance with statutory
accounting practices.
Holding company liquidity is the total funds available at
the holding company level to fund general corporate purposes,
primarily the payment of shareholder dividends and debt service.
These funds consist of total cash, short-term invested assets and
other readily marketable securities held by the holding
company.
For a glossary of other financial terms used in this press
release, we refer you to the Company’s most recent annual report on
Form 10-K filed with the SEC on February 14, 2019, and subsequent
periodic filings with the SEC.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190723005483/en/
Media: Patrick Linehan 917.778.6267
Institutional Investors: Abbe
Goldstein 917.778.6825
The Travelers Companies (NYSE:TRV)
Graphique Historique de l'Action
De Mar 2024 à Avr 2024
The Travelers Companies (NYSE:TRV)
Graphique Historique de l'Action
De Avr 2023 à Avr 2024