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Travelers Reports Second Quarter 2019 Net Income per Diluted Share of $2.10, up 9%, and Return on Equity of 9.0%

Company Release - 7/23/2019 6:57 AM ET

Second Quarter 2019 Core Incomeper 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.

NEW YORK--(BUSINESS WIRE)-- 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.