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Travelers Reports Second Quarter 2020 Net and Core Loss per Diluted Share of $0.16 and $0.20, Respectively

Company Release - 7/23/2020 6:57 AM ET

Provides Estimate of PG&E Subrogation Recoveries of Approximately $400 Million Pre-Tax to be Recognized in Third Quarter of 2020

  • Second quarter net loss of $40 million and core loss of $50 million.
  • Catastrophe losses of $854 million pre-tax, compared to $367 million pre-tax in the prior year quarter.
  • Net investment income of $268 million pre-tax, compared to $648 million pre-tax in the prior year quarter.
  • Consolidated combined ratio of 103.7%; underlying combined ratio improved 3.5 points to a strong 91.4%.
  • Net impact of COVID-19 and related economic conditions on underwriting results in the quarter was modest.
  • Net written premiums of $7.346 billion, down 1% compared to the prior year quarter; excluding personal automobile premium refunds, net written premiums increased 2%.
  • Strong renewal rate change in all three segments, including 7.4% in Business Insurance and a record level in Bond & Specialty Insurance.
  • Total capital returned to shareholders of $218 million; no share repurchases in the current quarter. Year-to-date total capital returned to shareholders of $899 million, including $471 million of share repurchases.
  • Book value per share of $106.42; adjusted book value per share of $92.01.
  • Board of Directors declares regular quarterly cash dividend of $0.85 per share.

NEW YORK--(BUSINESS WIRE)-- The Travelers Companies, Inc. today reported a net loss of $40 million, or $0.16 per diluted share, for the quarter ended June 30, 2020, compared to net income of $557 million, or $2.10 per diluted share, in the prior year quarter. The core loss in the current quarter was $50 million, or $0.20 per diluted share, compared to core income of $537 million, or $2.02 per diluted share, in the prior year quarter. The difference was primarily due to higher catastrophe losses, lower net investment income and lower net favorable prior year reserve development, partially offset by a higher underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses). COVID-19 and related economic conditions had a modest net impact on the underwriting result in the quarter. Net realized investment gains in the current quarter were $13 million pre-tax ($10 million after-tax), compared to net realized investment gains of $25 million pre-tax ($20 million after-tax) in the prior year quarter.

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,

 

 

2020

 

2019

 

Change

 

2020

 

2019

 

Change

 

Net written premiums

 

$

7,346

 

 

$

7,450

 

 

(1

)%

 

$

14,692

 

 

$

14,507

 

 

1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

7,401

 

 

$

7,834

 

 

(6

)

 

$

15,309

 

 

$

15,505

 

 

(1

)

 

Net income (loss)

 

$

(40

)

 

$

557

 

 

NM

 

 

$

560

 

 

$

1,353

 

 

(59

)

 

per diluted share

 

$

(0.16

)

 

$

2.10

 

 

NM

 

 

$

2.19

 

 

$

5.08

 

 

(57

)

 

Core income (loss)

 

$

(50

)

 

$

537

 

 

NM

 

 

$

626

 

 

$

1,292

 

 

(52

)

 

per diluted share

 

$

(0.20

)

 

$

2.02

 

 

NM

 

 

$

2.44

 

 

$

4.85

 

 

(50

)

 

Diluted weighted average shares outstanding

 

 

251.6

 

 

 

263.7

 

 

(5

)

 

 

254.7

 

 

 

264.2

 

 

(4

)

 

Combined ratio

 

 

103.7

%

 

 

98.4

%

 

5.3

 

pts

 

99.5

%

 

 

96.1

%

 

3.4

 

pts

Underlying combined ratio

 

 

91.4

%

 

 

94.9

%

 

(3.5

)

pts

 

91.3

%

 

 

93.3

%

 

(2.0

)

pts

Return on equity

 

 

(0.6

)%

 

 

9.0

%

 

(9.6

)

pts

 

4.3

%

 

 

11.2

%

 

(6.9

)

pts

Core return on equity

 

 

(0.8

)%

 

 

9.2

%

 

(10.0

)

pts

 

5.3

%

 

 

11.1

%

 

(5.8

)

pts

 

 

As of

 

Change From

 

 

June 30,
2020

 

December 31,
2019

 

June 30,
2019

 

December 31,
2019

 

June 30,
2019

Book value per share

 

$

106.42

 

$

101.55

 

$

97.26

 

5

%

 

9

%

Adjusted book value per share

 

 

92.01

 

 

92.76

 

 

90.05

 

(1

)%

 

2

%

 

See Glossary of Financial Measures for definitions and the statistical supplement for additional financial data. NM = Not meaningful.

“Our second quarter results reflect an improved underlying underwriting gain that was more than offset by a high level of catastrophe losses and, as expected, losses in our non-fixed income investment portfolio,” said Alan Schnitzer, Chairman and Chief Executive Officer. “Our underlying combined ratio improved by 3.5 points to a very strong 91.4%, with favorable contributions from both Business Insurance and Personal Insurance. The net impact of COVID-19 and related economic conditions on our underlying results was modest, reflecting a culture of disciplined underwriting and management of terms and conditions. Catastrophe losses this quarter were impacted by a relatively high frequency of PCS-designated catastrophe events. Results in our non-fixed income investment portfolio are reported on a lagged basis, and the losses we reported this quarter arose out of the disruption in global financial markets that took place in the first quarter.

“We were very pleased with our marketplace execution in the quarter, particularly in light of the challenging economic environment. Net written premiums declined just slightly, as the impact of the pandemic on insured exposures in our commercial businesses and our auto refund program in Personal Insurance were largely offset by strong renewal rate change in all three segments. Excluding the auto premium refunds, we grew net written premiums by 2%. In Business Insurance, we achieved renewal rate change of 7.4%, nearly 4 points higher than the prior year quarter and its highest level since 2013, while retention remained strong. In Bond & Specialty Insurance, net written premiums increased by 3% as our domestic management liability business achieved renewal premium change of 7.8%, including record renewal rate change, while retention remained strong. In Personal Insurance, net written premiums decreased by 1%. Excluding the auto premium refunds, net written premiums increased by 6%, driven by strong retention and new business in both Agency Auto and Agency Homeowners. In our Agency Homeowners business, renewal premium change remained very strong at 7.7%.

“Investments we have made over recent years as part of our innovation agenda to put digital tools in the hands of our colleagues, customers and distribution partners have proven particularly valuable as we effectively manage our business through the pandemic. We will continue to invest to advance our innovation priorities and ensure that those capabilities and our other competitive advantages remain relevant and differentiating.

“Our steady performance through these difficult times demonstrates the value of underwriting excellence and the strength and resilience of our franchise. With a strong balance sheet, our proven ability to execute on our marketplace strategies and the best talent in the industry, we remain well positioned to continue to deliver meaningful shareholder value over time.”

Consolidated Results

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

($ in millions and pre-tax, unless noted otherwise)

 

2020

 

2019

 

Change

 

2020

 

2019

 

Change

 

Underwriting gain (loss):

 

$

(280

)

 

$

74

 

 

$

(354

)

 

$

8

 

 

$

469

 

 

$

(461

)

 

Underwriting gain (loss) includes:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net favorable prior year reserve development

 

 

2

 

 

 

123

 

 

 

(121

)

 

 

29

 

 

 

174

 

 

 

(145

)

 

Catastrophes, net of reinsurance

 

 

(854

)

 

 

(367

)

 

 

(487

)

 

 

(1,187

)

 

 

(560

)

 

 

(627

)

 

Net investment income

 

 

268

 

 

 

648

 

 

 

(380

)

 

 

879

 

 

 

1,230

 

 

 

(351

)

 

Other income (expense), including interest expense

 

 

(86

)

 

 

(82

)

 

 

(4

)

 

 

(167

)

 

 

(145

)

 

 

(22

)

 

Core income (loss) before income taxes

 

 

(98

)

 

 

640

 

 

 

(738

)

 

 

720

 

 

 

1,554

 

 

 

(834

)

 

Income tax expense (benefit)

 

 

(48

)

 

 

103

 

 

 

(151

)

 

 

94

 

 

 

262

 

 

 

(168

)

 

Core income (loss)

 

 

(50

)

 

 

537

 

 

 

(587

)

 

 

626

 

 

 

1,292

 

 

 

(666

)

 

Net realized investment gains (losses) after income taxes

 

 

10

 

 

 

20

 

 

 

(10

)

 

 

(66

)

 

 

61

 

 

 

(127

)

 

Net income (loss)

 

$

(40

)

 

$

557

 

 

$

(597

)

 

$

560

 

 

$

1,353

 

 

$

(793

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Combined ratio

 

 

103.7

%

 

 

98.4

%

 

 

5.3

 

pts

 

99.5

%

 

 

96.1

%

 

 

3.4

 

pts

Impact on combined ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

Net favorable prior year reserve development

 

 

 

pts

 

(1.8

)

pts

 

1.8

 

pts

 

(0.2

)

pts

 

(1.3

)

pts

 

1.1

 

pts

Catastrophes, net of reinsurance

 

 

12.3

 

pts

 

5.3

 

pts

 

7.0

 

pts

 

8.4

 

pts

 

4.1

 

pts

 

4.3

 

pts

Underlying combined ratio

 

 

91.4

%

 

 

94.9

%

 

 

(3.5

)

pts

 

91.3

%

 

 

93.3

%

 

 

(2.0

)

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Insurance

 

$

3,777

 

 

$

3,874

 

 

 

(3

)%

 

$

7,967

 

 

$

8,037

 

 

 

(1

)%

 

Bond & Specialty Insurance

 

 

734

 

 

 

710

 

 

 

3

 

 

 

1,397

 

 

 

1,297

 

 

 

8

 

 

Personal Insurance

 

 

2,835

 

 

 

2,866

 

 

 

(1

)

 

 

5,328

 

 

 

5,173

 

 

 

3

 

 

Total

 

$

7,346

 

 

$

7,450

 

 

 

(1

)%

 

$

14,692

 

 

$

14,507

 

 

 

1

%

 

Second Quarter 2020 Results
(All comparisons vs. second quarter 2019, unless noted otherwise)

The Company reported a net loss of $40 million compared to net income of $557 million in the prior year quarter. The net loss was due to a core loss, partially offset by net realized investment gains. The core loss of $50 million decreased from core income of $537 million in the prior year quarter, primarily due to higher catastrophe losses, lower net investment income and lower net favorable prior year reserve development, partially offset by a higher underlying underwriting gain. The net impact of COVID-19 and related economic conditions on the underlying underwriting gain in the quarter was modest. Net realized investment gains were $13 million pre-tax ($10 million after-tax) compared to $25 million pre-tax ($20 million after-tax) in the prior year quarter.

Combined ratio:

  • The combined ratio of 103.7% increased 5.3 points due to higher catastrophe losses (7.0 points) and lower net favorable prior year reserve development (1.8 points), partially offset by a lower underlying combined ratio (3.5 points).
  • The underlying combined ratio of 91.4% decreased 3.5 points. See below for further details by segment.
  • Net favorable prior year reserve development in Personal Insurance was largely offset by net unfavorable prior year reserve development in Bond & Specialty Insurance. There was no net prior year reserve development in Business Insurance. Catastrophe losses primarily resulted from severe storms in several regions of the United States and civil unrest.

Net investment income of $268 million pre-tax ($251 million after-tax) decreased 59%. Income from the fixed income investment portfolio decreased from the prior year quarter, primarily due to lower long-term interest rates, partially offset by a higher average level of fixed maturity investments. The non-fixed income investment portfolio had a loss of $234 million pre-tax ($180 million after-tax), compared to income of $118 million pre-tax ($95 million after-tax) in the prior year quarter. Non-fixed income returns are generally reported on a one-quarter lagged basis and directionally follow the broader equity markets. Accordingly, the loss in the non-fixed income investment portfolio is related to the disruption in global financial markets during the first quarter of 2020 associated with COVID-19. Based on its composition, the Company’s non-fixed income investment portfolio declined less than the broader equity markets in the first quarter of 2020.

Net written premiums of $7.346 billion decreased 1%. Excluding premium refunds provided to personal automobile customers in response to COVID-19 and related economic conditions, net written premiums increased 2%. See below for further details by segment.

Year-to-Date 2020 Results
(All comparisons vs. year-to-date 2019, unless noted otherwise)

Net income of $560 million decreased $793 million due to lower core income and net realized investment losses in the current period compared to net realized investment gains in the prior year period. Core income of $626 million decreased by $666 million, primarily due to higher catastrophe losses, lower net investment income and lower net favorable prior year reserve development, partially offset by a higher underlying underwriting gain. The underlying underwriting gain benefited from higher business volumes and a lower underlying combined ratio. Net realized investment losses were $85 million pre-tax ($66 million after-tax), compared to net realized investment gains of $78 million pre-tax ($61 million after-tax) in the prior year period. Net realized investment losses in the current period included the mark-to-market impact on the Company’s equity investments related to the volatility in global financial markets in the first six months of 2020.

Combined ratio:

  • The combined ratio of 99.5% increased 3.4 points due to higher catastrophe losses (4.3 points) and lower net favorable prior year reserve development (1.1 points), partially offset by a lower underlying combined ratio (2.0 points).
  • The underlying combined ratio of 91.3% decreased 2.0 points. See below for further details by segment.
  • Net favorable prior year reserve development in Personal Insurance and Business Insurance was partially offset by net unfavorable prior year reserve development in Bond & Specialty Insurance. Catastrophe losses included the second quarter events described above, as well as tornado activity in Tennessee and other wind storms and winter storms in several regions of the United States in the first quarter of 2020.

Net investment income of $879 million pre-tax ($770 million after-tax) decreased 29%. Income from the fixed income investment portfolio decreased from the prior year period, primarily due to lower long-term interest rates, partially offset by a higher average level of fixed maturity investments. The non-fixed income investment portfolio had a loss of $146 million pre-tax ($109 million after-tax), compared to income of $171 million pre-tax ($138 million after-tax) in the prior year period. The loss from these investments reflected the impact of the disruption in global financial markets in the first quarter of 2020 associated with COVID-19.

Net written premiums of $14.692 billion increased 1%. Excluding premium refunds provided to personal automobile customers in response to COVID-19 and related economic conditions, net written premiums increased 3%. See below for further details by segment.

Shareholders’ Equity

Shareholders’ equity of $26.943 billion increased 4% over year-end 2019, primarily due to higher net unrealized investment gains resulting from lower interest rates, partially offset by the impact of changes in foreign currency exchange rates. Net unrealized investment gains included in shareholders’ equity were $4.634 billion pre-tax ($3.646 billion after-tax), compared to net unrealized investment gains of $2.853 billion pre-tax ($2.246 billion after-tax) at year-end 2019. Book value per share of $106.42 increased 5% over year-end 2019, also primarily due to the impact of lower interest rates on net unrealized investment gains, partially offset by changes in foreign currency exchange rates. Adjusted book value per share of $92.01, which excludes net unrealized investment gains, was 1% lower than year-end 2019. Book value per share and adjusted book value per share both included an adverse impact of $0.76 per share due to net unrealized losses resulting from foreign currency translation.

The Company did not repurchase any shares during the second quarter under its share repurchase authorization. Capacity remaining under the existing share repurchase authorization was $1.361 billion at the end of the quarter. Also at the end of the quarter, statutory capital and surplus was $20.607 billion, and the ratio of debt-to-capital was 20.7%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains included in shareholders’ equity was 23.2%, within the Company’s target range of 15% to 25%.

The Board of Directors declared a regular quarterly dividend of $0.85 per share. The dividend is payable on September 30, 2020, to shareholders of record at the close of business on September 10, 2020.

PG&E Subrogation Recoveries

In connection with the emergence of PG&E Corporation and Pacific Gas and Electric Company (together “PG&E”) from bankruptcy on July 1, 2020, the Company expects to recognize in the third quarter of 2020 favorable prior year reserve development of approximately $400 million, pre-tax and net of expenses and reinsurance, related to the 2017 and 2018 wildfires in California.

Business Insurance Segment Financial Results

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

($ in millions and pre-tax, unless noted otherwise)

 

2020

 

2019

 

Change

 

2020

 

2019

 

Change

 

Underwriting gain (loss):

 

$

(273

)

 

$

(55

)

 

$

(218

)

 

$

(372

)

 

$

2

 

 

$

(374

)

 

Underwriting gain (loss) includes:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net favorable prior year reserve development

 

 

 

 

 

71

 

 

 

(71

)

 

 

5

 

 

 

50

 

 

 

(45

)

 

Catastrophes, net of reinsurance

 

 

(377

)

 

 

(211

)

 

 

(166

)

 

 

(572

)

 

 

(306

)

 

 

(266

)

 

Net investment income

 

 

180

 

 

 

481

 

 

 

(301

)

 

 

633

 

 

 

908

 

 

 

(275

)

 

Other income (expense)

 

 

(6

)

 

 

(11

)

 

 

5

 

 

 

(22

)

 

 

(6

)

 

 

(16

)

 

Segment income (loss) before income taxes

 

 

(99

)

 

 

415

 

 

 

(514

)

 

 

239

 

 

 

904

 

 

 

(665

)

 

Income tax expense (benefit)

 

 

(41

)

 

 

64

 

 

 

(105

)

 

 

8

 

 

 

139

 

 

 

(131

)

 

Segment income (loss)

 

$

(58

)

 

$

351

 

 

$

(409

)

 

$

231

 

 

$

765

 

 

$

(534

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Combined ratio

 

 

107.1

%

 

 

101.1

%

 

 

6.0

 

pts

 

104.6

%

 

 

99.6

%

 

 

5.0

 

pts

Impact on combined ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

Net favorable prior year reserve development

 

 

 

pts

 

(1.9

)

pts

 

1.9

 

pts

 

 

pts

 

(0.7

)

pts

 

0.7

 

pts

Catastrophes, net of reinsurance

 

 

10.1

 

pts

 

5.6

 

pts

 

4.5

 

pts

 

7.5

 

pts

 

4.1

 

pts

 

3.4

 

pts

Underlying combined ratio

 

 

97.0

%

 

 

97.4

%

 

 

(0.4

)

pts

 

97.1

%

 

 

96.2

%

 

 

0.9

 

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums by market

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

 

 

 

 

 

 

 

 

 

 

 

 

Select Accounts

 

$

734

 

 

$

756

 

 

 

(3

)%

 

$

1,533

 

 

$

1,541

 

 

 

(1

)%

 

Middle Market

 

 

1,960

 

 

 

2,009

 

 

 

(2

)

 

 

4,368

 

 

 

4,419

 

 

 

(1

)

 

National Accounts

 

 

215

 

 

 

223

 

 

 

(4

)

 

 

516

 

 

 

527

 

 

 

(2

)

 

National Property and Other

 

 

585

 

 

 

588

 

 

 

(1

)

 

 

1,013

 

 

 

975

 

 

 

4

 

 

Total Domestic

 

 

3,494

 

 

 

3,576

 

 

 

(2

)

 

 

7,430

 

 

 

7,462

 

 

 

 

 

International

 

 

283

 

 

 

298

 

 

 

(5

)

 

 

537

 

 

 

575

 

 

 

(7

)

 

Total

 

$

3,777

 

 

$

3,874

 

 

 

(3

)%

 

$

7,967

 

 

$

8,037

 

 

 

(1

)%

 

Second Quarter 2020 Results
(All comparisons vs. second quarter 2019, unless noted otherwise)

The segment loss for Business Insurance was $58 million after-tax, compared with segment income of $351 million after-tax in the prior year quarter. The difference was primarily due to lower net investment income, higher catastrophe losses and no net prior year reserve development compared with net favorable prior year reserve development in the prior year quarter, partially offset by a higher underlying underwriting gain.

Combined ratio:

  • The combined ratio of 107.1% increased 6.0 points due to higher catastrophe losses (4.5 points) and no net prior year reserve development compared with net favorable prior year reserve development in the prior year quarter (1.9 points), partially offset by a lower underlying combined ratio (0.4 points).
  • The underlying combined ratio of 97.0% improved by 0.4 points, reflecting a 0.2 point improvement in each of the underlying loss ratio and expense ratio. The net impact of COVID-19 and related economic conditions was modest.
  • There was no net prior year reserve development in the current quarter, which reflected the following:

Workers’ compensation - better than expected loss experience in the segment’s domestic operations for multiple accident years; and

Commercial property - better than expected loss experience in the segment’s domestic operations for multiple accident years.

Offset by:

General liability (excluding asbestos and environmental) - higher than expected loss experience in the segment’s domestic operations for primary and excess coverages for multiple accident years; and

Commercial multi-peril - higher than expected loss experience in the segment’s domestic operations for recent accident years.

Net written premiums of $3.777 billion decreased 3%. The benefits of continued strong retention and higher renewal rate changes were more than offset by reduced exposures and a decrease in new business volume, both impacted by COVID-19 and related economic conditions.

Year-to-Date 2020 Results
(All comparisons vs. year-to-date 2019, unless noted otherwise)

Segment income for Business Insurance was $231 million after-tax, a decrease of $534 million. Segment income decreased primarily due to lower net investment income, higher catastrophe losses, a lower underlying underwriting gain and lower net favorable prior year reserve development.

Combined ratio:

  • The combined ratio of 104.6% increased 5.0 points due to higher catastrophe losses (3.4 points), a higher underlying combined ratio (0.9 points) and lower net favorable prior year reserve development (0.7 points).
  • The underlying combined ratio of 97.1% increased 0.9 points, primarily due to net charges associated with COVID-19 and related economic conditions.
  • Net favorable prior year reserve development was primarily driven by the following:

Workers’ compensation - better than expected loss experience in the segment’s domestic operations for multiple accident years; and

Commercial property - better than expected loss experience in the segment’s domestic operations for multiple accident years.

Largely offset by:

Commercial automobile - higher than expected loss experience in the segment’s domestic operations for recent accident years;

General liability (excluding asbestos and environmental) - higher than expected loss experience in the segment’s domestic operations for primary and excess coverages for multiple accident years; and

Commercial multi-peril - higher than expected loss experience in the segment’s domestic operations for recent accident years.

Net written premiums of $7.967 billion decreased 1%, driven by the same factors described above for the second quarter of 2020.

Bond & Specialty Insurance Segment Financial Results

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

($ in millions and pre-tax, unless noted otherwise)

2020

 

2019

 

Change

 

2020

 

2019

 

Change

 

Underwriting gain:

$

40

 

 

$

157

 

 

$

(117

)

 

$

132

 

 

$

269

 

 

$

(137

)

 

Underwriting gain includes:

 

 

 

 

 

 

 

 

 

 

 

 

Net favorable (unfavorable) prior year reserve development

 

(33

)

 

 

39

 

 

 

(72

)

 

 

(33

)

 

 

42

 

 

 

(75

)

 

Catastrophes, net of reinsurance

 

(7

)

 

 

 

 

 

(7

)

 

 

(8

)

 

 

(3

)

 

 

(5

)

 

Net investment income

 

42

 

 

 

58

 

 

 

(16

)

 

 

97

 

 

 

114

 

 

 

(17

)

 

Other income

 

4

 

 

 

5

 

 

 

(1

)

 

 

8

 

 

 

10

 

 

 

(2

)

 

Segment income before income taxes

 

86

 

 

 

220

 

 

 

(134

)

 

 

237

 

 

 

393

 

 

 

(156

)

 

Income tax expense

 

14

 

 

 

46

 

 

 

(32

)

 

 

43

 

 

 

81

 

 

 

(38

)

 

Segment income

$

72

 

 

$

174

 

 

$

(102

)

 

$

194

 

 

$

312

 

 

$

(118

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Combined ratio

 

93.8

%

 

 

74.9

%

 

 

18.9

 

pts

 

89.9

%

 

 

77.9

%

 

 

12.0

 

pts

Impact on combined ratio

 

 

 

 

 

 

 

 

 

 

 

 

Net (favorable) unfavorable prior year reserve development

 

4.7

 

pts

 

(6.2

)

pts

 

10.9

 

pts

 

2.4

 

pts

 

(3.4

)

pts

 

5.8

 

pts

Catastrophes, net of reinsurance

 

1.0

 

pts

 

0.1

 

pts

 

0.9

 

pts

 

0.6

 

pts

 

0.2

 

pts

 

0.4

 

pts

Underlying combined ratio

 

88.1

%

 

 

81.0

%

 

 

7.1

 

pts

 

86.9

%

 

 

81.1

%

 

 

5.8

 

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

 

 

 

 

 

 

 

 

 

 

 

Management Liability

$

438

 

 

$

403

 

 

 

9

%

 

$

839

 

 

$

770

 

 

 

9

%

 

Surety

 

220

 

 

 

244

 

 

 

(10

)

 

 

435

 

 

 

428

 

 

 

2

 

 

Total Domestic

 

658

 

 

 

647

 

 

 

2

 

 

 

1,274

 

 

 

1,198

 

 

 

6

 

 

International

 

76

 

 

 

63

 

 

 

21

 

 

 

123

 

 

 

99

 

 

 

24

 

 

Total

$

734

 

 

$

710

 

 

 

3

%

 

$

1,397

 

 

$

1,297

 

 

 

8

%

 

Second Quarter 2020 Results
(All comparisons vs. second quarter 2019, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $72 million after-tax, a decrease of $102 million. Segment income decreased primarily due to net unfavorable prior year reserve development compared to net favorable prior year reserve development in the prior year quarter, a lower underlying underwriting gain and lower net investment income. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

  • The combined ratio of 93.8% increased 18.9 points due to net unfavorable prior year reserve development compared to net favorable prior year reserve development in the prior year quarter (10.9 points), a higher underlying combined ratio (7.1 points) and higher catastrophe losses (0.9 points).
  • The underlying combined ratio of 88.1% increased 7.1 points, primarily driven by the impacts of higher loss estimates for management liability coverages, including the impact of COVID-19 and related economic conditions.
  • Net unfavorable prior year reserve development was driven by higher than expected loss experience in the domestic general liability product line for management liability coverages for recent accident years.

Net written premiums of $734 million increased 3%, reflecting continued strong retention and increased levels of renewal premium change in management liability.

Year-to-Date 2020 Results
(All comparisons vs. year-to-date 2019, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $194 million after-tax, a decrease of $118 million. Segment income decreased primarily due to net unfavorable prior year reserve development compared to net favorable prior year reserve development in the prior year period, a lower underlying underwriting gain and lower net investment income. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

  • The combined ratio of 89.9% increased 12.0 points due to net unfavorable prior year reserve development compared to net favorable prior year reserve development in the prior year period (5.8 points), a higher underlying combined ratio (5.8 points) and higher catastrophe losses (0.4 points).
  • The underlying combined ratio of 86.9% increased 5.8 points, primarily driven by the impacts of higher loss estimates for management liability coverages, including the impact of COVID-19 and related economic conditions.
  • Net unfavorable prior year reserve development was driven by higher than expected loss experience in the domestic general liability product line for management liability coverages for recent accident years.

Net written premiums of $1.397 billion increased 8%, reflecting continued strong retention, increased levels of renewal premium change and strong new business in management liability.

Personal Insurance Segment Financial Results

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

($ in millions and pre-tax, unless noted otherwise)

2020

 

2019

 

Change

 

2020

 

2019

 

Change

 

Underwriting gain (loss):

$

(47

)

 

$

(28

)

 

$

(19

)

 

$

248

 

 

$

198

 

 

$

50

 

 

Underwriting gain (loss) includes:

 

 

 

 

 

 

 

 

 

 

 

 

Net favorable prior year reserve development

 

35

 

 

 

13

 

 

 

22

 

 

 

57

 

 

 

82

 

 

 

(25

)

 

Catastrophes, net of reinsurance

 

(470

)

 

 

(156

)

 

 

(314

)

 

 

(607

)

 

 

(251

)

 

 

(356

)

 

Net investment income

 

46

 

 

 

109

 

 

 

(63

)

 

 

149

 

 

 

208

 

 

 

(59

)

 

Other income

 

10

 

 

 

21

 

 

 

(11

)

 

 

32

 

 

 

43

 

 

 

(11

)

 

Segment income before income taxes

 

9

 

 

 

102

 

 

 

(93

)

 

 

429

 

 

 

449

 

 

 

(20

)

 

Income tax expense (benefit)

 

(1

)

 

 

14

 

 

 

(15

)

 

 

83

 

 

 

83

 

 

 

 

 

Segment income

$

10

 

 

$

88

 

 

$

(78

)

 

$

346

 

 

$

366

 

 

$

(20

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Combined ratio

 

101.3

%

 

 

100.2

%

 

 

1.1

 

pts

 

94.5

%

 

 

95.2

%

 

 

(0.7

)

pts

Impact on combined ratio

 

 

 

 

 

 

 

 

 

 

 

 

Net favorable prior year reserve development

 

(1.3

)

pts

 

(0.5

)

pts

 

(0.8

)

pts

 

(1.1

)

pts

 

(1.6

)

pts

 

0.5

 

pts

Catastrophes, net of reinsurance

 

18.6

 

pts

 

6.1

 

pts

 

12.5

 

pts

 

11.6

 

pts

 

4.9

 

pts

 

6.7

 

pts

Underlying combined ratio

 

84.0

%

 

 

94.6

%

 

 

(10.6

)

pts

 

84.0

%

 

 

91.9

%

 

 

(7.9

)

pts

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

 

 

 

 

 

 

 

 

 

 

 

Agency (1)

 

 

 

 

 

 

 

 

 

 

 

 

Automobile

$

1,141

 

 

$

1,300

 

 

 

(12

)%

 

$

2,401

 

 

$

2,524

 

 

 

(5

)%

 

Homeowners and Other

 

1,419

 

 

 

1,258

 

 

 

13

 

 

 

2,409

 

 

 

2,095

 

 

 

15

 

 

Total Agency