HARTFORD, Conn.--(BUSINESS WIRE)--Jan. 28, 2004--
Diluted Net Income Per Share Was $0.49 Compared To
A Loss of $0.79 In 2002 Quarter; Net Income For Full Year 2003 Was
$1.696 Billion Or $1.68 Per Share, Diluted
Travelers Property Casualty Corp. (NYSE: TAP.A) (NYSE: TAP.B)
today reported net income for the fourth quarter of $488.7 million, or
$0.49 per share, basic and diluted, compared to a net loss of $793.4
million, or $0.79 per share, basic and diluted, in the prior year
quarter. The prior year quarter included a net charge of $1.297
billion to strengthen asbestos reserves.
Record Quarter For Operating And Net Income
-- Achieved record operating income of $463.3 million, which
included substantial strengthening of prior year reserves, due
to continued strong current accident year results for
Commercial Lines and record operating income for Personal
Lines. The consolidated combined ratio improved to 96.2%.
-- Maintained a high level of profitability with operating return
on equity of 17.4%.
-- Recorded a consolidated underwriting gain of $343.7 million,
before catastrophes and prior year reserve development, a
$269.8 million increase over the prior year quarter.
-- Grew consolidated net written premiums by 11% to $3.389
billion on strong growth in both Commercial and Personal
Lines.
-- Agreed to merge with The St. Paul Companies, combining two
leaders in the property casualty industry and creating a
broad-based, property casualty company with enhanced growth
opportunities.
"We had another strong quarter, achieving a level of profitability
that is historically among the top tier in our industry," said Robert
I. Lipp, Chairman and Chief Executive Officer. "We are very pleased
with our new business volumes and continue to benefit from the
positive rate environment.
"We also made excellent progress in preparing for the integration
of our businesses with those of The St. Paul and are on track to
complete the merger during the second quarter. We have identified a
strong management team at both the senior and field levels, are well
down the road in analyzing systems integration needs, and are
proceeding as planned in our regulatory submissions and reviews," said
Mr. Lipp.
Fourth Quarter Consolidated Results
----------------------------------------------------------------------
(for the quarter ended December 31, in
millions, after tax) 2003 2002 Change
------- --------- ---------
Consolidated underwriting gain,
before catastrophes and prior year
reserve development $343.7 $73.9 $269.8
Catastrophes (30.2) (18.9) (11.3)
Prior year reserve development - benefit
/ (charge):
Asbestos (1) - (1,296.8) 1,296.8
All other (203.5) (34.5) (169.0)
Accretion of discount (11.7) (7.3) (4.4)
------- --------- ---------
Underwriting gain (loss) 98.3 (1,283.6) 1,381.9
Net investment income 378.9 363.1 15.8
Other, including interest expense
and minority interest (13.9) (4.8) (9.1)
------- --------- ---------
Consolidated operating income (loss) 463.3 (925.3) 1,388.6
Net realized investment gains 25.4 131.9 (106.5)
------- --------- ---------
Consolidated net income (loss) $488.7 $(793.4) $1,282.1
======= ========= =========
(1) Net of benefit of $360.7 million in 4Q02 related to asbestos
incurrals subject to the Citigroup indemnification agreement.
Note: See Glossary of Financial Measures on page 11.
----------------------------------------------------------------------
Consolidated operating income for the quarter was $463.3 million
compared to an operating loss of $925.3 million in the prior year
quarter that resulted from a $1.297 billion net reserve charge for
asbestos. (See Prior Year Reserve Development below.) The difference
between net and operating income (loss) in the current and prior year
quarters is the inclusion in net income (loss) of net realized
investment gains and losses.
The consolidated underwriting gain component of operating income,
before catastrophes and prior year reserve development, increased
$269.8 million to $343.7 million, after tax, primarily due to the
favorable rate environment and a decline in non-catastrophe-related
property loss frequency in both Commercial and Personal Lines.
Catastrophe losses were $30.2 million, principally due to the impact
on Personal Lines of the California wildfires and wind and storms in
the Northeast and Midwest, compared to $18.9 million in the prior year
quarter. The current quarter also included a charge for
non-asbestos-related prior year reserve development of $203.5 million
compared to $34.5 million in the prior year quarter. (See Prior Year
Reserve Development below).
Net investment income, after tax, increased $15.8 million to
$378.9 million compared to $363.1 million in the prior year quarter.
This increase resulted from higher returns on alternative investments
and higher average invested assets resulting from continuing strong
operating cash flows, partially offset by lower average yields on
fixed income securities. The after tax investment yield, which
declined 20 basis points from the prior year quarter to 4.2%, was up
30 basis points from the third quarter of 2003.
----------------------------------------------------------------------
(for the quarter ended December 31, in
millions) 2003 2002 Change
--------- --------- ------
Consolidated net written premiums
Commercial Lines $2,125.1 $1,920.7 11 %
Personal Lines 1,264.3 1,145.6 10
--------- ---------
Total $3,389.4 $3,066.3 11 %
========= =========
----------------------------------------------------------------------
Commercial Lines net written premiums increased $204.4 million or
11% due to higher rates, new business growth in targeted markets and
strong retention across all major business lines. Personal Lines net
written premiums increased $118.7 million or 10% due to higher rates
as well as increased business volumes and strong retention.
----------------------------------------------------------------------
(for the quarter ended December 31) 2003 2002 Change
----- ------ ------
Consolidated GAAP combined ratio, before
catastrophes and prior year
reserve development:
Loss and loss adjustment expense (LAE)
ratio 58.6 % 67.2 % (8.6)pts
Other underwriting expense ratio 26.3 28.8 (2.5)
----- ------ ------
84.9 96.0 (11.1)
Catastrophes 1.4 1.0 0.4
Prior year reserve development -
(benefit) / charge:
Asbestos - 67.9 (67.9)
All other 9.4 1.8 7.6
Accretion of discount 0.5 0.4 0.1
----- ------ ------
Consolidated GAAP combined ratio 96.2 % 167.1 % (70.9) pts
===== ====== ======
Note: See Glossary of Financial Measures on page 11.
----------------------------------------------------------------------
The 11.1 point improvement in the consolidated GAAP combined
ratio, before catastrophes and prior year reserve development, to
84.9% reflects an 8.6 point improvement in the loss and LAE ratio and
a 2.5 point improvement in the underwriting expense ratio. The
improvement in the loss and LAE ratio was primarily due to the
favorable rate environment and the benefit of declining current
accident year non-catastrophe-related property claim frequency. The
improvement in the consolidated GAAP combined ratio also reflects
significantly less prior year reserve development. (See Prior Year
Reserve Development below).
Prior Year Reserve Development
----------------------------------------------------------------------
(for the quarter ended December 31, in
millions, after tax and reinsurance) 2003 2002 Change
-------- ---------- ---------
Net benefit (charge) resulting from
prior year reserve development
Commercial Lines
Asbestos (1) $- $(1,296.8) $1,296.8
All other (269.4) (61.8) (207.6)
-------- ---------- ---------
Total Commercial Lines (269.4) (1,358.6) 1,089.2
Personal Lines 65.9 27.3 38.6
-------- ---------- ---------
Total $(203.5) $(1,331.3) $1,127.8
======== ========== =========
(1) Net of benefit of $360.7 million in 4Q02 related to asbestos
incurrals subject to the Citigroup indemnification agreement.
Note: See Glossary of Financial Measures on page 11.
----------------------------------------------------------------------
Commercial Lines prior year reserve development in the current
quarter resulted in a charge of $269.4 million, net of reinsurance and
tax. The principal components of this charge, net of reinsurance and
tax, were a $163.8 million charge associated with Gulf Insurance, a
majority owned subsidiary that writes specialty insurance; a $74.8
million charge associated with American Equity, a run-off operation;
and a $38.9 million charge associated with environmental coverages.
These charges were partially offset by favorable prior year reserve
development primarily associated with commercial property coverages in
which Travelers has continued to experience lower
non-catastrophe-related property claim frequency. Commercial Lines
prior year reserve development in the 2002 quarter primarily resulted
from the $1.297 billion asbestos-related charge, net of reinsurance,
tax and the benefit from the Citigroup indemnification agreement.
Personal Lines favorable prior year reserve development in the
current quarter of $65.9 million, net of reinsurance and tax, resulted
from a $32.5 million reduction in reserves, net of reinsurance and
tax, related to the terrorist attack on September 11, 2001, and
continued improvement in non-catastrophe-related property claim
frequency in both homeowners and non-bodily-injury automobile
businesses. The prior year quarter benefit of $27.3 million also
resulted from lower non-catastrophe-related property claim frequency.
Year to Date Consolidated Results
----------------------------------------------------------------------
(for the twelve months ended December
31, in millions, after tax) 2003 2002 Change
--------- --------- ---------
Consolidated underwriting gain,
before catastrophes and prior year
reserve development $865.7 $317.1 $548.6
Catastrophes (229.0) (54.7) (174.3)
Prior year reserve development -
benefit / (charge):
Asbestos (1) - (1,394.3) 1,394.3
All other (309.4) (92.8) (216.6)
Accretion of discount (47.3) (28.9) (18.4)
--------- --------- ---------
Underwriting gain (loss) 280.0 (1,253.6) 1,533.6
Net investment income 1,415.2 1,402.5 12.7
Other, including interest expense
and minority interest (19.9) (30.7) 10.8
--------- --------- ---------
Consolidated operating income 1,675.3 118.2 1,557.1
Net realized investment gains 20.7 99.0 (78.3)
Restructuring charge - (1.6) 1.6
Cumulative effect of change
in accounting principle - (242.6) 242.6
--------- --------- ---------
Consolidated net income (loss) $1,696.0 $(27.0) $1,723.0
========= ========= =========
(1) Net of benefit of $520.0 million in 2002 related to asbestos
incurrals subject to the Citigroup indemnification agreement.
Note: See Glossary of Financial Measures on page 11.
----------------------------------------------------------------------
For the full year 2003, net income was $1.696 billion, or $1.68
per share, diluted, compared to a net loss of $27.0 million, or $0.03
per share, diluted, for the prior year. Net loss for the prior year
included charges of $1.394 billion for asbestos reserve strengthening
and a cumulative charge of $242.6 million, after tax, resulting from a
change in accounting principle relating to goodwill.
Consolidated operating income for the full year 2003 was $1.675
billion compared to $118.2 million in the prior year. The difference
between net and operating income (loss) in the year-over-year
comparison is the inclusion in net income (loss) of net realized
investment gains, which were $78.3 million lower in the current year,
restructuring charges of $1.6 million in the prior year compared to
none in the current year, and the cumulative effect of a change in an
accounting principle as noted above.
The 2003 underwriting gain component of operating income, before
catastrophes and prior year reserve development, more than doubled to
$865.7 million from $317.1 million, after tax, primarily due to the
favorable rate environment and improved non-catastrophe-related
property claim frequency.
Catastrophe losses of $229.0 million, net of reinsurance and after
tax, increased from $54.7 million in the prior year. The current year
losses reflect higher catastrophe losses in each of the 2003 quarters
as compared to 2002, including the impact of storms in the second
quarter and Hurricane Isabel in the third quarter.
Operating income also reflects lower net charges for prior year
reserve development in the current year as compared to the 2002
period, which included an asbestos reserve charge of $1.297 billion in
the fourth quarter. Non-asbestos-related charges for prior year
reserve development in the current year primarily relate to a first
quarter charge by Gulf Insurance for a line of business that insured
the residual values of leased vehicles and that was placed in run-off
in late 2001, along with the fourth quarter charges described above in
Prior Year Reserve Development. Net investment income, after tax, was
up slightly from the prior year period due to higher returns on
alternative investments and higher average invested assets that
resulted from strong operating cash flows, partially offset by lower
average yields on fixed income securities.
Commercial Lines Operating Income Exceeds $300 Million
----------------------------------------------------------------------
(for the quarter ended December 31, in
millions, after tax) 2003 2002 Change
------- ---------- ---------
CL underwriting gain, before
catastrophes and prior year reserve
development $272.0 $55.0 $217.0
Catastrophes 2.4 - 2.4
Prior year reserve development - benefit
/ (charge):
Asbestos (1) - (1,296.8) 1,296.8
All other (269.4) (61.8) (207.6)
Accretion of discount (11.7) (7.3) (4.4)
------- ---------- ---------
Underwriting loss (6.7) (1,310.9) 1,304.2
Net investment income 312.5 289.7 22.8
Other, including minority interest (3.5) 12.6 (16.1)
------- ---------- ---------
CL operating income (loss) $302.3 $(1,008.6) $1,310.9
======= ========== =========
(1) Net of benefit of $360.7 million in 4Q02 related to asbestos
incurrals subject to the Citigroup indemnification agreement.
Note: See Glossary of Financial Measures on page 11.
----------------------------------------------------------------------
Commercial Lines operating income was $302.3 million, compared to
an operating loss of $1.009 billion in the prior year quarter. The
underwriting gain, before catastrophes and prior year reserve
development, increased to $272.0 million primarily due to the
favorable rate environment and favorable non-catastrophe-related
property claim frequency. Net investment income increased 8% to $312.5
million compared to the prior year quarter. Also see Prior Year
Reserve Development above.
----------------------------------------------------------------------
(for the quarter ended December 31, in
millions) 2003 2002 Change
--------- --------- ------
CL net written premiums by market
Core:
National Accounts $239.2 $222.4 8%
Commercial Accounts 1,006.6 896.4 12
Select Accounts 515.2 488.0 6
--------- ---------
Total Core 1,761.0 1,606.8 10
Specialty:
Bond 195.6 163.4 20
Gulf 168.5 150.5 12
--------- ---------
Total Specialty 364.1 313.9 16
--------- ---------
Total $2,125.1 $1,920.7 11%
========= =========
----------------------------------------------------------------------
Commercial Lines net written premiums increased $204.4 million or
11% due to higher rates, new business growth in targeted markets and
strong retention across all major lines of business.
Core
-- In National Accounts, which provides loss-sensitive insurance
products to large corporations and fee-based services to
self-insured corporations and state-sponsored workers'
compensation residual market pools, net written premiums of
$239.2 million increased $16.8 million over the prior year
quarter. Written fees rose 37% from $118.3 million in the
prior year quarter to $162.1 million. National Accounts
continued to benefit from rate increases, higher new business
levels that, in part, resulted from our third quarter 2003
renewal rights transaction with Royal & SunAlliance, and
higher business volumes in residual market pools.
-- In Commercial Accounts, which primarily serves mid-sized
businesses, net written premiums increased 12% to $1.007
billion due to higher rates, new business growth in targeted
markets and strong retention. Renewal price change increases
were 8%, as compared to 17% in the 2002 quarter and 9% in the
third quarter of 2003 reflecting on-going rate moderation,
particularly in the property businesses.
-- In Select Accounts, which serves small businesses, net written
premiums increased 6% to $515.2 million. The increase was
primarily due to strong retention and renewal price change
increases that averaged 13% in the current quarter, compared
to 14% in the third quarter of 2003 and 17% in the prior year
quarter.
Specialty
-- In Bond, which provides surety bonds and executive liability
insurance for small and mid-sized accounts, net written
premiums increased 20% to $195.6 million. This increase
reflects the favorable rate environment and strong new
business, principally in executive liability products.
-- In Gulf, which provides a broad range of management and
professional liability coverages and excess and surplus lines
of insurance, net written premiums increased 12% to $168.5
million due to the continued positive rate environment across
all product lines.----------------------------------------------------------------------
(for the quarter ended December 31) 2003 2002 Change
------ ------ -------
CL GAAP combined ratio, before
catastrophes and prior year reserve
development:
Loss and LAE ratio 54.5 % 64.8 % (10.3) pts
Other underwriting expense ratio 26.4 30.4 (4.0)
------ ------ -------
80.9 95.2 (14.3)
Catastrophes (0.2) - (0.2)
Prior year reserve development -
(benefit) / charge:
Asbestos - 110.8 (110.8)
All other 20.1 5.3 14.8
Accretion of discount 0.9 0.6 0.3
------ ------ -------
CL GAAP combined ratio 101.7 % 211.9 % (110.2) pts
====== ====== =======
Note: See Glossary of Financial Measures on page 11.
----------------------------------------------------------------------
The 14.3 point improvement to 80.9% in the Commercial Lines GAAP
combined ratio, before catastrophes and prior year reserve
development, reflects a 10.3 point improvement in the loss and LAE
ratio, driven, in part, by the continued improvement in
non-catastrophe-related property claim frequency. The 4.0 point
improvement in the underwriting expense ratio was primarily due to the
benefits of the favorable rate environment and further expense
leverage. Prior year reserve development increased the combined ratio
by 20.1 points in the current quarter as compared to 116.1 points in
the prior year quarter. (See Prior Year Reserve Development above).
Personal Lines Fundamentals Remain Strong
----------------------------------------------------------------------
(for the quarter ended December 31, in
millions, after tax) 2003 2002 Change
------- ------- ------
PL underwriting gain, before catastrophes
and prior year reserve development $71.7 $18.9 $52.8
Catastrophes (32.6) (18.9) (13.7)
Prior year reserve development - benefit /
(charge) 65.9 27.3 38.6
------- ------- ------
Underwriting gain 105.0 27.3 77.7
Net investment income 66.4 73.3 (6.9)
Other 13.6 13.1 0.5
------- ------- ------
PL operating income $185.0 $113.7 $71.3
======= ======= ======
Note: See Glossary of Financial Measures on page 11.
----------------------------------------------------------------------
Personal Lines operating income was $185.0 million compared to
$113.7 million in the prior year quarter. The underwriting gain,
before catastrophes and prior year reserve development, increased
$52.8 million to $71.7 million primarily due to the favorable rate
environment and continued lower non-catastrophe property claim
frequency. Catastrophe losses of $32.6 million were $13.7 million
higher in the current quarter than in the prior year quarter due
principally to the California wildfires and wind and storms in the
Northeast and Midwest. Also see Prior Year Reserve Development above.
----------------------------------------------------------------------
(for the quarter ended December 31, in
millions) 2003 2002 Change
--------- --------- ------
PL net written premiums by product line
Automobile $742.7 $699.4 6 %
Homeowners and other 521.6 446.2 17
--------- ---------
Total $1,264.3 $1,145.6 10 %
========= =========
----------------------------------------------------------------------
Net written premiums increased $118.7 million, or 10%, over the
prior year quarter, due to rate increases and higher business volumes
in both the Automobile and the Homeowners and other lines of business.
-- Automobile net written premiums increased 6% to $742.7
million. Renewal price change increases averaged 5%, which was
3 points below the fourth quarter of 2002. Retention levels
were 81%, consistent with the 2002 quarter. Policies in force
rose for the eleventh consecutive quarter and grew by 4% from
the prior year quarter.
-- Homeowners and other net written premiums increased 17% to
$521.6 million. Renewal price change increases averaged 9%
compared to 15% in the fourth quarter 2002 and 11% in the
third quarter 2003. The higher level of renewal price change
increases in the prior year quarter was mostly attributable to
rate increases in Texas. Retention levels were 81%, consistent
with the 2002 quarter. Policies in force rose for the sixth
consecutive quarter and grew 6% from the prior year quarter.
-- Production through independent agents, which represented 81%
of net written premiums, was up 11% to $1.029 billion.
Production through other channels, which includes affinity and
joint marketing arrangements, was up 8% to $235.5 million.----------------------------------------------------------------------
(for the quarter ended December 31) 2003 2002 Change
----- ----- ------
PL GAAP combined ratio, before
catastrophes and prior year reserve
development:
Loss and LAE ratio 65.1 % 71.0 % (5.9) pts
Other underwriting expense ratio 26.2 26.4 (0.2)
----- ----- ------
91.3 97.4 (6.1)
Catastrophes 4.0 2.6 1.4
Prior year reserve development - (benefit)
/ charge (8.1) (3.7) (4.4)
----- ----- ------
PL GAAP combined ratio 87.2 % 96.3 % (9.1) pts
===== ===== ======
Note: See Glossary of Financial Measures on page 11.
----------------------------------------------------------------------
The 6.1 point improvement to 91.3% in the Personal Lines GAAP
combined ratio, before catastrophes and prior year reserve
development, reflects an improvement in both the loss and LAE ratio
and the underwriting expense ratio. The improvement in the loss and
LAE ratio resulted from the favorable rate environment and continuing
reductions in non-catastrophe property claim frequency. Catastrophes
increased the combined ratio by 4.0 points while favorable prior year
reserve development lowered the combined ratio by 8.1 points. (See
Prior Year Reserve Development above).
Interest Expense and Other Has Been Reduced
The after tax charge of $24.0 million in the quarter for Interest
Expense and Other decreased from $30.4 million in the prior year
quarter, primarily due to lower interest expense and lower shareholder
service costs. Interest expense was $22.8 million, after tax, in the
current year quarter, as compared to $25.7 million in the 2002
quarter.
Investment Highlights
After tax net investment income increased 4% to $378.9 million
compared to $363.1 million in the prior year quarter. Net investment
income increased due to higher returns on alternative investments and
higher average invested assets resulting from continuing strong
operating cash flows. These increases were partially offset by lower
average yields on fixed income securities. The after tax investment
yield of 4.2%, while 20 basis points lower than the prior year
quarter, was 30 basis points higher than the third quarter of 2003.
Net realized investment gains of $38.7 million for the quarter,
before tax, or $25.4 million, after tax, resulted from net realized
investment gains of $44.6 million principally from the sale of fixed
maturity securities, partially offset by impairments of $5.9 million.
For the prior year quarter, net realized investment gains of $205.2
million, before tax, or $131.9 million, after tax, resulted from net
realized investment gains of $265.7 million principally from the sale
of fixed maturity securities, partially offset by impairments of $60.5
million.
Invested assets, after adjusting for the effects of securities in
process of settlement and securities lending activities, were $37.593
billion, an increase of $3.365 billion over the comparable December
31, 2002, amount. Invested assets benefited from strong operating cash
flows and the higher carrying value of the fixed maturity portfolio
resulting from lower interest rates. Net unrealized investment gains
as of December 31, 2003, were $1.628 billion, or $1.060 billion after
tax and minority interest, compared to $1.115 billion, or $731.6
million after tax and minority interest, as of December 31, 2002.
Financial Supplement: http://www.travelers.com/investor/earnings
Our financial supplement is available at our website by clicking
on the above link. The supplement provides a more in-depth view of our
performance.
Webcast: http://www.travelers.com/investor/
Travelers' management will review the Company's fourth quarter
results via webcast at 10:00 AM (EDT) today. Following the live event,
an audio playback of the webcast will be available until February 28
and the slide presentation and financial supplement will be archived
at the web site noted above. To listen to the webcast or the playback,
click on the above link.
About Travelers Property Casualty
Travelers Property Casualty Corp. (NYSE: TAP.A and TAP.B) is a
leading provider of a wide range of insurance products. Travelers is
the third largest commercial lines insurer, providing a broad range of
insurance products including workers' compensation, integrated
disability, property, liability, specialty lines, surety bonds,
inland/ocean marine, and boiler and machinery. The Company is the
second largest writer of homeowners and auto insurance through
independent agents. On November 17, 2003, Travelers announced an
agreement to merge with The St. Paul Companies, Inc. The merger is
expected to be completed in the second quarter of 2004. For more
information on Travelers products, see www.travelers.com.
Glossary of Financial Measures
The following measures are used by the Company's management to
evaluate financial performance against historical results and
establish targets on a consolidated basis. These measures are
components of net income but, in some cases, are considered non-GAAP
financial measures under applicable SEC rules because they are not
displayed as separate line items in the consolidated statement of
income, and in some cases, require inclusion or exclusion of certain
items not ordinarily included or excluded in a GAAP financial measure.
In the opinion of the Company's management, a discussion of these
measures provides investors with a better understanding of the
significant factors that comprise the Company's periodic results of
operations.
Operating income and operating income per share: Net income
excluding the after-tax impact of net realized investment gains
(losses) and cumulative effect of changes in accounting principles.
For 2002 and prior, operating income also excludes non-recurring
restructuring charges related to periods prior to the spin-off from
Citigroup.
Return on equity is the ratio of net income to average equity.
Operating return on equity is the ratio of operating income to average
equity excluding net unrealized gains or losses on investment
securities, net of tax.
In the opinion of the Company's management, operating income,
operating income per share and operating return on equity are
meaningful indicators of underwriting and operating results. In
particular, net realized investment gains or losses are significantly
impacted by both discretionary and other economic factors and are not
necessarily indicative of operating trends. In addition, the Company's
management uses operating income, operating income per share and
operating return on equity internally to evaluate performance against
historical results and established financial targets on a consolidated
basis.
Underwriting gain or loss: The profit or loss experienced by a
property casualty insurance company after deducting claims and claim
adjustment expenses and insurance-related expenses from net earned
premiums and fee income. This profit or loss calculation includes
reinsurance assumed and ceded but excludes net investment income.
Underwriting gain or loss measures the return on the Company's in
force property casualty contracts and reflects the contribution of
underwriting activities to earnings. Underwriting gain or loss
includes the effects of catastrophes and loss reserve development.
-- A catastrophe is a severe loss, resulting from natural and
manmade events, including risks such as fire, earthquake,
windstorm, explosion, terrorism and other similar events. Each
catastrophe has unique characteristics. Catastrophes are not
predictable as to timing or amount in advance, and therefore
their effects are not included in earnings or claims and claim
adjustment expense reserves prior to occurrence. In the
opinion of the Company's management, a discussion of the
impact of catastrophes is meaningful for investors to
understand the variability in periodic earnings.
-- 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. Loss reserve development may be related to prior year
or current year development. In the opinion of the Company's
management, a discussion of prior year loss reserve
development is useful to investors as it allows them to assess
the impact between prior year and current year development on
current earnings and changes in claims and claim adjustment
expense reserve levels from period to period.
The Company uses consolidated underwriting gain or loss before
catastrophes and prior year reserve development to represent the
contribution to earnings from current period underwriting (i.e.,
without development on business written in prior periods) and the
highly irregular effects of catastrophes. A reconciliation of these
measures to net income is provided on page 2.
Forward Looking Statement
This press release contains 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. Specifically, we may have
forward-looking statements about our results of operations, financial
condition and liquidity, and the sufficiency of our asbestos reserves.
These forward-looking statements also include statements about our
proposed merger with The St. Paul Companies, Inc, including but not
limited to statements regarding the integration of our business with
St. Paul's. Such statements are subject to certain risks and
uncertainties, many of which are difficult to predict and generally
beyond our control, that could cause actual results to differ
materially from those expressed in, or implied or projected by, the
forward-looking information and statements.
In particular, the sufficiency of our asbestos reserves, as well
as our results of operations, financial condition and liquidity, to
the extent impacted by the sufficiency of our asbestos reserves, is
subject to a number of potential adverse developments including, among
others, adverse developments involving asbestos claims and related
litigation, the willingness of parties, including the Company, to
settle disputes, the impact of aggregate policy coverage limits, and
the impact of bankruptcies of various asbestos producers and related
businesses. In addition, we may not be able to fully integrate our
business with that of St. Paul's in the manner or in the time frame
currently anticipated. Some other risks and uncertainties include, but
are not limited to those discussed and identified in our public
filings with the Securities and Exchange Commission (the "SEC").
Some of the other factors that could cause actual results to
differ include, but are not limited to, the following: our inability
to obtain price increases due to competition or otherwise; the
performance of the Company's investment portfolios, which could be
adversely impacted by adverse developments in U.S. and global
financial markets, interest rates and rates of inflation; weakening
U.S. and global economic conditions; insufficiency of, or changes in,
loss reserves; the occurrence of catastrophic events, both natural and
man-made, including terrorist acts, with a severity or frequency
exceeding the Company's expectations; exposure to, and adverse
developments involving, environmental claims and related litigation;
the impact of claims related to exposure to potentially harmful
products or substances, including, but not limited to, lead paint,
silica and other potentially harmful substances; adverse changes in
loss cost trends, including inflationary pressures in medical costs
and auto and home repair costs; developments relating to coverage and
liability for mold claims; the effects of corporate bankruptcies on
surety bond claims; adverse developments in the cost, availability
and/or ability to collect reinsurance; the ability of the Company's
subsidiaries to pay dividends to the Company; adverse outcomes in
legal proceedings; judicial expansion of policy coverage and the
impact of new theories of liability; the impact of legislative
actions, including federal and state legislation related to asbestos
liability reform; larger than expected assessments for guaranty funds
and mandatory pooling arrangements; a downgrade in the Company's
claims-paying and financial strength ratings; the loss or significant
restriction on the Company's ability to use credit scoring in the
pricing and underwriting of Personal Lines policies; and amendments
to, and changes to the risk-based capital requirements. For more
information about these and other factors that may affect the Company,
please refer to the information under the headings "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Outlook" and "- Forward-Looking Statements" in the
Travelers Annual Report on Form 10K.
Our forward-looking statements speak only as of the date made, and
we undertake no obligation to update these forward-looking statements.
----------------------------------------------------------------------
Summary of Financial Information Travelers Property Casualty Corp.
(in millions, except per share data)
----------------------------------------------------------------------
At and for the quarter At and for the year
ended December 31, ended December 31,
------------------- -------------------
2003 2002 2003 2002
----------------------------------------------------------------------
Operating income
(loss) $463.3 $(925.3) $1,675.3 $118.2
Net realized
investment gains 25.4 131.9 20.7 99.0
Restructuring
charge - - - (1.6)
Cumulative effect
of change in
accounting
principle - - - (242.6)
----------------------------------------------------------------------
Net income (loss) $488.7 $(793.4) $1,696.0 $(27.0)
----------------------------------------------------------------------
Basic earnings per share
Operating income
(loss) $0.46 $(0.92) $1.67 $0.12
Net realized
investment gains 0.03 0.13 0.02 0.11
Cumulative effect
of change in
accounting
principle - - - (0.26)
----------------------------------------------------------------------
Net income (loss) $0.49 $(0.79) $1.69 $(0.03)
----------------------------------------------------------------------
Diluted earnings per share
Operating income
(loss) $0.46 $(0.92) $1.66 $0.12
Net realized
investment gains 0.03 0.13 0.02 0.11
Cumulative effect
of change in
accounting
principle - - - (0.26)
----------------------------------------------------------------------
Net income (loss) $0.49 $(0.79) $1.68 $(0.03)
----------------------------------------------------------------------
Weighted average
number of common
shares outstanding
(basic) 1,001.0 1,000.4 1,002.0 949.5
Weighted average
number of common
shares outstanding and
common stock
equivalents
(diluted) 1,006.5 1,000.4 1,007.3 951.2
Common shares
outstanding at
period end 1,005.5 1,003.9 1,005.5 1,003.9
Common stock
dividends declared $80.4 $- $281.8 $5,252.5(1)
----------------------------------------------------------------------
Operating income
(loss) by segment
Commercial Lines $302.3 $(1,008.6) $1,295.0 $(125.8)
Personal Lines 185.0 113.7 492.5 346.9
Interest Expense
and Other (24.0) (30.4) (112.2) (102.9)
----------------------------------------------------------------------
$463.3 $(925.3) $1,675.3 $118.2
----------------------------------------------------------------------
Return on equity 16.7% (29.8)% 15.3% (0.3)%
Operating return on
equity 17.4% (37.9)% 16.6% 1.2%
----------------------------------------------------------------------
(1) Dividends were primarily paid in the form of notes, which were
substantially prepaid from the $4.1 billion of net proceeds from
the March 2002 initial public offering and the issuance of $892.5
million of convertible notes.
Note: See Glossary of Financial Measures on page 11.
----------------------------------------------------------------------
Summary of Financial Information Travelers Property Casualty Corp.
(in millions)
----------------------------------------------------------------------
For the quarter For the year
ended December 31, ended December 31,
------------------- ---------------------
2003 2002 2003 2002
----------------------------------------------------------------------
Revenues
Premiums $3,317.2 $2,938.7 $12,545.4 $11,155.3
Net investment
income 499.1 487.2 1,868.8 1,880.5
Fee income 156.3 124.8 560.0 454.9
Net realized
investment gains 38.7 205.2 38.0 146.7
Recoveries from
former affiliate - 360.7 - 520.0
Other revenues 30.7 36.7 127.0 112.3
----------------------------------------------------------------------
$4,042.0 $4,153.3 $15,139.2 $14,269.7
----------------------------------------------------------------------
Revenues by segment excluding net realized
investment gains (losses)
Commercial Lines (1) $2,632.8 $2,687.9 $9,830.4 $9,303.5
Personal Lines 1,370.5 1,260.2 5,268.9 4,818.9
Interest Expense and
Other - - 1.9 0.6
----------------------------------------------------------------------
$4,003.3 $3,948.1 $15,101.2 $14,123.0
----------------------------------------------------------------------
Net written premiums
Commercial Lines $2,125.1 $1,920.7 $8,119.4 $7,369.5
Personal Lines 1,264.3 1,145.6 5,081.4 4,575.0
----------------------------------------------------------------------
$3,389.4 $3,066.3 $13,200.8 $11,944.5
----------------------------------------------------------------------
GAAP combined ratios:
Commercial Lines (2)
Loss and loss
adjustment expense
ratio 75.3% 181.5% 71.7% 101.3%
Other underwriting
expense ratio 26.4% 30.4% 26.7% 27.6%
----------------------------------------------------------------------
Combined ratio 101.7% 211.9% 98.4% 128.9%
----------------------------------------------------------------------
Personal Lines
Loss and loss
adjustment expense
ratio 61.0% 69.9% 69.1% 73.6%
Other underwriting
expense ratio 26.2% 26.4% 25.3% 25.8%
----------------------------------------------------------------------
Combined ratio 87.2% 96.3% 94.4% 99.4%
----------------------------------------------------------------------
Total Company (2)
Loss and loss
adjustment expense
ratio 69.9% 138.3% 70.7% 90.5%
Other underwriting
expense ratio 26.3% 28.8% 26.2% 26.9%
----------------------------------------------------------------------
Combined ratio 96.2% 167.1% 96.9% 117.4%
----------------------------------------------------------------------
(1) Includes $360.7 million and $520.0 million of recoveries from
Citigroup related to asbestos incurrals subject to the Citigroup
indemnification agreement in 4Q02 and YTD 4Q02, respectively.
(2) For purposes of computing GAAP combined ratios, losses recovered
under the Citigroup asbestos agreement are excluded and fee income
is allocated as a reduction of losses and loss adjustment expenses
and other underwriting expenses. Before policyholder dividends.
CONTACT: Travelers Property Casualty Corp.
Media:
Keith Anderson, 860/954-6390
or
Institutional Investors:
Maria Olivo, 860/277-8330
or
Individual Investors:
Marc Parr, 860/277-0779
SOURCE: Travelers Property Casualty Corp.