SAINT PAUL, Minn.--(BUSINESS WIRE)--
The Travelers Companies, Inc. ("Travelers")(NYSE:TRV) today
reported net income of $1.254 billion, or $1.90 per basic share and
$1.86 per diluted share, for the quarter ended June 30, 2007, compared
to $970 million, or $1.40 per basic share and $1.36 per diluted share,
for the quarter ended June 30, 2006. Operating income in the current
quarter was $1.167 billion, or $1.77 per basic share and $1.73 per
diluted share, compared to $959 million, or $1.39 per basic share and
$1.34 per diluted share, in the prior year quarter.
"We are very pleased with our performance this quarter," commented
Jay Fishman, Chairman and Chief Executive Officer. "The 29 percent
growth in our operating income per share is a reflection of our
operational success and our continuing focus on capital management. In
that regard, we have already repurchased almost $2.5 billion of our
company's stock since the beginning of our buyback program in May
2006.
"Each of our segments generated strong underwriting results, and
our investment portfolio produced impressive returns. We remain
focused on risk selection and pricing adequacy, paying close attention
to our profitability. Our underwriting analytics continue to be an
important driver in our ability to identify attractive business.
Furthermore, our financial strength and product breadth position us
well for the future," concluded Mr. Fishman.
Current Quarter Highlights
-- Return on equity of 19.9 percent and operating return on
equity of 18.6 percent.
-- Net investment income of $758 million after-tax, a 13 percent
increase from the prior year quarter.
-- Net written premiums of $5.714 billion, a 1 percent increase
from the prior year quarter, or 2 percent when adjusted for
the recent sale of two operations, Mendota and Afianzadora
Insurgentes.
-- Strong underwriting results in all segments, with GAAP
combined ratios in Business Insurance of 88.1 percent;
Financial, Professional & International Insurance of 91.0
percent; and Personal Insurance of 85.9 percent. Consolidated
GAAP combined ratio of 87.8 percent.
-- Repurchased 11.4 million common shares under the company's
share repurchase program for a total cost of $622 million.
-- Book value per share (excluding FAS 115) of $38.76, a 15
percent increase from June 30, 2006, and a 7 percent increase
from December 31, 2006.
-- On July 6, 2007, entered into a settlement for all ACandS
asbestos-related coverage claims (subject to final court
approval).
Consolidated Second Quarter Highlights
----------------------------------------------------------------------
($ in millions,
except for per Three Months Ended Six Months Ended
share amounts, June 30, June 30,
---------------------- ------------------------
and after-tax
except for
premiums) 2007 2006 Change 2007 2006 Change
------- ------- ------ -------- -------- ------
Gross written
premiums $6,262 $6,197 1 % $12,333 $12,007 3 %
Net written
premiums 5,714 5,655 1 10,858 10,429 4
Net earned
premiums 5,327 5,181 3 10,622 10,172 4
Underwriting
gain 449 311 44 790 648 22
Net investment
income 758 673 13 1,495 1,343 11
Operating income 1,167 959 22 2,245 1,970 14
per diluted
share $ 1.73 $ 1.34 29 $ 3.27 $ 2.75 19
Net income 1,254 970 29 2,340 1,976 18
per diluted
share $ 1.86 $ 1.36 37 $ 3.41 $ 2.76 24
Book value per
share $38.36 $33.14 16 $ 38.36 $ 33.14 16
Adjusted book
value per share $38.76 $33.83 15 $ 38.76 $ 33.83 15
GAAP combined
ratio 87.8% 89.8% (2.0)pts 88.5% 89.4% (0.9)pts
Operating return
on equity 18.6% 16.6% 2.0 pts 18.0% 17.4% 0.6 pts
Return on equity 19.9% 17.0% 2.9 pts 18.6% 17.5% 1.1 pts
See Glossary of Financial Measures for definitions and the statistical
supplement for additional financial data
----------------------------------------------------------------------
Second Quarter 2007 Consolidated Results
Net and operating income in the current quarter of $1.254 billion
and $1.167 billion, respectively, were driven by strong net investment
income and current accident year underwriting results. The current
quarter included $83 million after-tax ($125 million pre-tax) for net
favorable prior year reserve development and $58 million for the
favorable resolution of various prior year federal tax matters. The
current quarter also included $26 million after-tax ($40 million
pre-tax) of catastrophe losses and an after-tax charge of $25 million
($39 million pre-tax) due to the redemption of convertible junior
subordinated notes.
The net favorable prior year reserve development of $83 million
after-tax included environmental reserve strengthening of $120 million
after-tax ($185 million pre-tax), the largest component of which was
attributable to litigation costs relating to coverage disputes. Each
of the company's business segments experienced net favorable prior
year reserve development in the current quarter.
Net and operating income in the prior year quarter of $970 million
and $959 million, respectively, included $68 million after-tax ($101
million pre-tax) for net favorable prior year reserve development and
$23 million after-tax ($36 million pre-tax) for the favorable
resolution of various prior year state tax matters, as well as $44
million after-tax ($67 million pre-tax) for catastrophe losses.
Net income in the current quarter included $87 million after-tax
($128 million pre-tax) of net realized investment gains, primarily due
to the bundled sale of a substantial portion of the company's venture
capital portfolio that resulted in a $52 million after-tax ($81
million pre-tax) realized gain.
As discussed in the first quarter of 2007, the company has
implemented a new fixed, value-based agent compensation program for
all of its personal lines business and the majority of its commercial
lines business. The change to the new program created a difference in
the timing of commission expense recognition. The impact of this
change in the second quarter was to lower reported expenses, from what
otherwise would have been reported, by $38 million after-tax ($59
million pre-tax), primarily in Business Insurance and Personal
Insurance.
Net written premiums increased 1 percent from the prior year
quarter, or 2 percent when adjusted for the recent sales of Mendota,
the company's non-standard personal auto operation, and Afianzadora
Insurgentes, the company's Mexican surety operation. This result was
primarily driven by renewal price increases in Personal Insurance and
strong retention rates across most businesses, partially offset by the
timing of the purchase of certain catastrophe reinsurance for the
Northeastern United States via the company's new catastrophe bond
program, established in May 2007.
Net investment income in the current quarter was $758 million
after-tax ($990 million pre-tax), a 13 percent increase from the prior
year quarter. The increase was primarily driven by higher yields
throughout the portfolio, particularly for non-fixed income
investments, and higher average invested assets largely due to strong
operating cash flows.
The GAAP combined ratio in the current quarter was 87.8 percent, a
2.0 point improvement from the 89.8 percent reported in the prior year
quarter. The current quarter GAAP combined ratio benefited by 2.4
points from net favorable prior year reserve development, partially
offset by 0.8 points for catastrophe losses. The current quarter GAAP
combined ratio also benefited by 1.1 points from the change to the new
fixed compensation program. The prior year quarter GAAP combined ratio
included a 2.0 point benefit for net favorable prior year reserve
development, partially offset by 1.3 points for catastrophe losses.
Capital Management
During the second quarter of 2007, the company repurchased 11.4
million of its common shares under its share repurchase program for a
total cost of $622 million. Through June 30, 2007, the company has
repurchased 48.1 million shares for a total cost of $2.468 billion
since the program's inception in the second quarter of 2006. As of
June 30, 2007, the total remaining authorization under the program was
$2.532 billion.
Also during the second quarter of 2007, the company redeemed all
of its outstanding $893 million, 4.50% convertible junior subordinated
notes due in 2032, resulting in an after-tax loss of $25 million ($39
million pre-tax) and the elimination of 16 million shares from the
calculation of fully diluted earnings per share, as of April 18, 2007.
Year-to-Date 2007 Consolidated Results
Net income for the six-month period ended June 30, 2007, was
$2.340 billion, or $3.52 per basic share and $3.41 per diluted share,
compared to $1.976 billion, or $2.85 per basic share and $2.76 per
diluted share, for the six-month period ended June 30, 2006. Operating
income in the current year period was $2.245 billion, or $3.38 per
basic share and $3.27 per diluted share, compared to $1.970 billion,
or $2.84 per basic share and $2.75 per diluted share, in the prior
year period.
Net and operating income for the first six months of 2007 included
$123 million after-tax ($187 million pre-tax) for net favorable prior
year reserve development and $86 million for the favorable resolution
of various prior year federal tax matters. The current year period
also included $55 million after-tax ($85 million pre-tax) for
catastrophe losses and an after-tax charge of $25 million ($39 million
pre-tax) due to the redemption of the convertible junior subordinated
notes. In addition, the current year period included the impact of the
change to the new fixed compensation program which lowered reported
expenses, from what otherwise would have been reported, by $85 million
after-tax ($131 million pre-tax). The change to the new program
created a difference in the timing of commission expense recognition.
In the prior year period, net and operating income included net
favorable prior year reserve development of $100 million after-tax
($150 million pre-tax) and $72 million after-tax for the favorable
resolution of various prior year federal and state tax matters ($91
million before federal tax on the state tax amounts), as well as $44
million after-tax ($67 million pre-tax) for catastrophe losses.
The GAAP combined ratio in the current year period was 88.5
percent, a 0.9 point improvement from the 89.4 percent reported in the
prior year. The GAAP combined ratio benefited by 1.8 points from net
favorable prior year reserve development, partially offset by 0.8
points for catastrophe losses. The GAAP combined ratio also benefited
by 1.2 points from the change to the new fixed compensation program.
The prior year period GAAP combined ratio included a 1.5 point benefit
for net favorable prior year reserve development, partially offset by
0.7 points for catastrophe losses.
Net investment income in the current year period was $1.495
billion after-tax ($1.950 billion pre-tax), an 11 percent increase
from the prior year period. The increase was primarily driven by
higher yields throughout the portfolio, particularly for non-fixed
income investments, and higher average invested assets largely due to
strong operating cash flows.
Net written premiums increased 4 percent from the prior year
period, or 5 percent when adjusted for the sales of Mendota and
Afianzadora Insurgentes.
For the first six months of 2007, operating return on equity was
18.0 percent, compared to 17.4 percent in the prior year period.
Business Insurance Segment Financial Results
For the second quarter 2007, the Business Insurance segment
reported operating income of $805 million, compared to $655 million in
the prior year quarter. The current quarter benefited from the
continuation of favorable loss trends, higher net investment income,
the resolution of certain tax matters discussed above and net
favorable prior year reserve development.
The current quarter included an after-tax benefit of $39 million
($60 million pre-tax) for net favorable prior year reserve
development, consisting of $159 million after-tax ($245 million
pre-tax) primarily due to better than expected frequency and severity
loss trends in recent accident years in the commercial multi-peril,
general liability and commercial auto lines of business, partially
offset by $120 million after-tax ($185 million pre-tax) of
environmental reserve strengthening. The current quarter also included
an after-tax benefit of $19 million ($29 million pre-tax) due to the
change to the new fixed compensation program and $34 million for the
favorable resolution of various prior year federal tax matters. The
prior year quarter included an after-tax benefit of $21 million ($34
million pre-tax) for net favorable prior year reserve development.
There were no catastrophe losses reported in the current or prior year
quarters.
The GAAP combined ratio was 88.1 percent in the current quarter, a
2.0 point improvement from the 90.1 percent reported in the prior year
quarter. The current quarter GAAP combined ratio benefited by 2.1
points from net favorable prior year reserve development, compared to
a benefit of 1.2 points in the prior year quarter. The current quarter
GAAP combined ratio also included a 1.0 point benefit from the change
to the new fixed compensation program.
Net written premiums increased 2 percent from the prior year
quarter, primarily due to growth in new business volume. Overall,
retention rates were strong, generally consistent with recent
quarters, and renewal price changes were modestly lower than recent
quarters.
Select Accounts net written premiums increased 4 percent from the
prior year quarter. Retention rates were strong, increasing from
recent quarters, and renewal price changes were positive, but
moderately lower than recent quarters. New business volume increased
significantly from the prior year quarter due in part to the recent
introduction in 10 states of TravelersExpress(SM), an enhanced
quote-to-issue agency platform and multivariate pricing program.
Commercial Accounts net written premiums increased 6 percent from
the prior year quarter. Retention rates continued to be strong, but
moderately lower than recent quarters, and renewal price changes were
negative, declining from the recent quarter. New business volume
increased from the prior year quarter due to recent product
introductions, the selling of additional products to existing
customers and greater submission volume as a result of increased
marketing efforts.
Industry-Focused Underwriting net written premiums increased 4
percent from the prior year quarter due to strong business volumes in
Oil & Gas, Construction and Agribusiness. Target Risk Underwriting net
written premiums increased 3 percent from the prior year quarter due
to strong business volumes in National Property and Inland Marine.
Specialized Distribution and National Accounts net written premiums
decreased 1 percent and 4 percent, respectively, from the prior year
quarter.
Financial, Professional & International Insurance Segment
Financial Results
For the second quarter 2007, the Financial, Professional &
International Insurance segment reported operating income of $152
million, compared to $149 million in the prior year quarter. The
current quarter benefited from higher net investment income and net
favorable prior year reserve development, offset by non-catastrophe
losses related to flooding in the United Kingdom.
The current quarter included an after-tax benefit of $12 million
($15 million pre-tax) for net favorable prior year reserve
development, compared to an after-tax benefit of $9 million ($9
million pre-tax) in the prior year quarter. There were no catastrophe
losses reported in the current or prior year quarters; however, the
current quarter was negatively impacted by $20 million after-tax ($30
million pre-tax) due to the U.K. floods.
The GAAP combined ratio was 91.0 percent in the current quarter, a
2.6 point increase from the 88.4 percent reported in the prior year
quarter. The U.K. floods added 3.6 points to the current quarter GAAP
combined ratio. The current quarter GAAP combined ratio benefited by
1.7 points from net favorable prior year reserve development, compared
to 1.1 points in the prior year quarter.
Gross written premiums increased 2 percent from the prior year
quarter, due to strong business volumes for the construction surety,
United Kingdom and Canada business units as well as favorable rates of
exchange. Net written premiums decreased 2 percent from the prior year
quarter, or 1 percent when adjusted for the sale of Afianzadora
Insurgentes, predominantly due to the timing of certain reinsurance
transactions, which negatively impacted net written premiums in the
current quarter.
Bond & Financial Products net written premiums were consistent
with the prior year quarter, but increased 1 percent when adjusted for
Afianzadora Insurgentes, due to strong construction surety business
volumes. For Bond & Financial Products, excluding the surety line of
business, retention rates were very strong, increasing from recent
quarters; renewal price changes were slightly negative, a decline from
recent quarters; and new business volume decreased from the prior year
quarter due to more competitive market conditions. These metrics are
not relevant for the surety line of business because these products
are sold on a non-recurring, project-specific basis.
International and Lloyd's net written premiums decreased 5 percent
from the prior year quarter. The current quarter benefited from
favorable rates of exchange but was negatively impacted by the timing
of certain reinsurance transactions. Retention rates were strong, but
lower than recent quarters; renewal price changes were flat,
consistent with recent quarters; and new business volume was
consistent with the prior year quarter.
Personal Insurance Segment Financial Results
For the second quarter 2007, the Personal Insurance segment
reported operating income of $276 million, compared to $203 million in
the prior year quarter. The current quarter benefited from lower
catastrophe losses, higher earned premium volume and net favorable
prior year reserve development.
The current quarter included an after-tax benefit of $32 million
($50 million pre-tax) for net favorable prior year reserve
development, primarily due to better than expected auto loss
performance resulting in part from claim initiatives and fewer than
expected late reported homeowners claims related to non-catastrophe
weather events. The prior year quarter included an after-tax benefit
of $38 million ($58 million pre-tax) for net favorable prior year
reserve development. The current quarter was negatively impacted by
$26 million after-tax ($40 million pre-tax) due to catastrophe losses,
compared to $44 million after-tax ($67 million pre-tax) in the prior
year quarter. The current quarter also included an after-tax benefit
of $16 million ($25 million pre-tax) due to the change to the new
fixed compensation program.
The GAAP combined ratio was 85.9 percent in the current quarter, a
4.2 point improvement from the 90.1 percent reported in the prior year
quarter. The current quarter GAAP combined ratio benefited by 3.0
points from net favorable prior year reserve development, compared to
a benefit of 3.6 points in the prior year quarter. Catastrophe losses
added 2.4 points to the current quarter GAAP combined ratio, compared
to 4.1 points in the prior year quarter. The current quarter GAAP
combined ratio also benefited by 1.5 points from the change to the new
fixed compensation program.
Personal Insurance net written premiums increased 1 percent from
the prior year quarter, or 3 percent when adjusted for the sale of
Mendota. This result was primarily attributable to continued strong
retention rates and renewal price increases, partially offset by the
timing of the purchase of certain catastrophe reinsurance via the
company's new catastrophe bond program, for which Personal Insurance
was allocated a portion of the cost.
Automobile net written premiums decreased 4 percent from the prior
year quarter, but increased 1 percent when adjusted for Mendota.
Policies in force increased 4 percent from the prior year quarter,
adjusted for Mendota. Retention rates were strong and renewal price
changes were positive, both consistent with recent quarters, and new
business volume decreased from the prior year quarter.
Homeowners and Other net written premiums increased 6 percent from
the prior year quarter, or 7 percent when adjusted for Mendota.
Policies in force increased 6 percent from the prior year quarter,
adjusted for Mendota. Retention rates were strong, consistent with
recent quarters; renewal price changes increased from recent quarters;
and new business volume decreased from the prior year quarter.
2007 Annual Guidance
Travelers is increasing its 2007 operating income per diluted
share guidance to a range of $5.80 to $6.05, compared to the
previously announced range of $5.60 to $5.85. This guidance is based
on a number of assumptions, including:
-- Catastrophe losses of $530 million pre-tax and $355 million
after-tax, for the full year;
-- No additional prior year reserve development, favorable or
unfavorable;
-- Growth in average invested assets in the low single digits,
after taking into account expected dividends and approximately
$2.5 billion of share repurchases;
-- An estimated $100 million after-tax timing benefit for the
full year, resulting from accounting for the change to the new
fixed, value-based compensation program;
-- Weighted average diluted shares of approximately 675 million,
including the estimated impacts of share repurchases and
normal growth in share count from employee equity awards.
Financial Supplement and Conference Call
The information in this press release should be read in
conjunction with a financial supplement that is available on our Web
site at www.travelers.com. The management of Travelers will discuss
the contents of this release via Webcast at 9 a.m. Eastern (8 a.m.
Central) on Thursday, July 26, 2007. Prior to the Webcast, a related
slide presentation will be available on the company's Web site.
Following the live event, an audio playback of the Webcast and the
slide presentation will be available at the company's Web site.
To view the slides or to listen to the Webcast or the playback,
visit the "Webcasts & Presentations" section of the Travelers investor
relations Web site at http://investor.travelers.com/.
About Travelers
Travelers is a leading provider of property casualty insurance.
For more information, visit 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. 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 statement of income or required to be disclosed in the
notes to financial statements, and in some cases, include or exclude
certain items not ordinarily included or excluded in the most
comparable 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 and how management evaluates
the Company's financial performance.
Operating income (loss) is net income (loss) excluding the
after-tax impact of net realized investment gains (losses). Operating
income (loss) per share is operating income (loss) on a per share
basis. 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 investment gains and losses, 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. These
measures exclude net realized investment gains or losses, which can be
significantly impacted by both discretionary and other economic
factors and are not necessarily indicative of operating trends.
Internally, the Company's management uses operating income, operating
income per share and operating return on equity to evaluate
performance against historical results and establish financial targets
on a consolidated basis.
Underwriting gain (loss) is net earned premiums and fee income
less claims and claim adjustment expenses and insurance-related
expenses.
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. A catastrophe may result in the payment of reinstatement
premiums and assessments from various pools. 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, 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.
GAAP combined ratio is the sum of the loss and loss adjustment
expense ratio (loss and LAE ratio), the underwriting expense ratio
and, where applicable, the ratio of dividends to policyholders to net
premiums earned. For GAAP, the loss and LAE ratio is the ratio of
incurred losses and loss adjustment expenses reduced by an allocation
of fee income to net earned premiums. The underwriting expense ratio
is the ratio of underwriting expenses incurred reduced by an
allocation of fee income, billing and policy fees to net earned
premiums. A GAAP combined ratio under 100% generally indicates an
underwriting profit. A GAAP combined ratio over 100% generally
indicates an underwriting loss. The GAAP combined ratio is an
operating statistic that includes GAAP measures in the numerator and
the denominator.
Gross written premiums reflect the direct and assumed
contractually determined amounts charged to the policyholders for the
effective period of the contract based on the terms and conditions of
the insurance contract. Gross written premiums are a measure of
overall business volume.
Book value per share is total common shareholders' equity divided
by the number of common shares outstanding. Adjusted book value per
share is total common shareholders' equity excluding the after-tax
impact of net unrealized investment gains and losses, divided by the
number of common shares outstanding. In the opinion of the Company's
management, adjusted book value is useful in an analysis of a property
casualty company's book value on a nominal basis as it removes the
effect of changing prices on invested assets, which do not have an
equivalent impact on unpaid claims and claim adjustment expense
reserves. Tangible book value per share is adjusted book value per
share excluding the after-tax value of goodwill and other intangible
assets divided by the number of common shares outstanding. In the
opinion of the Company's management, tangible book value per share is
useful in an analysis of a property casualty company's book value on a
nominal basis as it removes certain effects of purchase accounting
(i.e., goodwill and other intangible assets), in addition to the
effect of changing prices on invested assets.
Travelers has organized its businesses into the following
reportable business segments, beginning with the third quarter 2006:
Business Insurance: The Business Insurance segment offers a broad
array of property and casualty insurance and insurance-related
services in the United States. Business Insurance is organized into
the following groups, which collectively comprise Business Insurance
Core operations: Select Accounts; Commercial Accounts; National
Accounts; Industry-Focused Underwriting including Construction,
Technology, Public Sector Services, Oil & Gas and Agribusiness; Target
Risk Underwriting including National Property, Inland Marine, Ocean
Marine, Excess Casualty, Boiler & Machinery and Global Accounts; and
Specialized Distribution including Northland and National Programs.
Business Insurance also includes the Special Liability Group and
policies written by Gulf (primarily management and professional
liability coverages) and other runoff operations, which collectively
are referred to as Business Insurance Other.
Financial, Professional & International Insurance: The Financial,
Professional & International Insurance segment includes surety, crime,
and financial liability businesses, which primarily use credit-based
underwriting processes, as well as property and casualty products that
are predominantly marketed on an international basis. The businesses
in Financial, Professional & International Insurance are Bond &
Financial Products and International and Lloyd's.
Personal Insurance: The Personal Insurance segment writes
virtually all types of property and casualty insurance covering
personal risks. The primary coverages in this segment are personal
automobile and homeowners insurance sold to individuals.
Prior quarter segment results have been reclassified from the
historical presentation to conform with current business segment
definitions where applicable. The Company's historical Commercial and
Specialty segments have been realigned into two new segments: the
Business Insurance segment and the Financial, Professional &
International Insurance segment. As a result, prior quarter results of
certain businesses have been disaggregated from the historical
Specialty segment and are now reported in the Business Insurance
segment. In addition, the Personal segment has been renamed Personal
Insurance.
Forward Looking Statement
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.
Specifically, earnings guidance and statements about our share
repurchase plans are forward looking, and we may make forward-looking
statements about our results of operations (including, among others,
premium volume, income from continuing operations, net and operating
income, investment income, return on equity and combined ratio),
financial condition (including, among others, invested assets and
liquidity); and the sufficiency of our asbestos and other reserves
(including, among others, asbestos claim payment patterns); the cost
and availability of reinsurance coverage; catastrophe losses; and
strategic initiatives. Such statements are subject to 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.
Some of the factors that could cause actual results to differ
include, but are not limited to, the following: catastrophe losses
could materially reduce our profitability and adversely impact our
ratings, our ability to raise capital and the availability and cost of
reinsurance; if actual claims exceed our loss reserves, or if changes
in the estimated level of loss reserves are necessary, our financial
results could be significantly and adversely affected; our business
could be harmed because of our potential exposure to asbestos and
environmental claims and related litigation; we are 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 our
business are uncertain; reinsurance may be unavailable on acceptable
terms, and we may be unable to collect amounts of reinsurance that are
material to us; the insurance industry is the subject of a number of
investigations by state and federal authorities in the United States,
and we cannot predict the outcome of these investigations or their
impact on our business or financial results; our businesses are
heavily regulated, and changes in regulation may reduce our
profitability and limit our growth; a downgrade in our claims-paying
and financial strength ratings could significantly reduce our business
volumes, adversely impact our ability to access the capital markets
and increase our borrowing costs; our investment portfolio may suffer
reduced returns or losses which could reduce our profitability; the
intense competition that we face could harm our ability to maintain or
increase our profitability and premium volume; the inability of our
insurance subsidiaries to pay dividends to us in sufficient amounts
would harm our ability to meet our obligations and to pay future
dividends; assessments and other surcharges for guaranty funds,
second-injury funds, catastrophe funds and other mandatory pooling
arrangements may reduce our profitability; loss or significant
restriction of the use of credit scoring in the pricing and
underwriting of Personal Insurance products could reduce our future
profitability; disruptions to our relationships with our distributors,
independent agents and brokers could adversely affect us; and if we
experience difficulties with outsourcing relationships, technology
and/or data security, our ability to conduct our business might be
negatively impacted.
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 caption
"Risk Factors" in our most recent annual report on Form 10-K/A filed
with the Securities and Exchange Commission.
----------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
($ in millions, except per share
amounts, and after-tax) 2007 2006 2007 2006
----------------------------------------------------------------------
Operating income $1,167 $ 959 $2,245 $1,970
Net realized investment gains 87 11 95 6
----------------------------------------------------------------------
Net income $1,254 $ 970 $2,340 $1,976
----------------------------------------------------------------------
Basic earnings per share
Operating income $ 1.77 $ 1.39 $ 3.38 $ 2.84
Net realized investment gains 0.13 0.01 0.14 0.01
----------------------------------------------------------------------
Net income $ 1.90 $ 1.40 $ 3.52 $ 2.85
----------------------------------------------------------------------
Diluted earnings per share
Operating income $ 1.73 $ 1.34 $ 3.27 $ 2.75
Net realized investment gains 0.13 0.02 0.14 0.01
----------------------------------------------------------------------
Net income $ 1.86 $ 1.36 $ 3.41 $ 2.76
----------------------------------------------------------------------
Weighted average number of common
shares outstanding (basic) 658.6 691.8 664.2 692.0
Weighted average number of common
shares outstanding and common
stock equivalents (diluted) 676.0 720.4 688.6 720.6
Common shares outstanding at
period end 657.0 691.4 657.0 691.4
Common stock dividends declared $192.0 $180.0 $366.0 $340.0
----------------------------------------------------------------------
Operating income (loss) by segment
Business Insurance $ 805 $ 655 $1,483 $1,306
Financial, Professional &
International Insurance 152 149 308 290
Personal Insurance 276 203 542 443
----------------------------------------------------------------------
Total segment operating income 1,233 1,007 2,333 2,039
Interest Expense and Other (66) (48) (88) (69)
----------------------------------------------------------------------
$1,167 $ 959 $2,245 $1,970
----------------------------------------------------------------------
Operating return on equity 18.6% 16.6% 18.0% 17.4%
Return on equity 19.9% 17.0% 18.6% 17.5%
----------------------------------------------------------------------
See Glossary of Financial Measures and the statistical supplement for
additional financial data.
Three months ended Six months ended
June 30, June 30,
----------------- --------------------
($ in millions, pre-tax) 2007 2006 2007 2006
----------------------------------------------------------------------
Revenues
Premiums $5,327 $5,181 $ 10,622 $ 10,172
Net investment income 990 874 1,950 1,749
Fee income 127 153 247 303
Net realized investment gains 128 10 142 4
Other revenues 1 37 39 77
----------------------------------------------------------------------
$6,573 $6,255 $ 13,000 $ 12,305
----------------------------------------------------------------------
Revenues
Business Insurance $3,656 $3,512 $ 7,237 $ 6,948
Financial, Professional &
International Insurance 975 947 1,945 1,843
Personal Insurance 1,850 1,786 3,707 3,504
----------------------------------------------------------------------
Total segment revenues 6,481 6,245 12,889 12,295
Interest Expense and Other (36) - (31) 6
----------------------------------------------------------------------
6,445 6,245 12,858 12,301
Net realized investment gains 128 10 142 4
----------------------------------------------------------------------
$6,573 $6,255 $ 13,000 $ 12,305
----------------------------------------------------------------------
Gross written premiums
Business Insurance $3,321 $3,314 $ 6,708 $ 6,568
Financial, Professional &
International Insurance 1,063 1,043 2,038 1,978
Personal Insurance 1,878 1,840 3,587 3,461
----------------------------------------------------------------------
$6,262 $6,197 $ 12,333 $ 12,007
----------------------------------------------------------------------
Net written premiums
Business Insurance $2,935 $2,872 $ 5,815 $ 5,559
Financial, Professional &
International Insurance 984 1,002 1,584 1,517
Personal Insurance 1,795 1,781 3,459 3,353
----------------------------------------------------------------------
$5,714 $5,655 $ 10,858 $ 10,429
----------------------------------------------------------------------
GAAP combined ratios: (1)
Business Insurance (2)
Loss and loss adjustment
expense ratio 57.6 % 60.0% 59.3 % 60.4%
Underwriting expense ratio 30.5 30.1 30.4 30.0
----------------------------------------------------------------------
Combined ratio 88.1 % 90.1% 89.7 % 90.4%
----------------------------------------------------------------------
Financial, Professional &
International Insurance (2)
Loss and loss adjustment
expense ratio 54.7 % 52.6% 53.8 % 52.8%
Underwriting expense ratio 36.3 35.8 36.4 35.4
----------------------------------------------------------------------
Combined ratio 91.0 % 88.4% 90.2 % 88.2%
----------------------------------------------------------------------
Personal Insurance
Loss and loss adjustment
expense ratio 57.6 % 62.2% 58.3 % 60.5%
Underwriting expense ratio 28.3 27.9 27.4 27.8
----------------------------------------------------------------------
Combined ratio 85.9 % 90.1% 85.7 % 88.3%
----------------------------------------------------------------------
Total Company (2)
Loss and loss adjustment
expense ratio 57.1 % 59.5% 58.1 % 59.2%
Underwriting expense ratio 30.7 30.3 30.4 30.2
----------------------------------------------------------------------
Combined ratio 87.8 % 89.8% 88.5 % 89.4%
----------------------------------------------------------------------
(1) For purposes of computing GAAP ratios, billing and policy fees
(which are a component of other revenues) are allocated as a
reduction of other underwriting expenses. In addition, fee income
is allocated as a reduction of losses and loss adjustment expenses
and other underwriting expenses.
(2) Before policyholder dividends.
See Glossary of Financial Measures and the statistical supplement
for additional financial data.
----------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
($ in millions; after-tax except
as noted) 2007 2006 2007 2006
----------------------------------------------------------------------
Reconciliation of underwriting
gain to net income
Pre-tax underwriting gain $ 607 $ 494 $1,132 $1,010
Tax expense on underwriting
results (158) (183) (342) (362)
----------------------------------------------------------------------
Underwriting gain 449 311 790 648
Net investment income 758 673 1,495 1,343
Other, including interest expense (40) (25) (40) (21)
----------------------------------------------------------------------
Consolidated operating income 1,167 959 2,245 1,970
Net realized investment gains 87 11 95 6
----------------------------------------------------------------------
Net income $1,254 $ 970 $2,340 $1,976
----------------------------------------------------------------------
As of
-------------------------
June 30, Dec 31, June 30,
(in millions; except per share data) 2007 2006 2006
----------------------------------------------------------------------
Reconciliation of tangible and adjusted
common shareholders' equity to common
shareholders' equity
Tangible common shareholders' equity $21,338 $20,491 $19,266
Goodwill and other intangibles, net of tax 4,128 4,062 4,122
----------------------------------------------------------------------
Adjusted common shareholders' equity 25,466 24,553 23,388
Net unrealized investment gains (losses),
net of tax (263) 453 (476)
----------------------------------------------------------------------
Common shareholders' equity $25,203 $25,006 $22,912
----------------------------------------------------------------------
Common shares oustanding 657.0 678.3 691.4
----------------------------------------------------------------------
Tangible book value per share $ 32.48 $ 30.21 $ 27.87
Adjusted book value per share 38.76 36.20 33.83
Book value per share $ 38.36 $ 36.86 $ 33.14
----------------------------------------------------------------------
See Glossary of Financial Measures and the statistical supplement for
additional financial data.
Source: The Travelers Companies, Inc.
Contact: The Travelers Companies, Inc.
Media:
Marlene Ibsen, 860-277-9039
or
Jennifer Wislocki, 860-277-7458
or
Institutional Investors:
Michael Connelly, 860-277-1507
or
David Schlosberg, 917-778-6817
or
Individual Investors:
Marc Parr, 860-277-0779