SAINT PAUL, Minn.--(BUSINESS WIRE)--
The Travelers Companies, Inc. ("Travelers,")(NYSE:TRV) today
reported net income of $967 million, or $1.57 per basic share and
$1.54 per diluted share, for the quarter ended March 31, 2008,
compared to $1.086 billion, or $1.62 per basic share and $1.56 per
diluted share, for the quarter ended March 31, 2007. Operating income
in the current quarter was $1.008 billion, or $1.63 per basic share
and $1.61 per diluted share, compared to $1.078 billion, or $1.61 per
basic share and $1.55 per diluted share, in the prior year quarter.
Jay Fishman, Chairman and Chief Executive Officer, remarked, "We
are pleased to be starting the year with strong financial results,
particularly in light of the more challenging investment environment
and the continuation of competitive insurance dynamics. We generated
an operating return on equity in excess of 15% and a combined ratio
under 88%. We had solid top-line performance in all our business
segments, with continued strong retentions and renewal price changes
consistent with previous quarters. Our demonstrated ability to grow is
a testament to our disciplined approach to selecting risks
thoughtfully and adding value to our agents, brokers and customers.
"We remain very pleased with the quality of our investment
portfolio. Our fixed income portfolio continued its strong
performance, but overall returns were impacted by lower short-term
interest rates and much smaller real estate and private equity gains
compared to the prior year quarter.
"The strength of our balance sheet and liquidity enables us to
continue to focus our attention on executing our business strategy,
and it positions us to consider investment portfolio opportunities
that may come along as a result of the current investment
environment," concluded Mr. Fishman.
Current Quarter Highlights
-- Return on equity and operating return on equity of 14.6
percent and 15.6 percent, respectively.
-- Net written premiums of $5.188 billion, a 1 percent increase
from the prior year quarter, or a 2 percent increase when
adjusted for the sales of Afianzadora Insurgentes and Mendota.
-- Strong underwriting results in all segments with GAAP combined
ratios in Business Insurance of 86.6 percent; Financial,
Professional & International Insurance of 81.4 percent; and
Personal Insurance of 92.2 percent. Consolidated GAAP combined
ratio of 87.6 percent.
-- Net favorable prior year reserve development of $261 million
after-tax ($400 million pre-tax) in the current quarter,
compared to $40 million after-tax ($62 million pre-tax) in the
prior year quarter.
-- Catastrophe losses of $62 million after-tax ($95 million
pre-tax) in the current quarter, compared to $29 million
after-tax ($45 million pre-tax) in the prior year quarter.
-- Net investment income of $650 million after-tax ($815 million
pre-tax), compared to $737 million after-tax ($960 million
pre-tax) in the prior year quarter. Net investment income from
the non-fixed income portfolio declined primarily due to much
smaller real estate and private equity gains compared to the
prior year quarter.
-- Book value per share (excluding FAS 115) of $42.36, a 3
percent increase from December 31, 2007 and a 14 percent
increase from March 31, 2007, after repurchasing 20.8 million
common shares for a total cost of $1.0 billion in the quarter
and 62.9 million common shares for a total cost of $3.2
billion during the preceding twelve months under the company's
share repurchase authorization.
Consolidated Highlights----------------------------------------------------------------------
($ in millions, except for per share
amounts, and after-tax except for
premiums) Three Months Ended March 31,
-----------------------------
2008 2007 Change
------------ ------ ------
Gross written premiums $5,933 $6,071 (2)%
Net written premiums 5,188 5,144 1
Net earned premiums 5,340 5,295 1
Underwriting gain 401 341 18
Net investment income 650 737 (12)
Operating income 1,008 1,078 (6)
per diluted share $1.61 $1.55 4
Net income 967 1,086 (11)
per diluted share $1.54 $1.56 (1)
Book value per share $43.31 $37.93 14
Adjusted book value per share $42.36 $37.26 14
GAAP combined ratio 87.6% 89.2% (1.6)pts
Operating return on equity 15.6% 17.5% (1.9)pts
Return on equity 14.6% 17.3% (2.7)pts
See Glossary of Financial Measures for definitions and the statistical
supplement for additional financial data
----------------------------------------------------------------------
First Quarter 2008 Consolidated Results
Net and operating income in the current quarter of $967 million
and $1.008 billion, respectively, benefited from significant net
favorable prior year reserve development as well as solid current
accident year underwriting results. In addition, net investment income
was solid in light of the current environment. The current and prior
year quarters included the following:
----------------------------------------------------------------------
($ in millions) Three Months Ended March 31,
--------------------------------
2008 2007 2008 2007
------- ------- ------- -------
Pre-tax After-tax
---------------- ---------------
Net favorable prior year reserve
development $ 400 $ 62 $ 261 $ 40
Catastrophes, net of reinsurance (95) (45) (62) (29)
Timing impact for the transition to
fixed, value- - 72 - 47
based agent compensation program
Resolution of prior year tax matters - 28 - 28
----------------------------------------------------------------------
Net favorable prior year reserve development in the current
quarter was driven by better than expected loss experience in each
segment, particularly in Business Insurance. Catastrophe losses in the
current quarter were primarily due to tornadoes and hail storms in the
Midwest and Southeast United States. The prior year quarter included a
benefit from the timing impact for the transition to the fixed,
value-based agent compensation program adopted in first quarter 2007,
which lowered reported expenses from what otherwise would have been
reported, and a benefit for the favorable resolution of various
federal tax matters.
Net written premiums in the current quarter increased by 1 percent
from the prior year quarter or 2 percent when adjusted for the March
2007 sale of Afianzadora Insurgentes, the company's Mexican surety
operation, and the April 2007 sale of Mendota, the company's
non-standard personal auto operation. Overall, retention rates
continued to be strong, and renewal price changes were consistent with
recent quarters. In addition, new business volumes declined due in
part to the company's continued disciplined underwriting in an
increasingly competitive market for new business compared to the prior
year quarter.
Net investment income in the current quarter was $650 million
after-tax ($815 million pre-tax), compared to $737 million after-tax
($960 million pre-tax) in the prior year quarter. Net investment
income from the non-fixed income portfolio declined primarily due to
much smaller real estate and private equity gains compared to the
prior year quarter. This result was partially offset by a slight
increase in net investment income from the fixed income portfolio as
compared to the prior year quarter due to higher invested assets.
Average invested assets in the current quarter of $74.7 billion
increased 3 percent from the prior year quarter even after $4.0
billion of share repurchases and dividends during the preceding twelve
months, due to continued strong operating cash flows.
The GAAP combined ratio in the current quarter was 87.6 percent, a
1.6 point decrease from the 89.2 percent reported in the prior year
quarter. The GAAP combined ratios included the following:
----------------------------------------------------------------------
Three Months Ended March 31,
----------------------------
Impact on GAAP combined ratios 2008 2007
------------------------------------------ ------- ------
Net favorable prior year reserve
development (7.5) pts (1.2) pts
Catastrophes, net of reinsurance 1.8 0.9
Timing impact for the transition to fixed,
value- - (1.4)
based agent compensation program
----------------------------------------------------------------------
Excluding net favorable prior year reserve development,
catastrophe losses and the timing impact for the transition to the
fixed, value-based agent compensation program, the GAAP combined ratio
would have increased 2.4 points from the prior year quarter, due to
market trends which the company previously anticipated, as well as
higher than anticipated large property losses and non-catastrophe
related weather losses. The company believes this increase will
moderate into a full year increase of 1.5 points, which is 0.5 points
more than the 1.0 point increase originally anticipated for 2008.
Capital Management
During the first quarter 2008, the company repurchased 20.8
million of its common shares under its share repurchase authorization
for a total cost of $1.0 billion. Since the initial share repurchase
authorization granted by the Board in the second quarter of 2006, the
company has repurchased 99.7 million shares for a total cost of $5.1
billion.
The company remains very well capitalized, with all of its
financial strength indicators at or better than the company's target
levels. At the end of the first quarter 2008, shareholders' equity was
$26.4 billion, an increase of 4 percent from the prior year quarter,
and statutory surplus was $22.4 billion, an increase of 5 percent from
the prior year quarter. At the end of the first quarter 2008, the
company's debt-to-capital ratio (excluding FAS 115) was 18.5 percent
as compared to its 20.0 percent target level, and holding company
liquidity was $1.5 billion, or $0.4 billion above the target level.
The debt-to-capital ratio at the end of the quarter was below the
target level in large part due to the repayment of $400 million of
outstanding debt in the quarter from the company's operating cash
flows.
Business Insurance Segment Financial Results
For the first quarter 2008, the Business Insurance segment
reported operating income of $683 million, compared to $678 million in
the prior year quarter. The increase in operating income resulted from
significant net favorable prior year reserve development, partially
offset by lower current accident year underwriting results and lower
net investment income. The current and prior year quarters included
the following:
----------------------------------------------------------------------
($ in millions) Three Months Ended March 31,
-------------------------------
2008 2007 2008 2007
------ ------ ------- ------
Pre-tax After-tax
--------------- ---------------
Net favorable prior year reserve
development $ 312 $ 27 $ 204 $ 17
Catastrophes, net of reinsurance (57) - (37) -
Timing impact for the transition to
fixed, value-
based agent compensation program - 37 - 24
----------------------------------------------------------------------
Net favorable prior year reserve development in the quarter was
driven by better than expected loss experience for recent accident
years primarily in the commercial multi-peril, general liability and
property product lines. Catastrophe losses in the current quarter were
primarily due to tornadoes in the Midwest United States.
The GAAP combined ratio was 86.6 percent in the current quarter, a
4.9 point improvement from the 91.5 percent reported in the prior year
quarter. The GAAP combined ratios included the following:
----------------------------------------------------------------------
Three Months Ended March 31,
-------------------------------------
Impact on GAAP combined ratios 2008 2007
--------------------------------- ----------- ------------
Net favorable prior year reserve
development (11.2) pts (0.9) pts
Catastrophes, net of reinsurance 2.1 -
Timing impact for the transition to
fixed, value- - (1.3)
based agent compensation program
The GAAP combined ratio in the current quarter was also impacted
by market trends, including rate decreases in recent quarters, as well
as large property losses.
Net written premiums increased 1 percent from the prior year
quarter. Retention rates continued to be strong, renewal price changes
were negative but slightly improved from the prior quarter and new
business volumes declined from the prior year quarter.
Select Accounts net written premiums increased 1 percent from the
prior year quarter. Retention rates remained strong, and renewal price
changes were positive, consistent with recent quarters. The company
continued to rollout TravelersExpress(SM), the enhanced quote-to-issue
agency platform and multivariate pricing program for smaller
businesses served by Select Accounts, which is currently in 37 states
for commercial multi-peril and 6 states for workers compensation.
TravelersExpress(SM) has been very successful in the marketplace, with
an increase in submissions of over 50 percent compared to the prior
year quarter in the states where it was operational.
TravelersExpress(SM) represented more than 40 percent of all smaller
account new business within Select Accounts in the current quarter. In
the aggregate, new business volume declined from the prior year
quarter primarily due to the competitive environment for larger
businesses served by Select Accounts, which more than offset the
growth of TravelersExpress(SM).
Commercial Accounts net written premiums increased 5 percent from
the prior year quarter driven by continued strong submission volume
and increased sales of additional products to existing customers.
Retention rates continued to be strong, renewal price changes were
negative but improved from the prior quarter and new business volume
declined from the prior year quarter.
National Accounts net written premiums declined 4 percent from the
prior year quarter primarily due to a continued competitive market for
large account new business. Industry-Focused Underwriting net written
premiums increased 5 percent from the prior year quarter due primarily
to increased business volumes within Construction. Target Risk
Underwriting net written premiums increased 1 percent from the prior
year quarter largely due to higher business volumes in Inland Marine.
Specialized Distribution net written premiums declined 3 percent from
the prior year quarter primarily due to lower retention rates as well
as lower new business volumes in Northland.
Financial, Professional & International Insurance Segment
Financial Results
For the first quarter 2008, the Financial, Professional &
International Insurance segment reported operating income of $208
million, compared to $156 million in the prior year quarter. The
increase in operating income resulted primarily from net favorable
prior year reserve development and better current accident year
underwriting results. The current and prior year quarters included the
following:
----------------------------------------------------------------------
($ in millions) Three Months Ended March 31,
------------------------------------
2008 2007 2008 2007
------- ------ ------- ---------
Pre-tax After-tax
----------------- ------------------
Net favorable prior year reserve
development $ 63 $ - $ 41 $ -
Catastrophes, net of reinsurance - - - -
----------------------------------------------------------------------
The net favorable prior year reserve development in the quarter
was primarily driven by better than expected loss experience from
recent accident years for employers' liability (workers' compensation)
as well as public and products liability (general liability) lines of
business within International.
The GAAP combined ratio was 81.4 percent in the current quarter,
an 8.0 point improvement from the 89.4 percent reported in the prior
year quarter. The GAAP combined ratios included the following:
----------------------------------------------------------------------
Three Months Ended March 31,
-------------------------------------
Impact on GAAP combined ratios 2008 2007
--------------------------------- ------------ -----------
Net favorable prior year reserve
development (7.4) pts - pts
Catastrophes, net of reinsurance - -
----------------------------------------------------------------------
Net written premiums increased 7 percent from the prior year
quarter, or 11 percent when adjusted for the sale of Afianzadora
Insurgentes. This result was primarily driven by higher retained
premiums due to a change in certain reinsurance programs and the
favorable impact of foreign currency exchange rates.
Bond & Financial Products net written premiums increased 22
percent from the prior year quarter, or 29 percent when adjusted for
the sale of Afianzadora Insurgentes, driven primarily by higher
retained premiums due to the reinsurance change. For Bond & Financial
Products, retention rates were strong and slightly higher than recent
quarters, renewal price changes were zero and new business volumes
decreased from the prior year quarter. These metrics exclude the
surety line of business because these products are sold on a
non-recurring, project-specific basis.
International net written premiums declined 8 percent from the
prior year quarter primarily driven by the company's operation at
Lloyd's. Retention rates were lower than recent quarters due to the
non-renewal of certain property business in Canada as well as more
competitive aviation and property markets in Lloyd's. Renewal price
changes were negative and down from recent quarters due in large part
to competition for the company's Accident & Special Risks business at
Lloyd's. New business volumes increased from the prior year quarter.
Personal Insurance Segment Financial Results
For the first quarter 2008, the Personal Insurance segment
reported operating income of $181 million, compared to $266 million in
the prior year quarter. The decline in operating income primarily
resulted from lower current accident year underwriting results driven
in part by increased non-catastrophe related weather losses. The
current and prior year quarters also included the following:
-----------------------------------------------------------------
($ in millions) Three Months Ended March 31,
-------------------------------
2008 2007 2008 2007
------ ------ ------ -------
Pre-tax After-tax
---------------- --------------
Net favorable prior year reserve
development $25 $35 $16 $23
Catastrophes, net of reinsurance (38) (45) (25) (29)
Timing impact for the transition
to fixed, value- - 32 - 21
based agent compensation program
Net favorable prior year reserve development in the quarter was
primarily driven by better than expected loss experience within
Homeowners and Other. Catastrophe losses in the current quarter were
due to tornadoes and hail storms in the Southeast United States.
The GAAP combined ratio was 92.2 percent in the current quarter, a
6.7 point increase from the 85.5 percent reported in the prior year
quarter. The GAAP combined ratios included the following:
----------------------------------------------------------------------
Three Months Ended
March 31,
---------------------
Impact on GAAP combined ratios 2008 2007
------------------------------------------------- ------ ------
Net favorable prior year reserve development (1.5) pts (2.1) pts
Catastrophes, net of reinsurance 2.2 2.7
- (1.9)
Timing impact for the transition to fixed, value-
based agent compensation program
----------------------------------------------------------------------
The GAAP combined ratio in the current quarter also increased by
3.2 points due to non-catastrophe related weather resulting in higher
frequency of property and auto losses as compared to the prior year
quarter. Non-catastrophe related weather losses increased the
Homeowners and Other and the Automobile GAAP combined ratios by 4.8
points and 1.9 points, respectively, compared to the prior year
quarter.
Personal Insurance net written premiums declined 2 percent from
the prior year quarter, but increased by 1 percent when adjusted for
the sale of Mendota. This result was primarily attributable to
continued strong retention rates, positive renewal price changes and
higher new business volume.
Automobile net written premiums declined 4 percent from the prior
year quarter, but increased 1 percent when adjusted for Mendota.
Policies in force increased 2 percent from the prior year quarter
adjusted for Mendota. Retention rates were strong and renewal price
changes were positive, both consistent with recent quarters. New
business volume increased from the prior year quarter, adjusted for
Mendota, due to the continued success of QuantumAuto(SM), the
company's multivariate pricing product, which is now offered in 39
states and the District of Columbia.
Homeowners and Other net written premiums increased 2 percent and
policies in force increased 3 percent from the prior year quarter.
Retention rates were strong and renewal price changes were positive,
both consistent with recent quarters. New business volume was
consistent with the prior year quarter as new business growth in
non-coastal areas was offset by ongoing coastal risk management
initiatives.
2008 Annual Guidance
Travelers is revising its full year 2008 operating income per
diluted share to a range of $5.55 to $5.85, compared with the
previously announced guidance range of $5.40 to $5.75. The revised
range incorporates the net favorable prior year reserve development in
the first quarter 2008 and a reduced full year outlook for net
investment income. This range equates approximately to an operating
return on equity of 13 percent to 14 percent. This guidance is based
on a number of assumptions, including:
-- Catastrophe losses of $525 million pre-tax and $340 million
after-tax, or $0.56 per diluted share, for the full year;
-- No additional prior year reserve development, favorable or
unfavorable;
-- GAAP combined ratio increase of 1.5 points compared to 2007
excluding prior year reserve development, catastrophe losses
and the timing impact for the transition to the fixed,
value-based agent compensation program;
-- Average invested assets are expected to grow slightly, after
taking into account dividends and approximately $2.7 billion
of share repurchases for the full year; and
-- Weighted average diluted shares of approximately 612 million,
including the impact of assumed share repurchases and normal
growth in shares outstanding 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 and other relevant topics via Web cast at
10 a.m. Eastern (9 a.m. Central) on Thursday, April 24, 2008. Prior to
the Web cast, a slide presentation pertaining to the quarterly
earnings will be available on the company's Web site. Following the
live event, an audio playback of the Web cast and the slide
presentation will be available on the company's Web site.
To view the slides or to listen to the Web cast or the playback,
visit the "Web casts & 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
man-made events, including risks such as fire, earthquake, windstorm,
explosion, terrorism and other similar events. Each catastrophe has
unique characteristics, and catastrophes are not predictable as to
timing or amount. Their effects are included in net and operating
income and claims and claim adjustment expense reserves upon
occurrence. A catastrophe may result in the payment of reinsurance
reinstatement premiums and assessments from various pools. 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 one or more prior years or the current year. In the
opinion of the company's management, discussion of loss reserve
development is useful to investors as it allows them to assess the
impact between prior and current year development on incurred claims
and claim adjustment expenses, net and operating income, 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 percent generally indicates
an underwriting profit. A GAAP combined ratio over 100 percent
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. Net written premiums reflect gross written
premiums less premiums ceded to reinsurers.
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 (i.e., excluding
FAS 115), 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 as it removes
the effect of changing prices on invested assets (i.e. net unrealized
investment gains (losses), net of tax), which do not have an
equivalent impact on unpaid claims and claim adjustment expense
reserves. Tangible book value per share is adjusted book value per
share excluding the after-tax value of goodwill and other intangible
assets divided by the number of common shares outstanding. In the
opinion of the company's management, tangible book value per share is
useful in an analysis of a property casualty company's book value on a
nominal basis as it removes certain effects of purchase accounting
(i.e., goodwill and other intangible assets), in addition to the
effect of changing prices on invested assets.
Travelers has organized its businesses into the following
reportable business segments:
Business Insurance: The Business Insurance segment offers a broad
array of property and casualty insurance and insurance-related
services to its clients primarily in the United States. Business
Insurance is organized into the following six 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 (which manages the
company's asbestos and environmental liabilities) 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 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.
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.
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, statements about our share repurchase
plans and statements about the potential impact of the recent
disruption in the investment markets on our investment portfolio and
underwriting results are forward looking, and we may make
forward-looking statements about our results of operations (including,
among others, premium volume, net and operating income, investment
income, return on equity and combined ratio), and financial condition
(including, among others, invested assets and liquidity); the
sufficiency of our asbestos and other reserves (including, among
others, asbestos claim payment patterns); the cost and availability of
reinsurance coverage; catastrophe losses; investment performance;
market conditions; 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 and adversely affect our results of operations, our
financial position and/or liquidity and could 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 materially 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; we may not be able to collect all amounts due
to us from reinsurers, and reinsurance coverage may not be available
to us in the future at commercially reasonable rates or at all; the
intense competition that we face could harm our ability to maintain or
increase our profitability and premium volume; we are exposed to
credit risk in certain of our business operations and in our
investment portfolio; the insurance industry and we are 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 adversely impact
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; the inability of our
insurance subsidiaries to pay dividends to our holding company in
sufficient amounts would harm our ability to meet our obligations and
to pay future shareholder dividends; disruptions to our relationships
with our independent agents and brokers could adversely affect us; we
are subject to a number of risks associated with our business outside
the United States; we could be adversely affected if our controls to
ensure compliance with guidelines, policies and legal and regulatory
standards are not effective; our business success and profitability
depend, in part, on effective information technology systems and on
continuing to develop and implement improvements in technology;
certain significant multiyear projects are currently in process but
may not be successful; and if we experience difficulties with
technology, data security and/or outsourcing relationships our ability
to conduct our business could 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 filed
with the Securities and Exchange Commission.
----------------------------------------------------------------------
Three Months Ended
March 31,
---------------------------
($ in millions, except per share amounts,
and after-tax) 2008 2007
----------------------------------------------------------------------
Operating income $ 1,008 $ 1,078
Net realized investment gains (losses) (41) 8
----------------------------------------------------------------------
Net income $ 967 $ 1,086
----------------------------------------------------------------------
Basic earnings per share
Operating income $ 1.63 $ 1.61
Net realized investment gains (losses) (0.06) 0.01
----------------------------------------------------------------------
Net income $ 1.57 $ 1.62
----------------------------------------------------------------------
Diluted earnings per share
Operating income $ 1.61 $ 1.55
Net realized investment gains (losses) (0.07) 0.01
----------------------------------------------------------------------
Net income $ 1.54 $ 1.56
----------------------------------------------------------------------
Weighted average number of common shares
outstanding
(basic) 616.2 669.9
Weighted average number of common shares
outstanding and
common stock equivalents (diluted) 628.1 701.2
Common shares outstanding at period end 606.9 665.3
Common stock dividends declared $ 178 $ 174
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Operating income by segment
Business Insurance $ 683 $ 678
Financial, Professional & International
Insurance 208 156
Personal Insurance 181 266
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Total segment operating income 1,072 1,100
Interest Expense and Other (64) (22)
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$ 1,008 $ 1,078
----------------------------------------------------------------------
Operating return on equity 15.6% 17.5%
Return on equity 14.6% 17.3%
----------------------------------------------------------------------
See Glossary of Financial Measures and the statistical supplement for
additional financial data.
----------------------------------------------------------------------
Three Months Ended
March 31,
--------------------------
($ in millions, pre-tax) 2008 2007
----------------------------------------------------------------------
Revenues
Premiums $ 5,340 $ 5,295
Net investment income 815 960
Fee income 105 120
Net realized investment gains (losses) (62) 14
Other revenues 34 38
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$ 6,232 $ 6,427
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Revenues
Business Insurance $ 3,470 $ 3,581
Financial, Professional & International
Insurance 974 970
Personal Insurance 1,848 1,857
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Total segment revenues 6,292 6,408
Interest Expense and Other 2 5
----------------------------------------------------------------------
6,294 6,413
Net realized investment gains (losses) (62) 14
----------------------------------------------------------------------
$ 6,232 $ 6,427
----------------------------------------------------------------------
Gross written premiums
Business Insurance $ 3,308 $ 3,387
Financial, Professional & International
Insurance 946 975
Personal Insurance 1,679 1,709
----------------------------------------------------------------------
$ 5,933 $ 6,071
----------------------------------------------------------------------
Net written premiums
Business Insurance $ 2,911 $ 2,880
Financial, Professional & International
Insurance 644 600
Personal Insurance 1,633 1,664
----------------------------------------------------------------------
$ 5,188 $ 5,144
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GAAP combined ratios: (1)
Business Insurance (2)
Loss and loss adjustment expense ratio 54.2 % 61.2%
Underwriting expense ratio 32.4 30.3
----------------------------------------------------------------------
Combined ratio 86.6 % 91.5%
----------------------------------------------------------------------
Financial, Professional & International
Insurance (2)
Loss and loss adjustment expense ratio 45.7 % 53.0%
Underwriting expense ratio 35.7 36.4
----------------------------------------------------------------------
Combined ratio 81.4 % 89.4%
----------------------------------------------------------------------
Personal Insurance
Loss and loss adjustment expense ratio 62.9 % 59.0%
Underwriting expense ratio 29.3 26.5
----------------------------------------------------------------------
Combined ratio 92.2 % 85.5%
----------------------------------------------------------------------
Total Company (2)
Loss and loss adjustment expense ratio 55.7 % 59.2%
Underwriting expense ratio 31.9 30.0
----------------------------------------------------------------------
Combined ratio 87.6 % 89.2%
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(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 expense and
other underwriting expenses.
(2) Before policyholder dividends.
See Glossary of Financial Measures and the statistical supplement for
additional financial data.
----------------------------------------------------------------------
Three Months Ended
March 31,
--------------------------
($ in millions; after-tax except as
noted) 2008 2007
----------------------------------------------------------------------
Reconciliation of underwriting gain to net
income
Pre-tax underwriting gain $ 630 $ 534
Tax expense on underwriting results (229) (193)
----------------------------------------------------------------------
Underwriting gain 401 341
Net investment income 650 737
Other, including interest expense (43) -
----------------------------------------------------------------------
Consolidated operating income 1,008 1,078
Net realized investment gains (losses) (41) 8
----------------------------------------------------------------------
Net income $ 967 $ 1,086
----------------------------------------------------------------------
As of
--------------------------
March December March
31, 31, 31,
($ in millions; except per share data) 2008 2007 2007
----------------------------------------------------------------------
Reconciliation of tangible and adjusted
common shareholders' equity to common
shareholders' equity
Tangible common shareholders' equity $ 21,659 $ 21,811 $20,567
Goodwill and other intangibles, net of tax 4,045 4,073 4,227
----------------------------------------------------------------------
Adjusted common shareholders' equity 25,704 25,884 24,794
Net unrealized investment gains, net of tax 576 620 439
----------------------------------------------------------------------
Common shareholders' equity $ 26,280 $ 26,504 $25,233
----------------------------------------------------------------------
Common shares outstanding 606.9 627.8 665.3
----------------------------------------------------------------------
Tangible book value per share $ 35.69 $ 34.74 $ 30.91
Adjusted book value per share 42.36 41.23 37.26
Book value per share $ 43.31 $ 42.22 $ 37.93
----------------------------------------------------------------------
See Glossary of Financial Measures and the statistical
supplement for additional financial data.
Source: The Travelers Companies, Inc.
Contact: The Travelers Companies, Inc.
Media:
Shane Boyd, 651-310-3846
Jennifer Wislocki, 860-277-7458
Institutional Investors:
Michael Connelly, 860-277-1507
Andrew Hersom, 860-277-0902
Individual Investors:
Marc Parr, 860-277-0779