NEW YORK--(BUSINESS WIRE)--
The Travelers Companies, Inc. ("Travelers,") (NYSE: TRV) today reported
net income of $662 million, or $1.12 per basic share and $1.11 per
diluted share, for the quarter ended March 31, 2009, compared to $967
million, or $1.56 per basic share and $1.54 per diluted share, for the
quarter ended March 31, 2008. Operating income in the current quarter
was $799 million, or $1.36 per basic share and $1.34 per diluted share,
compared to $1.008 billion, or $1.63 per basic share and $1.60 per
diluted share, in the prior year quarter.
"Notwithstanding difficult economic and investment environments, we
delivered a net and operating return on equity of 10.2% and 12.4%,
respectively, and we grew book value per share in the quarter,
continuing to demonstrate our ability to achieve our long-term financial
objectives," commented Jay Fishman, Chairman and Chief Executive
Officer. "These results reflect a solid underwriting performance, as
evidenced by our 90.6% combined ratio. While long-term fixed income
returns were stable, total net investment income declined due to lower
short-term interest rates and negative returns on our non-fixed income
investment portfolio. Notwithstanding current investment market
conditions, we remain pleased with the quality of our investment
portfolio.
"Our position in the marketplace remains strong and we continue to gain
momentum. The benefits from our ongoing investments in technology
platforms and product enhancements, as well as the flight to quality
that is occurring in our industry, can be seen in our high retention
rates and increased business submission flows. Adding to our franchise
has been an improving rate trend across each of our business segments
which has more than offset the impact of declining coverage needs
resulting from general economic conditions. Our financial strength,
coupled with our exceptional brand, positions us well for the future,"
concluded Mr. Fishman.
Current Quarter Highlights
-- Return on equity and operating return on equity of 10.2 percent and 12.4
percent, respectively.
-- Net written premiums of $5.203 billion, an increase from $5.188 billion
in the prior year quarter. Improving rate trends continued in each
business segment, although coverage demands from existing policyholders
declined due to general economic conditions.
-- Solid underwriting results in all segments with GAAP combined ratios in
Business Insurance of 89.0 percent; Financial, Professional &
International Insurance of 90.2 percent; and Personal Insurance of 93.3
percent. Consolidated GAAP combined ratio of 90.6 percent.
-- Net favorable prior year reserve development of $168 million after-tax
($258 million pre-tax), compared to $261 million after-tax ($400 million
pre-tax) in the prior year quarter.
-- Catastrophe losses of $54 million after-tax ($83 million pre-tax),
compared to $62 million after-tax ($95 million pre-tax) in the prior
year quarter.
-- Positive impact on net and operating income of $40 million after-tax
($61 million pre-tax) due to a reduction in the estimate of Texas
Windstorm Insurance Association (TWIA) assessments related to Hurricane
Ike.
-- Net investment income of $474 million after-tax ($542 million pre-tax),
declined from $650 million after-tax ($815 million pre-tax) in the prior
year quarter, due to negative returns in the non-fixed income portfolio
and significantly lower short-term interest rates.
-- Net realized investment losses of $137 million after-tax ($214 million
pre-tax), compared to net realized investment losses of $41 million
after-tax ($62 million pre-tax) in the prior year quarter primarily due
to an increase in impairments.
-- Resolution of various prior year federal tax matters resulted in a $69
million benefit to net and operating income.
-- Book value per share of $45.12 and adjusted book value per share (which
excludes FAS 115) of $44.19, an increase of 5 percent and 2 percent,
respectively, from December 31, 2008. There were no share repurchases in
the current quarter. Book value per share and adjusted book value per
share each increased 4 percent from March 31, 2008, after repurchasing
24.2 million common shares for a total cost of $1.122 billion and paying
common stock dividends of $711 million during the preceding twelve
months.
-- Announced a direct to consumer initiative within Personal Insurance
enhancing the company's ability to compete successfully in the
marketplace by broadening its target customer base.
Consolidated Highlights
($ in millions, except for per share amounts, Three Months Ended March 31,
and after-tax, except for premiums) 2009 2008 Change
Gross written premiums $ 5,863 $ 5,933 (1 ) %
Net written premiums 5,203 5,188 -
Net earned premiums 5,301 5,340 (1 )
Underwriting gain 353 401 (12 )
Net investment income 474 650 (27 )
Operating income 799 1,008 (21 )
per diluted share $ 1.34 $ 1.60 (16 )
Net income 662 967 (32 )
per diluted share $ 1.11 $ 1.54 (28 )
Book value per share $ 45.12 $ 43.31 4
Adjusted book value per share $ 44.19 $ 42.36 4
GAAP combined ratio 90.6 % 87.6 % 3.0 pts
Operating return on equity 12.4 % 15.6 % (3.2 ) pts
Return on equity 10.2 % 14.6 % (4.4 ) pts
See Glossary of Financial Measures for definitions and the statistical
supplement
for additional financial data.
First Quarter 2009 Consolidated Results
Net and operating income in the current quarter of $662 million and $799
million, respectively, declined from $967 million and $1.008 billion in the
prior year quarter. The current quarter included an after-tax underwriting gain
of $353 million and after-tax net investment income of $474 million. The current
and prior year quarters included the following:
($ in millions) Three Months Ended March 31,
2009 2008 2009 2008
Pre-tax After-tax
Underwriting gain $ 465 $ 630 $ 353 $ 401
GAAP combined ratio 90.6 % 87.6 %
Underwriting gain includes:
Net favorable prior year 258 400 168 261
reserve development
Impact on GAAP combined ratio (4.9 ) pts (7.5 ) pts
Catastrophes, net of (83 ) (95 ) (54 ) (62 )
reinsurance
Impact on GAAP combined ratio 1.6 pts 1.8 pts
Resolution of prior year tax 55 -
matters
Net investment income 542 815 474 650
Average yield 3.0 % 4.4 % 2.6 % 3.5 %
Other, including interest (66 ) (69 ) (28 ) (43 )
expense
Other also includes:
Resolution of prior year tax 14 -
matters
Net realized investment (214 ) (62 ) (137 ) (41 )
losses
The current quarter underwriting gain reflects a GAAP combined ratio of
93.9 percent, excluding net favorable prior year reserve development and
catastrophe losses, as compared to 93.3 percent in the prior year
quarter. This increase of 0.6 points primarily resulted from reduced
underwriting margins related to pricing and loss cost trends, partially
offset by a $61 million pre-tax reduction in the estimate of TWIA
assessments related to Hurricane Ike.
Net favorable prior year reserve development in the current quarter
resulted from better than expected loss experience in each segment,
particularly in Business Insurance. Catastrophe losses in the current
quarter were related to several tornadoes and hail storms. In addition,
the current quarter benefited from the resolution of various prior year
federal tax matters.
Net investment income in the current quarter declined from the prior
year quarter despite steady returns in the long-term fixed-income
portfolio. The non-fixed income investment portfolio, representing $4.0
billion or 6 percent of the total investment portfolio and comprised
substantially of private equity funds, real estate partnerships and
hedge funds, recorded an investment loss of $113 million after-tax ($175
million pre-tax) in the current quarter, compared to an investment gain
of $27 million after-tax ($39 million pre-tax) in the prior year
quarter, reflective of the difficult investment market conditions during
recent quarters. In addition, returns in the short-term fixed-income
portfolio in the current quarter were negatively impacted by a 220 basis
point reduction in average after-tax interest rates compared to the
prior year quarter.
Net realized investment losses in the current quarter included
impairments of $120 million after-tax ($184 million pre-tax) consisting
of $70 million after-tax ($107 million pre-tax) in the fixed income
portfolio and $50 million after-tax ($77 million pre-tax) in the
non-fixed income portfolio. Net realized investment losses in the prior
year quarter included impairments of $25 million after-tax ($38 million
pre-tax).
Net written premiums of $5.203 billion in the current quarter were
slightly higher than in the prior year quarter. Overall, business
retention remained at historically high levels and increased in many
lines of business from the prior year quarter. Improving rate trends
continued in each business segment, although coverage demands from
existing policyholders declined due to general economic conditions. New
business volumes were slightly lower than the prior year quarter as
small growth in Business Insurance was more than offset by lower volumes
in Financial, Professional & International Insurance and Personal
Insurance.
Capital Management
The company remains very well capitalized, with all of its financial strength
indicators at or better than target levels. At the end of the first quarter
2009, shareholders' equity was $26.5 billion, a 5 percent increase from year-end
2008. Included in shareholders' equity at the end of the current quarter were
after-tax net unrealized investment gains of $543 million as compared to
after-tax net unrealized investment losses of $144 million at year-end 2008.
Statutory surplus was $21.6 billion, the company's debt to capital ratio of 18.9
percent (excluding FAS 115) was better than its 20.0 percent target level, and
holding company liquidity of $2.6 billion was $1.5 billion more than the
company's target level.
Business Insurance Segment Financial Results
For the first quarter 2009, the Business Insurance segment reported operating
income of $547 million, a decline from $683 million in the prior year quarter.
The current quarter included an after-tax underwriting gain of $226 million and
after-tax net investment income of $317 million. The current and prior year
quarters included the following:
($ in millions) Three Months Ended March 31,
2009 2008 2009 2008
Pre-tax After-tax
Underwriting gain $ 296 $ 367 $ 226 $ 219
GAAP combined ratio 89.0 % 86.6 %
Underwriting gain includes:
Net favorable prior year reserve 182 312 118 204
development
Impact on GAAP combined ratio (6.6 ) pts (11.2 ) pts
Catastrophes, net of reinsurance (12 ) (57 ) (8 ) (37 )
Impact on GAAP combined ratio 0.4 pts 2.1 pts
Resolution of prior year tax 38 -
matters
Net investment income 355 573 317 460
Other 6 5 4 4
The current quarter underwriting gain reflects a GAAP combined ratio of
95.2 percent, excluding net favorable prior year reserve development and
catastrophe losses, as compared to 95.7 percent in the prior year
quarter. This decrease of 0.5 points primarily resulted from a $26
million pre-tax reduction in the estimate of TWIA assessments relating
to Hurricane Ike, lower non-catastrophe weather-related losses and a
lower amount of large property losses, partially offset by reduced
underwriting margins related to pricing and loss cost trends.
Net favorable prior year reserve development in the current quarter
primarily resulted from better than expected loss experience in the
general liability, commercial multi-peril, property and commercial
automobile product lines. Catastrophe losses in the current quarter were
related to several tornadoes and hail storms.
Business Insurance net written premiums of $2.963 billion increased 2
percent from the prior year quarter. Retention rates continued to be
very strong and improved from the prior year quarter. Renewal price
changes, while generally slightly negative, improved from the prior year
quarter due to continued improving rate trends, partially offset by
lower coverage demands from existing policyholders due to general
economic conditions. New business volumes improved slightly from the
prior year quarter driven by strong growth in Select Accounts and
Industry-Focused Underwriting, partially offset by declines in Target
Risk Underwriting and Specialized Distribution.
Select Accounts
-- Net written premiums of $731 million increased 3 percent from the prior
year quarter.
-- Retention rates remained strong and improved from the prior year
quarter.
-- Renewal price changes were flat and improved from recent quarters as a
result of an improving rate trend.
-- New business volume increased from already strong levels in the prior
year quarter. Submission flows once again increased significantly driven
by the continued success and expansion of TravelersExpressSM, the
enhanced quote-to-issue agency platform and multivariate pricing program
for smaller businesses. The expansion of the platform continued in
January 2009 with the initial launch of TravelersExpressSM for
Commercial Automobile in 6 states.
Commercial Accounts
-- Net written premiums of $710 million increased 5 percent from the prior
year quarter.
-- Retention rates remained very strong and improved from the prior year
quarter.
-- Renewal price changes were slightly negative, but improved from recent
quarters as the impact of an improving rate trend was partially offset
by lower coverage demands from existing policyholders.
-- New business volumes were generally consistent with the prior year
quarter, an improvement from recent quarterly trends. In addition,
submission flows continued to increase due to the success of various
product initiatives.
National Accounts
-- Net written premiums of $259 million increased 5 percent from the prior
year quarter due to strong retention rates and improvement in new
business.
Industry-Focused Underwriting
-- Net written premiums of $617 million increased 1 percent from the prior
year quarter driven by strong results in Oil & Gas and Public Sector,
offset by lower results in Construction and Technology.
Target Risk Underwriting
-- Net written premiums of $422 million declined less than 1 percent from
the prior year quarter primarily due to lower new business volumes in
Inland Marine.
Specialized Distribution
-- Net written premiums of $222 million declined 9 percent from the prior
year quarter primarily due to weaknesses in the commercial trucking
industry and continuing competition from standard markets and other
distribution channels.
Financial, Professional & International Insurance Segment Financial Results
For the first quarter 2009, the Financial, Professional & International
Insurance segment reported operating income of $148 million, a decline from
$208 million in the prior year quarter. The current quarter included an
after-tax underwriting gain of $60 million and after-tax net investment income
of $84 million. The current and prior year quarters included the following:
($ in millions) Three Months Ended March 31,
2009 2008 2009 2008
Pre-tax After-tax
Underwriting gain $ 75 $ 154 $ 60 $ 112
GAAP combined ratio 90.2 % 81.4 %
Underwriting gain includes:
Net favorable prior year reserve 12 63 8 41
development
Impact on GAAP combined ratio (1.4 ) pts (7.4 ) pts
Catastrophes, net of reinsurance - - - -
Impact on GAAP combined ratio - pts - pts
Resolution of prior year tax matters 8 -
Net investment income 104 122 84 93
Other 6 5 4 3
The current quarter underwriting gain reflects a GAAP combined ratio of
91.6 percent, excluding net favorable prior year reserve development, as
compared to 88.8 percent in the prior year quarter. The 2.8 point
increase resulted from a small number of large losses within
International as well as a change in business mix due to lower
construction surety volumes within Bond & Financial Products.
The net favorable prior year reserve development in the current quarter
resulted from better than expected loss experience across various lines
of business within International.
Financial, Professional & International Insurance net written premiums
of $563 million declined 13 percent from the prior year quarter.
Adjusting for the impact of changes in foreign exchange rates, net
written premiums declined 6 percent due to lower business volumes in
construction surety and a change in the timing of certain reinsurance
treaties.
Bond & Financial Products
-- Net written premiums of $350 million declined 7 percent from the prior
year quarter primarily driven by lower business volumes in construction
surety due to reduced public construction project activity.
-- Retention rates continued to be strong.
-- Renewal price changes were positive and improved from recent quarters as
the impact of an improving rate trend across several lines was partially
offset by lower coverage demands from existing policyholders.
-- New business volumes declined from the prior year quarter despite
increases in submissions due to the company's underwriting discipline.
-- The retention, renewal price change and new business volume metrics
exclude the surety line of business because these products are sold on a
non-recurring, project-specific basis.
International
-- Net written premiums of $213 million declined 20 percent from the prior
year quarter. After adjusting for the impact of changes in foreign
exchange rates, net written premiums declined 5 percent primarily due to
a change in the timing of certain reinsurance treaties.
-- Retention rates were lower than the prior year quarter primarily due to
underwriting actions taken within the company's Lloyd's operations.
-- Renewal price changes in the current quarter were flat, compared to
being negative in the prior year quarter.
-- New business volumes, after adjusting for the impact of changes in
foreign exchange rates, increased from the prior year quarter.
Personal Insurance Segment Financial Results
For the first quarter 2009, the Personal Insurance segment reported operating
income of $154 million, a decline from $181 million in the prior year quarter.
The current quarter included an after-tax underwriting gain of $67 million and
after-tax net investment income of $73 million. The current and prior year
quarters included the following:
($ in millions) Three Months Ended March 31,
2009 2008 2009 2008
Pre-tax After-tax
Underwriting gain $ 94 $ 109 $ 67 $ 70
GAAP combined ratio 93.3 % 92.2 %
Underwriting gain includes:
Net favorable prior year reserve 64 25 42 16
development
Impact on GAAP combined ratio (3.7 ) pts (1.5 ) pts
Catastrophes, net of reinsurance (71 ) (38 ) (46 ) (25 )
Impact on GAAP combined ratio 4.1 pts 2.2 pts
Resolution of prior year tax 9 -
matters
Net investment income 83 120 73 97
Other 21 21 14 14
The current quarter underwriting gain reflects a GAAP combined ratio of
92.9 percent, excluding net favorable prior year reserve development and
catastrophe losses, as compared to 91.5 percent in the prior year
quarter. This increase of 1.4 points was primarily due to higher
non-catastrophe weather-related losses in Homeowners and Other and
approximately 1.5 points related to results associated with the
company's recently announced direct to consumer initiative, partially
offset by a $34 million pre-tax reduction in the estimate of TWIA
assessments relating to Hurricane Ike.
Net favorable prior year reserve development in the current quarter was
primarily driven by favorable loss experience related to Hurricanes Ike
and Katrina within Homeowners and Other, partially offset by unfavorable
loss experience in New Jersey within Automobile. Catastrophe losses in
the current quarter were related to several tornadoes and hail storms.
Personal Insurance net written premiums of $1.677 billion increased 3
percent from the prior year quarter. This result was primarily due to
continued strong retention rates and positive renewal price changes.
Automobile
-- Net written premiums of $925 million increased slightly, and policies in
force increased 1 percent, from the prior year quarter.
-- Retention rates and new business volume, while remaining strong, were
down slightly from recent quarters due to the impact of rate increases.
-- Renewal price changes remained positive and improved from recent
quarters.
Homeowners and Other
-- Net written premiums of $752 million increased 6 percent, and policies
in force increased 3 percent, from the prior year quarter.
-- Retention rates were strong and renewal price changes were positive,
both generally consistent with recent quarters.
-- New business volume increased from the prior year quarter due to growth
in non-coastal areas.
2009 Annual Guidance
Travelers continues to expect that its full year 2009 operating income per
diluted share will be in the range of $4.50 to $4.90, unchanged from the
previously announced guidance range. This guidance includes the reported results
for the first three months of 2009 and estimates for the remainder of 2009 based
on a number of assumptions, including:
-- Catastrophe losses of $552 million pre-tax and $360 million after-tax,
or $0.62 per diluted share for the full year;
-- No additional prior year reserve development, favorable or unfavorable;
-- No significant changes in private equity and hedge fund valuations due
to an assumption of unchanged market conditions. Lower real estate
partnership valuations due to a continuing downward trend in commercial
real estate values;
-- No significant change in average invested assets (excluding FAS 115),
after taking into account dividends and approximately $750 million of
share repurchases for the full year; and
-- Weighted average diluted shares of approximately 585 million.
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.
Travelers management will discuss the contents of this release and other
relevant topics via webcast at 9 a.m. Eastern (8 a.m. Central) on
Thursday, April 30, 2009. Prior to the webcast, 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 webcast and
the slide presentation will be available on 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 auto, home and business. For more information,
visit www.travelers.com.
From time to time Travelers may use its Web site as a channel of
distribution of material company information. Financial and other
material information regarding the company is routinely posted on and
accessible at http://investor.travelers.com.
In addition, you may automatically receive email alerts and other
information about Travelers by enrolling your email by visiting the
"Email Alert Service" section at http://investor.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 earned
premiums. 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, Aviation
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 the assumed reinsurance, healthcare and certain
international 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 coverages, which require a primarily
credit-based underwriting process, as well as property and casualty
products that are primarily marketed on a domestic basis in the United
Kingdom, Ireland and Canada, and on an international basis through
Lloyd's. 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 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, statements about the potential impact of the recent disruption in
the investment markets and other economic conditions 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, expected current returns 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; investment, economic and underwriting 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 business; financial disruption or a
prolonged economic downturn may materially and adversely affect our
business; our investment portfolio may suffer reduced returns or
material losses; 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; we are exposed to
credit risk in certain of our business operations; 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; the intense
competition that we face could harm our ability to maintain or increase
our business volumes and our profitability; 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 the impact on our business practices 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; 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; loss of or significant restriction on the use of credit
scoring in the pricing and underwriting of Personal Insurance products
could reduce our future profitability; 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; some strategic initiatives are
long-term in nature and may negatively impact our expense ratios as we
invest and may not be successful; if we experience difficulties with
technology, data security and/or outsourcing relationships, our ability
to conduct our business could be negatively impacted; and acquisitions
and integration of acquired businesses may result in operating
difficulties and other unintended consequences.
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 and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our most recent annual
report on Form 10-K and our quarterly report on Form 10-Q for the first
quarter ended March 31, 2009 filed with the Securities and Exchange
Commission.
Three Months Ended
March 31,
($ in millions, except per share amounts, and after-tax) 2009 2008
Operating income $ 799 $ 1,008
Net realized investment losses (137 ) (41 )
Net income $ 662 $ 967
Basic earnings per share1
Operating income $ 1.36 $ 1.63
Net realized investment losses (0.24 ) (0.07 )
Net income $ 1.12 $ 1.56
Diluted earnings per share1
Operating income $ 1.34 $ 1.60
Net realized investment losses (0.23 ) (0.06 )
Net income $ 1.11 $ 1.54
Weighted average number of common shares outstanding 584.6 615.4
(basic)1
Weighted average number of common shares outstanding and 590.4 624.8
common stock equivalents (diluted)1
Common shares outstanding at period end 585.3 606.9
Common stock dividends declared $ 177 $ 178
Operating income by segment
Business Insurance $ 547 $ 683
Financial, Professional & International Insurance 148 208
Personal Insurance 154 181
Total segment operating income 849 1,072
Interest Expense and Other (50 ) (64 )
$ 799 $ 1,008
Operating return on equity 12.4 % 15.6 %
Return on equity 10.2 % 14.6 %
1 In accordance with the provisions of FSP EITF 03-06-1, Determining
Whether Instruments Granted in Shared-Based Payment Transactions are
Participating Securities, which was effective January 1, 2009, all
prior-period basic and diluted EPS data has been restated to reflect the
retrospective application of this guidance.
See Glossary of Financial Measures and the statistical supplement for
additional financial data.
Three Months Ended
March 31,
($ in millions, pre-tax) 2009 2008
Revenues
Premiums $ 5,301 $ 5,340
Net investment income 542 815
Fee income 73 105
Net realized investment losses (214 ) (62 )
Other revenues 33 34
$ 5,735 $ 6,232
Revenues
Business Insurance $ 3,191 $ 3,470
Financial, Professional & International Insurance 911 974
Personal Insurance 1,847 1,848
Total segment revenues 5,949 6,292
Interest Expense and Other - 2
5,949 6,294
Net realized investment losses (214 ) (62 )
$ 5,735 $ 6,232
Gross written premiums
Business Insurance $ 3,294 $ 3,308
Financial, Professional & International Insurance 842 946
Personal Insurance 1,727 1,679
$ 5,863 $ 5,933
Net written premiums
Business Insurance $ 2,963 $ 2,911
Financial, Professional & International Insurance 563 644
Personal Insurance 1,677 1,633
$ 5,203 $ 5,188
GAAP combined ratios:1
Business Insurance2
Loss and loss adjustment expense ratio 57.8 % 54.2 %
Underwriting expense ratio 31.2 32.4
Combined ratio 89.0 % 86.6 %
Financial, Professional & International Insurance2
Loss and loss adjustment expense ratio 54.7 % 45.7 %
Underwriting expense ratio 35.5 35.7
Combined ratio 90.2 % 81.4 %
Personal Insurance
Loss and loss adjustment expense ratio 64.9 % 62.9 %
Underwriting expense ratio 28.4 29.3
Combined ratio 93.3 % 92.2 %
Total Company2
Loss and loss adjustment expense ratio 59.7 % 55.7 %
Underwriting expense ratio 30.9 31.9
Combined ratio 90.6 % 87.6 %
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) 2009 2008
Reconciliation of underwriting gain to net income
Pre-tax underwriting gain $ 465 $ 630
Tax expense on underwriting results (112 ) (229 )
Underwriting gain 353 401
Net investment income 474 650
Other, including interest expense (28 ) (43 )
Consolidated operating income 799 1,008
Net realized investment losses (137 ) (41 )
Net income $ 662 $ 967
As of
March 31, December 31, March 31,
($ in millions; except per share data) 2009 2008 2008
Reconciliation of tangible and adjusted
common
shareholders' equity to common shareholders'
equity
Tangible common shareholders' equity $ 21,919 $ 21,402 $ 21,659
Goodwill and other intangibles, net of tax 3,948 3,972 4,045
Adjusted common shareholders' equity 25,867 25,374 25,704
Net unrealized investment gains (losses), 543 (144 ) 576
net of tax
Common shareholders' equity $ 26,410 $ 25,230 $ 26,280
Common shares outstanding 585.3 585.1 606.9
Tangible book value per share $ 37.45 $ 36.58 $ 35.69
Adjusted book value per share 44.19 43.37 42.36
Book value per share 45.12 43.12 43.31
See Glossary of Financial Measures and the statistical supplement for
additional financial data.
Twelve Months Ended December 31,
($ in millions; after-tax) 2008 2007 2006 2005
Reconciliation of operating
income to net income
Operating income $ 3,195 $ 4,500 $ 4,200 $ 2,026
Net realized investment gains (271 ) 101 8 35
(losses)
Income from continuing 2,924 4,601 4,208 2,061
operations
Discontinued operations - - - (439 )
Net income $ 2,924 $ 4,601 $ 4,208 $ 1,622
As of December 31,
($ in millions) 2008 2007 2006 2005
Reconciliation of adjusted
common shareholders'
equity to common shareholders'
equity
Adjusted common shareholders' $ 25,374 $ 25,884 $ 24,553 $ 21,823
equity
Net unrealized investment gains (144 ) 620 453 327
(losses), net of tax
Common shareholders' equity $ 25,230 $ 26,504 $ 25,006 $ 22,150
Return on equity 11.4 % 18.0 % 17.9 % 7.5 %
Operating return on equity 12.4 % 17.7 % 17.9 % 9.6 %
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
or
Jennifer Wislocki, 860-277-7458
or
Institutional Investors:
Gabriella Nawi, 917-778-6844,
or
Andrew Hersom, 860-277-0902
or
Individual Investors:
Marc Parr, 860-277-0779