Operating Return on Equity and Return on Equity of 15.5% and 13.6%,
Respectively
-
Operating and net income of $867 million and $864 million,
respectively.
-
Underlying underwriting margin improvement continued across all
segments, and net investment income remained strong due to alternative
investment performance.
-
Written rate gains were strong across all segments.
-
Book value per share of $67.81, up 11% from end of prior year quarter
and 9% from year-end 2011.
-
Board of Directors approved quarterly dividend per share of $0.46.
NEW YORK--(BUSINESS WIRE)--
The Travelers Companies, Inc. today reported net income of $864 million,
or $2.21 per diluted share, for the quarter ended September 30, 2012,
compared to $333 million, or $0.79 per diluted share, in the prior year
quarter. Operating income in the current quarter was $867 million, or
$2.22 per diluted share, compared to $332 million, or $0.79 per diluted
share, in the prior year quarter. The increase in net and operating
income in the current quarter compared to the prior year quarter was
primarily driven by lower catastrophe losses and higher underlying
underwriting results. Catastrophe losses in the current quarter were $59
million after tax ($91 million pre tax), compared to $394 million after
tax ($606 million pre tax) in the prior year quarter.
|
Consolidated Highlights |
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|
|
($ in millions, except for per share amounts, and after-tax, except
for premiums & revenues)
|
| Three Months Ended September 30, |
| |
|
| Nine Months Ended September 30, |
| |
| 2012 | |
| 2011 | |
| Change |
| | | | 2012 | |
| 2011 | |
| Change |
| |
| | | | | | | | | | | | | | | | |
|
Net written premiums | | $ | 5,697 | | | $ | 5,672 | | | - | | % | | | $ | 17,062 | | | $ | 16,926 | | | 1 | |
%
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| | | | |
| | | | | | | | | | | | | | | | |
|
Total revenues | | $ | 6,512 | | | $ | 6,407 | | | 2 | | | | | $ | 19,263 | | | $ | 19,073 | | | 1 | | |
| | | | | | | | | | | | | | | | |
|
Operating income | | $ | 867 | | | $ | 332 | | | 161 | | | | | $ | 2,163 | | | $ | 781 | | | 177 | | |
per diluted share | | $ | 2.22 | | | $ | 0.79 | | | 181 | | | | |
$
|
5.48
| | |
$
|
1.82
| | | 201 | | |
| | | | | | | | | | | | | | | | |
|
Net income | | $ | 864 | | | $ | 333 | | | 159 | | | | | $ | 2,169 | | | $ | 808 | | | 168 | | |
per diluted share | | $ | 2.21 | | | $ | 0.79 | | | 180 | | | | |
$
|
5.50
| | |
$
|
1.88
| | | 193 | | |
| | | | | | | | | | | | | | | | |
|
Diluted weighted average shares outstanding | | | 387.9 | | | | 418.5 | | | (7 | ) | | | | | 391.5 | | | | 425.6 | | | (8 | ) | |
| | | | | | | | | | | | | | | | |
|
GAAP combined ratio | | | 90.3 | % | | | 104.5 | % | | (14.2 | ) | pts | | | | 94.3 | % | | | 108.2 | % | | (13.9 | ) | pts |
| | | | | | | | | | | | | | | | |
|
Operating return on equity | | | 15.5 | % | | | 5.9 | % | | 9.6 | | pts | | | | 13.1 | % | | | 4.5 | % | | 8.6 | | pts |
| |
|
Return on equity | | | 13.6 | % | | | 5.3 | % | | 8.3 | | pts | | | | 11.6 | % | | | 4.3 | % | | 7.3 | | pts |
| | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | As of September 30, |
| |
| | | | | | | | | | | 2012 | | | 2011 | | | Change |
| |
Book value per share | | | | | | | | | | | $ | 67.81 | | | $ | 60.98 | | | 11 | | % |
Adjusted book value per share | | | | | | | | | | | $ | 59.13 | | | $ | 54.53 | | | 8 | | |
| | | | | | | | | | | | | | | | |
|
See Glossary of Financial Measures for definitions and the
statistical supplement for additional financial data.
|
|
|
|
| |
|
“We are very pleased with our strong results this quarter,” commented
Jay Fishman, Chairman and Chief Executive Officer. “Our underwriting
performance reflected a GAAP combined ratio of 90.3%, which benefited
from lower weather-related losses as well as the rate gains we have
achieved during the past year. Net investment income benefited from
strong results in our non-fixed income portfolio.
“We are also very pleased with our continued execution in the
marketplace, noting in particular that we once again achieved written
rate gains across each of our segments. In Business Insurance, we
continue to leverage our data and analytics to achieve targeted rate
gains in order to drive profitability. Our results this quarter
demonstrate our success in this strategy as our underlying combined
ratio improved meaningfully. In Financial, Professional and
International Insurance, renewal rate change improvements from recent
quarters were driven by Management Liability, which reported rate gains
of more than 6 percent. In Personal Insurance, we again achieved strong
increases in renewal premium change, which includes rate as well as
changes in exposure, across the segment, as well as targeted changes in
terms and conditions within Agency Homeowners & Other.
“We remain committed to continuing to improve profitability through a
strategy of actively, but selectively, seeking price increases and
improved terms and conditions, given historically low interest rates and
uncertain weather patterns,” concluded Fishman.
|
Third Quarter 2012 Consolidated Results |
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($ in millions)
|
| Three Months Ended September 30, |
| | 2012 |
| 2011 |
| 2012 |
| 2011 |
|
| | Pre-tax | | After-tax |
| | | | | | | | | | |
|
Underwriting gain (loss) | | $ | 514 | | | | $ | (289 | ) | | | $ | 327 | | | | $ | (185 | ) |
Underwriting gain (loss) includes: | | | | | | | | | | | |
Net favorable prior year reserve development | | | 193 | | | | | 184 | | | | | 129 | | | | | 124 | |
Catastrophes, net of reinsurance | | | (91 | ) | | | | (606 | ) | | | | (59 | ) | | | | (394 | ) |
| | | | | | | | | | |
|
Net investment income | | | 722 | | | | | 690 | | | | | 578 | | | | | 561 | |
| | | | | | | | | | |
|
Other, including interest expense | |
| (64 | ) | | |
| (71 | ) | | |
| (38 | ) | | |
| (44 | ) |
| | | | | | | | | | |
|
Operating income | | | 1,172 | | | | | 330 | | | | | 867 | | | | | 332 | |
Net realized investment gains (losses) | |
| (2 | ) | | |
| 2 |
| | |
| (3 | ) | | |
| 1 |
|
Income before income taxes | | $ | 1,170 |
| | | $ | 332 |
| | | | | | |
Net income | | | | | | | | $ | 864 |
| | | $ | 333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | |
|
GAAP combined ratio | | | 90.3 | | % | | | 104.5 | | % | | | | | |
| | | | | | | | | | |
|
GAAP combined ratio excluding incremental impact of direct to
consumer initiative
| | |
89.3
| |
%
| | |
103.6
| |
%
| | | | | |
| | | | | | | | | | | |
Impact on GAAP combined ratio | | | | | | | | | | | |
Net favorable prior year reserve development
| | |
(3.4
|
)
|
pts
| | |
(3.3
|
)
|
pts
| | | | | |
Catastrophes, net of reinsurance
| | |
1.6
| |
pts
| | |
10.8
| |
pts
| | | | | |
|
|
Operating income of $867 million after tax increased $535 million from
the prior year quarter mostly due to a $512 million after-tax
improvement in the underwriting results, reflecting lower catastrophe
losses and higher underlying underwriting margins.
The underwriting gain in the current quarter reflected a GAAP combined
ratio of 90.3 percent, as compared to 104.5 percent in the prior year
quarter. This improvement of 14.2 points in the combined ratio was
primarily due to lower catastrophe losses (9.2 points) and higher
underlying underwriting margins (4.9 points). Catastrophe losses in the
current quarter were primarily driven by increases in estimated losses
related to wind and hail storms that occurred in the second quarter
2012. Also included in the current quarter underwriting gain was net
favorable prior year reserve development in all three segments.
The current quarter underlying underwriting gain, which excludes net
favorable prior year reserve development and catastrophe losses,
reflected a GAAP combined ratio of 92.1 percent, as compared to 97.0
percent in the prior year quarter. This improvement of 4.9 points
primarily resulted from lower non-catastrophe weather-related losses as
well as earned rate increases exceeding loss cost trends.
Total revenues of $6.512 billion in the current quarter increased $105
million or 2 percent from the prior year quarter. Within total revenues,
earned premiums and net investment income increased $61 million and $32
million, respectively. The modest increase in net investment income was
due to the non-fixed income portfolio driven by real estate partnerships
and hedge fund performance. Net investment income in the fixed income
portfolio decreased slightly from the prior year quarter primarily due
to lower reinvestment rates.
Net written premiums of $5.697 billion in the current quarter were
approximately the same as the prior year quarter. Renewal rate gains
continued across all segments. Retention rates remained strong across
each segment and were generally consistent with recent quarters. New
business volumes were lower than the prior year quarter in all segments,
largely as a result of the company’s pricing strategy. Net written
premiums in Business Insurance also benefited from continued positive
exposure change at renewal, as well as a meaningfully higher level of
positive audit premiums compared to the prior year quarter.
Capital Management
“Our $1.5 billion of cash flows from operating activities during the
quarter were the highest level since the third quarter of 2007,”
commented Jay S. Benet, Vice Chairman and Chief Financial Officer. “We
repurchased 5.4 million shares for $350 million and dividends were $179
million, bringing the year-to-date total capital returned to
shareholders to over $1.5 billion.”
At the end of the third quarter of 2012, shareholders’ equity was
$25.905 billion, a 6 percent increase from the end of the prior year.
Included in shareholders’ equity at the end of the third quarter of 2012
were after-tax net unrealized investment gains of $3.315 billion,
compared to $2.871 billion at year-end 2011. Statutory surplus was
$20.291 billion, up $1.117 billion from the beginning of the year. The
company’s debt-to-capital ratio (excluding after-tax net unrealized
investment gains) was 21.9 percent, well within its target range, and
holding company liquidity was $2.042 billion.
The Board of Directors declared a quarterly dividend of $0.46 per common
share. This dividend is payable December 31, 2012, to shareholders of
record as of the close of business on December 10, 2012.
Business Insurance Segment Financial Results
“In Business Insurance, our strong results this quarter were driven in
large part by lower weather-related losses and previously achieved rate
gains,” commented Brian MacLean, President and Chief Operating Officer.
“We continued to achieve broad based written rate increases across the
segment, led by Workers’ Compensation and Commercial Auto, along with
improved retentions. We are encouraged by our progress so far and plan
on continuing this strategy."
|
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|
($ in millions)
| | Three Months Ended September 30, |
|
| | 2012 | | 2011 | | 2012 | | 2011 |
|
| | Pre-tax | | After-tax |
|
| | | | | | | | | | | | | | |
|
Underwriting gain (loss) | | $ | 187 | | | | $ | (167 | ) | | | $ | 117 | | | | $ | (110 | ) |
Underwriting gain (loss) includes: | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | 41 | | | | | 26 | | | | | 27 | | | | | 17 | |
Catastrophes, net of reinsurance | | | (50 | ) | | | | (195 | ) | | | | (33 | ) | | | | (127 | ) |
| | | | | | | | | | | | | | |
|
Net investment income | | | 524 | | | | | 487 | | | | | 419 | | | | | 398 | |
| | | | | | | | | | | | | | |
|
Other | | | 9 | | | | | 8 | | | | | 7 | | | | | 6 | |
| |
|
| | |
|
| | |
|
| | |
|
|
Operating income | | $ | 720 |
| | | $ | 328 |
| | | $ | 543 |
| | | $ | 294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | |
|
GAAP combined ratio | | | 93.3 | | % | | | 105.4 | | % | | | | | | | |
| | | | | | | | | | | | | | |
|
Impact on GAAP combined ratio | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | |
(1.4
|
)
|
pts
| | |
(0.9
|
)
|
pts
| | | | | | | |
Catastrophes, net of reinsurance
| | |
1.7
| |
pts
| | |
6.8
| |
pts
| | | | | | | |
|
|
Operating income of $543 million after tax increased $249 million from
the prior year quarter mostly due to a $227 million after-tax
improvement in the underwriting results, reflecting higher underlying
underwriting margins and lower catastrophe losses.
The underwriting gain in the current quarter reflected a GAAP combined
ratio of 93.3 percent, as compared to 105.4 percent in the prior year
quarter. This improvement of 12.1 points in the combined ratio was
primarily due to higher underlying underwriting margins (6.5 points) and
lower catastrophe losses (5.1 points). Also included in the current
quarter underwriting gain was net favorable prior year reserve
development which primarily resulted from better than expected loss
experience in property-related coverages largely for accident years
2009-2011 and in the general liability product line for accident years
2003-2009. These improvements were partially offset by a $108 million
after tax ($167 million pre tax) increase to asbestos reserves, which
was consistent with the prior year quarter.
The asbestos reserve strengthening in the current quarter was primarily
driven by increases in the company’s estimate for projected settlement
and defense costs related to a broad number of policyholders and higher
projected payments on assumed reinsurance accounts. The increase in the
estimate of projected settlement and defense costs resulted from recent
payment trends being moderately higher than previously anticipated due
to the impact of the current litigation environment. Notwithstanding
these payment trends, the company’s overall view of the underlying
asbestos environment is essentially unchanged from recent periods and
there remains a high degree of uncertainty with respect to future
exposure from asbestos claims.
The current quarter underlying underwriting gain, which excludes net
favorable prior year reserve development and catastrophe losses,
reflected a GAAP combined ratio of 93.0 percent, as compared to 99.5
percent in the prior year quarter. This improvement of 6.5 points
primarily resulted from earned rate increases exceeding loss cost trends
and lower non-catastrophe weather-related losses.
Business Insurance net written premiums of $2.962 billion in the current
quarter increased 5 percent from the prior year quarter primarily driven
by continued increases in renewal rate change. Retention rates remained
strong and increased from recent quarters. New business volumes were
lower than the prior year quarter, consistent with the company’s pricing
strategy. Net written premiums also benefited from continued positive
exposure change at renewal, as well as a meaningfully higher level of
positive audit premiums compared to the prior year quarter.
Select Accounts
-
Net written premiums of $679 million increased 2 percent from the
prior year quarter due to increased renewal premium change as well as
a higher level of audit premiums.
-
Renewal premium change was positive, continuing a long-standing trend.
-
Retention rates increased from recent quarters but were lower than the
prior year quarter.
-
New business volumes decreased from the prior year quarter.
Commercial Accounts
-
Net written premiums of $805 million increased 8 percent from the
prior year quarter primarily due to increased renewal premium change
as well as a higher level of positive audit premiums.
-
Renewal premium change was again positive and increased from recent
quarters.
-
Retention rates remained strong and increased from recent quarters.
-
New business volumes decreased from the prior year quarter, but were
generally consistent with recent quarters.
Other Business Insurance
Includes Industry-Focused Underwriting, Target Risk Underwriting and
Specialized Distribution
-
Net written premiums of $1.275 billion increased 3 percent from the
prior year quarter primarily due to increased renewal premium change
as well as a higher level of positive audit premiums.
-
Renewal premium change was positive and continued to increase from
recent quarters.
-
Retention rates remained strong and increased from recent quarters.
-
New business volumes decreased from the prior year quarter.
National Accounts
-
Net written premiums of $202 million increased 15 percent from the
prior year quarter primarily due to increased renewal premium
change driven by payroll exposure growth as well as higher new
business volumes. In addition, the repopulation of workers’
compensation residual market pools contributed to premium growth in
the third quarter 2012.
Financial, Professional & International
Insurance Segment Financial Results
“In Financial, Professional and International Insurance, we are pleased
that our underlying combined ratio has improved both sequentially and
year over year in each of the last four quarters driven by improved
underwriting results in both our International and Management Liability
businesses,” commented MacLean. “We are also pleased that thanks to
solid execution in our Management Liability business written rate
increases have accelerated both during the quarter and over the past
several quarters.”
| | |
|
|
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|
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|
|
|
|
|
|
|
| | | |
| | | |
| | |
| | |
($ in millions)
| | Three Months Ended September 30, |
|
| | 2012 | | 2011 | | 2012 | | 2011 |
|
| | Pre-tax | | After-tax |
|
| | | | | | | | | | | | | |
|
Underwriting gain | | $ | 149 | | | | $ | 187 | | | | $ | 97 | | | $ | 126 | |
Underwriting gain includes: | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | 87 | | | | | 153 | | | | | 60 | | | | 104 | |
Catastrophes, net of reinsurance | | | (1 | ) | | | | (3 | ) | | | | - | | | | (2 | ) |
| | | | | | | | | | | | | |
|
Net investment income | | | 97 | | | | | 101 | | | | | 78 | | | | 81 | |
| | | | | | | | | | | | | |
|
Other | | | 8 | | | | | 6 | | | | | 5 | | | | 4 | |
| |
|
| | |
|
| | |
| | |
|
|
Operating income | | $ | 254 |
| | | $ | 294 |
| | | $ | 180 | | | $ | 211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | |
|
GAAP combined ratio | | | 80.2 | | % | | | 76.2 | | % | | | | | | |
| | | | | | | | | | | | | |
|
Impact on GAAP combined ratio | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | |
(11.3
|
)
|
pts
| | |
(19.1
|
)
|
pts
| | | | | | |
Catastrophes, net of reinsurance
| | |
0.1
| |
pts
| | |
0.4
| |
pts
| | | | | | |
|
| | | | | | | | | | | | | | | |
|
Operating income of $180 million after tax decreased $31 million from
the prior year quarter mostly due to a $29 million after-tax decrease in
the underwriting gain, reflecting lower net favorable prior year reserve
development, partially offset by higher underlying underwriting margins.
The underwriting gain in the current quarter reflected a GAAP combined
ratio of 80.2 percent, as compared to 76.2 percent in the prior year
quarter. This increase of 4.0 points in the combined ratio was due to
lower net favorable prior year reserve development (7.8 points),
partially offset by higher underlying underwriting margins (3.5 points).
Net favorable prior year reserve development in the current quarter
primarily resulted from better than expected loss experience in the
surety business within Bond & Financial Products for accident years
2006-2007 as well as in several lines of business within International,
partially offset by a $6 million after tax ($8 million pre tax) increase
to asbestos reserves.
The current quarter underlying underwriting gain, which excludes net
favorable prior year reserve development and catastrophe losses,
reflected a GAAP combined ratio of 91.4 percent, as compared to 94.9
percent in the prior year quarter. This improvement of 3.5 points
primarily resulted from a lower level of large losses within
International as well as earned rate increases exceeding loss cost
trends, partially offset by an increase in the expense ratio primarily
as a result of lower earned premiums.
Financial, Professional & International Insurance net written premiums
of $729 million decreased 10 percent from the prior year quarter
primarily driven by International due to a number of factors described
below.
Retention rates, renewal premium changes and new business volumes, as
discussed below, exclude the surety line of business as surety products
are generally sold on a non-recurring, project-specific basis.
Bond & Financial Products
-
Net written premiums of $529 million decreased 2 percent from the
prior year quarter primarily due to lower business volumes in
construction surety reflecting the continued slowdown in construction
spending, partially offset by growth in Management Liability business
volume.
-
Renewal premium change remained positive and continued to increase
from recent quarters due to positive renewal rate change, partially
offset by slightly lower insured exposures.
-
Retention rates remained strong and generally consistent with recent
quarters.
-
New business volumes decreased from the prior year quarter.
International
-
Net written premiums of $200 million decreased 26 percent from the
prior year quarter primarily driven by policies written in the third
quarter of 2011 that, because their terms were generally 18 months,
were not up for renewal in the third quarter of 2012, lower surety
volumes in Canada and the impact of the company’s withdrawal from the
personal insurance business in Ireland.
-
Renewal premium change was slightly negative as the impact of
continued positive renewal rate change was offset by lower insured
exposures.
-
Retention rates decreased from recent quarters but were improved from
the prior year quarter.
-
New business volumes decreased from the prior year quarter.
Personal Insurance Segment Financial Results
“In Personal Insurance, our improved underwriting performance this
quarter resulted from lower weather-related losses,” commented MacLean.
“Given our goal of improving profitability over time, we are
particularly pleased with the significant acceleration of pricing gains
that we achieved this quarter in both Auto and Homeowners. Although this
strategy has resulted in lower new business volumes, retention rates
remain high and we will continue to seek improved pricing, terms and
conditions.”
|
| | | | | |
|
|
|
|
|
|
|
($ in millions)
| | Three Months Ended September 30, |
|
| | 2012 |
| 2011 |
| 2012 |
| 2011 |
|
| | Pre-tax | | After-tax |
|
| | | | | | | | | | | | | | |
|
Underwriting gain (loss) | | $ | 178 | | | | $ | (309 | ) | | | $ | 113 | | | | $ | (201 | ) |
Underwriting gain (loss) includes: | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | 65 | | | | | 5 | | | | | 42 | | | | | 3 | |
Catastrophes, net of reinsurance | | | (40 | ) | | | | (408 | ) | | | | (26 | ) | | | | (265 | ) |
| | | | | | | | | | | | | | |
|
Net investment income | | | 101 | | | | | 102 | | | | | 81 | | | | | 82 | |
| | | | | | | | | | | | | | |
|
Other | | | 17 | | | | | 17 | | | | | 12 | | | | | 11 | |
| |
|
| | |
|
| | |
|
| | |
|
|
Operating income (loss) | | $ | 296 |
| | | $ | (190 | ) | | | $ | 206 |
| | | $ | (108 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | |
|
GAAP combined ratio | | | 89.7 | | % | | | 115.0 | | % | | | | | | | |
| | | | | | | | | | | | | | |
|
GAAP combined ratio excluding incremental impact of direct to
consumer initiative
| | |
86.8
| |
%
| | |
112.5
| |
%
| | | | | | | |
| | | | | | | | | | | | | | |
|
Impact on GAAP combined ratio | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | |
(3.4
|
)
|
pts
| | |
(0.3
|
)
|
pts
| | | | | | | |
Catastrophes, net of reinsurance
| | |
2.1
| |
pts
| | |
21.3
| |
pts
| | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | |
|
Operating income of $206 million after tax increased $314 million from
the prior year quarter due to improved underwriting results, reflecting
lower catastrophe losses and higher net favorable prior year reserve
development.
The underwriting gain in the current quarter reflected a GAAP combined
ratio of 89.7 percent, as compared to 115.0 percent in the prior year
quarter. This improvement of 25.3 points in the combined ratio was
primarily due to lower catastrophe losses (19.2 points) and higher net
favorable prior year reserve development (3.1 points). The net favorable
prior year reserve development in the current quarter primarily resulted
from better than expected loss experience in Homeowners & Other
attributable to weather-related losses incurred in 2011 and in the
umbrella product line for accident years 2007-2010.
The current quarter underlying underwriting gain, which excludes net
favorable prior year reserve development and catastrophe losses,
reflected a GAAP combined ratio of 91.0 percent, as compared to 94.0
percent in the prior year quarter. This improvement of 3.0 points was
primarily due to lower non-catastrophe weather-related losses.
Personal Insurance net written premiums of $2.006 billion decreased 2
percent from the prior year quarter primarily due to lower new business
volumes in Automobile.
Agency Automobile and Agency Homeowners & Other, as discussed below,
represent business sold through agents, brokers and other intermediaries
and exclude direct to consumer.
Agency Automobile
-
Net written premiums of $906 million decreased 4 percent from the
prior year quarter.
-
Policies in force decreased 6 percent from the prior year quarter.
-
Renewal premium change remained positive and increased meaningfully
from recent quarters.
-
Retention rates remained strong and generally consistent with recent
quarters.
-
New business volumes were lower than the prior year quarter.
Agency Homeowners & Other
-
Net written premiums of $1.056 billion were consistent with the prior
year quarter.
-
Policies in force decreased 4 percent from the prior year quarter.
-
Renewal premium change remained positive and increased modestly from
recent quarters.
-
Retention rates remained very strong and generally consistent with
recent quarters.
-
New business volumes were lower than the prior year quarter.
|
| | | |
| | | |
| | | |
| | |
Year-to-Date 2012 Consolidated Financial
Results | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | |
|
($ in millions)
| | Nine Months Ended September 30, |
|
| | 2012 | | 2011 | | 2012 | | 2011 |
|
| | Pre-tax | | After-tax |
|
| | | | | | | | | | | | | | |
|
Underwriting gain (loss) | | $ | 845 | | | | $ | (1,453 | ) | | | $ | 528 | | | | $ | (860 | ) |
Underwriting gain (loss) includes: | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | 718 | | | | | 589 | | | | | 476 | | | | | 390 | |
Catastrophes, net of reinsurance | | | (808 | ) | | | | (2,460 | ) | | | | (525 | ) | | | | (1,601 | ) |
Resolution of prior year tax matters | | | | | | | | | | | | | | | 100 | |
| | | | | | | | | | | | | | |
|
Net investment income | | | 2,200 | | | | | 2,227 | | | | | 1,760 | | | | | 1,789 | |
| | | | | | | | | | | | | | |
|
Other, including interest expense | | | (202 | ) | | | | (241 | ) | | | | (125 | ) | | | | (148 | ) |
Other also includes: | | | | | | | | | | | | | | | |
Resolution of prior year tax matters | | | | | | | | | | | | | | |
4
| |
| |
|
| | |
|
| | |
|
| | |
|
|
Operating income | | | 2,843 | | | | | 533 | | | | | 2,163 | | | | | 781 | |
Net realized investment gains | |
| 12 |
| | |
| 41 |
| | |
| 6 |
| | |
| 27 |
|
Income before income taxes | | $ | 2,855 |
| | | $ | 574 |
| | | | | | | | |
Net income | | | | | | | | | | $ | 2,169 |
| | | $ | 808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | |
|
GAAP combined ratio | | | 94.3 | | % | | | 108.2 | | % | | | | | | | |
| | | | | | | | | | | | | | |
|
GAAP combined ratio excluding incremental impact of direct to
consumer initiative
| | |
93.5
| |
%
| | |
107.3
| |
%
| | | | | | | |
| | | | | | | | | | | | | | |
|
Impact on GAAP combined ratio | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | |
(4.3
|
)
|
pts
| | |
(3.5
|
)
|
pts
| | | | | | | |
Catastrophes, net of reinsurance
| | |
4.9
| |
pts
| | |
14.9
| |
pts
| | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | |
|
Operating income of $2.163 billion after tax increased $1.382 billion
from the prior year period due to a $1.388 billion after-tax increase in
underwriting results, reflecting lower catastrophe losses and higher
underlying underwriting margins.
The underwriting gain in the current period reflected a GAAP combined
ratio of 94.3 percent, as compared to 108.2 percent in the prior year
period. This improvement of 13.9 points in the combined ratio was
primarily due to lower catastrophe losses (10.0 points) and higher
underlying underwriting margins (3.1 points).
The current period underlying underwriting gain, which excludes net
favorable prior year reserve development and catastrophe losses,
reflected a GAAP combined ratio of 93.7 percent, as compared to 96.8
percent in the prior year period. This improvement of 3.1 points
primarily resulted from lower non-catastrophe weather-related losses as
well as earned rate increases exceeding loss cost trends.
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 website 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, October 18, 2012. Prior to the webcast, a slide presentation
pertaining to the quarterly earnings will be available on the company's
website. Following the live event, an audio playback of the webcast and
the slide presentation will be available on the company's website.
To view the slides or to listen to the webcast or the playback, visit
the "Webcasts & Presentations" section of the Travelers investor
relations website at http://investor.travelers.com.
About Travelers
The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of
property casualty insurance for auto,
home
and business.
The company’s diverse business lines offer its customers a wide range of
coverage sold primarily through independent agents and brokers. A
component of the Dow Jones Industrial Average, Travelers has more than
30,000 employees and operations in the United States and selected
International markets. For more information, visit www.travelers.com.
From time to time, Travelers may use its website 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.
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 Partner Services; 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 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 primarily use
credit-based underwriting processes, as well as property and casualty
products that are primarily marketed on a domestic basis in the United
Kingdom, Canada and the Republic of Ireland, 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 a broad
range of property and casualty insurance covering individuals’ personal
risks. The primary products of automobile and homeowners insurance are
complemented by a broad suite of related coverages.
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. Words
such as “may”, “will”, “should”, “likely”, “anticipates”, “expects”,
“intends”, “plans”, “projects”, “believes”, “estimates” and similar
expressions are used to identify these forward-looking statements.
Specifically, statements about the company’s share repurchase plans,
expected margin improvement, future pension plan contributions and the
potential impact of investment markets and other economic conditions on
the company’s investment portfolio and underwriting results, among
others, are forward looking, and the company may also make
forward-looking statements about, among other things:
-
its results of operations and financial condition (including, among
other things, premium volume, premium rates, net and operating income,
investment income and performance, return on equity, and expected
current returns and combined ratios);
-
the sufficiency of the company’s asbestos and other reserves;
-
the impact of emerging claims issues as well as other insurance and
non-insurance litigation;
-
the cost and availability of reinsurance coverage;
-
catastrophe losses;
-
the impact of investment, economic and underwriting market conditions;
and
-
strategic initiatives.
The company cautions investors that such statements are subject to risks
and uncertainties, many of which are difficult to predict and generally
beyond the company’s 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 the company’s
results of operations, its financial position and/or liquidity, and
could adversely impact the company’s ratings, the company’s ability to
raise capital and the availability and cost of reinsurance;
-
during or following a period of financial market disruption or
economic downturn, the company’s business could be materially and
adversely affected;
-
if actual claims exceed the company’s claims and claim adjustment
expense reserves, or if changes in the estimated level of claims and
claim adjustment expense reserves are necessary, the company’s
financial results could be materially and adversely affected;
-
the company’s investment portfolio may suffer reduced returns or
material realized or unrealized losses;
-
the company’s business could be harmed because of its potential
exposure to asbestos and environmental claims and related litigation;
-
the company is 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 the company’s
business are uncertain;
-
the intense competition that the company faces could harm its ability
to maintain or increase its business volumes, its pricing levels
and/or its profitability;
-
the company may not be able to collect all amounts due to it from
reinsurers, and reinsurance coverage may not be available to the
company in the future at commercially reasonable rates or at all;
-
the company is exposed to credit risk in certain of its business
operations;
-
within the United States, the company’s businesses are heavily
regulated by the states in which it conducts business, including
licensing and supervision, and changes in regulation may reduce the
company’s profitability and limit its growth;
-
changes in federal regulation could impose significant burdens on the
company and otherwise adversely impact its results;
-
a downgrade in the company’s claims-paying and financial strength
ratings could adversely impact the company’s business volumes,
adversely impact the company’s ability to access the capital markets
and increase the company’s borrowing costs;
-
the inability of the company’s insurance subsidiaries to pay dividends
to the company’s holding company in sufficient amounts would harm the
company’s ability to meet its obligations, pay future shareholder
dividends or make future share repurchases;
-
disruptions to the company’s relationships with its independent agents
and brokers could adversely affect the company;
-
the company’s efforts to develop new products or expand in targeted
markets may not be successful and may create enhanced risks;
-
any net deferred tax asset could be adversely affected by a reduction
in the U.S. Federal corporate income tax rate;
-
the company may be adversely affected if its pricing and capital
models provide materially different indications than actual results;
-
the company is subject to a number of risks associated with its
business outside the United States;
-
new regulations outside of the U.S., including in the European Union,
could adversely impact the company’s results of operations and limit
its growth;
-
the company’s business success and profitability depend, in part, on
effective information technology systems and on continuing to develop
and implement improvements in technology;
-
if the company experiences difficulties with technology, data security
and/or outsourcing relationships, the company’s ability to conduct its
business could be negatively impacted;
-
acquisitions and integration of acquired businesses may result in
operating difficulties and other unintended consequences;
-
changes to existing accounting standards may adversely impact the
company’s reported results;
-
the company could be adversely affected if its controls designed to
ensure compliance with guidelines, policies and legal and regulatory
standards are not effective;
-
the company’s businesses may be adversely affected if it is unable to
hire and retain qualified employees;
-
loss of or significant restriction on the use of credit scoring in the
pricing and underwriting of Personal Insurance products could reduce
the company’s future profitability; and
-
the company’s repurchase plans depend on a variety of factors,
including the company’s financial position, earnings, common share
price, catastrophe losses, funding of the company’s qualified pension
plan, capital requirements of the company’s operating subsidiaries,
legal requirements, regulatory constraints, other investment
opportunities (including mergers and acquisitions), market conditions
and other factors.
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 captions "Risk Factors" 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 filed with the Securities and Exchange
Commission.
GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF NON-GAAP
MEASURES TO GAAP 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 financial
statements or are not required to be disclosed in the notes to financial
statements or, in some cases, include or exclude certain items not
ordinarily included or excluded in the most comparable GAAP financial
measure. Reconciliations of non-GAAP measures to their most directly
comparable GAAP measures also follow.
In the opinion of the company’s management, a discussion of these
measures provides investors, financial analysts, rating agencies and
other financial statement users 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. Internally, the company's management uses these measures to
evaluate performance against historical results, to establish financial
targets on a consolidated basis and for other reasons, which are
discussed below.
Some of these measures exclude net realized investment gains (losses),
net of tax, and/or net unrealized investment gains (losses), net of tax,
which can be significantly impacted by both discretionary and other
economic factors and are not necessarily indicative of operating trends.
Other companies may calculate these measures differently, and,
therefore, their measures may not be comparable to those used by the
company’s management.
RECONCILIATION OF OPERATING INCOME AND CERTAIN OTHER NON-GAAP
MEASURES TO NET INCOME
Operating income is net income excluding the after-tax impact of
net realized investment gains (losses) and discontinued operations.
Management uses operating income to analyze each segment’s performance
and as a tool in making business decisions. Financial statement users
also consider operating income when analyzing the results and trends of
insurance companies. Operating earnings per share is operating
income on a per common share basis.
Reconciliation of Operating Income less Preferred Dividends and Net
Income less Preferred Dividends to Net Income
|
|
|
|
|
|
|
|
|
|
|
| | |
| |
| |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
($ in millions, after-tax)
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | | |
|
Operating income, less preferred dividends | | $ | 867 | | | $ | 332 | | $ | 2,163 | | $ | 780 |
Preferred dividends
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
1
|
Operating income | | | 867 | | | | 332 | | | 2,163 | | | 781 |
Net realized investment gains (losses)
|
|
|
(3
|
)
|
|
|
1
|
|
|
6
|
|
|
27
|
Net income |
| $ | 864 |
|
| $ | 333 |
| $ | 2,169 |
| $ | 808 |
| | | | | | | | |
|
Net income, less preferred dividends | | $ | 864 | | | $ | 333 | | $ | 2,169 | | $ | 807 |
Preferred dividends
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
1
|
Net income |
| $ | 864 |
|
| $ | 333 |
| $ | 2,169 |
| $ | 808 |
|
|
|
|
|
|
|
|
|
|
| | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
| |
| |
| |
| |
| |
| | Twelve Months Ended December 31, |
($ in millions, after-tax)
|
|
| 2011 |
|
| 2010 |
|
| 2009 |
|
| 2008 |
|
|
| 2007 |
|
| 2006 |
|
| 2005 |
|
| | | | | | | | | | | | | |
|
Operating income, less preferred dividends
| |
$
|
1,389
| |
$
|
3,040
| |
$
|
3,597
| |
$
|
3,191
| | |
$
|
4,496
| |
$
|
4,195
| |
$
|
2,020
| |
Preferred dividends
|
|
|
1
|
|
|
3
|
|
|
3
|
|
|
4
|
|
|
|
4
|
|
|
5
|
|
|
6
|
|
Operating income | | | 1,390 | | | 3,043 | | | 3,600 | | | 3,195 | | | | 4,500 | | | 4,200 | | | 2,026 | |
Net realized investment gains (losses)
|
|
|
36
|
|
|
173
|
|
|
22
|
|
|
(271
|
)
|
|
|
101
|
|
|
8
|
|
|
35
|
|
Income from continuing operations | | | 1,426 | | | 3,216 | | | 3,622 | | | 2,924 | | | | 4,601 | | | 4,208 | | | 2,061 | |
Discontinued operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
(439
|
)
|
Net income |
| $ | 1,426 |
| $ | 3,216 |
| $ | 3,622 |
| $ | 2,924 |
|
| $ | 4,601 |
| $ | 4,208 |
| $ | 1,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | |
|
Reconciliation of Operating Earnings per Share to Net Income per
Share on a Basic and Diluted Basis
|
|
|
|
|
|
|
|
|
|
| |
| |
| |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | |
|
Basic earnings per share | | | | | | | | |
Operating income | | $ | 2.24 | | | $ | 0.79 | | $ | 5.53 | | $ | 1.84 |
Net realized investment gains (losses)
|
|
|
(0.01
|
)
|
|
|
0.01
|
|
|
0.02
|
|
|
0.06
|
Net income |
| $ | 2.23 |
|
| $ | 0.80 |
| $ | 5.55 |
| $ | 1.90 |
| | | | | | | |
|
Diluted earnings per share | | | | | | | | |
Operating income | | $ | 2.22 | | | $ | 0.79 | | $ | 5.48 | | $ | 1.82 |
Net realized investment gains (losses)
|
|
|
(0.01
|
)
|
|
|
-
|
|
|
0.02
|
|
|
0.06
|
Net income |
| $ | 2.21 |
|
| $ | 0.79 |
| $ | 5.50 |
| $ | 1.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
|
Reconciliation of Operating Income (Loss) by Segment to Total
Operating Income
|
|
|
|
|
|
|
|
|
|
| |
| |
| |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
($ in millions, after-tax)
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | |
|
| | | | | | | |
|
Business Insurance | |
$
|
543
| | |
$
|
294
| | |
$
|
1,517
| | |
$
|
909
| |
Financial, Professional & International Insurance | | |
180
| | | |
211
| | | |
511
| | | |
495
| |
Personal Insurance |
|
|
206
|
|
|
|
(108
|
)
|
|
|
331
|
|
|
|
(409
|
)
|
Total segment operating income
| | |
929
| | | |
397
| | | |
2,359
| | | |
995
| |
Interest Expense and Other
|
|
|
(62
|
)
|
|
|
(65
|
)
|
|
|
(196
|
)
|
|
|
(214
|
)
|
Total operating income |
| $ | 867 |
|
| $ | 332 |
|
| $ | 2,163 |
|
| $ | 781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | |
|
RECONCILIATION OF ADJUSTED SHAREHOLDERS’ EQUITY TO SHAREHOLDERS’
EQUITY AND OPERATING RETURN ON EQUITY TO RETURN ON EQUITY
Average shareholders’ equity is (a) the sum of total
shareholders’ equity excluding preferred stock at the beginning and end
of each of the quarters for the period presented divided by (b) the
number of quarters in the period presented times two. Adjusted
shareholders’ equity is shareholders’ equity excluding net
unrealized investment gains (losses), net of tax, net realized
investment gains (losses), net of tax, for the period presented,
preferred stock and discontinued operations. Adjusted average
shareholders’ equity is average shareholders’ equity excluding net
unrealized investment gains (losses), net of tax, for all quarters
included in the calculation and, for each quarterly period included in
the calculation, that quarter’s net realized investment gains (losses),
net of tax.
Reconciliation of Adjusted Shareholders’ Equity to Shareholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| | | |
| |
| |
| |
| |
| |
| | As of September 30, | | | | | | | | | | | |
($ in millions)
|
|
| 2012 |
|
| 2011 |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | |
|
Adjusted shareholders' equity | | $ | 22,584 | | $ | 22,481 | | | | | | | | | | | | |
Net unrealized investment gains, net of tax
| | |
3,315
| | |
2,664
| | | | | | | | | | | | |
Net realized investment gains, net of tax
|
|
|
6
|
|
|
27
|
| | | | | | | | | | | |
Shareholders' equity |
| $ | 25,905 |
| $ | 25,172 |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | |
|
| | As of December 31, |
($ in millions)
|
|
| 2011 |
|
| 2010 |
|
| 2009 |
|
| 2008 |
|
|
| 2007 |
|
| 2006 |
|
| 2005 |
|
|
| 2004 |
|
| | | | | | | | | | | | | | | |
|
Adjusted shareholders' equity | | $ | 21,570 | | $ | 23,375 | | $ | 25,458 | | $ | 25,647 | | | $ | 25,783 | | $ | 24,545 | | $ | 22,227 | | | $ | 20,087 | |
Net unrealized investment gains (losses), net of tax
| | |
2,871
| | |
1,859
| | |
1,856
| | |
(146
|
)
| | |
620
| | |
453
| | |
327
| | | |
866
| |
Net realized investment gains (losses), net of tax
| | |
36
| | |
173
| | |
22
| | |
(271
|
)
| | |
101
| | |
8
| | |
35
| | | |
(28
|
)
|
Preferred stock
| | |
-
| | |
68
| | |
79
| | |
89
| | | |
112
| | |
129
| | |
153
| | | |
188
| |
Discontinued operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
(439
|
)
|
|
|
88
|
|
Shareholders' equity |
| $ | 24,477 |
| $ | 25,475 |
| $ | 27,415 |
| $ | 25,319 |
|
| $ | 26,616 |
| $ | 25,135 |
| $ | 22,303 |
|
| $ | 21,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | |
|
Return on equity is the ratio of annualized net income (loss)
less preferred dividends to average shareholders’ equity for the periods
presented. Operating return on equity is the ratio of annualized
operating income (loss) less preferred dividends to adjusted average
shareholders’ equity for the periods presented. In the opinion of the
company’s management, these are important indicators of how well
management creates value for its shareholders through its operating
activities and its capital management.
Calculation of Operating Return on Equity and Return on Equity
|
|
|
|
|
|
|
|
|
|
| |
| |
| |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
($ in millions, after-tax)
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | |
|
Annualized operating income, less preferred dividends
| |
$
|
3,467
| | |
$
|
1,326
| | |
$
|
2,884
| | |
$
|
1,040
| |
Adjusted average shareholders' equity
|
|
|
22,331
|
|
|
|
22,647
|
|
|
|
22,066
|
|
|
|
23,057
|
|
Operating return on equity |
|
| 15.5 | % |
|
| 5.9 | % |
|
| 13.1 | % |
|
| 4.5 | % |
| | | | | | | |
|
Annualized net income, less preferred dividends
| |
$
|
3,458
| | |
$
|
1,334
| | |
$
|
2,892
| | |
$
|
1,076
| |
Average shareholders' equity
|
|
|
25,477
|
|
|
|
25,090
|
|
|
|
25,037
|
|
|
|
25,159
|
|
Return on equity |
|
| 13.6 | % |
|
| 5.3 | % |
|
| 11.6 | % |
|
| 4.3 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | |
|
Average annual operating return on equity over a period is the ratio
of:
|
a) the sum of operating income (loss) less preferred dividends for
the periods presented to
|
b) the sum of: 1) the sum of the adjusted average shareholders’
equity for all full years in the period presented, and 2) for
partial years in the period presented, the number of quarters in
that partial year divided by four, multiplied by the adjusted
average shareholders’ equity of the partial year.
|
|
Calculation of Average Annual Operating Return on Equity from January
1, 2005 through September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
| |
| |
| |
| |
| |
| |
| |
| | Nine Months Ended | | | | | | | | | | | | | | | |
| | September 30, | | | Twelve Months Ended December 31, |
($ in millions)
|
|
| 2012 |
|
|
| 2011 |
| | |
| 2011 |
|
|
| 2010 |
|
|
| 2009 |
|
|
| 2008 |
|
|
| 2007 |
|
|
| 2006 |
|
|
| 2005 |
|
| | | | | | | | | | | | | | | | | | |
|
Operating income, less preferred dividends
| |
$
|
2,163
| | |
$
|
780
| | | |
$
|
1,389
| | |
$
|
3,040
| | |
$
|
3,597
| | |
$
|
3,191
| | |
$
|
4,496
| | |
$
|
4,195
| | |
$
|
2,020
| |
Operating income, less preferred dividends - annualized
| | |
2,884
| | | |
1,040
| | | | | | | | | | | | | | | | |
Adjusted average shareholders' equity
| | |
22,066
| | | |
23,057
| | | | |
22,806
| | | |
24,285
| | | |
25,777
| | | |
25,668
| | | |
25,350
| | | |
23,381
| | | |
21,118
| |
Operating return on equity
|
|
|
13.1
|
%
|
|
|
4.5
|
%
| | |
|
6.1
|
%
|
|
|
12.5
|
%
|
|
|
14.0
|
%
|
|
|
12.4
|
%
|
|
|
17.7
|
%
|
|
|
17.9
|
%
|
|
|
9.6
|
%
|
| | | | | | | | | | | | | | | | | | |
|
Average annual operating return on equity for the period
January 1, 2005 through September 30, 2012 | | | 13.0 | % | | | | | | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | |
|
RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN ITEMS
TO NET INCOME
Underwriting gain (loss) is net earned premiums and fee income
less claims and claim adjustment expenses and insurance-related
expenses. In the opinion of the company’s management, it is important to
measure the profitability of each segment excluding the results of
investing activities, which are managed separately from the insurance
business. This measure is used to assess each segment’s business
performance and as a tool in making business decisions. Pre-taxunderwriting
gain, excluding the impact of catastrophes and net favorable prior year
loss reserve development, is the underwriting gain (loss) adjusted
to exclude claims, claim adjustment expenses, and reinstatement premiums
and assessments related to catastrophes and loss reserve development
related to time periods prior to the current year. In the opinion of the
company's management, this measure is meaningful to users of the
financial statements to understand the company's periodic earnings and
the variability of earnings caused by the unpredictable nature (i.e.,
the timing and amount) of catastrophes and loss reserve development.
This measure is also referred to as underlying underwriting margin
or underlying underwriting gain (loss).
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
(loss) 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 to users of the financial statements to understand the
company’s periodic earnings and the variability in periodic earnings
caused by the unpredictable nature of catastrophes.
Net favorable (unfavorable) prior year 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, which may be related to one or more prior years. In the opinion
of the company's management, a discussion of loss reserve development is
meaningful to users of the financial statements 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 (loss),
and changes in claims and claim adjustment expense reserve levels from
period to period.
Reconciliation of Pre-tax Underwriting Gain (Excluding the Impact of
Catastrophes and Net Favorable Prior Year Loss Reserve Development) to
Net Income
|
|
|
|
|
|
|
|
|
|
| |
| |
| |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 30, |
| September 30, |
($ in millions, after-tax except as noted)
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | |
|
Pre-tax underwriting gain excluding the impact of catastrophes and
net favorable prior year loss reserve development
| |
$
|
412
| | |
$
|
133
| | |
$
|
935
| | |
$
|
418
| |
Pre-tax impact of catastrophes
| | |
(91
|
)
| | |
(606
|
)
| | |
(808
|
)
| | |
(2,460
|
)
|
Pre-tax impact of net favorable prior year loss reserve development
|
|
|
193
|
|
|
|
184
|
|
|
|
718
|
|
|
|
589
|
|
Pre-tax underwriting gain (loss)
| | |
514
| | | |
(289
|
)
| | |
845
| | | |
(1,453
|
)
|
Income tax expense (benefit) on underwriting results
|
|
|
187
|
|
|
|
(104
|
)
|
|
|
317
|
|
|
|
(593
|
)
|
Underwriting gain (loss)
| | |
327
| | | |
(185
|
)
| | |
528
| | | |
(860
|
)
|
Net investment income
| | |
578
| | | |
561
| | | |
1,760
| | | |
1,789
| |
Other, including interest expense
|
|
|
(38
|
)
|
|
|
(44
|
)
|
|
|
(125
|
)
|
|
|
(148
|
)
|
Operating income | | | 867 | | | | 332 | | | | 2,163 | | | | 781 | |
Net realized investment gains (losses)
|
|
|
(3
|
)
|
|
|
1
|
|
|
|
6
|
|
|
|
27
|
|
Net income |
| $ | 864 |
|
| $ | 333 |
|
| $ | 2,169 |
|
| $ | 808 |
|
|
|
|
|
|
|
|
|
|
| | | | | | | |
|
ADJUSTMENT TO THE GAAP COMBINED RATIO FOR THE INCREMENTAL IMPACT OF
THE DIRECT TO CONSUMER INITIATIVE
GAAP combined ratio is the sum of the loss and loss adjustment
expense ratio (loss and LAE ratio) and the underwriting expense ratio.
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,
and 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.
Calculation of the GAAP Combined Ratio
|
|
|
|
|
|
|
|
|
|
| |
| |
| |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 30, |
| September 30, |
($ in millions, pre-tax)
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | |
|
Loss and loss adjustment expense ratio | | | | | | | | |
Claims and claim adjustment expenses
| |
$
|
3,359
| | |
$
|
4,136
| | |
$
|
10,509
| | |
$
|
12,659
| |
Less:
| | | | | | | | |
Policyholder dividends
| | |
11
| | | |
11
| | | |
34
| | | |
29
| |
Allocated fee income
|
|
|
40
|
|
|
|
38
|
|
|
|
86
|
|
|
|
105
|
|
Loss ratio numerator |
| $ | 3,308 |
|
| $ | 4,087 |
|
| $ | 10,389 |
|
| $ | 12,525 |
|
| | | | | | | |
|
Underwriting expense ratio | | | | | | | | |
Amortization of deferred acquisition costs
| |
$
|
986
| | |
$
|
982
| | |
$
|
2,933
| | |
$
|
2,900
| |
General and administrative expenses
| | |
904
| | | |
860
| | | |
2,681
| | | |
2,650
| |
Less:
| | | | | | | | |
G&A included in Interest Expense and Other
| | |
5
| | | |
5
| | | |
17
| | | |
50
| |
Allocated fee income
| | |
52
| | | |
41
| | | |
147
| | | |
122
| |
Billing and policy fees
|
|
|
24
|
|
|
|
26
|
|
|
|
76
|
|
|
|
77
|
|
Expense ratio numerator |
| $ | 1,809 |
|
| $ | 1,770 |
|
| $ | 5,374 |
|
| $ | 5,301 |
|
|
|
|
|
|
|
|
|
|
Earned premium |
| $ | 5,666 |
|
| $ | 5,605 |
|
| $ | 16,718 |
|
| $ | 16,479 |
|
| | | | | | | |
|
GAAP combined ratio 1 | | | | | | | | |
Loss and loss adjustment expense ratio
| | |
58.4
|
%
| | |
72.9
|
%
| | |
62.1
|
%
| | |
76.0
|
%
|
Underwriting expense ratio
|
|
|
31.9
|
%
|
|
|
31.6
|
%
|
|
|
32.2
|
%
|
|
|
32.2
|
%
|
Combined ratio |
|
| 90.3 | % |
|
| 104.5 | % |
|
| 94.3 | % |
|
| 108.2 | % |
| | | | |
1 For purposes of computing GAAP ratios, billing and
policy fees (which are a component of other revenues) are allocated
as a reduction of underwriting expenses. In addition, fee income is
allocated as a reduction of losses and loss adjustment expenses and
underwriting expenses.
|
|
|
GAAP combined ratio excluding the incremental impact of the direct to
consumer initiative is the GAAP combined ratio adjusted to exclude
the direct, variable impact of the company’s direct-to-consumer
initiative in Personal Insurance. In the opinion of the company’s
management, this is useful in an analysis of the profitability of the
company’s ongoing agency business.
Reconciliation of the Consolidated and Personal Insurance GAAP
Combined Ratios (Excluding the Incremental Impact of the Direct to
Consumer Initiative) to the Consolidated and Personal Insurance GAAP
Combined Ratios
|
|
|
|
|
|
| |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 30, |
| September 30, |
| | 2012 |
| 2011 |
| 2012 |
| 2011 |
| | |
| | | |
| |
Personal Insurance | | | | | | | | |
GAAP combined ratio excluding incremental impact of direct to
consumer initiative
| |
86.8
|
%
| |
112.5
|
%
| |
95.1
|
%
| |
115.8
|
%
|
Incremental impact of direct to consumer initiative
|
|
2.9
|
%
|
|
2.5
|
%
|
|
2.3
|
%
|
|
2.6
|
%
|
GAAP combined ratio |
| 89.7 | % |
| 115.0 | % |
| 97.4 | % |
| 118.4 | % |
| | | | | | | |
|
Consolidated | | | | | | | | |
GAAP combined ratio excluding incremental impact of direct to
consumer initiative
| |
89.3
|
%
| |
103.6
|
%
| |
93.5
|
%
| |
107.3
|
%
|
Incremental impact of direct to consumer initiative
|
|
1.0
|
%
|
|
0.9
|
%
|
|
0.8
|
%
|
|
0.9
|
%
|
GAAP combined ratio |
| 90.3 | % |
| 104.5 | % |
| 94.3 | % |
| 108.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
ADJUSTMENT TO NET WRITTEN PREMIUMS FOR THE IMPACT OF CHANGES IN
FOREIGN EXCHANGE RATES
Adjusting for the impact of changes in foreign exchange rates
allows the effect of foreign exchange rate differences to be isolated in
the analysis of changes in various financial statement line items that
are translated from a local currency to the company's reporting
currency, U.S. dollars. The impact is determined by assuming constant
foreign exchange rates between periods as illustrated in the
reconciliation below. In the opinion of the company's management, this
is useful in an analysis of the results of the International market and
the FP&II segment.
Reconciliation of the Impact of Changes in Foreign Exchange Rates on
International Net Written Premiums to International Net Written Premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| | September 30, | | September 30, |
($ in millions)
|
| 2012 |
| 2011 |
| Change |
| 2012 |
| 2011 |
| Change |
| | |
| |
| | | |
| |
| |
Net written premiums - holding foreign exchange rates constant
| |
$
|
204
| | |
$
|
270
| |
(24
|
)%
| |
$
|
779
| | |
$
|
871
| |
(11
|
)%
|
Impact of changes in foreign exchange rates
|
|
|
(4
|
)
|
|
|
|
|
|
|
(16
|
)
|
|
|
|
|
Net written premiums
|
|
$
|
200
|
|
|
$
|
270
|
|
(26
|
)%
|
|
$
|
763
|
|
|
$
|
871
|
|
(12
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
Reconciliation of the Impact of Changes in Foreign Exchange Rates on
FP&II Net Written Premiums to FP&II Net Written Premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| | September 30, | | September 30, |
($ in millions)
|
| 2012 |
| 2011 |
| Change |
| 2012 |
| 2011 |
| Change |
| | |
| |
| | | |
| |
| |
Net written premiums - holding foreign exchange rates constant
| |
$
|
733
| | |
$
|
808
| |
(9
|
)%
| |
$
|
2,189
| | |
$
|
2,311
| |
(5
|
)%
|
Impact of changes in foreign exchange rates
|
|
|
(4
|
)
|
|
|
|
|
|
|
(16
|
)
|
|
|
|
|
Net written premiums
|
|
$
|
729
|
|
|
$
|
808
|
|
(10
|
)%
|
|
$
|
2,173
|
|
|
$
|
2,311
|
|
(6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | |
|
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO BOOK VALUE PER SHARE
AND SHAREHOLDERS’ EQUITY
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 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.
Reconciliation of Tangible and Adjusted Common Shareholders’ Equity
to Shareholders’ Equity
|
|
|
|
|
|
|
|
| |
| |
| |
| | As of |
| | September 30, | | December 31, | | September 30, |
($ in millions, except per share amounts)
|
| 2012 |
| 2011 |
| 2011 |
| | | | | |
|
Tangible shareholders' equity | | $ | 18,879 | | | $ | 17,856 | | | $ | 18,743 | |
Goodwill
| | |
3,365
| | | |
3,365
| | | |
3,365
| |
Other intangible assets
| | |
393
| | | |
433
| | | |
449
| |
Less: Impact of deferred tax on other intangible assets
|
|
|
(47
|
)
|
|
|
(48
|
)
|
|
|
(49
|
)
|
Adjusted shareholders' equity | | | 22,590 | | | | 21,606 | | | | 22,508 | |
Net unrealized investment gains, net of tax
|
|
|
3,315
|
|
|
|
2,871
|
|
|
|
2,664
|
|
Shareholders' equity |
| $ | 25,905 |
|
| $ | 24,477 |
|
| $ | 25,172 |
|
| | | | | |
|
Common shares outstanding
|
|
|
382.0
|
|
|
|
392.8
|
|
|
|
412.8
|
|
| | | | | |
|
Tangible book value per share
| |
$
|
49.42
| | |
$
|
45.46
| | |
$
|
45.41
| |
Adjusted book value per share
| | |
59.13
| | | |
55.01
| | | |
54.53
| |
Book value per share
|
|
|
67.81
|
|
|
|
62.32
|
|
|
|
60.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO TOTAL CAPITALIZATION
Total capitalization is the sum of total shareholders’ equity and
debt. Debt-to-capital ratio excluding net unrealized gain on
investments is the ratio of debt to total capitalization excluding
the after-tax impact of net unrealized investment gains and losses. In
the opinion of the company's management, the debt to capital ratio is
useful in an analysis of the company's financial leverage.
Reconciliation of Total Debt and Equity Excluding Net Unrealized
Investment Gain to Total Capitalization
|
|
|
|
|
|
|
|
| |
| |
| |
| | As of |
| | September 30, | | December 31, | | September 30, |
($ in millions)
|
| 2012 |
| 2011 |
| 2011 |
| | | | | |
|
Debt
| |
$
|
6,350
| | |
$
|
6,605
| | |
$
|
6,604
| |
Shareholders' equity
|
|
|
25,905
|
|
|
|
24,477
|
|
|
|
25,172
|
|
Total capitalization |
|
| 32,255 |
|
|
| 31,082 |
|
|
| 31,776 |
|
Net unrealized investment gains, net of tax
|
|
|
3,315
|
|
|
|
2,871
|
|
|
|
2,664
|
|
Total capitalization excluding net unrealized gain on
investments, net of tax |
| $ | 28,940 |
|
| $ | 28,211 |
|
| $ | 29,112 |
|
| | | | | |
|
Debt-to-capital ratio
| | |
19.7
|
%
| | |
21.3
|
%
| | |
20.8
|
%
|
Debt-to-capital ratio excluding net unrealized investment gains, net
of tax
|
|
|
21.9
|
%
|
|
|
23.4
|
%
|
|
|
22.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
OTHER DEFINITIONS
Gross written premiums reflect the direct and assumed
contractually determined amounts charged to policyholders for the
effective period of the contract based on the terms and conditions of
the insurance contract. Net written premiums reflect gross
written premiums less premiums ceded to reinsurers. These are GAAP
measures.
For the Business Insurance and Financial, Professional and International
Insurance segments, retention is theamount of premium
available for renewal that was retained, excluding rate and exposure
changes. For the Personal Insurance segment, retention is the ratio of
the expected number of renewal policies that will be retained throughout
the annual policy period to the number of available renewal base
policies. For all of the segments, renewalrate change represents
the estimated change in average premium on policies that renew,
excluding exposure changes. Exposure is the measure of risk used
in the pricing of an insurance product. The change in exposure is the
amount of change in premium on policies that renew attributable to the
change in portfolio risk. Renewal premium change represents the
estimated change in average premium on policies that renew, including
rate and exposure changes. New business volume is the amount of
written premium related to new policyholders and additional products
sold to existing policyholders. These are operating statistics, which
are subject to change based upon a number of factors, including changes
in actuarial estimates. For the Business Insurance segment, retention,
renewal premium change and new business volumes exclude National
Accounts and Business Insurance-Other.
An insurance company’s statutory surplus represents the excess of
its assets over its liabilities in accordance with the statutory
accounting practices required by state laws and regulations.
Holding company liquidity is the total funds available at the
holding company level to fund general corporate purposes, primarily the
payment of shareholder dividends and debt service. These funds consist
of cash, short-term invested assets and readily marketable securities
held by the holding company.
For a glossary of other financial terms used in this press release, we
refer you to the company’s most recent annual report on Form 10-K filed
with the Securities and Exchange Commission.

The Travelers Companies, Inc.
Media:
Shane Boyd,
917-778-6267
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
Source: The Travelers Companies, Inc.