Full Year Net Income of $2.5 Billion and Return on Equity and
Operating Return on Equity of 9.8% and 11.0%, Respectively
NEW YORK--(BUSINESS WIRE)--
The Travelers Companies, Inc. (NYSE: TRV):
-
Fourth quarter operating income of $278 million or $0.72 per diluted
share.
-
Substantial improvement in underlying underwriting margin.
-
Strong net investment income attributable to alternative investment
returns.
-
Written rate gains strong in all segments, with renewal rate change of
approximately 8% in Business Insurance.
-
Book value per share of $67.31, up 8% from year-end 2011.
-
Repurchased 5.4 million shares for $400 million in the quarter and
22.4 million shares for $1.450 billion in the full year.
-
Board of Directors approved quarterly dividend per share of $0.46.
The Travelers Companies, Inc. today reported net income of $304 million,
or $0.78 per diluted share, for the quarter ended December 31, 2012,
compared to $618 million, or $1.51 per diluted share, in the prior year
quarter. Operating income in the current quarter was $278 million, or
$0.72 per diluted share, compared to $609 million, or $1.48 per diluted
share, in the prior year quarter. The decrease in net and operating
income in the current quarter compared to the prior year quarter
resulted from the after-tax impact of higher catastrophe losses,
partially offset by higher underlying underwriting margins and higher
net favorable prior year reserve development. Catastrophe losses in the
current quarter were $689 million after-tax ($1.054 billion pre-tax),
including losses resulting from Storm Sandy of $669 million after-tax
($1.024 billion pre-tax), compared to $68 million after-tax ($102
million pre-tax) in the prior year quarter.
Consolidated Highlights
|
($ in millions, except for per share amounts, and after-tax,
except for premiums & revenues)
|
| Three Months Ended December 31, | |
|
| Twelve Months Ended December 31, | |
| | 2012 |
| 2011 |
| Change | | | | 2012 |
| 2011 |
| Change | |
| | | | | | | | | | | | | | |
|
Net written premiums | | $ | 5,385 | | | $ | 5,261 | | | 2 | | % | | | $ | 22,447 | | | $ | 22,187 | | | 1 | |
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | |
| | | | | | | | | | | | | | |
|
Total revenues | | $ | 6,477 | | | $ | 6,373 | | | 2 | | | | | $ | 25,740 | | | $ | 25,446 | | | 1 | | |
| | | | | | | | | | | | | | |
|
Operating income | | $ | 278 | | | $ | 609 | | | (54 | ) | | | | $ | 2,441 | | | $ | 1,390 | | | 76 | | |
per diluted share | | $ | 0.72 | | | $ | 1.48 | | | (51 | ) | | | |
$
|
6.21
| | |
$
|
3.28
| | | 89 | | |
| | | | | | | | | | | | | | |
|
Net income | | $ | 304 | | | $ | 618 | | | (51 | ) | | | | $ | 2,473 | | | $ | 1,426 | | | 73 | | |
per diluted share | | $ | 0.78 | | | $ | 1.51 | | | (48 | ) | | | |
$
|
6.30
| | |
$
|
3.36
| | | 88 | | |
| | | | | | | | | | | | | | |
|
Diluted weighted average shares outstanding | | | 385.3 | | | | 407.0 | | | (5 | ) | | | | | 389.8 | | | | 420.5 | | | (7 | ) | |
| | | | | | | | | | | | | | |
|
GAAP combined ratio | | | 105.4 | % | | | 95.9 | % | | 9.5 | | pts | | | | 97.1 | % | | | 105.1 | % | | (8.0 | ) | pts |
| | | | | | | | | | | | | | |
|
Operating return on equity | | | 5.0 | % | | | 11.1 | % | | (6.1 | ) | pts | | | | 11.0 | % | | | 6.1 | % | | 4.9 | | pts |
Return on equity | | | 4.7 | % | | | 10.0 | % | | (5.3 | ) | pts | | | | 9.8 | % | | | 5.7 | % | | 4.1 | | pts |
| | | | | | | | | | | | | | |
|
| | | | | | | | | | As of December 31, | |
| | | | | | | | | | 2012 | | 2011 | | Change | |
Book value per share | | | | | | | | | | $ | 67.31 | | | $ | 62.32 | | | 8 | | % |
Adjusted book value per share | | | | | | | | | | $ | 59.09 | | | $ | 55.01 | | | 7 | | |
See Glossary of Financial Measures for definitions and the
statistical supplement for additional financial data.
|
|
“We are pleased with our fourth quarter results, as well as our full
year results, particularly in light of Storm Sandy,” commented Jay
Fishman, Chairman and Chief Executive Officer. “Our full year operating
income was $2.4 billion, which included $1.2 billion in after-tax
catastrophe losses, compared to operating income of $1.4 billion in the
prior year, which included $1.7 billion in after-tax catastrophe losses.
In addition to the lower level of catastrophe losses, higher underlying
underwriting margins contributed significantly to the year over year
improvement. The underlying underwriting margins improved in each of our
businesses, attributable to improved non-catastrophe weather-related
losses and the significant pricing gains we have been realizing. Our
high quality investment portfolio continued to perform very well.
Finally, in light of the overall economic environment, we remained
highly disciplined in managing our expenses but continue to invest
strategically in our businesses where appropriate.
“We are very encouraged by pricing trends across all three business
segments. Renewal rate change in Business Insurance was approximately
8%, up from nearly 6% in the fourth quarter of last year and consistent
with recent quarters. Renewal rate change in Financial, Professional and
International Insurance improved to 4%, and we once again achieved
double-digit pricing improvements in Personal Insurance.
“Given the continued low interest rate environment and uncertain weather
patterns, we will continue to seek improved pricing. In addition, we
remain committed to returning excess capital to shareholders, and in
that regard we are especially pleased that notwithstanding the high
level of catastrophe losses we again experienced in 2012, we were able
to return more than $2.1 billion to shareholders through dividends and
share repurchases.
“This was another year in which unusual severe weather events affected
many of our customers, and we remain committed to delivering on our
promise of helping them restore their lives. Our entire Claim
organization has again been called upon to work under difficult
circumstances and has responded with their customary care and
professionalism. We are deeply appreciative for all that they have done
over these difficult months to make sure Travelers does it right,”
concluded Fishman.
Fourth Quarter 2012 Consolidated Results
|
|
| | |
| | |
| | |
| | |
($ in millions)
| | Three Months Ended December 31, |
| | 2012 | | 2011 | | 2012 | | 2011 |
| | Pre-tax | | After-tax |
| | | | | | | | | | | |
|
Underwriting gain (loss) | | $ | (338 | ) | | | $ | 187 | | | | $ | (232 | ) | | | $ | 115 | | |
Underwriting gain (loss) includes: | | | | | | | | | | | | |
Net favorable prior year reserve development | | | 222 | | | | | 126 | | | | | 146 | | | | | 83 | | |
Catastrophes, net of reinsurance | | | (1,054 | ) | | | | (102 | ) | | | | (689 | ) | | | | (68 | ) | |
| | | | | | | | | | | |
|
Net investment income | | | 689 | | | | | 652 | | | | | 556 | | | | | 541 | | |
| | | | | | | | | | | |
|
Other, including interest expense | |
| (79 | ) | | |
| (75 | ) | | |
| (46 | ) | | |
| (47 | ) | |
Operating income | | | 272 | | | | | 764 | | | | | 278 | | | | | 609 | | |
Net realized investment gains | |
| 39 |
| | |
| 14 |
| | |
| 26 |
| | |
| 9 |
| |
Income before income taxes | | $ | 311 |
| | | $ | 778 |
| | | | | | | |
Net income | | | | | | | | $ | 304 |
| | | $ | 618 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| | | | | | | | | | | |
|
GAAP combined ratio | | | 105.4 | | % | | | 95.9 | | % | | | | | | |
| | | | | | | | | | | |
|
GAAP combined ratio excluding incremental impact of direct to
consumer initiative
| | |
104.6
| |
%
| | |
95.1
| |
%
| | | | | | |
| | | | | | | | | | | |
|
Impact on GAAP combined ratio | | | | | | | | | | | | |
Net favorable prior year reserve development
| | |
(4.0
|
)
|
pts
| | |
(2.3
|
)
|
pts
| | | | | | |
Catastrophes, net of reinsurance
| | |
18.7
| |
pts
| | |
1.8
| |
pts
| | | | | | |
|
Operating income of $278 million after-tax decreased $331 million from
the prior year quarter due to a $347 million after-tax decrease in the
underwriting results, reflecting the after-tax impact of higher
catastrophe losses that were partially offset by higher underlying
underwriting margins (which excludes net favorable prior year reserve
development and catastrophe losses) and higher net favorable prior year
reserve development.
The underwriting results in the current quarter reflected a GAAP
combined ratio of 105.4 percent, as compared to 95.9 percent in the
prior year quarter. This increase of 9.5 points in the combined ratio
resulted from higher catastrophe losses (16.9 points), partially offset
by higher underlying underwriting margins (5.7 points) and higher net
favorable prior year reserve development (1.7 points). Catastrophe
losses in the current quarter were mostly due to Storm Sandy. Net
favorable prior year reserve development in the current quarter occurred
in all three business segments.
The current quarter underlying GAAP combined ratio was 90.7 percent
(which excludes net favorable prior year reserve development and
catastrophe losses) as compared to 96.4 percent in the prior year
quarter. This improvement of 5.7 points primarily resulted from lower
non-weather related property losses in Personal Insurance and earned
rate increases exceeding loss cost trends in all three business segments.
Total revenues of $6.477 billion in the current quarter increased 2
percent from the prior year quarter. Within total revenues, net
investment income of $689 million increased $37 million from the prior
year quarter due to private equity performance in the non-fixed income
portfolio, partially offset by a slight reduction in fixed income
returns due to lower reinvestment rates.
Net written premiums of $5.385 billion in the current quarter increased
2 percent from the prior year quarter. Renewal rate gains continued
across all segments. Retention rates remained strong across all three
business segments and were generally consistent with recent quarters.
New business volumes in Business Insurance increased slightly from the
prior year quarter but decreased in Financial, Professional &
International Insurance and Personal Insurance. Net written premiums in
Business Insurance also benefited from continued positive exposure
change at renewal, as well as a modestly higher level of positive audit
premiums compared to the prior year quarter.
Capital Management
“Our cash position remained strong as we ended the year with holding
company liquidity of $2.0 billion,” commented Jay S. Benet, Vice
Chairman and Chief Financial Officer. “Even with the elevated claim
payments related to Storm Sandy and a discretionary contribution of $150
million to our qualified pension plan to maintain our high funding
ratio, operating cash flows were over $450 million in the quarter.
Further, we repurchased 5.4 million shares for $400 million, and
dividends were $178 million during the quarter, bringing the full year
total capital returned to shareholders to more than $2.1 billion.”
During full year 2012, the company repurchased 22.4 million common
shares under its existing share repurchase authorization at a total cost
of $1.450 billion, leaving $2.159 billion of capacity under that
authorization for future share repurchases. Shareholders’ equity was
$25.405 billion at year-end 2012, a 4 percent increase from the end of
the prior year. Included in shareholders’ equity at year-end 2012 were
after-tax net unrealized investment gains of $3.103 billion, compared to
$2.871 billion at year-end 2011. Statutory surplus was $20.048 billion,
a 5 percent increase from the beginning of the year. The company’s
debt-to-capital ratio (excluding after-tax net unrealized investment
gains) was 22.2 percent, well within its target range.
The Board of Directors declared a quarterly dividend of $0.46 per share.
This dividend is payable March 29, 2013, to shareholders of record as of
the close of business on March 8, 2013.
Business Insurance Segment Financial Results
“We were pleased with the profitability in Business Insurance,
particularly in light of Storm Sandy,” commented Brian MacLean,
President and Chief Operating Officer. “We were especially pleased that
the underlying combined ratio improved over 4 points from the prior year
quarter driven primarily by earned rate increases which exceeded loss
cost trends. Written rate gains were between 6% and 10% across all
lines, led by Workers’ Compensation and Commercial Auto, with stable
retentions and slightly improved new business levels. Going forward we
will continue to execute on our targeted pricing strategy to further
improve underwriting margins.”
|
|
| | |
| | |
| | |
| | |
($ in millions)
| | Three Months Ended December 31, |
| | 2012 | | 2011 | | 2012 | | 2011 |
| | Pre-tax | | After-tax |
| | | | | | | | | | | |
|
Underwriting gain (loss) | | $ | (119 | ) | | | $ | 106 | | | | $ | (82 | ) | | | $ | 63 | | |
Underwriting gain (loss) includes: | | | | | | | | | | | | |
Net favorable prior year reserve development | | | 120 | | | | | 49 | | | | | 78 | | | | | 32 | | |
Catastrophes, net of reinsurance | | | (439 | ) | | | | (14 | ) | | | | (285 | ) | | | | (9 | ) | |
| | | | | | | | | | | |
|
Net investment income | | | 498 | | | | | 457 | | | | | 402 | | | | | 379 | | |
| | | | | | | | | | | |
|
Other | | | 9 | | | | | 4 | | | | | 6 | | | | | 3 | | |
| |
| | |
| | |
| | |
| |
Operating income | | $ | 388 |
| | | $ | 567 |
| | | $ | 326 |
| | | $ | 445 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| | | | | | | | | | | |
|
GAAP combined ratio | | | 103.5 | | % | | | 95.8 | | % | | | | | | |
| | | | | | | | | | | |
|
Impact on GAAP combined ratio | | | | | | | | | | | | |
Net favorable prior year reserve development
| | |
(4.0
|
)
|
pts
| | |
(1.7
|
)
|
pts
| | | | | | |
Catastrophes, net of reinsurance
| | |
14.7
| |
pts
| | |
0.5
| |
pts
| | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income of $326 million after-tax decreased $119 million from
the prior year quarter due to a $145 million after-tax decrease in the
underwriting results, reflecting the after-tax impact of higher
catastrophe losses that were partially offset by higher underlying
underwriting margins and higher net favorable prior year reserve
development.
The underwriting results in the current quarter reflected a GAAP
combined ratio of 103.5 percent, as compared to 95.8 percent in the
prior year quarter. This increase of 7.7 points in the combined ratio
resulted from higher catastrophe losses (14.2 points), partially offset
by higher underlying underwriting margins (4.2 points) and higher net
favorable prior year reserve development (2.3 points). Net favorable
prior year reserve development in the current quarter primarily resulted
from better than expected loss experience related to 2011 catastrophes
as well as lower than expected claim department expenses.
The current quarter underlying GAAP combined ratio was 92.8 percent, as
compared to 97.0 percent in the prior year quarter. This improvement
of 4.2 points primarily resulted from earned rate increases exceeding
loss cost trends.
Business Insurance net written premiums of $2.784 billion in the current
quarter increased 6 percent from the prior year quarter primarily driven
by continued increases in renewal rate change. Retention rates remained
strong, and new business volumes increased slightly from the prior year
quarter. Net written premiums also benefited from continued positive
exposure change at renewal, as well as a modestly higher level of
positive audit premiums compared to the prior year quarter.
Select Accounts
-
Net written premiums of $657 million increased 1 percent from the
prior year quarter primarily due to higher renewal premium change.
-
Renewal premium change was positive and driven by continued strong
renewal rate change.
-
Retention rates increased from the prior year quarter driven by higher
retention rates for larger accounts.
-
New business volumes decreased from the prior year quarter.
Commercial Accounts
-
Net written premiums of $718 million increased 8 percent from the
prior year quarter primarily due to higher renewal premium change.
-
Renewal premium change was positive and driven by continued strong
renewal rate change.
-
Retention rates remained at a high level and increased from the prior
year quarter.
-
New business volumes increased significantly from the prior year
quarter.
Other Business Insurance
Includes Industry-Focused Underwriting, Target Risk Underwriting and
Specialized Distribution
-
Net written premiums of $1.166 billion increased 6 percent from the
prior year quarter primarily due to higher renewal premium change.
-
Renewal premium change was positive and driven by continued strong
renewal rate change.
-
Retention rates remained at a high level and increased from the prior
year quarter.
-
New business volumes decreased slightly from the prior year quarter.
National Accounts
-
Net written premiums of $244 million increased 18 percent from the
prior year quarter due to higher new business volumes and increased
renewal premium change driven by payroll exposure growth, as well as
favorable prior year audit and retro premium. In addition, growing
workers’ compensation residual market pools contributed to our premium
growth.
Financial, Professional & International
Insurance Segment Financial Results
“In Financial, Professional & International Insurance, we continued to
see favorable trends in the underlying combined ratio in both our
Management Liability and International businesses,” commented MacLean.
“The underlying combined ratio improved by 2.6 points quarter over
quarter driven by a 4.3 point improvement in the underlying loss ratio.
Net written premiums in the segment increased 2% in the quarter,
primarily driven by a 6% increase in net written premiums in the
International business. Written rate in the Management Liability
business improved to almost 8% in the quarter, driving an overall rate
increase of 4% in the segment.”
|
|
| | |
| | |
| | |
| | |
($ in millions)
| | Three Months Ended December 31, |
| | 2012 | | 2011 | | 2012 | | 2011 |
| | Pre-tax | | After-tax |
| | | | | | | | | | | |
|
Underwriting gain | | $ | 88 | | | | $ | 97 | | | | $ | 50 | | | | $ | 63 | | |
Underwriting gain includes: | | | | | | | | | | | | |
Net favorable prior year reserve development | | | 69 | | | | | 72 | | | | | 46 | | | | | 48 | | |
Catastrophes, net of reinsurance | | | (45 | ) | | | | (17 | ) | | | | (34 | ) | | | | (13 | ) | |
| | | | | | | | | | | |
|
Net investment income | | | 95 | | | | | 102 | | | | | 77 | | | | | 85 | | |
| | | | | | | | | | | |
|
Other | | | 5 | | | | | 7 | | | | | 4 | | | | | 4 | | |
| |
| | |
| | |
| | |
| |
Operating income | | $ | 188 |
| | | $ | 206 |
| | | $ | 131 |
| | | $ | 152 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
| | | | | | | | | | | |
|
GAAP combined ratio | | | 88.3 | | % | | | 87.3 | | % | | | | | | |
| | | | | | | | | | | |
|
Impact on GAAP combined ratio | | | | | | | | | | | | |
Net favorable prior year reserve development
| | |
(9.1
|
)
|
pts
| | |
(9.0
|
)
|
pts
| | | | | | |
Catastrophes, net of reinsurance
| | |
5.9
| |
pts
| | |
2.2
| |
pts
| | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income of $131 million after-tax decreased $21 million from
the prior year quarter mostly due to a $13 million after-tax decrease in
the underwriting gain, reflecting the after-tax impact of higher
catastrophe losses that were partially offset by higher underlying
underwriting margins.
The underwriting gain in the current quarter reflected a GAAP combined
ratio of 88.3 percent, as compared to 87.3 percent in the prior year
quarter. This increase of 1.0 point in the combined ratio resulted from
higher catastrophe losses (3.7 points), partially offset by higher
underlying underwriting margins (2.6 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 the Surety business for accident years 2007-2008 and the
Management Liability business for accident year 2007 and prior within
Bond & Financial Products, as well as several lines of business within
International.
The current quarter underlying GAAP combined ratio was 91.5 percent, as
compared to 94.1 percent in the prior year quarter. This improvement of
2.6 points primarily resulted from a lower level of large losses as well
as earned rate increases exceeding loss cost trends, partially offset by
an increase in the expense ratio mostly due to lower earned premiums.
Financial, Professional & International Insurance net written premiums
of $808 million increased 2 percent from the prior year quarter
primarily driven by International.
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 $514 million were approximately the same as
the prior year quarter as growth in Management Liability was offset by
lower construction surety production due to the continued low levels
of government construction spending.
-
Renewal premium change remained positive and continued to increase
from recent quarters due to positive renewal rate change, partially
offset by 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 $294 million increased 6 percent from the
prior year quarter (4 percent adjusting for the impact of changes in
foreign exchange rates) primarily due to somewhat lower levels of
ceded premium and growth in the United Kingdom, partially offset by
lower surety production in Canada.
-
Renewal premium change was slightly negative due to lower insured
exposures.
-
Retention rates improved from the prior year quarter.
-
New business volumes increased from the prior year quarter.
Personal Insurance Segment Financial Results
“In Personal Insurance, both Auto and Homeowners results were
significantly impacted by catastrophe losses,” commented MacLean. “While
we were very pleased with our Homeowners results given Storm Sandy, we
remain concerned about uncertain weather patterns and we will continue
to seek improved pricing, terms and conditions. In Auto, although we are
not yet satisfied with our results due to continued elevated severity,
rate gains are now exceeding our current view of loss trends and, all
other things being the same, we anticipate improving margins.”
|
|
| | |
| | |
| | |
| | |
($ in millions)
| | Three Months Ended December 31, |
| | 2012 | | 2011 | | 2012 | | 2011 |
| | Pre-tax | | After-tax |
| | | | | | | | | | | |
|
Underwriting gain (loss) | | $ | (307 | ) | | | $ | (16 | ) | | | $ | (200 | ) | | | $ | (11 | ) | |
Underwriting gain (loss) includes: | | | | | | | | | | | | |
Net favorable prior year reserve development | | | 33 | | | | | 5 | | | | | 22 | | | | | 3 | | |
Catastrophes, net of reinsurance | | | (570 | ) | | | | (71 | ) | | | | (370 | ) | | | | (46 | ) | |
| | | | | | | | | | | |
|
Net investment income | | | 96 | | | | | 93 | | | | | 77 | | | | | 77 | | |
| | | | | | | | | | | |
|
Other | | | 14 | | | | | 17 | | | | | 9 | | | | | 11 | | |
| |
| | |
| | |
| | |
| |
Operating income (loss) | | $ | (197 | ) | | | $ | 94 |
| | | $ | (114 | ) | | | $ | 77 |
| |
|
| | | | | | | | | | | |
|
GAAP combined ratio | | | 115.2 | | % | | | 99.8 | | % | | | | | | |
| | | | | | | | | | | |
|
GAAP combined ratio excluding incremental impact of direct to
consumer initiative
| | |
113.1
| |
%
| | |
97.4
| |
%
| | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | |
|
Impact on GAAP combined ratio | | | | | | | | | | | | |
Net favorable prior year reserve development
| | |
(1.8
|
)
|
pts
| | |
(0.3
|
)
|
pts
| | | | | | |
Catastrophes, net of reinsurance
| | |
30.1
| |
pts
| | |
3.7
| |
pts
| | | | | | |
|
|
|
|
|
|
|
|
|
|
|
| |
After-tax operating results decreased $191 million from the prior year
quarter mostly due to a $189 million after-tax decrease in underwriting
results, reflecting the after-tax impact of higher catastrophe losses
that were partially offset by higher underlying underwriting margins and
higher net favorable prior year reserve development.
The underwriting results in the current quarter reflected a GAAP
combined ratio of 115.2 percent, as compared to 99.8 percent in the
prior year quarter. This increase of 15.4 points in the combined ratio
was primarily due to higher catastrophe losses (26.4 points), partially
offset by higher underlying underwriting margins (9.5 points) and higher
net favorable prior year reserve development (1.5 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 catastrophe and non-catastrophe
losses incurred in 2011 and in the umbrella line of business for
accident years 2008-2011.
The current quarter underlying GAAP combined ratio was 86.9 percent, as
compared to 96.4 percent in the prior year quarter. This improvement of
9.5 points was primarily due to lower non-weather related property
losses, lower non-catastrophe weather-related losses and earned rate
increases exceeding loss cost trends.
Personal Insurance net written premiums of $1.793 billion decreased 3
percent from the prior year quarter primarily due to lower new business
volumes, largely as a result of the company’s pricing strategy,
increasing deductibles and other profitability improvement initiatives.
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 $822 million decreased 6 percent from the
prior year quarter.
-
Policies in force decreased 9 percent from the prior year quarter.
-
Renewal premium change remained positive and continued to increase
from recent quarters.
-
Retention rates remained strong and generally consistent with recent
quarters.
-
New business volumes decreased from the prior year quarter.
Agency Homeowners & Other
-
Net written premiums of $934 million decreased 1 percent from the
prior year quarter.
-
Policies in force decreased 7 percent from the prior year quarter.
-
Renewal premium change remained positive and continued to increase
from recent quarters.
-
Retention rates remained very strong and consistent with recent
quarters.
-
New business volumes decreased from the prior year quarter.
Full Year 2012 Consolidated Financial Results
|
($ in millions)
|
| Twelve Months Ended December 31, |
| | 2012 |
| 2011 |
| 2012 |
| 2011 |
| | Pre-tax | | After-tax |
| | | | | | | | | | | |
|
Underwriting gain (loss) | | $ | 507 | | | | $ | (1,266 | ) | | | $ | 296 | | | | $ | (745 | ) | |
Underwriting gain (loss) includes: | | | | | | | | | | | | |
Net favorable prior year reserve development | | | 940 | | | | | 715 | | | | | 622 | | | | | 473 | | |
Catastrophes, net of reinsurance | | | (1,862 | ) | | | | (2,562 | ) | | | | (1,214 | ) | | | | (1,669 | ) | |
Resolution of prior year tax matters | | | | | | | | | | | | 100 | | |
| | | | | | | | | | | |
|
Net investment income | | | 2,889 | | | | | 2,879 | | | | | 2,316 | | | | | 2,330 | | |
| | | | | | | | | | | |
|
Other, including interest expense | | | (281 | ) | | | | (316 | ) | | | | (171 | ) | | | | (195 | ) | |
Other also includes: | | | | | | | | | | | | |
Resolution of prior year tax matters | | | | | | | | | | | |
4
| | |
| |
| | |
| | |
| | |
| |
Operating income | | | 3,115 | | | | | 1,297 | | | | | 2,441 | | | | | 1,390 | | |
Net realized investment gains | |
| 51 |
| | |
| 55 |
| | |
| 32 |
| | |
| 36 |
| |
Income before income taxes | | $ | 3,166 |
| | | $ | 1,352 |
| | | | | | | |
Net income | | | | | | | | $ | 2,473 |
| | | $ | 1,426 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | |
|
GAAP combined ratio | | | 97.1 | | % | | | 105.1 | | % | | | | | | |
| | | | | | | | | | | |
|
GAAP combined ratio excluding incremental impact of direct to
consumer initiative
|
| |
96.3
| |
%
| | |
104.2
| |
%
| | | | | | |
| | | | | | | | | | | |
|
Impact on GAAP combined ratio | | | | | | | | | | | | |
Net favorable prior year reserve development
| | |
(4.2
|
)
|
pts
| | |
(3.2
|
)
|
pts
| | | | | | |
Catastrophes, net of reinsurance
| | |
8.3
| |
pts
| | |
11.6
| |
pts
| | | | | | |
|
Operating income of $2.441 billion after-tax increased $1.051 billion
from the prior year mostly due to a $1.041 billion after-tax improvement
in underwriting results, reflecting the after-tax impact of lower
catastrophe losses, higher underlying underwriting margins and higher
net favorable prior year reserve development.
The underwriting gain in the current year reflected a GAAP combined
ratio of 97.1 percent, as compared to 105.1 percent in the prior year
period. This improvement of 8.0 points in the combined ratio was due to
higher underlying underwriting margins (3.7 points), lower catastrophe
losses (3.3 points) and higher net favorable prior year reserve
development (1.0 point).
The current year underlying GAAP combined ratio was 93.0 percent, as
compared to 96.7 percent in the prior year period. This improvement
of 3.7 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
Tuesday, January 22, 2013. 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 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,
strategies to improve profitability, 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, and 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;
-
other changes to tax laws could adversely impact our investment
portfolio or operating results;
-
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 | | Twelve Months Ended |
| | December 31, | | December 31, |
($ in millions, after-tax)
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | |
|
Operating income, less preferred dividends | | $ | 278 | | $ | 609 | | $ | 2,441 | | $ | 1,389 |
Preferred dividends
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1
|
Operating income | | | 278 | | | 609 | | | 2,441 | | | 1,390 |
Net realized investment gains
|
|
|
26
|
|
|
9
|
|
|
32
|
|
|
36
|
Net income |
| $ | 304 |
| $ | 618 |
| $ | 2,473 |
| $ | 1,426 |
| | | | | | | |
|
Net income, less preferred dividends | | $ | 304 | | $ | 618 | | $ | 2,473 | | $ | 1,425 |
Preferred dividends
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1
|
Net income |
| $ | 304 |
| $ | 618 |
| $ | 2,473 |
| $ | 1,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | |
| | |
| | |
| |
| | |
| | |
| |
| | 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 | | Twelve Months Ended |
| | December 31, | | December 31, |
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | |
|
Basic earnings per share | | | | | | | | |
Operating income | | $ | 0.72 | | $ | 1.50 | | $ | 6.27 | | $ | 3.31 |
Net realized investment gains
|
|
|
0.07
|
|
|
0.02
|
|
|
0.08
|
|
|
0.09
|
Net income |
| $ | 0.79 |
| $ | 1.52 |
| $ | 6.35 |
| $ | 3.40 |
| | | | | | | |
|
Diluted earnings per share | | | | | | | | |
Operating income | | $ | 0.72 | | $ | 1.48 | | $ | 6.21 | | $ | 3.28 |
Net realized investment gains
|
|
|
0.06
|
|
|
0.03
|
|
|
0.09
|
|
|
0.08
|
Net income |
| $ | 0.78 |
| $ | 1.51 |
| $ | 6.30 |
| $ | 3.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Operating Income by Segment to Total Operating
Income
|
|
|
|
|
|
|
|
|
|
| |
| |
| |
| |
| | Three Months Ended | | Twelve Months Ended |
| | December 31, | | December 31, |
($ in millions, after-tax)
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | |
|
| | | | | | | |
|
Business Insurance | |
$
|
326
| | |
$
|
445
| | |
$
|
1,843
| | |
$
|
1,354
| |
Financial, Professional & International Insurance | | |
131
| | | |
152
| | | |
642
| | | |
647
| |
Personal Insurance |
|
|
(114
|
)
|
|
|
77
|
|
|
|
217
|
|
|
|
(332
|
)
|
Total segment operating income
| | |
343
| | | |
674
| | | |
2,702
| | | |
1,669
| |
Interest Expense and Other
|
|
|
(65
|
)
|
|
|
(65
|
)
|
|
|
(261
|
)
|
|
|
(279
|
)
|
Total operating income |
| $ | 278 |
|
| $ | 609 |
|
| $ | 2,441 |
|
| $ | 1,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, |
($ in millions)
|
| 2012 |
| 2011 |
| 2010 |
| 2009 |
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Adjusted shareholders' equity | | $ | 22,270 | | | $ | 21,570 | | | $ | 23,375 | | | $ | 25,458 | | | $ | 25,647 | | | $ | 25,783 | | | $ | 24,545 | | | $ | 22,227 | | | $ | 20,087 | |
Net unrealized investment gains (losses), net of tax
| | |
3,103
| | | |
2,871
| | | |
1,859
| | | |
1,856
| | | |
(146
|
)
| | |
620
| | | |
453
| | | |
327
| | | |
866
| |
Net realized investment gains (losses), net of tax
| | |
32
| | | |
36
| | | |
173
| | | |
22
| | | |
(271
|
)
| | |
101
| | | |
8
| | | |
35
| | | |
(28
|
)
|
Preferred stock
| | |
-
| | | |
-
| | | |
68
| | | |
79
| | | |
89
| | | |
112
| | | |
129
| | | |
153
| | | |
188
| |
Discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(439
|
)
|
|
|
88
|
|
Shareholders' equity |
| $ | 25,405 |
|
| $ | 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 less
preferred dividends to average shareholders’ equity for the periods
presented. Operating return on equity is the ratio of annualized
operating income 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 | | Twelve Months Ended |
| | December 31, | | December 31, |
($ in millions, after-tax)
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | |
|
Annualized operating income, less preferred dividends
| |
$
|
1,111
| | |
$
|
2,437
| | |
$
|
2,441
| | |
$
|
1,389
| |
Adjusted average shareholders' equity
|
|
|
22,433
|
|
|
|
22,053
|
|
|
|
22,158
|
|
|
|
22,806
|
|
Operating return on equity |
|
| 5.0 | % |
|
| 11.1 | % |
|
| 11.0 | % |
|
| 6.1 | % |
| | | | | | | |
|
Annualized net income, less preferred dividends
| |
$
|
1,215
| | |
$
|
2,472
| | |
$
|
2,473
| | |
$
|
1,425
| |
Average shareholders' equity
|
|
|
25,655
|
|
|
|
24,825
|
|
|
|
25,192
|
|
|
|
25,075
|
|
Return on equity |
|
| 4.7 | % |
|
| 10.0 | % |
|
| 9.8 | % |
|
| 5.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average annual operating return on equity over a period is the
ratio of:
a) the sum of operating income 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 December 31, 2012
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | |
|
| | Twelve Months Ended December 31, |
($ in millions)
|
| 2012 |
| 2011 |
| 2010 |
| 2009 |
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| | | | | | | | | | | | | | | |
|
Operating income, less preferred dividends
| |
$
|
2,441
| | |
$
|
1,389
| | |
$
|
3,040
| | |
$
|
3,597
| | |
$
|
3,191
| | |
$
|
4,496
| | |
$
|
4,195
| | |
$
|
2,020
| |
Adjusted average shareholders' equity
| | |
22,158
| | | |
22,806
| | | |
24,285
| | | |
25,777
| | | |
25,668
| | | |
25,350
| | | |
23,381
| | | |
21,118
| |
Operating return on equity
|
|
|
11.0
|
%
|
|
|
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 December 31, 2012 | | | 12.8 | % | | | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and claim adjustment expenses, 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
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 | | Twelve Months Ended |
| | December 31, | | December 31, |
($ 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
| |
$
|
494
| | |
$
|
163
| | |
$
|
1,429
| | |
$
|
581
| |
Pre-tax impact of catastrophes
| | |
(1,054
|
)
| | |
(102
|
)
| | |
(1,862
|
)
| | |
(2,562
|
)
|
Pre-tax impact of net favorable prior year loss reserve development
|
|
|
222
|
|
|
|
126
|
|
|
|
940
|
|
|
|
715
|
|
Pre-tax underwriting gain (loss)
| | |
(338
|
)
| | |
187
| | | |
507
| | | |
(1,266
|
)
|
Income tax expense (benefit) on underwriting results
|
|
|
(106
|
)
|
|
|
72
|
|
|
|
211
|
|
|
|
(521
|
)
|
Underwriting gain (loss)
| | |
(232
|
)
| | |
115
| | | |
296
| | | |
(745
|
)
|
Net investment income
| | |
556
| | | |
541
| | | |
2,316
| | | |
2,330
| |
Other, including interest expense
|
|
|
(46
|
)
|
|
|
(47
|
)
|
|
|
(171
|
)
|
|
|
(195
|
)
|
Operating income | | | 278 | | | | 609 | | | | 2,441 | | | | 1,390 | |
Net realized investment gains
|
|
|
26
|
|
|
|
9
|
|
|
|
32
|
|
|
|
36
|
|
Net income |
| $ | 304 |
|
| $ | 618 |
|
| $ | 2,473 |
|
| $ | 1,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income per Diluted Share Excluding the Impact
of Catastrophes to Net Income per Diluted Share1
|
|
|
|
| |
| | Three Months |
| | Ended |
|
| December 31, 2012 |
| |
|
Net income per diluted share, excluding the impact of catastrophes
| |
$
|
2.56
| |
| | |
Impact of catastrophes
| | |
(1.78
|
)
|
|
|
|
Net income per diluted share
|
|
$
|
0.78
|
|
1 Includes the effect of allocating a portion of
earnings to participating share based awards in the per share
computation
|
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 and other 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 | | Twelve Months Ended |
| | December 31, | | December 31, |
($ in millions, pre-tax)
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | |
|
Loss and loss adjustment expense ratio | | | | | | | | |
Claims and claim adjustment expenses
| |
$
|
4,167
| | |
$
|
3,617
| | |
$
|
14,676
| | |
$
|
16,276
| |
Less:
| | | | | | | | |
Policyholder dividends
| | |
12
| | | |
15
| | | |
46
| | | |
44
| |
Allocated fee income
|
|
|
38
|
|
|
|
28
|
|
|
|
124
|
|
|
|
133
|
|
Loss ratio numerator |
| $ | 4,117 |
|
| $ | 3,574 |
|
| $ | 14,506 |
|
| $ | 16,099 |
|
| | | | | | | |
|
Underwriting expense ratio | | | | | | | | |
Amortization of deferred acquisition costs
| |
$
|
977
| | |
$
|
976
| | |
$
|
3,910
| | |
$
|
3,876
| |
General and administrative expenses (G&A)
| | |
929
| | | |
906
| | | |
3,610
| | | |
3,556
| |
Less:
| | | | | | | | |
G&A included in Interest Expense and Other
| | |
6
| | | |
6
| | | |
23
| | | |
56
| |
Allocated fee income
| | |
52
| | | |
41
| | | |
199
| | | |
163
| |
Billing and policy fees and other
|
|
|
22
|
|
|
|
25
|
|
|
|
98
|
|
|
|
102
|
|
Expense ratio numerator |
| $ | 1,826 |
|
| $ | 1,810 |
|
| $ | 7,200 |
|
| $ | 7,111 |
|
|
|
|
|
|
|
|
|
|
Earned premium |
| $ | 5,639 |
|
| $ | 5,611 |
|
| $ | 22,357 |
|
| $ | 22,090 |
|
| | | | | | | |
|
GAAP combined ratio 1 | | | | | | | | |
Loss and loss adjustment expense ratio
| | |
73.0
|
%
| | |
63.7
|
%
| | |
64.9
|
%
| | |
72.9
|
%
|
Underwriting expense ratio
|
|
|
32.4
|
%
|
|
|
32.2
|
%
|
|
|
32.2
|
%
|
|
|
32.2
|
%
|
Combined ratio |
|
| 105.4 | % |
|
| 95.9 | % |
|
| 97.1 | % |
|
| 105.1 | % |
1 For purposes of computing GAAP ratios, billing and
policy fees and other (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 | | Twelve Months Ended |
| | December 31, | | December 31, |
| | 2012 |
| 2011 |
| 2012 |
| 2011 |
| | | | | | | |
|
Personal Insurance |
| | | | | | | |
GAAP combined ratio excluding incremental impact of direct to
consumer initiative
| |
113.1
|
%
| |
97.4
|
%
| |
99.6
|
%
| |
111.1
|
%
|
Incremental impact of direct to consumer initiative
|
|
2.1
|
%
|
|
2.4
|
%
|
|
2.3
|
%
|
|
2.5
|
%
|
GAAP combined ratio |
| 115.2 | % |
| 99.8 | % |
| 101.9 | % |
| 113.6 | % |
| | | | | | | |
|
Consolidated | | | | | | | | |
GAAP combined ratio excluding incremental impact of direct to
consumer initiative
| |
104.6
|
%
| |
95.1
|
%
| |
96.3
|
%
| |
104.2
|
%
|
Incremental impact of direct to consumer initiative
|
|
0.8
|
%
|
|
0.8
|
%
|
|
0.8
|
%
|
|
0.9
|
%
|
GAAP combined ratio |
| 105.4 | % |
| 95.9 | % |
| 97.1 | % |
| 105.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Financial, Professional & International (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 |
| Twelve Months Ended |
| | December 31, | | December 31, |
($ in millions)
|
| 2012 |
| 2011 |
| Change |
| 2012 |
| 2011 |
| Change |
| | | |
| | |
| | | |
| | |
| |
Net written premiums - holding foreign exchange rates constant
| |
$
|
290
| | |
$
|
278
| | |
4
|
%
| |
$
|
1,069
| | |
$
|
1,149
| | |
(7
|
)%
|
Impact of changes in foreign exchange rates
|
|
|
4
|
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
Net written premiums
|
|
$
|
294
|
|
|
$
|
278
|
|
|
6
|
%
|
|
$
|
1,057
|
|
|
$
|
1,149
|
|
|
(8
|
)%
|
|
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 |
| Twelve Months Ended |
| | December 31, | | December 31, |
($ in millions)
|
| 2012 |
| 2011 |
| Change |
| 2012 |
| 2011 |
| Change |
| | | |
| | |
| | | |
| | |
| |
Net written premiums - holding foreign exchange rates constant
| |
$
|
804
| | |
$
|
791
| | |
2
|
%
| |
$
|
2,993
| | |
$
|
3,102
| | |
(4
|
)%
|
Impact of changes in foreign exchange rates
|
|
|
4
|
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
Net written premiums
|
|
$
|
808
|
|
|
$
|
791
|
|
|
2
|
%
|
|
$
|
2,981
|
|
|
$
|
3,102
|
|
|
(4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Shareholders’ Equity to
Shareholders’ Equity
|
|
|
|
|
|
| |
| |
| | As of |
| | December 31, | | December 31, |
($ in millions, except per share amounts)
|
| 2012 |
| 2011 |
| | | |
|
Tangible shareholders' equity | | $ | 18,604 | | | $ | 17,856 | |
Goodwill
| | |
3,365
| | | |
3,365
| |
Other intangible assets
| | |
381
| | | |
433
| |
Less: Impact of deferred tax on other intangible assets
|
|
|
(48
|
)
|
|
|
(48
|
)
|
Adjusted shareholders' equity | | | 22,302 | | | | 21,606 | |
Net unrealized investment gains, net of tax
|
|
|
3,103
|
|
|
|
2,871
|
|
Shareholders' equity |
| $ | 25,405 |
|
| $ | 24,477 |
|
| | | |
|
Common shares outstanding
|
|
|
377.4
|
|
|
|
392.8
|
|
| | | |
|
Tangible book value per share
| |
$
|
49.29
| | |
$
|
45.46
| |
Adjusted book value per share
| | |
59.09
| | | |
55.01
| |
Book value per share
|
|
|
67.31
|
|
|
|
62.32
|
|
|
|
|
|
|
|
|
|
|
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 |
| | December 31, | | December 31, |
($ in millions)
|
| 2012 |
| 2011 |
| | | |
|
Debt
| |
$
|
6,350
| | |
$
|
6,605
| |
Shareholders' equity
|
|
|
25,405
|
|
|
|
24,477
|
|
Total capitalization |
|
| 31,755 |
|
|
| 31,082 |
|
Net unrealized investment gains, net of tax
|
|
|
3,103
|
|
|
|
2,871
|
|
Total capitalization excluding net unrealized gain on
investments, net of tax |
| $ | 28,652 |
|
| $ | 28,211 |
|
| | | |
|
Debt-to-capital ratio
| | |
20.0
|
%
| | |
21.3
|
%
|
Debt-to-capital ratio excluding net unrealized investment gains, net
of tax
|
|
|
22.2
|
%
|
|
|
23.4
|
%
|
|
|
|
|
|
|
|
|
|
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 total cash, short-term invested assets and other 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:
Patrick
Linehan, 917-778-6267
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.