Second Quarter Return on Equity and Operating Return on Equity of
10.7% and 11.4%, Respectively
Year-to-Date Return on Equity and Operating Return on Equity of 13.7%
and 14.6%, Respectively
-
Operating income of $673 million or $1.93 per diluted share.
-
Net and operating income lower due to higher catastrophe losses while
prior year quarter benefited $122 million after-tax from favorable tax
and legal settlements. In addition, net income in the prior year
quarter benefited $87 million after-tax from net realized investment
gains related to a short position in U.S. Treasury futures contracts.
-
Quarter benefited from a strong underlying combined ratio and solid
investment performance.
-
Written rate gains approximated expected loss cost trends in Business
Insurance and exceeded expected loss cost trends in Financial,
Professional & International Insurance and Personal Insurance.
-
Record quarterly net written premiums of $6.2 billion, up 6% from
prior year quarter, primarily due to the acquisition of Dominion of
Canada in November 2013.
-
Total capital returned to shareholders of $1.066 billion in the
quarter, including $876 million in share repurchases. Year-to-date
total capital returned to shareholders of $1.948 billion.
-
Increases in book value per share of 7% to $75.32 and adjusted book
value per share of 4% to $69.38 from year-end 2013.
NEW YORK--(BUSINESS WIRE)--
The Travelers Companies, Inc. today reported net income of $683 million,
or $1.95 per diluted share, for the quarter ended June 30, 2014,
compared to net income of $925 million, or $2.41 per diluted share, in
the prior year quarter. Operating income in the current quarter was $673
million, or $1.93 per diluted share, compared to $816 million, or $2.13
per diluted share, in the prior year quarter.
|
|
|
|
| | |
|
|
| | |
Consolidated Highlights |
| | | | | | | | | | |
|
($ in millions, except for per share amounts, and after-tax,
except for premiums & revenues)
| | | | | Three Months Ended June 30, | | | | | Six Months Ended June 30, | |
| | | | |
| 2014 |
|
|
|
| 2013 |
|
|
| Change | | | | |
| 2014 |
| |
|
| 2013 |
| |
| Change | |
| | | | | | | | | | | | | | | | | | | | |
| | |
Net written premiums | | | | | $ | 6,162 | | | | $ | 5,824 | | | | | 6 | | % | | | | $ | 12,035 | | | | $ | 11,421 | | | | 5 | |
%
|
| | | | | | | | | | | | | | | | | | | | | | |
|
Total revenues | | | | | $ | 6,785 | | | | $ | 6,674 | | | | | 2 | | | | | | $ | 13,493 | | | | $ | 13,002 | | | | 4 | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
Operating income | | | | | $ | 673 | | | | $ | 816 | | | | | (18 | ) | | | | | $ | 1,725 | | | | $ | 1,703 | | | | 1 | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | |
per diluted share | | | | | $ | 1.93 | | | | $ | 2.13 | | | | | (9 | ) | | | | |
$
|
4.89
| | | |
$
|
4.44
| | | | 10 | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
Net income | | | | | $ | 683 | | | | $ | 925 | | | | | (26 | ) | | | | | $ | 1,735 | | | | $ | 1,821 | | | | (5 | ) | |
| | | | | | | | | | | | | | | | | | | | | | |
|
per diluted share | | | | | $ | 1.95 | | | | $ | 2.41 | | | | | (19 | ) | | | | |
$
|
4.91
| | | |
$
|
4.75
| | | | 3 | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
Diluted weighted average | | | | | | 346.7 | | | | | 379.9 | | | | | (9 | ) | | | | | | 350.5 | | | | | 380.8 | | | | (8 | ) | |
shares outstanding | | | | | | | | | | |
| | | | | | | | | | |
| |
| | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | | 95.1 | % | | | | 94.3 | % | | | | 0.8 | | pts | | | | | 90.5 | % | | | | 91.4 | % | | | (0.9 | ) | pts |
| | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | | | 90.9 | % | | | | 91.7 | % | | | | (0.8 | ) | pts | | | | | 89.6 | % | | | | 91.3 | % | | | (1.7 | ) | pts |
| | | | | | | | | | | | | | | | | | | | | | |
|
Operating return on equity | | | | | | 11.4 | % | | | | 14.2 | % | | | | (2.8 | ) | pts | | | | | 14.6 | % | | | | 15.0 | % | | | (0.4 | ) | pts |
| | | | | | | | | | | | | | | | | | | | | | |
|
Return on equity | | | | | | 10.7 | % | | | | 14.6 | % | | | | (3.9 | ) | pts | | | | | 13.7 | % | | | | 14.4 | % | | | (0.7 | ) | pts |
| | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | Change from | | | | |
| | | | | June 30, | | | December 31, | | | June 30, | | | | | December 31, | | | June 30, | | | | |
| | | | |
| 2014 |
| | |
| 2013 |
| | |
| 2013 |
| | | | |
| 2013 |
| | |
| 2013 |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Book value per share | | | | | $ | 75.32 | | | | $ | 70.15 | | | | $ | 66.65 | | | | | | | 7 | | % | | | 13 | | % | | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
Adjusted book value per share | | | | | | 69.38 | | | | | 66.41 | | | | | 62.12 | | | | | | | 4 | | | | | 12 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
See Glossary of Financial Measures for definitions and the
statistical supplement for additional financial data.
|
|
“Our second quarter operating income of $673 million and operating
return on equity of 11.4% were strong, particularly given the relatively
high level of catastrophe losses we experienced this quarter,” commented
Jay Fishman, Chairman and Chief Executive Officer. “The comparison of
these results to last year’s second quarter was meaningfully impacted by
the significant increase in catastrophe losses in the current quarter as
well as the inclusion of significant favorable tax and legal settlements
in the prior year quarter.We are very pleased with our underlying
combined ratio of 90.9%, which improved from 91.7% in the prior year
quarter. Net investment income was comparable to the prior year quarter,
notwithstanding the impact of the low interest rate environment, as we
continued to generate strong returns from our non-fixed income
portfolio. In addition, our strong earnings in recent quarters enabled
us to return over $1 billion of capital to shareholders in the current
quarter, including $876 million of share repurchases.
“Our results year-to-date were very strong and demonstrated our
continued success in actively managing our businesses to produce
superior returns on capital over time. In Business Insurance, the
cumulative effect of the price increases we have achieved over the last
several years, combined with our highly analytic approach to risk
selection, has resulted in a product portfolio that is achieving
meaningfully improved and attractive returns. That said, we are not
declaring mission accomplished. There remains opportunity to further
improve the product portfolio by continuing to take appropriate action
on those accounts or classes of business that still do not meet our
return thresholds and by achieving additional rate increases for those
accounts that continue to experience unusual weather volatility. In
Personal Insurance, we still have more work to do to improve our
returns, but we have made considerable progress in both Auto and
Homeowners. The market response of Quantum 2.0, our new auto product, is
particularly encouraging. Finally, Financial, Professional &
International Insurance posted record operating income.
“In summary, we will continue to execute on our long-held financial
strategy of building and sustaining meaningful competitive advantages,
delivering superior profitability and returns, and returning excess
capital to shareholders. As a consequence, we remain well positioned to
continue to deliver compelling shareholder value over time.”
| | | | |
|
|
|
| | |
| | |
| | | |
|
|
| | |
| | |
| | |
Consolidated Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions and pre-tax, unless noted otherwise)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Three Months Ended June 30, |
| | | | | Six Months Ended June 30, | |
| | | | | | | | |
| 2014 |
| | |
| 2013 |
| | | Change |
| | | | |
| 2014 |
| | |
| 2013 |
| | | Change | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gains: | | | | | | | | $ | 257 | | | | $ | 281 | | | | $ | (24 | ) | | | | | $ | 1,048 | | | | $ | 883 | | | | $ | 165 | | |
Underwriting gains includes: | | | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | | | | 183 | | | | | 192 | | | | | (9 | ) | | | | | | 477 | | | | | 423 | | | | | 54 | | |
Catastrophes, net of reinsurance | | | | | | (436 | ) | | | | (340 | ) | | | | (96 | ) | | | | | | (585 | ) | | | | (439 | ) | | | | (146 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | | | | | 695 | | | | | 687 | | | | | 8 | | | | | | | 1,431 | | | | | 1,357 | | | | | 74 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Other, including interest expense | | | | | | (67 | ) | | | | 42 | | | | | (109 | ) | | | | | | (125 | ) | | | | (20 | ) | | | | (105 | ) | |
| | | | | | | | |
| | |
| | |
|
| | | | |
| | |
| | |
| |
Operating income before income taxes | | | | | | | 885 | | | | | 1,010 | | | | | (125 | ) | | | | | | 2,354 | | | | | 2,220 | | | | | 134 | | |
Income tax expense | | | | |
| 212 |
| | |
| 194 |
| | | 18 |
| | | | |
| 629 |
| | |
| 517 |
| | |
| 112 |
| |
Operating income | | | | | | 673 | | | | | 816 | | | | | (143 | ) | | | | | | 1,725 | | | | | 1,703 | | | | | 22 | | |
Net realized investment gains after income taxes | | | | |
| 10 |
| | |
| 109 |
| | |
| (99 | ) | | | | |
| 10 |
| | |
| 118 |
| | |
| (108 | ) | |
Net Income | | | | | $ | 683 |
| | | $ | 925 |
| | | $ | (242 | ) | | | | | $ | 1,735 |
| | | $ | 1,821 |
| | | $ | (86 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | | 95.1 | | % | | | 94.3 | | % | | | 0.8 | |
pts
| | | | | 90.5 | | % | | | 91.4 | | % | | | (0.9 | ) |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | | | | |
(3.1
|
)
|
pts
| | |
(3.5
|
)
|
pts
| | |
0.4
| |
pts
| | | | |
(4.1
|
)
|
pts
| | |
(3.8
|
)
|
pts
| | |
(0.3
|
)
|
pts
|
Catastrophes, net of reinsurance
| | | | | |
7.3
| |
pts
| | |
6.1
| |
pts
| | |
1.2
| |
pts
| | | | |
5.0
| |
pts
| | |
3.9
| |
pts
| | |
1.1
| |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | | | 90.9 | | % | | | 91.7 | | % | | | (0.8 | ) |
pts
| | | | | 89.6 | | % | | | 91.3 | | % | | | (1.7 | ) |
pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums | | | | | | | | | | | | | | | | | | | | | | | | |
Business Insurance | | | | |
$
|
3,101
| | | |
$
|
3,068
| | | | |
1
| | % | | | |
$
|
6,405
| | | |
$
|
6,328
| | | | |
1
| | % |
Financial, Professional & International Insurance | | | | | |
1,168
| | | | |
849
| | | | |
38
| | | | | | |
2,118
| | | | |
1,496
| | | | |
42
| | |
Personal Insurance | | | | |
|
1,893
|
| | |
|
1,907
|
| | | |
(1
|
)
| | | | |
|
3,512
|
| | |
|
3,597
|
| | | |
(2
|
)
| |
Total |
|
|
|
| $ | 6,162 |
|
|
| $ | 5,824 |
|
|
|
| 6 |
| % |
|
|
| $ | 12,035 |
|
|
| $ | 11,421 |
|
|
|
| 5 |
| % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Second Quarter 2014 Results
(All comparisons vs. second quarter 2013, unless noted otherwise)
Net income of $683 million after-tax decreased $242 million or 26% due
to a reduction in both operating income and net realized investment
gains. Operating income of $673 million after-tax decreased $143 million
or 18% primarily reflecting a $122 million after-tax benefit in the
prior year quarter from favorable tax and legal settlements, as well as
higher catastrophe losses in the current quarter, partially offset by
higher underlying underwriting gains (which exclude prior year reserve
development and catastrophe losses).
Underwriting results
-
The combined ratio increased 0.8 points to 95.1% due to higher
catastrophe losses (1.2 points) and slightly lower net favorable prior
year reserve development (0.4 points), partially offset by higher
underlying underwriting margins (0.8 points).
-
Net favorable prior year reserve development occurred in all segments.
Catastrophe losses primarily resulted from wind and hail storms in
several regions of the United States.
-
The underlying combined ratio improvement of 0.8 points to 90.9%
primarily resulted from a lower expense ratio. The underlying loss
ratio improved slightly, as the benefit of earned rate increases
exceeding loss cost trends was mostly offset by higher non-catastrophe
weather-related losses.
Net investment income of $553 million after-tax ($695 million pre-tax)
benefited from strong private equity returns, partially offset by lower
reinvestment rates in the fixed income portfolio.
Net realized investment gains were $10 million after-tax ($16 million
pre-tax) compared to $109 million after-tax ($167 million pre-tax) in
the prior year quarter. The prior year quarter included an $87 million
after-tax ($134 million pre-tax) realized gain related to a short
position in U.S. Treasury futures contracts.
Record quarterly net written premiums of $6.162 billion increased 6%
primarily due to the inclusion of Dominion within Financial,
Professional & International Insurance, as well as slightly higher net
written premiums in Business Insurance. These increases were partially
offset by slightly lower net written premiums in Personal Insurance.
Year-to-Date 2014 Results
(All comparisons vs. year-to-date 2013, unless noted otherwise)
Net income of $1.735 billion after-tax decreased $86 million or 5% due
to a reduction in net realized investment gains, partially offset by
higher operating income. Operating income of $1.725 billion after-tax
increased $22 million or 1% primarily reflecting higher underlying
underwriting gains, higher net favorable prior year reserve development
and higher net investment income. These improvements were partially
offset by higher catastrophe losses. The current period included a $49
million after-tax benefit in the first quarter resulting from a
reduction in the estimated liability for state assessments to be paid by
the company related to workers’ compensation premiums. The prior year
period included a $122 million after-tax benefit from favorable tax and
legal settlements.
Underwriting results
-
The combined ratio improved 0.9 points to 90.5% due to higher
underlying underwriting margins (1.7 points) and higher net favorable
prior year reserve development (0.3 points), partially offset by
higher catastrophe losses (1.1 points).
-
Net favorable prior year reserve development occurred in all segments.
Catastrophe losses included the second quarter 2014 events discussed
above, as well as winter storms in the United States in the first
quarter 2014.
-
The underlying combined ratio improvement of 1.7 points to 89.6%
primarily resulted from the same factors as discussed above for the
second quarter.
Net investment income of $1.135 billion after-tax ($1.431 billion
pre-tax) increased primarily due to the same factors discussed above for
the second quarter, as well as higher real estate partnership returns.
Net written premiums of $12.035 billion increased 5% due to the same
factors discussed above for the second quarter.
Shareholders’ Equity
Shareholders’ equity of $25.532 billion increased 1% and 3%,
respectively, from the end of first quarter 2014 and year-end 2013.
Included in shareholders’ equity were after-tax net unrealized
investment gains of $2.013 billion, compared to $1.674 billion at the
end of the first quarter 2014 and $1.322 billion at the end of the prior
year.
The company repurchased 9.5 million shares during the second quarter and
18.0 million shares year-to-date at a total cost of $876 million and
$1.581 billion, respectively. The company has $3.234 billion of
remaining capacity under its existing share repurchase authorization. At
the end of second quarter 2014, statutory surplus was $21.036 billion
and the ratio of debt-to-capital (excluding after-tax net unrealized
investment gains) was 21.3%, well within the target range of 15% to 25%.
The Board of Directors declared a quarterly dividend of $0.55 per share.
This dividend is payable on September 30, 2014, to shareholders of
record as of the close of business on September 10, 2014.
|
|
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| |
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|
| | |
| | |
| | |
|
|
| | |
| | |
| | |
Business Insurance Segment Financial
Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions and pre-tax, unless noted otherwise)
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Three Months Ended June 30, | | | | | Six Months Ended June 30, | |
| | | | | | | | |
| 2014 |
| | |
| 2013 |
| | | Change | | | | |
| 2014 |
| | |
| 2013 |
| | | Change | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gains: | | | | $ | 22 | | | | $ | 100 | | | | $ | (78 | ) | | | | | $ | 383 | | | | $ | 398 | | | | $ | (15 | ) | |
Underwriting gains includes: | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | | | 25 | | | | | 55 | | | | | (30 | ) | | | | | | 118 | | | | | 168 | | | | | (50 | ) | |
Catastrophes, net of reinsurance | | | | | (236 | ) | | | | (148 | ) | | | | (88 | ) | | | | | | (316 | ) | | | | (183 | ) | | | | (133 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | | 496 | | | | | 502 | | | | | (6 | ) | | | | | | 1,026 | | | | | 989 | | | | | 37 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Other | | | | | 8 | | | | | 114 | | | | | (106 | ) | | | | | | 16 | | | | | 127 | | | | | (111 | ) | |
| | | | | | | | |
| | |
| | |
| | | | |
| | |
| | |
| |
Operating income before income taxes | | | | | 526 | | | | | 716 | | | | | (190 | ) | | | | | | 1,425 | | | | | 1,514 | | | | | (89 | ) | |
Income tax expense | | | |
| 117 |
| | |
| 137 |
| | |
| (20 | ) | | | | |
| 363 |
| | |
| 345 |
| | |
| 18 |
| |
Operating income | | | | $ | 409 |
| | | $ | 579 |
| | | $ | (170 | ) | | | | | $ | 1,062 |
| | | $ | 1,169 |
| | | $ | (107 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | 99.0 | | % | | | 96.2 | | % | | | 2.8 | |
pts
| | | | | 93.4 | | % | | | 92.9 | | % | | | 0.5 | |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | | | |
(0.8
|
)
|
pts
| | |
(1.8
|
)
|
pts
| | |
1.0
| |
pts
| | | | |
(1.9
|
)
|
pts
| | |
(2.8
|
)
|
pts
| | |
0.9
| |
pts
|
Catastrophes, net of reinsurance
| | | | |
7.7
| |
pts
| | |
4.9
| |
pts
| | |
2.8
| |
pts
| | | | |
5.2
| |
pts
| | |
3.1
| |
pts
| | |
2.1
| |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | | 92.1 | | % | | | 93.1 | | % | | | (1.0 | ) |
pts
| | | | | 90.1 | | % | | | 92.6 | | % | | | (2.5 | ) |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums by market | | | | | | | | | | | | | | | | | | | | | | |
Select Accounts
| | | |
$
|
705
| | | |
$
|
709
| | | | |
(1
|
)
| % | | | |
$
|
1,423
| | | |
$
|
1,433
| | | | |
(1
|
)
| % |
Commercial Accounts
| | | | |
738
| | | | |
732
| | | | |
1
| | | | | | |
1,631
| | | | |
1,640
| | | | |
(1
|
)
| |
National Accounts
| | | | |
243
| | | | |
242
| | | | |
-
| | | | | | |
543
| | | | |
519
| | | | |
5
| | |
Industry-Focused Underwriting
| | | | |
678
| | | | |
653
| | | | |
4
| | | | | | |
1,410
| | | | |
1,352
| | | | |
4
| | |
Target Risk Underwriting
| | | | |
513
| | | | |
500
| | | | |
3
| | | | | | |
967
| | | | |
948
| | | | |
2
| | |
Specialized Distribution
| | | |
|
224
|
| | |
|
232
|
| | | |
(3
|
)
| | | | |
|
431
|
| | |
|
436
|
| | | |
(1
|
)
| |
Total | | | | $ | 3,101 |
| | | $ | 3,068 |
| | | | 1 | | % | | | | $ | 6,405 |
| | | $ | 6,328 |
| | | | 1 | | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2014 Results
(All comparisons vs. second quarter 2013, unless noted otherwise)
Operating income of $409 million after-tax decreased $170 million or
29%, primarily reflecting a $102 million after-tax benefit in the prior
year quarter from favorable tax and legal settlements, as well as higher
catastrophe losses, lower net favorable prior year reserve development
and lower net investment income, partially offset by higher underlying
underwriting gains.
Underwriting results
-
The combined ratio increased 2.8 points to 99.0% due to higher
catastrophes (2.8 points) and lower net favorable prior year reserve
development (1.0 points), partially offset by higher underlying
underwriting margins (1.0 points).
-
Net favorable prior year reserve development primarily resulted from
better than expected loss experience related to the general liability
product line, which was concentrated in excess coverages for accident
years 2008 through 2012. This improvement was partially offset by a
$57 million after-tax ($87 million pre-tax) increase to environmental
reserves.
-
The underlying combined ratio improvement of 1.0 point to 92.1%
primarily resulted from the benefit of earned rate increases exceeding
loss cost trends, partially offset by higher non-catastrophe
weather-related losses.
Net written premiums of $3.101 billion increased 1%, primarily driven by
continued improvement in renewal rate. Net written premiums also
benefited from positive exposure change at renewal. Retention rates
remained strong, and new business volumes increased from the prior year
quarter.
Year-to-Date 2014 Results
(All comparisons vs. year-to-date 2013, unless noted otherwise)
Operating income of $1.062 billion after-tax decreased $107 million or
9%, primarily reflecting the same factors as discussed above for the
second quarter, except that net investment income was higher than the
prior year period. The current period also included a $49 million
after-tax benefit resulting from a reduction in the estimated liability
for state assessments to be paid by the company related to workers’
compensation premiums in the first quarter.
Underwriting results
-
The combined ratio increased 0.5 points to 93.4% due to higher
catastrophes (2.1 points) and lower net favorable prior year reserve
development (0.9 points), partially offset by higher underlying
underwriting margins (2.5 points).
-
Net favorable prior year reserve development primarily resulted from
the same factors as discussed above for the second quarter as well as
better than expected loss experience related to the property product
line for accident years 2010 through 2013, partially offset by higher
than expected loss experience for liability coverages in the
commercial multi-peril product line for accident years 2010 through
2013.
-
The underlying combined ratio improvement of 2.5 points to 90.1%
mostly resulted from a lower expense ratio that included the impact of
the reduction in the estimated liability for assessments to be paid by
the company related to workers’ compensation premiums. The underlying
loss ratio improved slightly as the benefit of earned rate increases
exceeding loss cost trends was mostly offset by higher non-catastrophe
weather-related losses.
Net written premiums of $6.405 billion increased 1%, primarily driven by
the same factors as discussed above for the second quarter except that
new business volumes decreased slightly from the prior year period.
|
|
|
| |
|
|
|
| | |
| | |
| | |
|
|
| | |
| | |
| | |
Financial, Professional & International
Insurance Segment Financial Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions and pre-tax, unless noted otherwise)
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Three Months Ended June 30, | | | | | Six Months Ended June 30, | |
| | | | | | | | |
| 2014 |
| | |
| 2013 |
| | | Change | | | | |
| 2014 |
| | |
| 2013 |
| | | Change | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gains: | | | | | $ | 250 | | | | $ | 100 | | | | $ | 150 | | | | | | $ | 412 | | | | $ | 228 | | | | $ | 184 | | |
Underwriting gains includes: | | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | | | | 146 | | | | | 72 | | | | | 74 | | | | | | | 215 | | | | | 130 | | | | | 85 | | |
Catastrophes, net of reinsurance | | | | | | (10 | ) | | | | (46 | ) | | | | 36 | | | | | | | (14 | ) | | | | (46 | ) | | | | 32 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | | | 105 | | | | | 91 | | | | | 14 | | | | | | | 211 | | | | | 183 | | | | | 28 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Other | | | | | | 8 | | | | | 5 | | | | | 3 | | | | | | | 16 | | | | | 10 | | | | | 6 | | |
| | | | | | | | |
| | |
| | |
| | | | |
| | |
| | |
| |
Operating income before income taxes | | | | | | 363 | | | | | 196 | | | | | 167 | | | | | | | 639 | | | | | 421 | | | | | 218 | | |
Income tax expense | | | | |
| 109 |
| | |
| 42 |
| | |
| 67 |
| | | | |
| 190 |
| | |
| 104 |
| | |
| 86 |
| |
Operating income | | | | | $ | 254 |
| | | $ | 154 |
| | | $ | 100 |
| | | | | $ | 449 |
| | | $ | 317 |
| | | $ | 132 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | | 76.6 | | % | | | 86.3 | | % | | | (9.7 | ) |
pts
| | | | | 80.2 | | % | | | 84.3 | | % | | | (4.1 | ) |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | | | | |
(13.5
|
)
|
pts
| | |
(9.7
|
)
|
pts
| | |
(3.8
|
)
|
pts
| | | | |
(10.1
|
)
|
pts
| | |
(8.8
|
)
|
pts
| | |
(1.3
|
)
|
pts
|
Catastrophes, net of reinsurance
| | | | | |
0.9
| |
pts
| | |
6.1
| |
pts
| | |
(5.2
|
)
|
pts
| | | | |
0.7
| |
pts
| | |
3.1
| |
pts
| | |
(2.4
|
)
|
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | | | 89.2 | | % | | | 89.9 | | % | | | (0.7 | ) |
pts
| | | | | 89.6 | | % | | | 90.0 | | % | | | (0.4 | ) |
pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums by market | | | | | | | | | | | | | | | | | | | | | | | |
Bond & Financial Products
| | | | |
$
|
540
| | | |
$
|
531
| | | | |
2
| | % | | | |
$
|
1,022
| | | |
$
|
926
| | | | |
10
| | % |
International
| | | | |
|
628
|
| | |
|
318
|
| | | |
97
| | | | | |
|
1,096
|
| | |
|
570
|
| | | |
92
| | |
Total | | | | | $ | 1,168 |
| | | $ | 849 |
| | | | 38 | | % | | | | $ | 2,118 |
| | | $ | 1,496 |
| | | | 42 | | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2014 Results
(All comparisons vs. second quarter 2013, unless noted otherwise)
Record quarterly operating income of $254 million after-tax increased
$100 million or 65%, primarily reflecting improved underwriting results
driven by higher net favorable prior year reserve development, lower
catastrophe losses and higher underlying underwriting gains, as well as
higher net investment income.
Underwriting results
-
The combined ratio improved 9.7 points to 76.6% due to lower
catastrophe losses (5.2 points), higher net favorable prior year
reserve development (3.8 points) and higher underlying underwriting
margins (0.7 points).
-
Net favorable prior year reserve development primarily resulted from
better than expected loss experience in the surety line of business
for accident years 2004 through 2010 within Bond & Financial Products,
as well as better than expected loss experience in the company’s
operations at Lloyd’s and Canada within International.
-
The underlying combined ratio improved 0.7 points to 89.2%. An
improvement in the underlying loss ratio from lower reinsurance costs
and the benefit of earned rate increases exceeding loss cost trends in
Bond & Financial Products was more than offset by the impact of
Dominion on the underlying loss ratio. This higher underlying loss
ratio was more than offset by a reduction in the expense ratio.
Record quarterly Financial, Professional & International Insurance net
written premiums of $1.168 billion increased 38% as a result of higher
net written premiums in both Bond & Financial Products and
International. International net written premiums of $628 million
increased 97% due to the inclusion of Dominion. Bond & Financial
Products net written premiums of $540 million increased 2%, primarily
due to continued strong retention rates and renewal rate increases in
the management liability business within Bond & Financial Products.
Year-to-Date 2014 Results
(All comparisons vs. year-to-date 2013, unless noted otherwise)
Operating income of $449 million after-tax increased $132 million or
42%, primarily reflecting the same factors as discussed above for the
second quarter.
Underwriting results
-
The combined ratio improved 4.1 points to 80.2% due to lower
catastrophe losses (2.4 points), higher net favorable prior year
reserve development (1.3 points) and higher underlying underwriting
margins (0.4 points).
-
Net favorable prior year reserve development primarily resulted from
the same factors discussed above for the second quarter.
-
The underlying combined ratio improvement of 0.4 points to 89.6%
primarily reflected the same factors as discussed above for the second
quarter.
Financial, Professional & International Insurance net written premiums
of $2.118 billion increased 42% as a result of higher net written
premiums in both Bond & Financial Products and International. Net
written premiums of $1.096 billion in International and $1.022 billion
in Bond & Financial Products increased 92% and 10%, respectively, driven
by the same factors as discussed above for the second quarter, as well
as the elimination of a reinsurance program in Bond & Financial Products.
|
|
| | |
|
|
| | |
| | |
| | |
|
|
| | |
| | |
| | |
Personal Insurance Segment Financial
Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions and pre-tax, unless noted otherwise)
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Three Months Ended June 30, | | | | | Six Months Ended June 30, | |
| | | | | | | |
| 2014 |
| | |
| 2013 |
| | | Change | | | | |
| 2014 |
| | |
| 2013 |
| | | Change | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gains (losses): | | | | $ | (15 | ) | | | $ | 81 | | | | $ | (96 | ) | | | | | $ | 253 | | | | $ | 257 | | | | $ | (4 | ) | |
Underwriting gains (losses) includes: | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | | | 12 | | | | | 65 | | | | | (53 | ) | | | | | | 144 | | | | | 125 | | | | | 19 | | |
Catastrophes, net of reinsurance | | | | | (190 | ) | | | | (146 | ) | | | | (44 | ) | | | | | | (255 | ) | | | | (210 | ) | | | | (45 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | | 94 | | | | | 94 | | | | | - | | | | | | | 194 | | | | | 185 | | | | | 9 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
Other | | | | | | 17 | | | | | 15 | | | | | 2 | | | | | | | 43 | | | | | 33 | | | | | 10 | | |
| | | | | | | |
| | |
| | |
| | | | |
| | |
| | |
| |
Operating income before income taxes | | | | | 96 | | | | | 190 | | | | | (94 | ) | | | | | | 490 | | | | | 475 | | | | | 15 | | |
Income tax expense | | | |
| 21 |
| | |
| 48 |
| | |
| (27 | ) | | | | |
| 147 |
| | |
| 136 |
| | |
| 11 |
| |
Operating income | | | | $ | 75 |
| | | $ | 142 |
| | | $ | (67 | ) | | | | | $ | 343 |
| | | $ | 339 |
| | | $ | 4 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | 99.8 | | % | | | 94.5 | | % | | | 5.3 | |
pts
| | | | | 91.7 | | % | | | 91.9 | | % | | | (0.2 | ) |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | | | |
(0.7
|
)
|
pts
| | |
(3.5
|
)
|
pts
| | |
2.8
| |
pts
| | | | |
(4.1
|
)
|
pts
| | |
(3.4
|
)
|
pts
| | |
(0.7
|
)
|
pts
|
Catastrophes, net of reinsurance
| | | | |
10.7
| |
pts
| | |
8.0
| |
pts
| | |
2.7
| |
pts
| | | | |
7.2
| |
pts
| | |
5.7
| |
pts
| | |
1.5
| |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | | 89.8 | | % | | | 90.0 | | % | | | (0.2 | ) |
pts
| | | | | 88.6 | | % | | | 89.6 | | % | | | (1.0 | ) |
pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums | | | | | | | | | | | | | | | | | | | | | | |
Agency Automobile1 | | | |
$
|
831
| | | |
$
|
834
| | | | |
-
| | % | | | |
$
|
1,619
| | | |
$
|
1,665
| | | | |
(3
|
)
| % |
Agency Homeowners & Other1 | | | | |
1,016
| | | | |
1,033
| | | | |
(2
|
)
| | | | | |
1,804
| | | | |
1,853
| | | | |
(3
|
)
| |
Direct to Consumer
| | | |
|
46
|
| | |
|
40
|
| | | |
15
| | | | | |
|
89
|
| | |
|
79
|
| | | |
13
| | |
Total | | | | $ | 1,893 |
| | | $ | 1,907 |
| | | | (1 | ) | % | | | | $ | 3,512 |
| | | $ | 3,597 |
| | | | (2 | ) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
|
1 Represents business sold through agents, brokers and
other intermediaries, and excludes direct to consumer.
|
|
Second Quarter 2014 Results
(All comparisons vs. second quarter 2013, unless noted otherwise)
Operating income of $75 million after-tax decreased $67 million or 47%,
primarily reflecting lower net favorable prior year reserve development
and higher catastrophe losses.
Underwriting results
-
The combined ratio increased 5.3 points to 99.8% primarily due to
lower net favorable prior year reserve development (2.8 points) and
higher catastrophe losses (2.7 points), slightly offset by higher
underlying underwriting margins (0.2 points).
-
Net favorable prior year reserve development primarily resulted from
better than expected loss experience in Homeowners & Other for
accident year 2013 related to non-catastrophe weather related losses.
-
The underlying combined ratio improvement of 0.2 points to 89.8%
primarily resulted from a decrease in the expense ratio and the
benefit of earned rate increases exceeding loss cost trends in both
Automobile and Homeowners & Other, mostly offset by higher
non-catastrophe weather-related losses.
Personal Insurance net written premiums of $1.893 billion decreased 1%.
Renewal premium change remained positive. Retention rates continued to
be strong and generally consistent with recent quarters. New business
was significantly higher than the prior year quarter due to the
company’s new auto product, Quantum 2.0, which had been introduced in 31
states and the District of Columbia by the end of the second quarter.
Year-to-Date 2014 Results
(All comparisons vs. year-to-date 2013, unless noted otherwise)
Operating income of $343 million after-tax increased $4 million or 1%,
primarily reflecting improved underwriting results driven by higher net
favorable prior year reserve development and higher underlying
underwriting gains, as well as higher net investment income. These
improvements were mostly offset by higher catastrophe losses.
Underwriting results
-
The combined ratio improved slightly from 91.9% to 91.7%, primarily
due to higher underlying underwriting margins (1.0 point) and higher
net favorable prior year reserve development (0.7 points), largely
offset by higher catastrophe losses (1.5 points).
-
Net favorable prior year reserve development primarily resulted from
better than expected loss experience in Homeowners & Other for
accident years 2011 through 2013.
-
The underlying combined ratio improvement of 1.0 point to 88.6%
primarily resulted from the same factors as discussed above for the
second quarter.
Personal Insurance net written premiums of $3.512 billion decreased 2%.
Renewal premium change remained positive, retention rates continued to
be strong and new business was significantly higher than the prior year
period.
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, July 22, 2014. Investors can access the call via webcast at http://investor.travelers.com
or by dialing 1-800-728-2056 within the U.S. and 1-212-231-2901 outside
the U.S. (use passcode 14788 for both the U.S. and international calls).
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 at the same website. An audio playback
can also be accessed by phone at 1-800-633-8284 within the U.S. and
1-402-977-9140 outside the U.S. (use reservation 21720985 for both the
U.S. and international calls).
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 and/or social media
outlets, such as Facebook and Twitter, as distribution channels of
material company information. Financial and other important information
regarding the company is routinely accessible through and posted on our
website at http://investor.travelers.com,
our Facebook page at https://www.facebook.com/travelers
and our Twitter account (@TRV_Insurance) at https://twitter.com/TRV_Insurance.
In addition, you may automatically receive email alerts and other
information about Travelers when you enroll your email address by
visiting the “Email Alert Service” section at http://investor.travelers.com.
For the periods presented in this earnings release, Travelers was
organized 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 Canada, the
United Kingdom and the Republic of Ireland, and on an international
basis as a corporate member of Lloyd’s. The segment includes the Bond &
Financial Products groups as well as the International group. The
International group includes The Dominion of Canada General Insurance
Company, which the company acquired in November 2013 and which writes
personal lines and small commercial insurance business in Canada. In
addition, the company owns 49.5% of the common stock of J. Malucelli
Participações em Seguros e Resseguros S.A., its joint venture in Brazil.
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.
On June 10, 2014, the company announced a realignment of its management
team that gave rise to a realignment of two of its three business
segments, effective July 1, 2014. The company’s International Insurance
group, which had previously been included in the Financial, Professional
& International Insurance segment, will be combined with the company’s
previous Business Insurance segment to create a new Business &
International Insurance segment. The Bond & Financial Products group,
which was the remaining business in the Financial, Professional &
International Insurance segment, will now comprise the new Bond &
Financial Products segment. The Personal Insurance segment will not be
impacted by these changes. The changes were designed to reflect the
realignment of the company’s management team and the manner in which the
company’s businesses are managed effective July 1, 2014, and represent
an aggregation of products and services based on type of customer, how
the business is marketed and the manner in which risks are underwritten.
The newly aligned segments will be presented in the company’s financial
statements beginning with the period ending September 30, 2014 and the
prior periods presented will be restated to conform to the new
presentation.
* * * * *
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 outlook, share repurchase
plans, expected margin improvement, potential returns, 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, loss costs, 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, including initiatives, such as in Personal
Insurance, to improve profitability and competitiveness.
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 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 and
investment operations including reinsurance or structured settlements;
-
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 state or federal regulation or enforcement practices could
impose significant burdens on the company and otherwise adversely
impact the company’s 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, such as Quantum 2.0, or
expand in targeted markets may not be successful and may create
enhanced risks;
-
the company may be adversely affected if its pricing and capital
models provide materially different indications than actual results;
-
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;
-
the company is subject to a number of risks associated with its
business outside the United States;
-
new regulations outside of the United States, including in the
European Union, could adversely impact the company’s results of
operations and limit its growth;
-
loss of or significant restriction on the use of particular types of
underwriting criteria, such as credit scoring, in the pricing and
underwriting of the company’s products could reduce the company’s
future profitability;
-
acquisitions and integration of acquired businesses may result in
operating difficulties and other unintended consequences;
-
the company could be adversely affected if its controls 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;
-
intellectual property is important to the company’s business, and the
company may be unable to protect and enforce its own intellectual
property or the company may be subject to claims for infringing on the
intellectual property of others;
-
changes to existing accounting standards may adversely impact the
company’s reported results;
-
changes in U.S. tax laws or in the tax laws of other jurisdictions in
which the company operates could adversely impact the company; and
-
the company’s repurchase plans depend on a variety of factors,
including the company’s financial position, earnings, share price,
catastrophe losses, maintaining capital levels commensurate with the
company’s desired ratings from independent rating agencies, 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 and related financings), 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 (SEC).
*****
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 to Net
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Three Months Ended |
|
| Six Months Ended |
| | | | | June 30, | | | June 30, |
($ in millions, pre-tax)
|
|
|
| 2014 |
| 2013 |
|
| 2014 |
| 2013 |
| | | | |
| | | | |
| |
Operating income | | | | $ | 885 |
| $ | 1,010 | | | $ | 2,354 |
| $ | 2,220 |
Net realized investment gains
|
|
|
|
|
16
|
|
|
167
|
|
|
|
17
|
|
|
177
|
Net income |
|
|
| $ | 901 |
| $ | 1,177 |
|
| $ | 2,371 |
| $ | 2,397 |
| | | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Three Months Ended |
|
| Six Months Ended |
| | | | | June 30, | | | June 30, |
($ in millions, after-tax)
|
|
|
| 2014 |
| 2013 |
|
| 2014 |
| 2013 |
| | | | |
| | | | |
| |
Operating income | | | | $ | 673 | | $ | 816 | | | $ | 1,725 | | $ | 1,703 |
Net realized investment gains
|
|
|
|
|
10
|
|
|
109
|
|
|
|
10
|
|
|
118
|
Net income |
|
|
| $ | 683 |
| $ | 925 |
|
| $ | 1,735 |
| $ | 1,821 |
| | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Twelve Months Ended December 31, |
($ in millions, after-tax)
|
|
|
|
| 2013 |
| 2012 |
| 2011 |
| 2010 |
| 2009 |
| 2008 |
|
| 2007 |
| 2006 |
| 2005 |
| | | | | |
| |
| |
| |
| |
| |
| |
| |
| |
Operating income, less preferred dividends
| | | | |
$
|
3,567
| |
$
|
2,441
| |
$
|
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 | | | | | | 3,567 | | | 2,441 | | | 1,390 | | | 3,043 | | | 3,600 | | | 3,195 | | | | 4,500 | | | 4,200 | | | 2,026 | |
Net realized investment gains (losses)
|
|
|
|
|
|
106
|
|
|
32
|
|
|
36
|
|
|
173
|
|
|
22
|
|
|
(271
|
)
|
|
|
101
|
|
|
8
|
|
|
35
|
|
Income from continuing operations | | | | | | 3,673 | | | 2,473 | | | 1,426 | | | 3,216 | | | 3,622 | | | 2,924 | | | | 4,601 | | | 4,208 | | | 2,061 | |
Discontinued operations
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
(439
|
)
|
Net income |
|
|
|
| $ | 3,673 |
| $ | 2,473 |
| $ | 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 |
|
| Six Months Ended |
| | | | | June 30, | | | June 30, |
|
|
|
|
| 2014 |
| 2013 |
|
| 2014 |
| 2013 |
| | | | | |
| | | | |
| |
Basic earnings per share | | | | | | | | | | | |
Operating income | | | | $ 1.95 | | $ 2.15 | | | $ 4.94 | | $ 4.49 |
Net realized investment gains
|
|
|
|
0.03
|
|
0.29
|
|
|
0.03
|
|
0.31
|
Net income |
|
|
| $ 1.98 |
| $ 2.44 |
|
| $ 4.97 |
| $ 4.80 |
| | | | | | | | | | | |
|
Diluted earnings per share | | | | | | | | | | | |
Operating income | | | | $ 1.93 | | $ 2.13 | | | $ 4.89 | | $ 4.44 |
Net realized investment gains
|
|
|
|
0.02
|
|
0.28
|
|
|
0.02
|
|
0.31
|
Net income |
|
|
| $ 1.95 |
| $ 2.41 |
|
| $ 4.91 |
| $ 4.75 |
| | | | | | | | | | |
|
Reconciliation of Operating Income by Segment to Total Operating
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| Three Months Ended |
|
| Six Months Ended |
| | | | | | June 30, | | | June 30, |
($ in millions, after-tax)
|
|
|
|
| 2014 |
| 2013 |
|
| 2014 |
| 2013 |
| | | | | | |
| | | | |
| |
| | | | | | | | | | | | |
|
Business Insurance | | | | |
$
|
409
| | |
$
|
579
| | | |
$
|
1,062
| | |
$
|
1,169
| |
Financial, Professional & International Insurance | | | | | |
254
| | | |
154
| | | | |
449
| | | |
317
| |
Personal Insurance |
|
|
|
|
|
75
|
|
|
|
142
|
|
|
|
|
343
|
|
|
|
339
|
|
Total segment operating income
| | | | | |
738
| | | |
875
| | | | |
1,854
| | | |
1,825
| |
Interest Expense and Other
|
|
|
|
|
|
(65
|
)
|
|
|
(59
|
)
|
|
|
|
(129
|
)
|
|
|
(122
|
)
|
Total operating income |
|
|
|
| $ | 673 |
|
| $ | 816 |
|
|
| $ | 1,725 |
|
| $ | 1,703 |
|
| | | | | | | | | | | | | | | | | | | |
|
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 and discontinued operations.
Reconciliation of Adjusted Shareholders’ Equity to Shareholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
| As of June 30, | |
| |
| |
| |
| |
| |
($ in millions)
|
|
|
|
|
|
|
|
| 2014 |
| 2013 | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | |
Adjusted shareholders' equity | | | | | | | | | $ | 23,509 | | $ | 23,080 | | | | | | | | | | | | |
Net unrealized investment gains, net of tax
| | | | | | | | | |
2,013
| | |
1,692
| | | | | | | | | | | | |
Net realized investment gains, net of tax
|
|
|
|
|
|
|
|
|
|
10
|
|
|
118
|
| | | | | | | | | | | |
Shareholders' equity |
|
|
|
|
|
|
|
| $ | 25,532 |
| $ | 24,890 |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | As of December 31, |
($ in millions)
|
|
|
|
| 2013 |
| 2012 |
| 2011 |
| 2010 |
| 2009 |
| 2008 |
|
| 2007 |
| 2006 |
| 2005 |
| 2004 |
| | | | | | | | | | | | | | | | | | | | | | |
|
Adjusted shareholders' equity | | | | | $ | 23,368 | | $ | 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
| | | | | |
1,322
| | |
3,103
| | |
2,871
| | |
1,859
| | |
1,856
| | |
(146
|
)
| | |
620
| | |
453
| | |
327
| | | |
866
| |
Net realized investment gains (losses), net of tax
| | | | | |
106
| | |
32
| | |
36
| | |
173
| | |
22
| | |
(271
|
)
| | |
101
| | |
8
| | |
35
| | | |
(28
|
)
|
Preferred stock
| | | | | |
-
| | |
-
| | |
-
| | |
68
| | |
79
| | |
89
| | | |
112
| | |
129
| | |
153
| | | |
188
| |
Discontinued operations
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
(439
|
)
|
|
|
88
|
|
Shareholders' equity |
|
|
|
| $ | 24,796 |
| $ | 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 |
|
| Six Months Ended |
| | | | | | June 30, | | | June 30, |
($ in millions, after-tax)
|
|
|
|
| 2014 |
| 2013 |
|
| 2014 |
| 2013 |
| | | | | |
| | | | |
| |
Annualized operating income
| | | | |
$
|
2,693
| | |
$
|
3,261
| | | |
$
|
3,450
| | |
$
|
3,406
| |
Adjusted average shareholders' equity
|
|
|
|
|
|
23,612
|
|
|
|
22,910
|
|
|
|
|
23,603
|
|
|
|
22,711
|
|
Operating return on equity |
|
|
|
|
| 11.4 | % |
|
| 14.2 | % |
|
|
| 14.6 | % |
|
| 15.0 | % |
| | | | | | | | | | | | |
|
Annualized net income
| | | | |
$
|
2,730
| | |
$
|
3,697
| | | |
$
|
3,470
| | |
$
|
3,641
| |
Average shareholders' equity
|
|
|
|
|
|
25,460
|
|
|
|
25,243
|
|
|
|
|
25,276
|
|
|
|
25,372
|
|
Return on equity |
|
|
|
|
| 10.7 | % |
|
| 14.6 | % |
|
|
| 13.7 | % |
|
| 14.4 | % |
| | | | | | | | | | | |
|
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 June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | | | | June 30, | | | | Twelve Months Ended December 31, |
($ in millions)
|
|
|
|
| 2014 |
| 2013 |
|
|
|
| 2013 |
| 2012 |
| 2011 |
| 2010 |
| 2009 |
| 2008 |
| 2007 |
| 2006 |
| 2005 |
| | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Operating income, less preferred dividends
| | | | |
$
|
1,725
| | |
$
|
1,703
| | | | | |
$
|
3,567
| | |
$
|
2,441
| | |
$
|
1,389
| | |
$
|
3,040
| | |
$
|
3,597
| | |
$
|
3,191
| | |
$
|
4,496
| | |
$
|
4,195
| | |
$
|
2,020
| |
Annualized operating income
| | | | | |
3,450
| | | |
3,406
| | | | | | | | | | | | | | | | | | | | | | |
Adjusted average shareholders' equity
| | | | | |
23,603
| | | |
22,711
| | | | | | |
23,004
| | | |
22,158
| | | |
22,806
| | | |
24,285
| | | |
25,777
| | | |
25,668
| | | |
25,350
| | | |
23,381
| | | |
21,118
| |
Operating return on equity
|
|
|
|
|
|
14.6
|
%
|
|
|
15.0
|
%
|
|
|
|
|
|
15.5
|
%
|
|
|
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 Jan. 1, 2005 through Jun. 30, 2014 | | | | | | 13.2 | % | | | | | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN ITEMS
TO NET INCOME
Underwriting gain 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 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.
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 |
|
| Six Months Ended |
| | | | | | June 30, | | | June 30, |
($ in millions, after-tax except as noted)
|
|
|
|
| 2014 |
| 2013 |
|
| 2014 |
| 2013 |
| | | | | | |
| | | | |
| |
Pre-tax underwriting gains excluding the impact of catastrophes
and net favorable prior year loss reserve development
| | | | | | | | |
| | | |
$
|
510
| |
|
$
|
429
| | | |
$
|
1,156
| | |
$
|
899
| |
Pre-tax impact of catastrophes
| | | | | |
(436
|
)
| | |
(340
|
)
| | | |
(585
|
)
| | |
(439
|
)
|
Pre-tax impact of net favorable prior year loss reserve development
|
|
|
|
|
|
183
|
|
|
|
192
|
|
|
|
|
477
|
|
|
|
423
|
|
Pre-tax underwriting gains
| | | | | |
257
| | | |
281
| | | | |
1,048
| | | |
883
| |
Income tax expense on underwriting results
|
|
|
|
|
|
95
|
|
|
|
46
|
|
|
|
|
379
|
|
|
|
263
|
|
Underwriting gains
| | | | | |
162
| | | |
235
| | | | |
669
| | | |
620
| |
Net investment income
| | | | | |
553
| | | |
551
| | | | |
1,135
| | | |
1,093
| |
Other, including interest expense
|
|
|
|
|
|
(42
|
)
|
|
|
30
|
|
|
|
|
(79
|
)
|
|
|
(10
|
)
|
Operating income | | | | | | 673 | | | | 816 | | | | | 1,725 | | | | 1,703 | |
Net realized investment gains
|
|
|
|
|
|
10
|
|
|
|
109
|
|
|
|
|
10
|
|
|
|
118
|
|
Net income |
|
|
|
| $ | 683 |
|
| $ | 925 |
|
|
| $ | 1,735 |
|
| $ | 1,821 |
|
| | | | | | | | | | | | |
|
COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED RATIO
Combined ratio: For Statutory Accounting Practices (SAP), the
combined ratio is the sum of the SAP loss and LAE ratio and the SAP
underwriting expense ratio as defined in the statutory financial
statements required by insurance regulators. The combined ratio as used
in this earnings release is the equivalent of, and is calculated in the
same manner as, the SAP combined ratio except that the SAP underwriting
expense ratio is based on net written premium and the
underwriting expense ratio as used in this earnings release is based on
net earned premiums.
For SAP, loss and LAE ratio is the ratio of incurred losses and loss
adjustment expenses less certain administrative services fee income to
net earned premiums as defined in the statutory financial statements
required by insurance regulators. The loss and LAE ratio as used in this
earnings release is calculated in the same manner as the SAP ratio.
For SAP, the underwriting expense ratio is the ratio of underwriting
expenses incurred (including commissions paid), less certain
administrative services fee income and billing and policy fees, to net written
premiums as defined in the statutory financial statements required by
insurance regulators. The underwriting expense ratio as used in this
earnings release, is the ratio of underwriting expenses (including the
amortization of deferred acquisition costs), less certain administrative
services fee income and billing and policy fees, to net earned
premiums.
The combined ratio, loss and LAE ratio, and underwriting expense ratio
are used as indicators of the company’s underwriting discipline,
efficiency in acquiring and servicing its business and overall
underwriting profitability. A combined ratio under 100% generally
indicates an underwriting profit. A combined ratio over 100% generally
indicates an underwriting loss.
Other companies’ method of computing similarly titled measures may not
be comparable to the company’s method of computing these ratios.
Underlying combined ratio represents the combined ratio excluding
the impact of net prior year reserve development and catastrophes. The
underlying combined ratio is an indicator of the company’s underwriting
discipline and underwriting profitability for the current accident year.
Calculation of the Combined Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Three Months Ended |
|
| Six Months Ended |
| | | | | June 30, | | | June 30, |
($ in millions, pre-tax)
|
|
|
| 2014 |
| 2013 |
|
| 2014 |
| 2013 |
| | | | | |
| | | | |
| |
Loss and loss adjustment expense ratio | | | | | | | | | | | |
Claims and claim adjustment expenses
| | | |
$
|
3,826
| | |
$
|
3,530
| | | |
$
|
7,141
| | |
$
|
6,683
| |
Less:
| | | | | | | | | | | |
Policyholder dividends
| | | | |
7
| | | |
13
| | | | |
18
| | | |
23
| |
Allocated fee income
|
|
|
|
|
46
|
|
|
|
27
|
|
|
|
|
89
|
|
|
|
69
|
|
Loss ratio numerator |
|
|
| $ | 3,773 |
|
| $ | 3,490 |
|
|
| $ | 7,034 |
|
| $ | 6,591 |
|
| | | | | | | | | | | |
|
Underwriting expense ratio | | | | | | | | | | | |
Amortization of deferred acquisition costs
| | | |
$
|
965
| | |
$
|
950
| | | |
$
|
1,915
| | |
$
|
1,898
| |
General and administrative expenses (G&A)
| | | | |
1,001
| | | |
931
| | | | |
1,882
| | | |
1,846
| |
Less:
| | | | | | | | | | | |
G&A included in Interest Expense and Other
| | | | |
9
| | | |
7
| | | | |
16
| | | |
11
| |
Allocated fee income
| | | | |
66
| | | |
55
| | | | |
130
| | | |
110
| |
Billing and policy fees and other
|
|
|
|
|
25
|
|
|
|
25
|
|
|
|
|
55
|
|
|
|
49
|
|
Expense ratio numerator |
|
|
| $ | 1,866 |
|
| $ | 1,794 |
|
|
| $ | 3,596 |
|
| $ | 3,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premium |
|
|
| $ | 5,928 |
|
| $ | 5,603 |
|
|
| $ | 11,751 |
|
| $ | 11,120 |
|
| | | | | | | | | | | |
|
Combined ratio 1 | | | | | | | | | | | |
Loss and loss adjustment expense ratio
| | | | |
63.6
|
%
| | |
62.3
|
%
| | | |
59.9
|
%
| | |
59.3
|
%
|
Underwriting expense ratio
|
|
|
|
|
31.5
|
%
|
|
|
32.0
|
%
|
|
|
|
30.6
|
%
|
|
|
32.1
|
%
|
Combined ratio |
|
|
|
| 95.1 | % |
|
| 94.3 | % |
|
|
| 90.5 | % |
|
| 91.4 | % |
| | | | | | | | | | |
|
1 For purposes of computing 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.
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 to 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 |
|
| Six Months Ended |
| | | | | | June 30, | | | June 30, |
($ in millions)
|
|
|
|
| 2014 |
| 2013 |
| Change |
|
| 2014 |
| 2013 |
| Change |
| | | | | |
| |
| | | | |
| |
| |
Net written premiums - holding foreign exchange rates constant
| | | | |
$
|
623
| |
$
|
318
| |
96
|
%
| | |
$
|
1,090
| |
$
|
570
| |
91
|
%
|
Impact of changes in foreign exchange rates
|
|
|
|
|
5
|
|
|
|
|
|
|
6
|
|
|
|
|
Net written premiums
|
|
|
|
|
$
|
628
|
|
$
|
318
|
|
97
|
%
|
|
|
$
|
1,096
|
|
$
|
570
|
|
92
|
%
|
| | | | | | | | | | | | | | | |
|
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 |
|
| Six Months Ended |
| | | | | June 30, | | | June 30, |
($ in millions)
|
|
|
| 2014 |
| 2013 |
| Change |
|
| 2014 |
| 2013 |
| Change |
| | | | | |
| |
| | | | |
| |
| |
Net written premiums - holding foreign exchange rates constant
| | | |
$
|
1,163
| |
$
|
849
| |
37
|
%
| | |
$
|
2,112
| |
$
|
1,496
| |
41
|
%
|
Impact of changes in foreign exchange rates
|
|
|
|
|
5
|
|
|
|
|
|
|
|
6
|
|
|
|
|
Net written premiums
|
|
|
|
$
|
1,168
|
|
$
|
849
|
|
38
|
%
|
|
|
$
|
2,118
|
|
$
|
1,496
|
|
42
|
%
|
| | | | | | | | | | | | | | | |
|
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 |
| | June 30, |
| December 31, |
| June 30, |
($ in millions, except per share amounts)
| 2014 |
| 2013 |
| 2013 |
| | | | | |
|
Tangible shareholders' equity | $ | 19,613 | | | $ | 19,543 | | | $ | 19,523 | |
Goodwill
| |
3,634
| | | |
3,634
| | | |
3,365
| |
Other intangible assets
| |
328
| | | |
351
| | | |
358
| |
Less: Impact of deferred tax on other intangible assets
|
|
(56
|
)
|
|
|
(54
|
)
|
|
|
(48
|
)
|
Adjusted shareholders' equity | | 23,519 | | | | 23,474 | | | | 23,198 | |
Net unrealized investment gains, net of tax
|
|
2,013
|
|
|
|
1,322
|
|
|
|
1,692
|
|
Shareholders' equity | $ | 25,532 |
|
| $ | 24,796 |
|
| $ | 24,890 |
|
| | | | | |
|
Common shares outstanding
|
|
339.0
|
|
|
|
353.5
|
|
|
|
373.5
|
|
| | | | | |
|
Tangible book value per share
|
$
|
57.86
| | |
$
|
55.29
| | |
$
|
52.28
| |
Adjusted book value per share
| |
69.38
| | | |
66.41
| | | |
62.12
| |
Book value per share
|
|
75.32
|
|
|
|
70.15
|
|
|
|
66.65
|
|
|
|
|
|
|
|
|
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 |
| | | | | June 30, |
| December 31, |
| June 30, |
($ in millions)
|
|
|
| 2014 |
| 2013 |
| 2013 |
| | | | | | | | |
|
Debt
| | | |
$
|
6,347
| | |
$
|
6,346
| | |
$
|
5,852
| |
Shareholders' equity
|
|
|
|
|
25,532
|
|
|
|
24,796
|
|
|
|
24,890
|
|
Total capitalization |
|
|
|
| 31,879 |
|
|
| 31,142 |
|
|
| 30,742 |
|
Net unrealized investment gains, net of tax
|
|
|
|
|
2,013
|
|
|
|
1,322
|
|
|
|
1,692
|
|
Total capitalization excluding net unrealized gain | | | | $ | 29,866 | | | $ | 29,820 | | | $ | 29,050 | |
on investments, net of tax |
|
|
|
|
|
|
|
|
| | | | | | | | |
|
Debt-to-capital ratio
| | | | |
19.9
|
%
| | |
20.4
|
%
| | |
19.0
|
%
|
Debt-to-capital ratio excluding net unrealized investment gains, net
of tax
|
|
|
|
|
21.3
|
%
|
|
|
21.3
|
%
|
|
|
20.1
|
%
|
| | | | | | | |
|
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.