Operating Income per Diluted Share of $2.61, Up 11% from Prior Year
Quarter
Return on Equity and Operating Return on Equity of 14.5% and 15.2%,
Respectively
-
Net income and operating income of $919 million and $893 million,
increased 6% and 1%, respectively, from prior year quarter.
-
Total revenues of $6.886 billion increased 7% and net written premiums
of $6.033 billion increased 6% from the prior year quarter primarily
due to the acquisition of Dominion of Canada in November 2013.
-
Total capital returned to shareholders of $937 million in the quarter,
including $751 million in share repurchases. Year-to-date total
capital returned to shareholders of $2.885 billion.
-
Increases in book value per share of 9% to $76.42 and adjusted book
value per share of 6% to $70.64 from year-end 2013.
-
Board of Directors approves quarterly dividend per share of $0.55.
NEW YORK--(BUSINESS WIRE)--
The Travelers Companies, Inc. today reported net income of $919 million,
or $2.69 per diluted share, for the quarter ended September 30, 2014,
compared to net income of $864 million, or $2.30 per diluted share, in
the prior year quarter. Operating income in the current quarter was $893
million, or $2.61 per diluted share, compared to $883 million, or $2.35
per diluted share, in the prior year quarter. The increase in net and
operating income compared to the prior year quarter primarily resulted
from higher net investment income and lower catastrophe losses,
partially offset by lower net favorable prior year reserve development
and a slightly lower underlying underwriting gain (i.e., excluding net
favorable prior year reserve development and catastrophe losses), which
was impacted by higher non-catastrophe weather-related losses. Net
income also benefited from higher net realized investment gains while
per diluted share amounts also benefited from the impact of share
repurchases.
|
Consolidated Highlights |
($ in millions, except for per share amounts, and after-tax,
|
|
|
| Three Months Ended September 30, | |
|
| Nine Months Ended September 30, | |
except for premiums & revenues)
| | | | | 2014 |
| 2013 |
| Change | | | | 2014 | | 2013 | | Change | |
Net written premiums | | | | | $ | 6,033 | | | $ | 5,713 | | | | 6 | | % | | | $ | 18,068 | | | $ | 17,134 | | | 5 | |
%
|
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
|
Total revenues | | | | | $ | 6,886 | | | $ | 6,452 | | | | 7 | | | | | $ | 20,379 | | | $ | 19,454 | | | 5 | | |
| | | | | | | | | | | | | | | | | | |
|
Operating income | | | | | $ | 893 | | | $ | 883 | | | | 1 | | | | | $ | 2,618 | | | $ | 2,586 | | | 1 | | |
| | | | | | | | | | |
| | | | | | | | | | |
per diluted share | | | | | $ | 2.61 | | | $ | 2.35 | | | | 11 | | | | |
$
|
7.50
| | |
$
|
6.79
| | | 10 | | |
| | | | | | | | | | | | | | | | | | |
|
Net income | | | | | $ | 919 | | | $ | 864 | | | | 6 | | | | | $ | 2,654 | | | $ | 2,685 | | | (1 | ) | |
| | | | | | | | | | | | | | | | | | |
|
per diluted share | | | | | $ | 2.69 | | | $ | 2.30 | | | | 17 | | | | |
$
|
7.60
| | |
$
|
7.05
| | | 8 | | |
| | | | | | | | | | | | | | | | | | |
|
Diluted weighted average | | | | | | 338.9 | | | | 372.9 | | | | (9 | ) | | | | | 346.5 | | | | 378.1 | | | (8 | ) | |
shares outstanding | | | | | | | | |
| | | | | | | |
| |
| | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | | 90.0 | % | | | 88.9 | % | | | 1.1 | | pts | | | | 90.3 | % | | | 90.6 | % | | (0.3 | ) | pts |
| | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | | | 90.5 | % | | | 90.0 | % | | | 0.5 | | pts | | | | 89.9 | % | | | 90.8 | % | | (0.9 | ) | pts |
| | | | | | | | | | | | | | | | | | |
|
Operating return on equity | | | | | | 15.2 | % | | | 15.2 | % | | | - | | pts | | | | 14.8 | % | | | 15.1 | % | | (0.3 | ) | pts |
| | | | | | | | | | | | | | | | | | |
|
Return on equity | | | | | | 14.5 | % | | | 13.9 | % | | | 0.6 | | pts | | | | 14.0 | % | | | 14.2 | % | | (0.2 | ) | pts |
| | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | Change from | | | |
| | | | | | September 30, | | December 31, | | September 30, | | | | December 31, | | September 30, | | | |
| | | | | | 2014 | | 2013 | | 2013 | | | | 2013 | | 2013 | | | |
Book value per share | | | | | $ | 76.42 | | | $ | 70.15 | | | $ | 68.15 | | | | | | 9 | | % | | 12 | | % | | |
| | | | | | | | | | | | | | | | | | |
|
Adjusted book value per share | | | | | | 70.64 | | | | 66.41 | | | | 63.87 | | | | | | 6 | | | | 11 | | | | |
| | | | | | | | | | | | | | | | | | |
|
See Glossary of Financial Measures for definitions and the
statistical supplement for additional financial data.
|
|
“We are very pleased with our results this quarter,” commented Jay
Fishman, Chairman and Chief Executive Officer. “Our results were driven
by strong underwriting performance across all of our business segments,
as reflected in our consolidated combined ratio of 90.0%, and higher
investment returns driven by private equity performance. Our return on
equity and per share results continue to benefit meaningfully from our
ongoing strategy of returning excess capital to shareholders.
Year-to-date, total capital returned to shareholders was almost $2.9
billion, including over $2.3 billion in share repurchases and $553
million in dividends.
“In addition to these strong financial results, we were also very
pleased with our production metrics this quarter. Within Business and
International Insurance, once again, we improved retention in our
domestic businesses from already strong levels in recent quarters, while
continuing to achieve meaningful rate and exposure increases. Bond &
Specialty Insurance improved profitability from already high levels, and
continued to achieve positive renewal premium change while maintaining
strong retention. In Personal Insurance, Auto net written premiums were
up 3% from the prior year quarter and policies in force were up 1% from
the most recent quarter as a result of the very successful introduction
of Quantum 2.0 beginning last fall.
“As we continue to face persistently low interest rates and uncertain
weather patterns, we remain focused on delivering superior profitability
and returns on equity. Consequently, we remain committed to our highly
segmented pricing and underwriting strategies, executing on an account
by account or class by class basis.”
|
Consolidated Results |
($ in millions and pre-tax, unless noted otherwise)
|
|
| | |
| | |
| | |
|
| | |
| | |
| | |
|
|
|
| | | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | |
| | | | | | | 2014 | | | 2013 | | | Change | | | | 2014 | | | 2013 | | | Change | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gain: | | | $ | 564 | | | | $ | 595 | | | | $ | (31 | ) | | | | $ | 1,612 | | | | $ | 1,478 | | | | $ | 134 | | |
Underwriting gain includes: | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | | 113 | | | | | 158 | | | | | (45 | ) | | | | | 590 | | | | | 581 | | | | | 9 | | |
Catastrophes, net of reinsurance | | | | (83 | ) | | | | (99 | ) | | | | 16 | | | | | | (668 | ) | | | | (538 | ) | | | | (130 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | 719 | | | | | 657 | | | | | 62 | | | | | | 2,150 | | | | | 2,014 | | | | | 136 | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Other, including interest expense | | |
| (65 | ) | | |
| (53 | ) | | |
| (12 | ) | | | |
| (190 | ) | | |
| (73 | ) | | |
| (117 | ) | |
Operating income before income taxes | | | | 1,218 | | | | | 1,199 | | | | | 19 | | | | | | 3,572 | | | | | 3,419 | | | | | 153 | | |
Income tax expense | | |
| 325 |
| | |
| 316 |
| | |
| 9 |
| | | |
| 954 |
| | |
| 833 |
| | |
| 121 |
| |
Operating income | | | | 893 | | | | | 883 | | | | | 10 | | | | | | 2,618 | | | | | 2,586 | | | | | 32 | | |
Net realized investment gains (losses) after income taxes | | |
| 26 |
| | |
| (19 | ) | | |
| 45 |
| | | |
| 36 |
| | |
| 99 |
| | |
| (63 | ) | |
Net Income | | | $ | 919 |
| | | $ | 864 |
| | | $ | 55 |
| | | | $ | 2,654 |
| | | $ | 2,685 |
| | | $ | (31 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | 90.0 | | % | | | 88.9 | | % | | | 1.1 | |
pts
| | | | 90.3 | | % | | | 90.6 | | % | | | (0.3 | ) |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | | |
(1.9
|
)
|
pts
| | |
(2.8
|
)
|
pts
| | |
0.9
| |
pts
| | | |
(3.3
|
)
|
pts
| | |
(3.4
|
)
|
pts
| | |
0.1
| |
pts
|
Catastrophes, net of reinsurance
| | | |
1.4
| |
pts
| | |
1.7
| |
pts
| | |
(0.3
|
)
|
pts
| | | |
3.7
| |
pts
| | |
3.2
| |
pts
| | |
0.5
| |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | 90.5 | | % | | | 90.0 | | % | | | 0.5 | |
pts
| | | | 89.9 | | % | | | 90.8 | | % | | | (0.9 | ) |
pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums | | | | | | | | | | | | | | | | | | | | |
Business and International Insurance | | |
$
|
3,560
| | | |
$
|
3,249
| | | | |
10
| | % | | |
$
|
11,061
| | | |
$
|
10,147
| | | | |
9
| | % |
Bond & Specialty Insurance | | | |
556
| | | | |
553
| | | | |
1
| | | | | |
1,578
| | | | |
1,479
| | | | |
7
| | |
Personal Insurance | | |
|
1,917
|
| | |
|
1,911
|
| | | |
-
| | | | |
|
5,429
|
| | |
|
5,508
|
| | | |
(1
|
)
| |
Total | | | $ | 6,033 |
| | | $ | 5,713 |
| | | | 6 | | % | | | $ | 18,068 |
| | | $ | 17,134 |
| | | | 5 | | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | |
|
Third Quarter 2014 Results
(All comparisons vs. third quarter 2013, unless noted otherwise)
Net income of $919 million after-tax increased $55 million, or 6%, due
to an increase in both net realized investment gains and operating
income. Current period net realized investment gains resulted from the
sale of substantially all of one of the company’s real estate joint
venture investments. Operating income of $893 million after-tax
increased $10 million, or 1%, primarily driven by higher net investment
income and a continued strong, but lower, underwriting gain.
Underwriting results
-
The combined ratio increased 1.1 points to 90.0% as the benefit of
lower catastrophe losses (0.3 points) was more than offset by lower
net favorable prior year reserve development (0.9 points) and a higher
underlying combined ratio (0.5 points).
-
The underlying combined ratio increased 0.5 points to 90.5% as the
benefit of earned pricing that exceeded loss cost trends was more than
offset by higher non-catastrophe weather-related losses.
-
Net favorable prior year reserve development occurred in all segments.
Catastrophe losses were primarily due to wind and hail storms in
several regions of the United States, as well as increases in
estimated losses related to wind and hail storms that occurred in the
second quarter.
Net investment income of $568 million after-tax ($719 million pre-tax)
increased due to strong private equity performance, partially offset by
lower reinvestment rates in the fixed income portfolio.
Net written premiums of $6.033 billion increased 6% primarily due to the
inclusion of Dominion and domestic business insurance growth within
Business and International Insurance.
Year-to-Date 2014 Results
(All comparisons vs. year-to-date 2013, unless noted otherwise)
Net income of $2.654 billion after-tax decreased $31 million, or 1%, due
to lower net realized investment gains. Prior period net realized
investment gains related to a short position in U.S. Treasury futures
contracts. Operating income of $2.618 billion after-tax increased $32
million, or 1%, driven by higher net investment income and a higher
underwriting gain, partially offset by a decline in other income due to
the inclusion of a benefit in the prior year period of a $91 million
pre-tax favorable legal settlement, as well as the inclusion in the
prior year period of a $63 million benefit from a favorable tax
settlement. The current period operating income included a $49 million
after-tax benefit recorded 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.
Underwriting results
-
The combined ratio improved 0.3 points to 90.3% due to an improved
underlying combined ratio (0.9 points), partially offset by higher
catastrophe losses (0.5 points) and lower net favorable prior year
reserve development (0.1 points).
-
The underlying combined ratio improved 0.9 points to 89.9% as the
benefits of earned pricing that exceeded loss cost trends and an
improved expense ratio were partially offset by higher non-catastrophe
weather-related losses. The expense ratio benefited from the above
mentioned reduction in the estimated liability for state assessments.
-
Net favorable prior year reserve development occurred in all segments.
Catastrophe losses were primarily due to wind, hail and winter storms
in several regions in the United States.
Net investment income of $1.703 billion after-tax ($2.150 billion
pre-tax) increased primarily due to strong private equity performance
and higher real estate partnership returns, partially offset by lower
reinvestment rates in the fixed income portfolio.
Net written premiums of $18.068 billion increased 5% primarily due to
the inclusion of Dominion and domestic business insurance growth within
Business and International Insurance.
Shareholders’ Equity
Shareholders’equity of $25.321 billion decreased 1% and increased 2%,
respectively, from the end of second quarter 2014 and year-end 2013.
Included in shareholders’ equity were after-tax net unrealized
investment gains of $1.914 billion, compared to $2.013 billion at the
end of second quarter 2014 and $1.322 billion at year-end 2013. Book
value per share of $76.42 increased 1% and 9%, respectively, from the
end of second quarter 2014 and year-end 2013, while adjusted book value
per share of $70.64 increased 2% and 6%, respectively, from the end of
second quarter 2014 and year-end 2013.
The company repurchased 8.1 million shares during the third quarter and
26.1 million shares year-to-date at a total cost of $751 million and
$2.332 billion, respectively. The company has $2.484 billion of
remaining capacity under its existing share repurchase authorization. At
the end of third quarter 2014, statutory surplus was $21.005 billion and
the ratio of debt-to-capital (excluding after-tax net unrealized
investment gains) was 21.3%, well within the company’s target range of
15% to 25%.
The Board of Directors has declared a quarterly dividend today of $0.55
per share. This dividend is payable on December 31, 2014 to shareholders
of record as of the close of business on December 10, 2014.
Business and International Insurance
Segment Financial Results |
($ in millions and pre-tax, unless noted otherwise)
|
|
|
| | |
| | |
| | |
|
| | |
| | |
| | |
|
|
| | | | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | |
| | | | | | | 2014 | | | 2013 | | | Change | | | | 2014 | | | 2013 | | | Change | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gain: | | | | $ | 160 | | | | $ | 234 | | | | $ | (74 | ) | | | | $ | 584 | | | | $ | 625 | | | | $ | (41 | ) | |
Underwriting gain includes: | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | | | 21 | | | | | 77 | | | | | (56 | ) | | | | | 163 | | | | | 277 | | | | | (114 | ) | |
Catastrophes, net of reinsurance | | | | | (31 | ) | | | | (59 | ) | | | | 28 | | | | | | (356 | ) | | | | (283 | ) | | | | (73 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | | 557 | | | | | 504 | | | | | 53 | | | | | | 1,666 | | | | | 1,544 | | | | | 122 | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Other | | | | | 10 | | | | | 8 | | | | | 2 | | | | | | 32 | | | | | 135 | | | | | (103 | ) | |
| | | | | | |
| | |
| | |
| | | |
| | |
| | |
| |
Operating income before income taxes | | | | | 727 | | | | | 746 | | | | | (19 | ) | | | | | 2,282 | | | | | 2,304 | | | | | (22 | ) | |
Income tax expense | | | |
| 175 |
| | |
| 180 |
| | |
| (5 | ) | | | |
| 565 |
| | |
| 531 |
| | |
| 34 |
| |
Operating income | | | | $ | 552 |
| | | $ | 566 |
| | | $ | (14 | ) | | | | $ | 1,717 |
| | | $ | 1,773 |
| | | $ | (56 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | 95.2 | | % | | | 92.7 | | % | | | 2.5 | |
pts
| | | | 94.2 | | % | | | 93.3 | | % | | | 0.9 | |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | | | |
(0.6
|
)
|
pts
| | |
(2.3
|
)
|
pts
| | |
1.7
| |
pts
| | | |
(1.5
|
)
|
pts
| | |
(2.8
|
)
|
pts
| | |
1.3
| |
pts
|
Catastrophes, net of reinsurance
| | | | |
0.9
| |
pts
| | |
1.8
| |
pts
| | |
(0.9
|
)
|
pts
| | | |
3.3
| |
pts
| | |
2.9
| |
pts
| | |
0.4
| |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | | 94.9 | | % | | | 93.2 | | % | | | 1.7 | |
pts
| | | | 92.4 | | % | | | 93.2 | | % | | | (0.8 | ) |
pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums by market | | | | | | | | | | | | | | | | | | | | | |
Domestic
| | | | | | | | | | | | | | | | | | | | | |
Select Accounts
| | | |
$
|
654
| | | |
$
|
654
| | | | |
-
| | % | | |
$
|
2,077
| | | |
$
|
2,087
| | | | |
-
| | % |
Middle Market
| | | | |
1,545
| | | | |
1,487
| | | | |
4
| | | | | |
4,597
| | | | |
4,489
| | | | |
2
| | |
National Accounts
| | | | |
249
| | | | |
236
| | | | |
6
| | | | | |
792
| | | | |
755
| | | | |
5
| | |
First Party | | | | |
369
| | | | |
382
| | | | |
(3
|
)
| | | | |
1,206
| | | | |
1,198
| | | | |
1
| | |
Specialized Distribution
| | | |
|
262
|
| | |
|
273
|
| | | |
(4
|
)
| | | |
|
812
|
| | |
|
831
|
| | | |
(2
|
)
| |
Total Domestic
| | | | |
3,079
| | | | |
3,032
| | | | |
2
| | | | | |
9,484
| | | | |
9,360
| | | | |
1
| | |
International
| | | |
|
481
|
| | |
|
217
|
| | | |
122
| | | | |
|
1,577
|
| | |
|
787
|
| | | |
100
| | |
Total | | | | $ | 3,560 |
| | | $ | 3,249 |
| | | | 10 | | % | | | $ | 11,061 |
| | | $ | 10,147 |
| | | | 9 | | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 2014 Results
(All comparisons vs. third quarter 2013, unless noted otherwise)
Operating income of $552 million after-tax decreased $14 million, or 2%,
as higher net investment income was more than offset by a lower
underwriting gain.
Underwriting results
-
The combined ratio increased 2.5 points to 95.2% as the benefit of
lower catastrophe losses (0.9 points) was more than offset by a higher
underlying combined ratio (1.7 points) and lower net favorable prior
year reserve development (1.7 points).
-
The underlying combined ratio increased 1.7 points to 94.9% as the
benefit of earned pricing that exceeded loss cost trends was more than
offset by higher non-catastrophe weather-related losses.
-
Net favorable prior year reserve development resulted from (i) a $162
million pre-tax benefit related to better than expected loss
experience related to, and the commutation of reinsurance treaties
associated with, a workers’ compensation reinsurance pool for accident
years 1996 and prior and (ii) better than expected loss experience in
the general liability product line for accident years 2009 through
2012 as well as the property product line for accident years 2012 and
2013, partially offset by (iii) a $250 million pre-tax increase to
asbestos reserves, and (iv) a $77 million pre-tax increase to
unallocated loss adjusted expense (ULAE) reserves for the accrual of
interest resulting from a court decision received in the third
quarter, for which the associated settlement amount had been
previously included in our asbestos reserves.
-
The asbestos reserve strengthening, which resulted from our annual
in-depth asbestos claim review that was completed in the third
quarter, was driven by increases in the company’s estimate for
projected settlement and defense costs related to a broad number of
policyholders. The increase in the estimate of projected settlement
and defense costs resulted from recent payment trends that were higher
than previously anticipated. While the overall view of the underlying
asbestos environment is essentially unchanged from recent periods,
there remains a high degree of uncertainty with respect to future
exposure from asbestos claims.
Net written premiums of $3.560 billion increased 10% primarily driven by
the inclusion of Dominion. Domestic net written premiums of $3.079
billion increased 2% driven by continued positive renewal premium
changes. Retention remained strong and improved from recent quarters.
Year-to-Date 2014 Results
(All comparisons vs. year-to-date 2013, unless noted otherwise)
Operating income of $1.717 billion after-tax decreased $56 million, or
3%, as higher net investment income was more than offset by a decline in
other income due to the inclusion of a benefit in the prior year period
of a $91 million pre-tax favorable legal settlement, the inclusion in
the prior year period of a $43 million benefit from a favorable tax
settlement, as well as a lower underwriting gain. The current period
operating income included a $49 million after-tax benefit recorded 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.
Underwriting results
-
The combined ratio increased 0.9 points to 94.2% as the benefit of an
improved underlying combined ratio (0.8 points) was more than offset
by lower net favorable prior year reserve development (1.3 points) and
higher catastrophe losses (0.4 points).
-
The underlying combined ratio improved 0.8 points to 92.4% as the
benefits of earned pricing that exceeded loss cost trends and an
improved expense ratio were partially offset by higher non-catastrophe
weather-related losses. The expense ratio benefited from the above
mentioned reduction in the estimated liability for state assessments.
-
Net favorable prior year reserve development resulted from (i) better
than expected loss experience in the general liability product line
for accident years 2012 and prior as well as the property product line
for accident years 2010 through 2013, (ii) a $162 million pre-tax
benefit resulting from better than expected loss experience related
to, and the commutation of reinsurance treaties associated with, a
workers’ compensation reinsurance pool, partially offset by (iii) a
$250 million pre-tax increase to asbestos reserves, (iv) an $87
million pre-tax increase to environmental reserves, (v) a $77 million
pre-tax increase to unallocated loss adjusted expense (ULAE) reserves
for the accrual of interest resulting from a court decision received
in the third quarter, for which the associated settlement amount had
been previously included in our asbestos reserves, and (vi) higher
than expected loss experience related to the liability coverages in
the commercial multi-peril product line for accident years 2010
through 2013.
Net written premiums of $11.061 billion increased 9% primarily driven by
the inclusion of Dominion. Domestic net written premiums of $9.484
billion increased 1% driven by continued positive renewal premium
changes and high retention levels.
Bond & Specialty Insurance Segment
Financial Results |
($ in millions and pre-tax, unless noted otherwise)
|
|
|
| | |
| | |
| | |
|
| | |
| | |
| | |
|
|
| | | | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | |
| | | | | | | 2014 | | | 2013 | | | Change | | | | 2014 | | | 2013 | | | Change | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gain | | | | $ | 173 | | | | $ | 102 | | | | $ | 71 | | | | | $ | 544 | | | | $ | 337 | | | | $ | 207 | | |
Underwriting gain includes: | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | | | 79 | | | | | 33 | | | | | 46 | | | | | | 270 | | | | | 131 | | | | | 139 | | |
Catastrophes, net of reinsurance | | | | | (1 | ) | | | | (2 | ) | | | | 1 | | | | | | (6 | ) | | | | (7 | ) | | | | 1 | | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | | 64 | | | | | 63 | | | | | 1 | | | | | | 192 | | | | | 195 | | | | | (3 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | |
|
Other | | | | | 5 | | | | | 5 | | | | | - | | | | | | 15 | | | | | 15 | | | | | - | | |
| | | | | | |
| | |
| | |
| | | |
| | |
| | |
| |
Operating income before income taxes | | | | | 242 | | | | | 170 | | | | | 72 | | | | | | 751 | | | | | 547 | | | | | 204 | | |
Income tax expense | | | |
| 77 |
| | |
| 50 |
| | |
| 27 |
| | | |
| 240 |
| | |
| 148 |
| | |
| 92 |
| |
Operating income | | | | $ | 165 |
| | | $ | 120 |
| | | $ | 45 |
| | | | $ | 511 |
| | | $ | 399 |
| | | $ | 112 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | 66.9 | | % | | | 79.4 | | % | | | (12.5 | ) |
pts
| | | | 64.6 | | % | | | 76.7 | | % | | | (12.1 | ) |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | | | |
(15.0
|
)
|
pts
| | |
(6.6
|
)
|
pts
| | |
(8.4
|
)
|
pts
| | | |
(17.4
|
)
|
pts
| | |
(8.9
|
)
|
pts
| | |
(8.5
|
)
|
pts
|
Catastrophes, net of reinsurance
| | | | |
0.2
| |
pts
| | |
0.3
| |
pts
| | |
(0.1
|
)
|
pts
| | | |
0.5
| |
pts
| | |
0.4
| |
pts
| | |
0.1
| |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | | 81.7 | | % | | | 85.7 | | % | | | (4.0 | ) |
pts
| | | | 81.5 | | % | | | 85.2 | | % | | | (3.7 | ) |
pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums by market | | | | | | | | | | | | | | | | | | | | | |
Management Liability
| | | | |
348
| | | | |
350
| | | | |
(1
|
)
|
%
| | | |
1,003
| | | | |
932
| | | | |
8
| |
%
|
Surety
| | | |
|
208
|
| | |
|
203
|
| | | |
2
| | | | |
|
575
|
| | |
|
547
|
| | | |
5
| | |
Total | | | | $ | 556 |
| | | $ | 553 |
| | | | 1 | | % | | | $ | 1,578 |
| | | $ | 1,479 |
| | | | 7 | | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 2014 Results
(All comparisons vs. third quarter 2013, unless noted otherwise)
Operating income of $165 million after-tax increased $45 million, or
38%, primarily due to a higher underwriting gain.
Underwriting results
-
The combined ratio improved 12.5 points to 66.9% primarily due to
higher net favorable prior year reserve development (8.4 points), an
improved underlying combined ratio (4.0 points) and lower catastrophe
losses (0.1 points).
-
The underlying combined ratio improved 4.0 points to 81.7% primarily
driven by lower reinsurance costs and the benefit of earned pricing
that exceeded loss cost trends.
-
Net favorable prior year reserve development primarily resulted from
better than expected loss experience in the contract surety product
line for accident years 2009 through 2011.
Bond & Specialty Insurance net written premiums of $556 million
increased 1%.
Year-to-Date 2014 Results
(All comparisons vs. year-to-date 2013, unless noted otherwise)
Operating income of $511 million after-tax increased $112 million, or
28%, primarily due to a higher underwriting gain. The prior year period
operating income included a $15 million after-tax favorable tax
settlement.
Underwriting results
-
The combined ratio improved 12.1 points to 64.6% due to higher net
favorable prior year reserve development (8.5 points) and an improved
underlying combined ratio (3.7 points), partially offset by higher
catastrophe losses (0.1 points).
-
The underlying combined ratio improved 3.7 points to 81.5% primarily
driven by lower reinsurance costs and the benefit of earned pricing
that exceeded loss cost trends.
-
Net favorable prior year reserve development primarily resulted from
better than expected loss experience in the contract surety product
line for accident years 2007 through 2011.
Bond & Specialty Insurance net written premiums of $1.578 billion
increased 7% as a result of lower reinsurance costs and higher business
volumes in Surety.
Personal Insurance Segment Financial
Results |
($ in millions and pre-tax, unless noted otherwise)
|
|
| | |
| | |
| | |
|
| | |
| | |
| | |
|
| | | | Three Months Ended September 30, | | | | Nine Months Ended September 30, | |
| | | | | 2014 | | | 2013 | | | Change | | | | 2014 | | | 2013 | | | Change | |
| | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gain: | | | $ | 231 | | | | $ | 259 | | | | $ | (28 | ) | | | | $ | 484 | | | | $ | 516 | | | | $ | (32 | ) | |
Underwriting gain includes: | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | | 13 | | | | | 48 | | | | | (35 | ) | | | | | 157 | | | | | 173 | | | | | (16 | ) | |
Catastrophes, net of reinsurance | | | | (51 | ) | | | | (38 | ) | | | | (13 | ) | | | | | (306 | ) | | | | (248 | ) | | | | (58 | ) | |
| | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | 98 | | | | | 90 | | | | | 8 | | | | | | 292 | | | | | 275 | | | | | 17 | | |
| | | | | | | | | | | | | | | | | | | | | |
|
Other | | | | 19 | | | | | 34 | | | | | (15 | ) | | | | | 62 | | | | | 67 | | | | | (5 | ) | |
| | | | |
| | |
| | |
| | | |
| | |
| | |
| |
Operating income before income taxes | | | | 348 | | | | | 383 | | | | | (35 | ) | | | | | 838 | | | | | 858 | | | | | (20 | ) | |
Income tax expense | | |
| 109 |
| | |
| 121 |
| | |
| (12 | ) | | | |
| 256 |
| | |
| 257 |
| | |
| (1 | ) | |
Operating income | | | $ | 239 |
| | | $ | 262 |
| | | $ | (23 | ) | | | | $ | 582 |
| | | $ | 601 |
| | | $ | (19 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | 86.1 | | % | | | 84.7 | | % | | | 1.4 | |
pts
| | | | 89.8 | | % | | | 89.5 | | % | | | 0.3 | |
pts
|
| | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | | |
(0.7
|
)
|
pts
| | |
(2.6
|
)
|
pts
| | |
1.9
| |
pts
| | | |
(2.9
|
)
|
pts
| | |
(3.2
|
)
|
pts
| | |
0.3
| |
pts
|
Catastrophes, net of reinsurance
| | | |
2.8
| |
pts
| | |
2.0
| |
pts
| | |
0.8
| |
pts
| | | |
5.6
| |
pts
| | |
4.5
| |
pts
| | |
1.1
| |
pts
|
| | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | 84.0 | | % | | | 85.3 | | % | | | (1.3 | ) |
pts
| | | | 87.1 | | % | | | 88.2 | | % | | | (1.1 | ) |
pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums | | | | | | | | | | | | | | | | | | | | |
Agency Automobile1 | | |
$
|
849
| | | |
$
|
828
| | | | |
3
| | % | | |
$
|
2,468
| | | |
$
|
2,493
| | | | |
(1
|
)
| % |
Agency Homeowners & Other1 | | | |
1,017
| | | | |
1,039
| | | | |
(2
|
)
| | | | |
2,821
| | | | |
2,892
| | | | |
(2
|
)
| |
Direct to Consumer
| | |
|
51
|
| | |
|
44
|
| | | |
16
| | | | |
|
140
|
| | |
|
123
|
| | | |
14
| | |
Total | | | $ | 1,917 |
| | | $ | 1,911 |
| | | | - | | % | | | $ | 5,429 |
| | | $ | 5,508 |
| | | | (1 | ) | % |
| | | | | | | | | | | | | | | | | | | | | |
|
1 Represents business sold through agents, brokers and
other intermediaries and excludes direct to consumer.
|
Third Quarter 2014 Results
(All comparisons vs. third quarter 2013, unless noted otherwise)
Operating income of $239 million after-tax decreased $23 million, or 9%,
as the benefit of a higher underlying underwriting gain was more than
offset by lower net favorable prior year reserve development and higher
catastrophe losses.
Underwriting results
-
The combined ratio increased 1.4 points to 86.1% as an improved
underlying combined ratio (1.3 points) was more than offset by lower
net favorable prior year reserve development (1.9 points) and higher
catastrophe losses (0.8 points).
-
The underlying combined ratio improved 1.3 points to 84.0% primarily
due to the benefits of earned pricing that exceeded loss cost trends,
the company’s previously announced expense reduction initiatives and
lower homeowners’ commission expense, partially offset by the impact
of higher new business.
-
Net favorable prior year reserve development resulted from better than
expected loss experience in Homeowners & Other for accident years 2011
through 2013 related to catastrophe losses.
Personal Insurance net written premiums of $1.917 billion were slightly
above the prior year period, due to increased new business from the
company’s new auto product, Quantum 2.0.
Year-to-Date 2014 Results
(All comparisons vs. year-to-date 2013, unless noted otherwise)
Operating income of $582 million after-tax decreased $19 million, or 3%,
as higher net investment income was more than offset by a lower
underwriting gain. The prior year period operating income included a $5
million after-tax favorable tax settlement.
Underwriting results
-
The combined ratio increased 0.3 points to 89.8% as an improved
underlying combined ratio (1.1 points) was more than offset by higher
catastrophe losses (1.1 points) and lower net favorable prior year
reserve development (0.3 points).
-
The underlying combined ratio improved 1.1 points to 87.1% due to the
benefits of earned pricing that exceeded loss cost trends, lower
homeowners’ commission expenses and the company’s previously announced
expense reduction initiatives partially offset by higher
non-catastrophe weather-related losses and the impact of higher new
business.
-
Net favorable prior year reserve development resulted from better than
expected loss experience in Homeowners & Other, primarily driven by
better than expected loss experience for accident year 2013 for
non-catastrophe weather-related losses and for accident years 2011
through 2013 for catastrophe losses.
Personal Insurance net written premiums of $5.429 billion decreased 1%.
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, October 21, 2014. Investors can access the call via webcast at http://investor.travelers.com
or by dialing 1-800-754-1382 within the U.S. and 1-212-231-2932 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 21733237 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.
A component of the Dow Jones Industrial Average, Travelers has
approximately 30,000 employees and generated revenues of approximately
$26 billion in 2013. 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.
Travelers is organized into the following reportable business
segments:
Business and International Insurance: The Business and
International Insurance segment offers a broad array of property and
casualty insurance and insurance related services to its clients,
primarily in the United States, as well as in Canada, the United
Kingdom, the Republic of Ireland and throughout other parts of the world
as a corporate member of Lloyd’s.
Bond & Specialty Insurance: The Bond & Specialty Insurance
segment includes surety and financial liability coverages, which
primarily use credit-based underwriting processes, and provide a wide
range of primarily domestic customers with bond and insurance products
and risk management services.
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, effective July 1, 2014, that gave rise to a realignment of two of
its three reportable business segments. The company’s International
Insurance group, which had previously been included in the Financial,
Professional & International Insurance segment, was combined with the
company’s previous Business Insurance segment to create a new Business
and International Insurance segment. The Bond & Financial Products
group, which comprised the remaining businesses in the Financial,
Professional & International Insurance segment, now comprises the new
Bond & Specialty Insurance segment. The Personal Insurance segment was
not impacted by these changes. The realignment of segments described
above was made to reflect the realignment of the company’s senior
management responsibilities and the manner in which the company’s
businesses have been managed starting July 1, 2014, and the aggregation
of products and services based on the type of customer, how the business
is marketed and the manner in which risks are underwritten. In
connection with these changes, the company has realigned and revised the
names of several businesses that comprise the Business and International
Insurance segment.
* * * * *
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 regulations 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" in
our most recent annual report on Form 10-K filed with the Securities and
Exchange Commission (SEC) on February 13, 2014 and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” in our most recent annual report on Form 10-K as updated by
our current report on Form 8-K filed with the SEC on September 10, 2014
and our quarterly report on Form 10-Q filed with the 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 | | Nine Months Ended |
| | September 30, | | September 30, |
($ in millions, pre-tax)
|
| 2014 |
| 2013 |
|
| 2014 |
| 2013 |
| | | | | | | |
|
Operating income | | $ | 1,218 | | $ | 1,199 | | | $ | 3,572 | | $ | 3,419 |
Net realized investment gains (losses)
|
|
|
40
|
|
|
(22
|
)
|
|
|
57
|
|
|
155
|
Net income |
| $ | 1,258 |
| $ | 1,177 |
|
| $ | 3,629 |
| $ | 3,574 |
|
|
|
|
|
|
|
|
|
|
| |
| |
| |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
($ in millions, after-tax)
|
| 2014 |
| 2013 |
|
| 2014 |
| 2013 |
| | | | | | | |
|
Operating income | | $ | 893 | | $ | 883 | | | $ | 2,618 | | $ | 2,586 |
Net realized investment gains (losses)
|
|
|
26
|
|
|
(19
|
)
|
|
|
36
|
|
|
99
|
Net income |
| $ | 919 |
| $ | 864 |
|
| $ | 2,654 |
| $ | 2,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | 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 | | Nine Months Ended |
| | September 30, | | September 30, |
|
|
| 2014 |
|
| 2013 |
|
|
| 2014 |
|
| 2013 |
| | | | | | | |
|
Basic earnings per share | | | | | | | | |
Operating income | | $ | 2.64 | | $ | 2.38 | | | $ | 7.58 | | $ | 6.86 |
Net realized investment gains (losses)
|
|
|
0.08
|
|
|
(0.05
|
)
|
|
|
0.10
|
|
|
0.26
|
Net income |
| $ | 2.72 |
| $ | 2.33 |
|
| $ | 7.68 |
| $ | 7.12 |
| | | | | | | |
|
Diluted earnings per share | | | | | | | | |
Operating income | | $ | 2.61 | | $ | 2.35 | | | $ | 7.50 | | $ | 6.79 |
Net realized investment gains (losses)
|
|
|
0.08
|
|
|
(0.05
|
)
|
|
|
0.10
|
|
|
0.26
|
Net income |
| $ | 2.69 |
| $ | 2.30 |
|
| $ | 7.60 |
| $ | 7.05 |
|
Reconciliation of Operating Income by Segment to Total
Operating Income |
|
| |
| |
| |
| |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
($ in millions, after-tax)
|
| 2014 |
|
| 2013 |
|
|
| 2014 |
| 2013 |
|
| | | | | | | |
|
| | | | | | | |
|
Business and International Insurance | |
$
|
552
| | |
$
|
566
| | |
$
|
1,717
| | |
$
|
1,773
| |
Bond & Specialty Insurance | | |
165
| | | |
120
| | | |
511
| | | |
399
| |
Personal Insurance |
|
|
239
|
|
|
|
262
|
|
|
|
582
|
|
|
|
601
|
|
Total segment operating income
| | |
956
| | | |
948
| | | |
2,810
| | | |
2,773
| |
Interest Expense and Other
|
|
|
(63
|
)
|
|
|
(65
|
)
|
|
|
(192
|
)
|
|
|
(187
|
)
|
Total operating income |
| $ | 893 |
|
| $ | 883 |
|
| $ | 2,618 |
|
| $ | 2,586 |
|
| | | | | | | | | | | | | | | |
|
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 September 30, | | | | | | | | | | | |
($ in millions)
|
|
|
|
|
|
|
| 2014 |
| 2013 |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
|
Adjusted shareholders' equity | | | | | | | | $ | 23,371 | | $ | 23,153 | | | | | | | | | | | | |
Net unrealized investment gains, net of tax
| | | | | | | | |
1,914
| | |
1,559
| | | | | | | | | | | | |
Net realized investment gains, net of tax
|
|
|
|
|
|
|
|
|
36
|
|
|
99
|
| | | | | | | | | | | |
Shareholders' equity |
|
|
|
|
|
|
| $ | 25,321 |
| $ | 24,811 |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
|
| | | | 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 | | Nine Months Ended |
| | | September 30, | | September 30, |
($ in millions, after-tax)
|
|
| 2014 |
|
| 2013 |
|
| 2014 |
|
| 2013 |
|
| | | | | | | | |
|
Annualized operating income
| | |
$
|
3,570
| | |
$
|
3,534
| | |
$
|
3,490
| | |
$
|
3,448
| |
Adjusted average shareholders' equity
|
|
|
|
23,450
|
|
|
|
23,235
|
|
|
|
23,552
|
|
|
|
22,886
|
|
Operating return on equity |
|
|
| 15.2 | % |
|
| 15.2 | % |
|
| 14.8 | % |
|
| 15.1 | % |
| | | | | | | | |
|
Annualized net income
| | |
$
|
3,676
| | |
$
|
3,458
| | |
$
|
3,539
| | |
$
|
3,580
| |
Average shareholders' equity
|
|
|
|
25,427
|
|
|
|
24,851
|
|
|
|
25,326
|
|
|
|
25,198
|
|
Return on equity |
|
|
| 14.5 | % |
|
| 13.9 | % |
|
| 14.0 | % |
|
| 14.2 | % |
| | | | | | | | | | | | | | | | |
|
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 September 30, 2014 |
|
|
| |
| |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| | | Nine Months Ended | | | | | | | | | | | | | | | | | | | |
| | | September 30, | | | Twelve Months Ended December 31, |
($ in millions)
|
|
| 2014 |
|
| 2013 |
|
|
| 2013 |
|
| 2012 |
|
| 2011 |
|
| 2010 |
|
| 2009 |
|
| 2008 |
|
| 2007 |
|
| 2006 |
|
| 2005 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Operating income, less preferred dividends
| | |
$
|
2,618
| | |
$
|
2,586
| | | |
$
|
3,567
| | |
$
|
2,441
| | |
$
|
1,389
| | |
$
|
3,040
| | |
$
|
3,597
| | |
$
|
3,191
| | |
$
|
4,496
| | |
$
|
4,195
| | |
$
|
2,020
| |
Annualized operating income
| | | |
3,490
| | | |
3,448
| | | | | | | | | | | | | | | | | | | | |
Adjusted average shareholders' equity
| | | |
23,552
| | | |
22,886
| | | | |
23,004
| | | |
22,158
| | | |
22,806
| | | |
24,285
| | | |
25,777
| | | |
25,668
| | | |
25,350
| | | |
23,381
| | | |
21,118
| |
Operating return on equity
|
|
|
|
14.8
|
%
|
|
|
15.1
|
%
|
|
|
|
15.5
|
%
|
|
|
11.0
|
%
|
|
|
6.1
|
%
|
|
|
12.5
|
%
|
|
|
14.0
|
%
|
|
|
12.4
|
%
|
|
|
17.7
|
%
|
|
|
17.9
|
%
|
|
|
9.6
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Average annual operating return on equity | | | | | | | | | 13.2 | % | | | | | | | | | | | | | | | | |
for the period Jan. 1, 2005 through Sept. 30, 2014 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
|
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 | | Nine Months Ended |
| | | | September 30, | September 30, |
($ in millions, after-tax except as noted)
|
|
|
| 2014 |
| 2013 |
| 2014 |
| 2013 |
| | | | | | | | | |
|
Pre-tax underwriting gain excluding the impact of catastrophes
| | | | | | | | | |
and net favorable prior year loss reserve development
| | |
$
|
534
| |
|
$
|
536
| | |
$
|
1,690
| | |
$
|
1,435
| |
Pre-tax impact of catastrophes
| | | | |
(83
|
)
| | |
(99
|
)
| | |
(668
|
)
| | |
(538
|
)
|
Pre-tax impact of net favorable prior year loss reserve development
|
|
|
|
113
|
|
|
|
158
|
|
|
|
590
|
|
|
|
581
|
|
Pre-tax underwriting gain
| | | | |
564
| | | |
595
| | | |
1,612
| | | |
1,478
| |
Income tax expense on underwriting results
|
|
|
|
|
200
|
|
|
|
208
|
|
|
|
579
|
|
|
|
471
|
|
Underwriting gain
| | | | |
364
| | | |
387
| | | |
1,033
| | | |
1,007
| |
Net investment income
| | | | |
568
| | | |
531
| | | |
1,703
| | | |
1,624
| |
Other, including interest expense
|
|
|
|
|
(39
|
)
|
|
|
(35
|
)
|
|
|
(118
|
)
|
|
|
(45
|
)
|
Operating income | | | | | 893 | | | | 883 | | | | 2,618 | | | | 2,586 | |
Net realized investment gains (losses)
|
|
|
|
|
26
|
|
|
|
(19
|
)
|
|
|
36
|
|
|
|
99
|
|
Net income |
|
|
| $ | 919 |
|
| $ | 864 |
|
| $ | 2,654 |
|
| $ | 2,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 | | Nine Months Ended |
| | September 30, |
| September 30, |
($ in millions, pre-tax)
|
|
| 2014 |
|
|
| 2013 |
|
|
| 2014 |
|
|
| 2013 |
|
| | | | | | | |
|
Loss and loss adjustment expense ratio | | | | | | | | |
Claims and claim adjustment expenses
| |
$
|
3,520
| | |
$
|
3,297
| | |
$
|
10,661
| | |
$
|
9,980
| |
Less:
| | | | | | | | |
Policyholder dividends
| | |
9
| | | |
7
| | | |
27
| | | |
30
| |
Allocated fee income
|
|
|
43
|
|
|
|
44
|
|
|
|
132
|
|
|
|
113
|
|
Loss ratio numerator |
| $ | 3,468 |
|
| $ | 3,246 |
|
| $ | 10,502 |
|
| $ | 9,837 |
|
| | | | | | | |
|
Underwriting expense ratio | | | | | | | | |
Amortization of deferred acquisition costs
|
$
|
984
| | |
$
|
953
| | |
$
|
2,899
| | |
$
|
2,851
| |
General and administrative expenses (G&A)
| |
1,031
| | | |
934
| | | |
2,913
| | | |
2,780
| |
Less:
| | | | | | | | |
G&A included in Interest Expense and Other
| |
6
| | | |
6
| | | |
22
| | | |
17
| |
Allocated fee income
| | |
67
| | | |
63
| | | |
197
| | | |
173
| |
Billing and policy fees and other
|
|
|
25
|
|
|
|
25
|
|
|
|
80
|
|
|
|
74
|
|
Expense ratio numerator |
| $ | 1,917 |
|
| $ | 1,793 |
|
| $ | 5,513 |
|
| $ | 5,367 |
|
|
|
|
|
|
|
|
|
|
Earned premium |
| $ | 5,983 |
|
| $ | 5,666 |
|
| $ | 17,734 |
|
| $ | 16,786 |
|
| | | | | | | |
|
Combined ratio 1 | | | | | | | | |
Loss and loss adjustment expense ratio
| | |
58.0
|
%
| | |
57.3
|
%
| | |
59.2
|
%
| | |
58.6
|
%
|
Underwriting expense ratio
|
|
|
32.0
|
%
|
|
|
31.6
|
%
|
|
|
31.1
|
%
|
|
|
32.0
|
%
|
Combined ratio |
|
| 90.0 | % |
|
| 88.9 | % |
|
| 90.3 | % |
|
| 90.6 | % |
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 Business and International Insurance segment.
Reconciliation of the Impact of Changes in Foreign Exchange Rates on
International Net Written Premiums to International Net Written Premiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| | September 30, | | September 30, |
($ in millions)
|
| 2014 |
| 2013 |
| Change |
| 2014 |
| 2013 |
| Change |
| | |
| |
| | | |
| |
| |
Net written premiums - holding foreign
| |
$
|
478
| |
$
|
217
| |
120
|
%
| |
$
|
1,568
| |
$
|
787
| |
99
|
%
|
exchange rates constant
| | | | | | | | | | | | |
Impact of changes in foreign exchange rates
|
|
|
3
|
|
|
|
|
|
|
9
|
|
|
|
|
Net written premiums
|
|
$
|
481
|
|
$
|
217
|
|
122
|
%
|
|
$
|
1,577
|
|
$
|
787
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of the Impact of Changes in Foreign Exchange Rates on
Business and International Insurance Net Written Premiums to Business
and International Insurance Net Written Premiums
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| | | | September 30, | | September 30, |
($ in millions)
|
|
|
| 2014 |
| 2013 |
| Change |
| 2014 |
| 2013 |
| Change |
| | | | |
| |
| | | |
| |
| |
Net written premiums - holding foreign
| | | |
$
|
3,557
| |
$
|
3,249
| |
9
|
%
| |
$
|
11,052
| |
$
|
10,147
| |
9
|
%
|
exchange rates constant
| | | | | | | | | | | | | | |
Impact of changes in foreign exchange rates
|
|
|
|
|
3
|
|
|
|
|
|
|
9
|
|
|
|
|
Net written premiums
|
|
|
|
$
|
3,560
|
|
$
|
3,249
|
|
10
|
%
|
|
$
|
11,061
|
|
$
|
10,147
|
|
9
|
%
|
|
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 per share is useful in an
analysis of a property casualty company’s book value per share 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 |
| | September 30, | | December 31, | | September 30, | |
($ in millions, except per share amounts)
|
| 2014 |
|
| 2013 |
|
| 2013 |
|
| | | | | | | | |
|
Tangible shareholders' equity | | $ | 19,526 | | | $ | 19,543 | | | $ | 19,589 | |
Goodwill
| | |
3,621
| | | |
3,634
| | | |
3,365
| |
Other intangible assets
| | |
316
| | | |
351
| | | |
347
| |
Less: Impact of deferred tax on other intangible assets
|
|
|
(56
|
)
|
|
|
(54
|
)
|
|
|
(49
|
)
|
Adjusted shareholders' equity | | | 23,407 | | | | 23,474 | | | | 23,252 | |
Net unrealized investment gains, net of tax
|
|
|
1,914
|
|
|
|
1,322
|
|
|
|
1,559
|
|
Shareholders' equity |
| $ | 25,321 |
|
| $ | 24,796 |
|
| $ | 24,811 |
|
| | | | | | | | |
|
Common shares outstanding
|
|
|
331.4
|
|
|
|
353.5
|
|
|
|
364.1
|
|
| | | | | | | | |
|
Tangible book value per share
| |
$
|
58.93
| | |
$
|
55.29
| | |
$
|
53.81
| |
Adjusted book value per share
| | |
70.64
| | | |
66.41
| | | |
63.87
| |
Book value per share
|
|
|
76.42
|
|
|
|
70.15
|
|
|
|
68.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO TOTAL CAPITALIZATION
Total capitalization is the sum of total shareholders’ equity and
debt. Debt-to-capital ratio excluding net unrealized gain on
investments is the ratio of debt to total capitalization excluding
the after-tax impact of net unrealized investment gains and losses. In
the opinion of the company's management, the debt to capital ratio is
useful in an analysis of the company's financial leverage.
Reconciliation of Total Debt and Equity Excluding Net Unrealized
Investment Gain to Total Capitalization
|
| |
|
| | |
| | |
| |
| | | | As of |
| | | | September 30, | | December 31, | | September 30, |
($ in millions)
|
|
|
| 2014 |
|
| 2013 |
|
| 2013 |
|
| | | | | | | | | |
|
Debt
| | | |
$
|
6,348
| | |
$
|
6,346
| | |
$
|
6,346
| |
Shareholders' equity
|
|
|
|
|
25,321
|
|
|
|
24,796
|
|
|
|
24,811
|
|
Total capitalization |
|
|
|
| 31,669 |
|
|
| 31,142 |
|
|
| 31,157 |
|
Net unrealized investment gains, net of tax
|
|
|
|
1,914
|
|
|
|
1,322
|
|
|
|
1,559
|
|
Total capitalization excluding net unrealized gain | | | $ | 29,755 | | | $ | 29,820 | | | $ | 29,598 | |
on investments, net of tax |
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | |
|
Debt-to-capital ratio
| | | | |
20.0
|
%
| | |
20.4
|
%
| | |
20.4
|
%
|
Debt-to-capital ratio excluding net unrealized investment gains, net
of tax
|
|
|
|
21.3
|
%
|
|
|
21.3
|
%
|
|
|
21.4
|
%
|
|
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 and International Insurance and Bond & Specialty
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 and International Insurance
segment, retention, renewal premium change and new business volumes
exclude National Accounts and Surety.
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 (SEC) as updated by the
company’s Current Report on Form 8-K filed with the SEC on September 10,
2014.

The Travelers Companies, Inc.
Media:
Patrick
Linehan, 917-778-6267
or
Institutional
Investors:
Gabriella Nawi, 917-778-6844
or
Individual
Investors:
Marc Parr, 860-277-0779
Source: The Travelers Companies, Inc.