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Travelers Reports Excellent First Quarter Results, Including Strong Earnings and Premium Growth

04/19/2022

First Quarter 2022 Net Income per Diluted Share of $4.15, up 45%, and Return on Equity of 15.0%

First Quarter 2022 Core Income per Diluted Share of $4.22, up 55%, and Core Return on Equity of 15.5%

Board of Directors Declares 6% Increase in Regular Quarterly Cash Dividend to $0.93 per Share

  • First quarter net income of $1.018 billion and core income of $1.037 billion.
  • Consolidated combined ratio of 91.3% and underlying combined ratio of 91.2%.
  • Record net written premiums of $8.367 billion, up 11% compared to the prior year quarter.
  • Net written premium growth in all three segments compared to the prior year quarter; Business Insurance up 9%, Bond & Specialty Insurance up 22% and Personal Insurance up 12%.
  • Total capital returned to shareholders of $773 million, including $559 million of share repurchases.
  • Book value per share of $106.40, down 5% from March 31, 2021; adjusted book value per share of $112.19, up 11% from March 31, 2021.

NEW YORK--(BUSINESS WIRE)-- The Travelers Companies, Inc. today reported net income of $1.018 billion, or $4.15 per diluted share, for the quarter ended March 31, 2022, compared to $733 million, or $2.87 per diluted share, in the prior year quarter. Core income in the current quarter was $1.037 billion, or $4.22 per diluted share, compared to $699 million, or $2.73 per diluted share, in the prior year quarter. Core income increased primarily due to lower catastrophe losses, partially offset by lower net favorable prior year reserve development and lower net investment income. Net realized investment losses in the current quarter were $23 million pre-tax ($19 million after-tax), compared to net realized investment gains of $44 million pre-tax ($34 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.

 

Consolidated Highlights

 

($ in millions, except for per share amounts, and after-tax, except for premiums and revenues)

 

Three Months Ended March 31,

 

 

 

2022

 

 

 

2021

 

 

Change

 

Net written premiums

 

$

8,367

 

 

$

7,505

 

 

11

%

 

 

 

 

 

 

 

 

 

Total revenues

 

$

8,809

 

 

$

8,313

 

 

6

 

 

Net income

 

$

1,018

 

 

$

733

 

 

39

 

 

per diluted share

 

$

4.15

 

 

$

2.87

 

 

45

 

 

Core income

 

$

1,037

 

 

$

699

 

 

48

 

 

per diluted share

 

$

4.22

 

 

$

2.73

 

 

55

 

 

Diluted weighted average shares outstanding

 

 

243.7

 

 

 

254.1

 

 

(4

)

 

Combined ratio

 

 

91.3

%

 

 

96.6

%

 

(5.3

)

pts

Underlying combined ratio

 

 

91.2

%

 

 

89.5

%

 

1.7

 

pts

Return on equity

 

 

15.0

%

 

 

10.2

%

 

4.8

 

pts

Core return on equity

 

 

15.5

%

 

 

11.1

%

 

4.4

 

pts 

 

 

 

As of

 

Change From

 

 

March 31,
2022

 

December 31,
2021

 

March 31,
2021

 

December 31,
2021

 

March 31,
2021

Book value per share

 

$

106.40

 

$

119.77

 

$

112.42

 

(11

)%

 

(5

)%

Adjusted book value per share

 

 

112.19

 

 

109.76

 

 

101.21

 

2

%

 

11

%

See Glossary of Financial Measures for definitions and the statistical supplement for additional financial data.

“We are off to a terrific start in 2022, with strong contributions to our results from both underwriting and investments,” said Alan Schnitzer, Chairman and Chief Executive Officer. “Core income for the quarter was $1.0 billion, or $4.22 per diluted share, generating core return on equity of 15.5%. These results were driven by net earned premiums of $8.0 billion, which were 9% higher than in the prior year period, and an excellent combined ratio of 91.3%. Underlying underwriting income in our commercial business segments was particularly strong. Our high-quality investment portfolio generated after-tax net investment income of $539 million.

“These results, along with our strong balance sheet, enabled us to return $773 million of excess capital to our shareholders this quarter, including nearly $560 million of share repurchases. In recognition of our strong financial position and confidence in the outlook for our business, I am pleased to share that our Board of Directors declared a 6% increase in our quarterly cash dividend to $0.93 per share, marking 18 consecutive years of dividend increases with a compound annual growth rate of 9% over that period.

“Our best-in-class marketplace execution produced 11% growth in net written premiums this quarter to a record $8.4 billion, with each of our three segments contributing. In Business Insurance, net written premiums grew by 9%, with renewal premium change of 9.1%, near all-time highs, and record retention of 87%. In addition, new business was up 17% year over year. In Bond & Specialty Insurance, net written premiums increased by 22%, driven by renewal premium change of 12.0%, continued strong retention and 12% growth in new business in our management liability business, as well as terrific production in our surety business. In Personal Insurance, renewal premium change was higher in both Auto and Homeowners, contributing to net written premium growth of 12%.

“The significant innovation and technology investments we have been making for some time are driving our performance today and transforming Travelers into the insurance company of the future. We are innovating on top of a foundation of excellence to ensure our continued success through competitive advantages that are relevant, differentiating and difficult to replicate. With that and our talent advantage, we are confident in our ability to continue to create shareholder value over time.”

 

Consolidated Results

 

 

 

Three Months Ended March 31,

 

($ in millions and pre-tax, unless noted otherwise)

 

 

2022

 

 

 

2021

 

 

Change

 

Underwriting gain:

 

$

659

 

 

$

217

 

 

$

442

 

 

Underwriting gain includes:

 

 

 

 

 

 

 

Net favorable prior year reserve development

 

 

153

 

 

 

317

 

 

 

(164

)

 

Catastrophes, net of reinsurance

 

 

(160

)

 

 

(835

)

 

 

675

 

 

Net investment income

 

 

637

 

 

 

701

 

 

 

(64

)

 

Other income (expense), including interest expense

 

 

(91

)

 

 

(71

)

 

 

(20

)

 

Core income before income taxes

 

 

1,205

 

 

 

847

 

 

 

358

 

 

Income tax expense

 

 

168

 

 

 

148

 

 

 

20

 

 

Core income

 

 

1,037

 

 

 

699

 

 

 

338

 

 

Net realized investment gains (losses) after income taxes

 

 

(19

)

 

 

34

 

 

 

(53

)

 

Net income

 

$

1,018

 

 

$

733

 

 

$

285

 

 

 

 

 

 

 

 

 

 

Combined ratio

 

 

91.3

%

 

 

96.6

%

 

 

(5.3

)

pts

Impact on combined ratio

 

 

 

 

 

 

 

Net favorable prior year reserve development

 

 

(1.9

)

pts

 

(4.2

)

pts

 

2.3

 

pts

Catastrophes, net of reinsurance

 

 

2.0

 

pts

 

11.3

 

pts

 

(9.3

)

pts

Underlying combined ratio

 

 

91.2

%

 

 

89.5

%

 

 

1.7

 

pts

 

 

 

 

 

 

 

 

Net written premiums

 

 

 

 

 

 

 

Business Insurance

 

$

4,502

 

 

$

4,125

 

 

 

9

%

 

Bond & Specialty Insurance

 

 

882

 

 

 

723

 

 

 

22

 

 

Personal Insurance

 

 

2,983

 

 

 

2,657

 

 

 

12

 

 

Total

 

$

8,367

 

 

$

7,505

 

 

 

11

%

 

First Quarter 2022 Results
(All comparisons vs. first quarter 2021, unless noted otherwise)

Net income of $1.018 billion increased $285 million, due to higher core income, partially offset by net realized investment losses compared to net realized investment gains in the prior year quarter. Core income of $1.037 billion increased $338 million, primarily due to lower catastrophe losses, partially offset by lower net favorable prior year reserve development and lower net investment income. The underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses) benefited from higher business volumes and a $47 million benefit relating to the resolution of prior year income tax matters. Net realized investment losses were $23 million pre-tax ($19 million after-tax), compared to net realized investment gains of $44 million pre-tax ($34 million after-tax) in the prior year quarter.

Combined ratio:

  • The combined ratio of 91.3% improved 5.3 points due to lower catastrophe losses (9.3 points), partially offset by lower net favorable prior year reserve development (2.3 points) and a higher underlying combined ratio (1.7 points).
  • The underlying combined ratio of 91.2% increased 1.7 points. See below for further details by segment.
  • Net favorable prior year reserve development occurred in all three segments. See below for further details by segment. Catastrophe losses primarily resulted from wind storms in multiple states.

Net investment income of $637 million pre-tax ($539 million after-tax) decreased 9%. Income from the non-fixed income investment portfolio decreased from the prior year quarter, primarily due to lower private equity partnership returns as compared to very strong returns in the prior year quarter. Non-fixed income returns are generally reported on a one-quarter lagged basis and directionally follow the broader equity markets. Income from the fixed income investment portfolio increased over the prior year quarter, primarily due to growth in fixed maturity investments, partially offset by lower interest rates.

Net written premiums of $8.367 billion increased 11%. See below for further details by segment.

Shareholders’ Equity

Shareholders’ equity of $25.531 billion decreased 12% from year-end 2021, primarily due to net unrealized investment losses compared to net unrealized investment gains at year-end 2021, resulting from higher interest rates, common share repurchases and dividends to shareholders, partially offset by net income of $1.018 billion. Net unrealized investment losses included in shareholders’ equity were $1.770 billion pre-tax ($1.391 billion after-tax) compared to net unrealized investment gains of $3.060 billion pre-tax ($2.415 billion after-tax) at year-end 2021. Book value per share of $106.40 decreased 5% from March 31, 2021 and decreased 11% from year-end 2021. Adjusted book value per share of $112.19, which excludes net unrealized investment gains (losses), increased 11% over March 31, 2021 and 2% over year-end 2021.

The Company repurchased 3.3 million shares during the first quarter at an average price of $172.07 per share for a total of $559 million. At March 31, 2022, the Company had $3.505 billion of capacity remaining under its share repurchase authorization approved by the Board of Directors. At the end of the quarter, statutory capital and surplus was $24.168 billion, and the ratio of debt-to-capital was 22.2%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains (losses) included in shareholders’ equity was 21.3%, within the Company’s target range of 15% to 25%.

The Board of Directors declared a 6% increase in the regular quarterly dividend to $0.93 per share. The dividend is payable on June 30, 2022 to shareholders of record at the close of business on June 10, 2022.

 

Business Insurance Segment Financial Results

 

 

 

Three Months Ended March 31,

 

($ in millions and pre-tax, unless noted otherwise)

 

 

2022

 

 

 

2021

 

 

Change

 

Underwriting gain (loss):

 

$

358

 

 

$

(144

)

 

$

502

 

 

Underwriting gain (loss) includes:

 

 

 

 

 

 

 

Net favorable prior year reserve development

 

 

113

 

 

 

134

 

 

 

(21

)

 

Catastrophes, net of reinsurance

 

 

(79

)

 

 

(506

)

 

 

427

 

 

Net investment income

 

 

468

 

 

 

523

 

 

 

(55

)

 

Other income (expense)

 

 

(17

)

 

 

(7

)

 

 

(10

)

 

Segment income before income taxes

 

 

809

 

 

 

372

 

 

 

437

 

 

Income tax expense

 

 

140

 

 

 

55

 

 

 

85

 

 

Segment income

 

$

669

 

 

$

317

 

 

$

352

 

 

 

 

 

 

 

 

 

 

Combined ratio

 

 

90.9

%

 

 

103.5

%

 

 

(12.6

)

pts

Impact on combined ratio

 

 

 

 

 

 

 

Net favorable prior year reserve development

 

 

(2.8

)

pts

 

(3.5

)

pts

 

0.7

 

pts

Catastrophes, net of reinsurance

 

 

1.9

 

pts

 

13.3

 

pts

 

(11.4

)

pts

Underlying combined ratio

 

 

91.8

%

 

 

93.7

%

 

 

(1.9

)

pts

 

 

 

 

 

 

 

 

Net written premiums by market

 

 

 

 

 

 

 

Domestic

 

 

 

 

 

 

 

Select Accounts

 

$

819

 

 

$

729

 

 

 

12

%

 

Middle Market

 

 

2,616

 

 

 

2,384

 

 

 

10

 

 

National Accounts

 

 

303

 

 

 

290

 

 

 

4

 

 

National Property and Other

 

 

497

 

 

 

445

 

 

 

12

 

 

Total Domestic

 

 

4,235

 

 

 

3,848

 

 

 

10

 

 

International

 

 

267

 

 

 

277

 

 

 

(4

)

 

Total

 

$

4,502

 

 

$

4,125

 

 

 

9

%

 

First Quarter 2022 Results
(All comparisons vs. first quarter 2021, unless noted otherwise)

Segment income for Business Insurance was $669 million after-tax, an increase of $352 million. Segment income increased primarily due to lower catastrophe losses and also a higher underlying underwriting gain, partially offset by lower net investment income and lower net favorable prior year reserve development. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

  • The combined ratio of 90.9% improved 12.6 points due to lower catastrophe losses (11.4 points) and a lower underlying combined ratio (1.9 points), partially offset by lower net favorable prior year reserve development (0.7 points).
  • The underlying combined ratio of 91.8% improved 1.9 points, reflecting improvements of 0.8 points in the loss ratio and 1.1 points in the expense ratio.
  • Net favorable prior year reserve development was primarily driven by better than expected loss experience in the domestic operations’ workers’ compensation product line for multiple accident years. Net prior year reserve development also included an increase in environmental reserves.

Net written premiums of $4.502 billion increased 9%, reflecting strong renewal premium change and retention, as well as higher levels of new business.

 

Bond & Specialty Insurance Segment Financial Results

 

 

Three Months Ended March 31,

 

($ in millions and pre-tax, unless noted otherwise)

 

2022

 

 

 

2021

 

 

Change

 

Underwriting gain:

$

177

 

 

$

107

 

 

$

70

 

 

Underwriting gain includes:

 

 

 

 

 

 

Net favorable prior year reserve development

 

35

 

 

 

15

 

 

 

20

 

 

Catastrophes, net of reinsurance

 

(1

)

 

 

(24

)

 

 

23

 

 

Net investment income

 

59

 

 

 

59

 

 

 

 

 

Other income

 

3

 

 

 

3

 

 

 

 

 

Segment income before income taxes

 

239

 

 

 

169

 

 

 

70

 

 

Income tax expense

 

22

 

 

 

32

 

 

 

(10

)

 

Segment income

$

217

 

 

$

137

 

 

$

80

 

 

 

 

 

 

 

 

 

Combined ratio

 

78.0

%

 

 

85.2

%

 

 

(7.2

)

pts

Impact on combined ratio

 

 

 

 

 

 

Net favorable prior year reserve development

 

(4.3

)

pts

 

(2.1

)

pts

 

(2.2

)

pts

Catastrophes, net of reinsurance

 

0.1

 

pts

 

3.1

 

pts

 

(3.0

)

pts

Underlying combined ratio

 

82.2

%

 

 

84.2

%

 

 

(2.0

)

pts

 

 

 

 

 

 

 

Net written premiums

 

 

 

 

 

 

Domestic

 

 

 

 

 

 

Management Liability

$

505

 

 

$

444

 

 

 

14

%

 

Surety

 

257

 

 

 

200

 

 

 

29

 

 

Total Domestic

 

762

 

 

 

644

 

 

 

18

 

 

International

 

120

 

 

 

79

 

 

 

52

 

 

Total

$

882

 

 

$

723

 

 

 

22

%

 

First Quarter 2022 Results
(All comparisons vs. first quarter 2021, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $217 million after-tax, an increase of $80 million. Segment income increased primarily due to a higher underlying underwriting gain, lower catastrophe losses and higher net favorable prior year reserve development. The underlying underwriting gain benefited from higher business volumes. The current quarter also benefited by $24 million relating to the resolution of prior year income tax matters.

Combined ratio:

  • The combined ratio of 78.0% improved 7.2 points due to lower catastrophe losses (3.0 points), higher net favorable prior year reserve development (2.2 points) and a lower underlying combined ratio (2.0 points).
  • The underlying combined ratio improved by 2.0 points to a very strong 82.2%.
  • Net favorable prior year reserve development was primarily driven by better than expected loss experience in the domestic operations’ fidelity and surety product lines for recent accident years, partially offset by higher than expected loss experience in the domestic operations’ general liability product line for management liability coverages for multiple accident years.

Net written premiums of $882 million increased 22%, reflecting strong renewal premium change, retention and new business in management liability and strong production in surety.

 

Personal Insurance Segment Financial Results

 

 

Three Months Ended March 31,

 

($ in millions and pre-tax, unless noted otherwise)

 

2022

 

 

 

2021

 

 

Change

 

Underwriting gain:

$

124

 

 

$

254

 

 

$

(130

)

 

Underwriting gain includes:

 

 

 

 

 

 

Net favorable prior year reserve development

 

5

 

 

 

168

 

 

 

(163

)

 

Catastrophes, net of reinsurance

 

(80

)

 

 

(305

)

 

 

225

 

 

Net investment income

 

110

 

 

 

119

 

 

 

(9

)

 

Other income

 

18

 

 

 

21

 

 

 

(3

)

 

Segment income before income taxes

 

252

 

 

 

394

 

 

 

(142

)

 

Income tax expense

 

27

 

 

 

80

 

 

 

(53

)

 

Segment income

$

225

 

 

$

314

 

 

$

(89

)

 

 

 

 

 

 

 

 

Combined ratio

 

95.3

%

 

 

90.3

%

 

 

5.0

 

pts

Impact on combined ratio

 

 

 

 

 

 

Net favorable prior year reserve development

 

(0.1

)

pts

 

(5.9

)

pts

 

5.8

 

pts

Catastrophes, net of reinsurance

 

2.6

 

pts

 

10.8

 

pts

 

(8.2

)

pts

Underlying combined ratio

 

92.8

%

 

 

85.4

%

 

 

7.4

 

pts

 

 

 

 

 

 

 

Net written premiums

 

 

 

 

 

 

Domestic

 

 

 

 

 

 

Automobile

$

1,496

 

 

$

1,375

 

 

 

9

%

 

Homeowners and Other

 

1,344

 

 

 

1,144

 

 

 

17

 

 

Total Domestic

 

2,840

 

 

 

2,519

 

 

 

13

 

 

International

 

143

 

 

 

138

 

 

 

4

 

 

Total

$

2,983

 

 

$

2,657

 

 

 

12

%

 

First Quarter 2022 Results
(All comparisons vs. first quarter 2021, unless noted otherwise)

Segment income for Personal Insurance was $225 million after-tax, a decrease of $89 million. Segment income decreased primarily due to a lower underlying underwriting gain and lower net favorable prior year reserve development, partially offset by lower catastrophe losses. The underlying underwriting gain benefited from higher business volumes. The current quarter also benefited by $20 million relating to the resolution of prior year income tax matters.

Combined ratio:

  • The combined ratio of 95.3% increased 5.0 points due to a higher underlying combined ratio (7.4 points) and lower net favorable prior year reserve development (5.8 points), partially offset by lower catastrophe losses (8.2 points).
  • The underlying combined ratio of 92.8% increased 7.4 points, driven primarily by a comparison to a low level of loss activity in the prior year quarter in the automobile product line and elevated severity in the current quarter in both the automobile and homeowners and other product lines, partially offset by a lower expense ratio.
  • Net favorable prior year reserve development was not significant in the quarter.

Net written premiums of $2.983 billion increased 12%. Domestic Automobile net written premiums increased 9%, driven by strong retention and renewal premium change of 3.1%. Domestic Homeowners and Other net written premiums increased 17%, driven by strong retention and renewal premium change of 12.3%.

Financial Supplement and Conference Call

The information in this press release should be read in conjunction with the 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, April 19, 2022. Investors can access the call via webcast at http://investor.travelers.com or by dialing 1.844.895.1976 within the United States and 1.647.689.5389 outside the United States. Prior to the webcast, a slide presentation pertaining to the quarterly earnings will be available on the Company’s website.

Following the live event, replays will be available via webcast for one year at http://investor.travelers.com and by telephone for 30 days by dialing 1.800.585.8367 within the United States or 1.416.621.4642 outside the United States. All callers should use conference ID 1450817.

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 $35 billion in 2021. For more information, visit www.travelers.com.

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 (@Travelers) at https://twitter.com/travelers. In addition, you may automatically receive email alerts and other information about Travelers when you enroll your email address by visiting the Email Notifications section at http://investor.travelers.com.

Travelers is organized into the following reportable business segments:

Business Insurance - Business Insurance offers a broad array of property and casualty insurance products and services to its customers, 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 - Bond & Specialty Insurance offers surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to its customers, primarily in the United States, and certain surety and specialty insurance products in Canada, the United Kingdom and the Republic of Ireland, as well as Brazil through a joint venture, in each case utilizing various degrees of financially-based underwriting approaches.

Personal Insurance - Personal Insurance offers a broad range of property and casualty insurance products and services covering individuals’ personal risks, primarily in the United States, as well as in Canada. The primary products of automobile and homeowners insurance are complemented by a broad suite of related coverages.

* * * * *

Forward-Looking Statements

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,” “views,” “estimates” and similar expressions are used to identify these forward-looking statements. These statements include, among other things, the Company’s statements about:

  • the Company’s outlook, the impact of trends on its business and its future results of operations and financial condition;
  • the impact of COVID-19 and related economic conditions;
  • the impact of legislative or regulatory actions or court decisions taken in response to COVID-19 or otherwise;
  • share repurchase plans;
  • future pension plan contributions;
  • 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;
  • catastrophe losses and modeling;
  • the impact of investment, economic and underwriting market conditions, including interest rates and inflation;
  • the impact of changing climate conditions;
  • strategic and operational initiatives to improve profitability and competitiveness;
  • the Company’s competitive advantages and innovation agenda;
  • new product offerings;
  • the impact of developments in the tort environment; and
  • the impact of developments in the geopolitical environment.

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:

Insurance-Related Risks

  • high levels of catastrophe losses;
  • actual claims may exceed the Company’s claims and claim adjustment expense reserves, or the estimated level of claims and claim adjustment expense reserves may increase, including as a result of, among other things, changes in the legal/tort, regulatory and economic environments, including increased inflation;
  • the Company’s potential exposure to asbestos and environmental claims and related litigation;
  • the Company is exposed to, and may face adverse developments involving, mass tort claims; and
  • the effects of emerging claim and coverage issues on the Company’s business are uncertain, and court decisions or legislative changes that take place after the Company issues its policies can result in an unexpected increase in the number of claims.

Financial, Economic and Credit Risks

  • a period of financial market disruption or an economic downturn;
  • the Company’s investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses;
  • the Company is exposed to credit risk related to reinsurance and structured settlements, and reinsurance coverage may not be available to the Company;
  • the Company is exposed to credit risk in certain of its insurance operations and with respect to certain guarantee or indemnification arrangements that it has with third parties;
  • a downgrade in the Company’s claims-paying and financial strength ratings; and
  • the Company’s insurance subsidiaries may be unable to pay dividends to the Company’s holding company in sufficient amounts.

Business and Operational Risks

  • the ongoing impact of COVID-19 and related risks, including with respect to revenues, claims and claim adjustment expenses, general and administrative expenses, investments, inflation, adverse legislative and/or regulatory action, operational disruptions and heightened cyber security risks;
  • the intense competition that the Company faces, including with respect to attracting and retaining employees, and the impact of innovation, technological change and changing customer preferences on the insurance industry and the markets in which it operates;
  • disruptions to the Company’s relationships with its independent agents and brokers or the Company’s inability to manage effectively a changing distribution landscape;
  • the Company’s efforts to develop new products or services, expand in targeted markets, improve business processes and workflows or make acquisitions may not be successful and may create enhanced risks;
  • the Company’s pricing and capital models may provide materially different indications than actual results;
  • loss of or significant restrictions on the use of particular types of underwriting criteria, such as credit scoring, or other data or methodologies, in the pricing and underwriting of the Company’s products; and
  • the Company is subject to additional risks associated with its business outside the United States.

Technology and Intellectual Property Risks

  • as a result of cyber attacks (the risk of which could be exacerbated by geopolitical tensions) or otherwise, the Company may experience difficulties with technology, data and network security or outsourcing relationships;
  • the Company’s dependence on effective information technology systems and on continuing to develop and implement improvements in technology; and
  • the Company may be unable to protect and enforce its own intellectual property or may be subject to claims for infringing the intellectual property of others.

Regulatory and Compliance Risks

  • changes in regulation, including higher tax rates; and
  • the Company’s compliance controls may not be effective.

In addition, the Company’s share repurchase plans depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, changes in levels of written premiums, 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, changes in tax laws 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,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Forward Looking Statements” in the quarterly report on Form 10-Q filed with the Securities and Exchange Commission (SEC) on April 19, 2022, and in our most recent annual report on Form 10-K filed with the SEC on February 17, 2022, in each case as updated by our periodic filings with the SEC.

GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

The following measures are used by the Company’s management to evaluate financial performance against historical results, to establish performance targets on a consolidated basis and for other reasons as discussed below. 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 these measures to the most 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.

Some of these measures exclude net realized investment gains (losses), net of tax, and/or net unrealized investment gains (losses), net of tax, included in shareholders’ equity, 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 NET INCOME TO CORE INCOME AND CERTAIN OTHER NON-GAAP MEASURES

Core income (loss) is consolidated net income (loss) excluding the after-tax impact of net realized investment gains (losses), discontinued operations, the effect of a change in tax laws and tax rates at enactment, and cumulative effect of changes in accounting principles when applicable. Segment income (loss) is determined in the same manner as core income (loss) on a segment basis. Management uses segment income (loss) to analyze each segment’s performance and as a tool in making business decisions. Financial statement users also consider core income (loss) when analyzing the results and trends of insurance companies. Core income (loss) per share is core income (loss) on a per common share basis.

 

Reconciliation of Net Income to Core Income less Preferred Dividends

 

 

 

Three Months Ended
March 31,

($ in millions, after-tax)

 

 

2022

 

 

2021

 

Net income

 

$

1,018

 

$

733

 

Adjustments:

 

 

 

 

Net realized investment (gains) losses

 

 

19

 

 

(34

)

Core income

 

$

1,037

 

$

699

 

 

 

Three Months Ended
March 31,

($ in millions, pre-tax)

 

 

2022

 

 

2021

 

Net income

 

$

1,182

 

$

891

 

Adjustments:

 

 

 

 

Net realized investment (gains) losses

 

 

23

 

 

(44

)

Core income

 

$

1,205

 

$

847

 

 

 

Twelve Months Ended December 31,

 

 

Average
Annual

($ in millions, after-tax)

 

 

2021

 

 

 

2020

 

 

 

2019

 

 

 

2018

 

 

 

2017

 

 

 

2005 - 2016

Net income

 

$

3,662

 

 

$

2,697

 

 

$

2,622

 

 

$

2,523

 

 

$

2,056

 

 

 

$

3,159

 

Less: Loss from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37

)

Income from continuing operations

 

 

3,662

 

 

 

2,697

 

 

 

2,622

 

 

 

2,523

 

 

 

2,056

 

 

 

 

3,196

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized investment (gains) losses

 

 

(132

)

 

 

(11

)

 

 

(85

)

 

 

(93

)

 

 

(142

)

 

 

 

(29

)

Impact of changes in tax laws and/or tax rates (1) (2)

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

129

 

 

 

 

 

Core income

 

 

3,522

 

 

 

2,686

 

 

 

2,537

 

 

 

2,430

 

 

 

2,043

 

 

 

 

3,167

 

Less: Preferred dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

Core income, less preferred dividends

 

$

3,522

 

 

$

2,686

 

 

$

2,537

 

 

$

2,430

 

 

$

2,043

 

 

 

$

3,165

 

(1) Impact is recognized in the accounting period in which the change is enacted
(2) 2017 reflects impact of Tax Cuts and Jobs Act of 2017 (TCJA)

 

Reconciliation of Net Income per Share to Core Income per Share on a Basic and Diluted Basis

 

 

 

Three Months Ended
March 31,

 

 

2022

 

2021

Basic income per share

 

 

 

 

Net income

 

$

4.20

 

$

2.89

 

Adjustments:

 

 

 

 

Net realized investment (gains) losses, after-tax

 

 

0.07

 

 

(0.14

)

Core income

 

$

4.27

 

$

2.75

 

Diluted income per share

 

 

 

 

Net income

 

$

4.15

 

$

2.87

 

Adjustments:

 

 

 

 

Net realized investment (gains) losses, after-tax

 

 

0.07

 

 

(0.14

)

Core income

 

$

4.22

 

$

2.73

 

 

 

 

 

 

 

Reconciliation of Segment Income to Total Core Income

 

 

 

Three Months Ended March 31,

($ in millions, after-tax)

 

 

2022

 

 

 

2021

 

Business Insurance

 

$

669

 

 

$

317

 

Bond & Specialty Insurance

 

 

217

 

 

 

137

 

Personal Insurance

 

 

225

 

 

 

314

 

Total segment income

 

 

1,111

 

 

 

768

 

Interest Expense and Other

 

 

(74

)

 

 

(69

)

Total core income

 

$

1,037

 

 

$

699

 

RECONCILIATION OF SHAREHOLDERS’ EQUITY TO ADJUSTED SHAREHOLDERS’ EQUITY AND CALCULATION OF RETURN ON EQUITY AND CORE RETURN ON EQUITY

Adjusted shareholders’ equity is shareholders’ equity excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity, net realized investment gains (losses), net of tax, for the period presented, the effect of a change in tax laws and tax rates at enactment (excluding the portion related to net unrealized investment gains (losses)), preferred stock and discontinued operations.

 

Reconciliation of Shareholders’ Equity to Adjusted Shareholders’ Equity

 

 

 

As of March 31,

($ in millions)

 

 

2022

 

 

2021

 

Shareholders’ equity

 

$

25,531

 

$

28,269

 

Adjustments:

 

 

 

 

Net unrealized investment (gains) losses, net of tax, included in shareholders’ equity

 

 

1,391

 

 

(2,817

)

Net realized investment (gains) losses, net of tax

 

 

19

 

 

(34

)

Adjusted shareholders’ equity

 

$

26,941

 

$

25,418

 

 

 

As of December 31,

 

 

Average
Annual

($ in millions)

 

 

2021

 

 

 

2020

 

 

 

2019

 

 

 

2018

 

 

 

2017

 

 

 

2005 - 2016

Shareholders’ equity

 

$

28,887

 

 

$

29,201

 

 

$

25,943

 

 

$

22,894

 

 

$

23,731

 

 

 

$

24,883

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized investment (gains) losses, net of tax, included in shareholders’ equity

 

 

(2,415

)

 

 

(4,074

)

 

 

(2,246

)

 

 

113

 

 

 

(1,112

)

 

 

 

(1,354

)

Net realized investment (gains) losses, net of tax

 

 

(132

)

 

 

(11

)

 

 

(85

)

 

 

(93

)

 

 

(142

)

 

 

 

(29

)

Impact of changes in tax laws and/or tax rates (1) (2)

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

287

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(53

)

Loss from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37

 

Adjusted shareholders’ equity

 

$

26,332

 

 

$

25,116

 

 

$

23,612

 

 

$

22,914

 

 

$

22,764

 

 

 

$

23,484

(1) Impact is recognized in the accounting period in which the change is enacted
(2) 2017 reflects impact of Tax Cuts and Jobs Act of 2017 (TCJA)

Return on equity is the ratio of annualized net income (loss) less preferred dividends to average shareholders’ equity for the periods presented. Core return on equity is the ratio of annualized core income (loss) less preferred dividends to adjusted average shareholders’ equity for the periods presented. In the opinion of the Company’s management, these are important indicators of how well management creates value for its shareholders through its operating activities and its capital management.

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 average shareholders’ equity is (a) the sum of total adjusted shareholders’ equity 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.

 

Calculation of Return on Equity and Core Return on Equity

 

 

 

Three Months Ended
March 31,

($ in millions, after-tax)

 

 

2022

 

 

 

2021

 

Annualized net income

 

$

4,073

 

 

$

2,934

 

Average shareholders’ equity

 

 

27,209

 

 

 

28,735

 

Return on equity

 

 

15.0

%

 

 

10.2

%

Annualized core income

 

$

4,148

 

 

$

2,796

 

Adjusted average shareholders’ equity

 

 

26,706

 

 

 

25,272

 

Core return on equity

 

 

15.5

%

 

 

11.1

%

 

 

Twelve Months Ended December 31,

 

 

Average
Annual

($ in millions, after-tax)

 

 

2021

 

 

 

2020

 

 

 

2019

 

 

 

2018

 

 

 

2017

 

 

 

2005 - 2016

Net income, less preferred dividends

 

$

3,662

 

 

$

2,697

 

 

$

2,622

 

 

$

2,523

 

 

$

2,056

 

 

 

$

3,157

 

Average shareholders’ equity

 

 

28,735

 

 

 

26,892

 

 

 

24,922

 

 

 

22,843

 

 

 

23,671

 

 

 

 

24,913

 

Return on equity

 

 

12.7

%

 

 

10.0

%

 

 

10.5

%

 

 

11.0

%

 

 

8.7

%

 

 

 

12.7

%

Core income, less preferred dividends

 

$

3,522

 

 

$

2,686

 

 

$

2,537

 

 

$

2,430

 

 

$

2,043

 

 

 

$

3,165

 

Adjusted average shareholders’ equity

 

 

25,718

 

 

 

23,790

 

 

 

23,335

 

 

 

22,814

 

 

 

22,743

 

 

 

 

23,505

 

Core return on equity

 

 

13.7

%

 

 

11.3

%

 

 

10.9

%

 

 

10.7

%

 

 

9.0

%

 

 

 

13.5

%

RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN ITEMS TO NET INCOME

Underwriting gain (loss) is net earned premiums and fee income less claims and claim adjustment expenses and insurance-related expenses. In the opinion of the Company’s management, it is important to measure the profitability of each segment excluding the results of investing activities, which are managed separately from the insurance business. This measure is used to assess each segment’s business performance and as a tool in making business decisions. Pre-taxunderwriting gain, excluding the impact of catastrophes and net favorable (unfavorable) 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 gain, underlying underwriting margin or underlying underwriting income.

A catastrophe is a severe loss designated a catastrophe by internationally recognized organizations that track and report on insured losses resulting from catastrophic events, such as Property Claim Services (PCS) for events in the United States and Canada. Catastrophes can be caused by various natural events, including, among others, hurricanes, tornadoes and other windstorms, earthquakes, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions and other naturally-occurring events, such as solar flares. Catastrophes can also be man-made, such as terrorist attacks and other intentionally destructive acts including those involving nuclear, biological, chemical and radiological events, cyber events, explosions and destruction of infrastructure. Each catastrophe has unique characteristics and catastrophes are not predictable as to timing or amount. Their effects are included in net and core 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.

The Company’s threshold for disclosing catastrophes is primarily determined at the reportable segment level. If a threshold for one segment or a combination thereof is exceeded and the other segments have losses from the same event, losses from the event are identified as catastrophe losses in the segment results and for the consolidated results of the Company. Additionally, an aggregate threshold is applied for international business across all reportable segments. The threshold for 2022 ranges from $20 million to $30 million of losses before reinsurance and taxes.

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 core income (loss), and changes in claims and claim adjustment expense reserve levels from period to period.

 

Components of Net Income

 

 

 

Three Months Ended
March 31,

($ in millions, after-tax, except as noted)

 

 

2022

 

 

 

2021

 

Pre-tax underwriting gain excluding the impact of catastrophes and net prior year loss reserve development

 

$

666

 

 

$

735

 

Pre-tax impact of catastrophes

 

 

(160

)

 

 

(835

)

Pre-tax impact of net favorable prior year loss reserve development

 

 

153

 

 

 

317

 

Pre-tax underwriting gain

 

 

659

 

 

 

217

 

Income tax expense on underwriting results

 

 

84

 

 

 

51

 

Underwriting gain

 

 

575

 

 

 

166

 

Net investment income

 

 

539

 

 

 

590

 

Other income (expense), including interest expense

 

 

(77

)

 

 

(57

)

Core income

 

 

1,037

 

 

 

699

 

Net realized investment gains (losses)

 

 

(19

)

 

 

34

 

Net income

 

$

1,018

 

 

$

733

 

 

Reconciliation of Net Income to After-Tax Underlying Underwriting Income (also known as Underlying Underwriting Gain)

 

 

 

Three Months Ended
March 31,

($ in millions, after-tax)

 

2022

 

2021

Net income

 

$

1,018

 

 

$

733

 

Net realized investment (gains) losses

 

 

19

 

 

 

(34

)

Core income

 

 

1,037

 

 

 

699

 

Net investment income

 

 

(539

)

 

 

(590

)

Other (income) expense, including interest expense

 

 

77

 

 

 

57

 

Underwriting income

 

 

575

 

 

 

166

 

Impact of net favorable prior year reserve development

 

 

(122

)

 

 

(249

)

Impact of catastrophes

 

 

127

 

 

 

659

 

Underlying underwriting income

 

$

580

 

 

$

576

 

 

 

Twelve Months Ended December 31,

($ in millions, after-tax)

 

 

2021

 

 

 

2020

 

 

 

2019

 

 

 

2018

 

 

 

2017

 

 

 

2016

 

 

 

2015

 

 

 

2014

 

 

 

2013

 

 

 

2012

 

 

 

2011

 

Net income

 

$

3,662

 

 

$

2,697

 

 

$

2,622

 

 

$

2,523

 

 

$

2,056

 

 

$

3,014

 

 

$

3,439

 

 

$

3,692

 

 

$

3,673

 

 

$

2,473

 

 

$

1,426

 

Net realized investment gains

 

 

(132

)

 

 

(11

)

 

 

(85

)

 

 

(93

)

 

 

(142

)

 

 

(47

)

 

 

(2

)

 

 

(51

)

 

 

(106

)

 

 

(32

)

 

 

(36

)

Impact of changes in tax laws and/or tax rates (1) (2)

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

 

129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core income

 

 

3,522

 

 

 

2,686

 

 

 

2,537

 

 

 

2,430

 

 

 

2,043

 

 

 

2,967

 

 

 

3,437

 

 

 

3,641

 

 

 

3,567

 

 

 

2,441

 

 

 

1,390

 

Net investment income

 

 

(2,541

)

 

 

(1,908

)

 

 

(2,097

)

 

 

(2,102

)

 

 

(1,872

)

 

 

(1,846

)

 

 

(1,905

)

 

 

(2,216

)

 

 

(2,186

)

 

 

(2,316

)

 

 

(2,330

)

Other (income) expense, including interest expense

 

 

235

 

 

 

232

 

 

 

214

 

 

 

248

 

 

 

179

 

 

 

78

 

 

 

193

 

 

 

159

 

 

 

61

 

 

 

171

 

 

 

195

 

Underwriting income (loss)

 

 

1,216

 

 

 

1,010

 

 

 

654

 

 

 

576

 

 

 

350

 

 

 

1,199

 

 

 

1,725

 

 

 

1,584

 

 

 

1,442

 

 

 

296

 

 

 

(745

)

Impact of net (favorable) unfavorable prior year reserve development

 

 

(424

)

 

 

(276

)

 

 

47

 

 

 

(409

)

 

 

(378

)

 

 

(510

)

 

 

(617

)

 

 

(616

)

 

 

(552

)

 

 

(622

)

 

 

(473

)

Impact of catastrophes

 

 

1,459

 

 

 

1,274

 

 

 

699

 

 

 

1,355

 

 

 

1,267

 

 

 

576

 

 

 

338

 

 

 

462

 

 

 

387

 

 

 

1,214

 

 

 

1,669

 

Underlying underwriting income

 

$

2,251

 

 

$

2,008

 

 

$

1,400

 

 

$

1,522

 

 

$

1,239

 

 

$

1,265

 

 

$

1,446

 

 

$

1,430

 

 

$

1,277

 

 

$

888

 

 

$

451

 

(1) Impact is recognized in the accounting period in which the change is enacted
(2) 2017 reflects impact of Tax Cuts and Jobs Act of 2017 (TCJA)

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 premiums and the underwriting expense ratio as used in this earnings release is based on net earned premiums.

For SAP, the 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 and other, 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, billing and policy fees and other, 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.

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.

Other companies’ method of computing similarly titled measures may not be comparable to the Company’s method of computing these ratios.

 

Calculation of the Combined Ratio

 

 

 

Three Months Ended
March 31,

($ in millions, pre-tax)

 

 

2022

 

 

 

2021

 

Loss and loss adjustment expense ratio

 

 

 

 

Claims and claim adjustment expenses

 

$

5,039

 

 

$

4,970

 

Less:

 

 

 

 

Policyholder dividends

 

 

11

 

 

 

11

 

Allocated fee income

 

 

35

 

 

 

38

 

Loss ratio numerator

 

$

4,993

 

 

$

4,921

 

Underwriting expense ratio

 

 

 

 

Amortization of deferred acquisition costs

 

$

1,310

 

 

$

1,207

 

General and administrative expenses (G&A)

 

 

1,191

 

 

 

1,163

 

Less:

 

 

 

 

Non-insurance G&A

 

 

82

 

 

 

70

 

Allocated fee income

 

 

68

 

 

 

63

 

Billing and policy fees and other

 

 

27

 

 

 

27

 

Expense ratio numerator

 

$

2,324

 

 

$

2,210

 

Earned premium

 

$

8,014

 

 

$

7,386

 

Combined ratio (1)

 

 

 

 

Loss and loss adjustment expense ratio

 

 

62.3

%

 

 

66.7

%

Underwriting expense ratio

 

 

29.0

%

 

 

29.9

%

Combined ratio

 

 

91.3

%

 

 

96.6

%

Impact on combined ratio:

 

 

 

 

Net favorable prior year reserve development

 

 

(1.9

)%

 

 

(4.2

)%

Catastrophes, net of reinsurance

 

 

2.0

%

 

 

11.3

%

Underlying combined ratio

 

 

91.2

%

 

 

89.5

%

(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. These allocations are to conform the calculation of the combined ratio with statutory accounting. Additionally, general and administrative expenses include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio.

RECONCILIATION OF BOOK VALUE PER SHARE AND SHAREHOLDERS’ EQUITY TO CERTAIN NON-GAAP MEASURES

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 net unrealized investment gains and losses, net of tax, included in shareholders’ equity, 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 Shareholders’ Equity to Tangible Shareholders’ Equity, Excluding Net Unrealized Investment Gains (Losses), Net of Tax

 

 

 

As of

($ in millions, except per share amounts)

 

March 31,
2022

 

December 31,
2021

 

March 31,
2021

Shareholders’ equity

 

$

25,531

 

 

$

28,887

 

 

$

28,269

 

Less: Net unrealized investment gains (losses), net of tax, included in shareholders’ equity

 

 

(1,391

)

 

 

2,415

 

 

 

2,817

 

Shareholders’ equity, excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity

 

 

26,922

 

 

 

26,472

 

 

 

25,452

 

Less:

 

 

 

 

 

 

Goodwill

 

 

4,001

 

 

 

4,008

 

 

 

4,017

 

Other intangible assets

 

 

301

 

 

 

306

 

 

 

318

 

Impact of deferred tax on other intangible assets

 

 

(64

)

 

 

(66

)

 

 

(63

)

Tangible shareholders’ equity

 

$

22,684

 

 

$

22,224

 

 

$

21,180

 

Common shares outstanding

 

 

240.0

 

 

 

241.2

 

 

 

251.5

 

Book value per share

 

$

106.40

 

 

$

119.77

 

 

$

112.42

 

Adjusted book value per share

 

 

112.19

 

 

 

109.76

 

 

 

101.21

 

Tangible book value per share

 

 

94.53

 

 

 

92.15

 

 

 

84.23

 

RECONCILIATION OF TOTAL CAPITALIZATION TO TOTAL CAPITALIZATION EXCLUDING NET UNREALIZED INVESTMENT GAINS (LOSSES), NET OF TAX

Total capitalization is the sum of total shareholders’ equity and debt. Debt-to-capital ratio excluding net unrealized gain (loss) on investments, net of tax, included in shareholders’ equity,is the ratio of debt to total capitalization excluding the after-tax impact of net unrealized investment gains and losses included in shareholders’ equity. In the opinion of the Company’s management, the debt-to-capital ratio is useful in an analysis of the Company’s financial leverage.

 

 

As of

($ in millions)

 

March 31,
2022

 

December 31,
2021

 

Debt

 

$

7,291

 

 

$

7,290

 

 

Shareholders’ equity

 

 

25,531

 

 

 

28,887

 

 

Total capitalization

 

 

32,822

 

 

 

36,177

 

 

Less: Net unrealized investment gains (losses), net of tax, included in shareholders’ equity

 

 

(1,391

)

 

 

2,415

 

 

Total capitalization excluding net unrealized gain (loss) on investments, net of tax, included in shareholders’ equity

 

$

34,213

 

 

$

33,762

 

 

Debt-to-capital ratio

 

 

22.2

%

 

 

20.2

%

 

Debt-to-capital ratio excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity

 

 

21.3

%

 

 

21.6

%

 

 

RECONCILIATION OF INVESTED ASSETS TO INVESTED ASSETS EXCLUDING NET UNREALIZED INVESTMENT GAINS (LOSSES)

 

 

 

Three Months Ended March 31,

($ in millions, pre-tax)

 

 

2022

 

 

 

2021

Invested assets

 

$

83,664

 

 

$

83,887

Less: Net unrealized investment gains (losses), pre-tax

 

 

(1,770

)

 

 

3,579

Invested assets excluding net unrealized investment gains (losses)

 

$

85,434

 

 

$

80,308

 

 

As of December 31,

($ in millions, pre-tax)

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

 

2017

 

 

2016

 

 

2015

 

 

2014

 

 

2013

 

 

2012

 

 

2011

Invested assets

 

$

87,375

 

$

84,423

 

$

77,884

 

$

72,278

 

 

$

72,502

 

$

70,488

 

$

70,470

 

$

73,261

 

$

73,160

 

$

73,838

 

$

72,701

Less: Net unrealized investment gains (losses), pre-tax

 

 

3,060

 

 

5,175

 

 

2,853

 

 

(137

)

 

 

1,414

 

 

1,112

 

 

1,974

 

 

3,008

 

 

2,030

 

 

4,761

 

 

4,399

Invested assets excluding net unrealized investment gains (losses)

 

$

84,315

 

$

79,248

 

$

75,031

 

$

72,415

 

 

$

71,088

 

$

69,376

 

$

68,496

 

$

70,253

 

$

71,130

 

$

69,077

 

$

68,302

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.

For Business Insurance and Bond & Specialty Insurance, retention is the amount of premium available for renewal that was retained, excluding rate and exposure changes. For Personal Insurance, 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, renewal rate 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 is the amount of written premium related to new policyholders and additional products sold to existing policyholders. These are operating statistics, which are in part dependent on the use of estimates and are therefore subject to change. For Business Insurance, retention, renewal premium change and new business exclude National Accounts. For Bond & Specialty Insurance, retention, renewal premium change and new business exclude surety and other products that are generally sold on a non-recurring, project specific basis. For each of the segments, production statistics referred to herein are domestic only unless otherwise indicated.

Statutory capital and surplus represents the excess of an insurance company’s admitted assets over its liabilities, including loss reserves, as determined in accordance with statutory accounting practices.

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 SEC on February 17, 2022, and subsequent periodic filings with the SEC.

Media:
Patrick Linehan
917.778.6267

Institutional Investors:
Abbe Goldstein
917.778.6825

Source: The Travelers Companies, Inc.

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