Second Quarter 2023 Net Loss per Diluted
Share of $0.07
Second Quarter 2023 Core Income per Diluted
Share of $0.06
- Second quarter net loss of $14 million and core income of $15
million.
- Consolidated combined ratio of 106.5%.
- Catastrophe losses of $1.481 billion pre-tax compared to $746
million pre-tax in the prior year quarter.
- Consolidated underlying combined ratio improved 1.7 points
compared to the prior year quarter to an excellent 91.1%.
- Record net written premiums of $10.318 billion, up 14% compared
to the prior year quarter.
- Very strong production in all three segments, including renewal
premium change in Business Insurance which accelerated to a record
12.8%.
- Total capital returned to shareholders of $633 million,
including $400 million of share repurchases.
- Book value per share of $95.46, down 1% from June 30, 2022,
driven by higher interest rates; adjusted book value per share of
$115.45, up 3% over June 30, 2022.
- Board of Directors declares regular cash dividend of $1.00 per
share.
The Travelers Companies, Inc. today reported a net loss of $14
million, or $0.07 per diluted share, for the quarter ended June 30,
2023, compared to net income of $551 million, or $2.27 per diluted
share, in the prior year quarter. Core income in the current
quarter was $15 million, or $0.06 per diluted share, compared to
$625 million, or $2.57 per diluted share, in the prior year
quarter. Core income decreased primarily due to higher catastrophe
losses. The underlying underwriting gain (i.e., excluding net prior
year reserve development and catastrophe losses) was higher, while
net favorable prior year reserve development was lower. Net
realized investment losses in the current quarter were $35 million
pre-tax ($29 million after-tax), compared to $95 million pre-tax
($74 million after-tax) in the prior year quarter. Per diluted
share amounts benefited from the impact of share repurchases.
Consolidated Highlights
($ in millions, except for per share
amounts, and after-tax, except for premiums and revenues)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
Change
2023
2022
Change
Net written premiums
$
10,318
$
9,020
14
%
$
19,714
$
17,387
13
%
Total revenues
$
10,098
$
9,136
11
$
19,802
$
17,945
10
Net income (loss)
$
(14
)
$
551
NM
$
961
$
1,569
(39
)
per diluted share
$
(0.07
)
$
2.27
NM
$
4.09
$
6.43
(36
)
Core income
$
15
$
625
(98
)
$
985
$
1,662
(41
)
per diluted share
$
0.06
$
2.57
(98
)
$
4.19
$
6.81
(38
)
Diluted weighted average shares
outstanding
229.7
241.1
(5
)
233.3
242.4
(4
)
Combined ratio
106.5
%
98.3
%
8.2
pts
101.1
%
94.8
%
6.3
pts
Underlying combined ratio
91.1
%
92.8
%
(1.7
)
pts
90.8
%
92.0
%
(1.2
)
pts
Return on equity
(0.2
)%
9.1
%
(9.3
)
pts
8.6
%
12.2
%
(3.6
)
pts
Core return on equity
0.2
%
9.3
%
(9.1
)
pts
7.4
%
12.4
%
(5.0
)
pts
As of
Change From
June 30, 2023
December 31,
2022
June 30, 2022
December 31,
2022
June 30, 2022
Book value per share
$
95.46
$
92.90
$
96.39
3
%
(1
)%
Adjusted book value per share
115.45
114.00
112.37
1
%
3
%
NM = Not meaningful.
See Glossary of Financial Measures for definitions and the
statistical supplement for additional financial data.
“This quarter we reported strong underlying results and
investment returns, as well as net favorable prior year reserve
development, which were essentially offset by an historic level of
industry-wide catastrophe losses,” said Alan Schnitzer, Chairman
and Chief Executive Officer. “The fact that we were able to
generate positive core income notwithstanding $1.5 billion of
pre-tax catastrophe losses reflects the strength of our franchise
and the resiliency of our underlying business model.
“We are very pleased with the underlying fundamentals of our
business. Pre-tax underlying underwriting income of $781 million
for the quarter was up 38% over the prior year quarter, driven by
record net earned premiums of $9.2 billion and a consolidated
underlying combined ratio which improved by 1.7 points to an
excellent 91.1%. Earned premiums were higher in all three of our
business segments. The underlying combined ratio in our Business
Insurance segment improved by three points to an excellent 89.4%;
the underlying combined ratio in our Bond & Specialty Insurance
business was higher but still strong at 87.8%; and the underlying
combined ratio in Personal Insurance improved by two points to
94.1%. Our high-quality investment portfolio continued to perform
well, generating after-tax net investment income of $594 million.
As a reflection of our confidence in our business, we returned $633
million of excess capital to our shareholders this quarter,
including $400 million of share repurchases.
“Excellent marketplace execution across all three segments
delivered growth of $1.3 billion, or 14%, in net written premiums
to a record $10.3 billion. In Business Insurance, we grew net
written premiums by 18%. Renewal premium change in the segment was
a record high at 12.8%, driven by renewal rate change which
accelerated 2.5 points sequentially to 7.2%, while retention
remained very strong at 88%. New business increased 36% led by the
property line. In Bond & Specialty Insurance, record net
written premiums were about even with the prior year quarter. Given
the attractive returns, we are very pleased with the strong
production results in both of our commercial business segments. In
Personal Insurance, 13% top-line growth was driven by higher
pricing. Renewal premium change was 19.2% in our Homeowners and
Other business and increased to a record high 16.1% in our Auto
business.
“We are very confident in the outlook for our business. We have
terrific underlying fundamentals in our commercial businesses,
improving underlying results in our personal insurance business and
steadily rising investment returns in our fixed income portfolio.
Across the organization, we are leveraging our scale, expertise and
proven track record of execution to invest in exciting new
capabilities to advance our ambitious innovation agenda. With that
momentum and the best talent in the industry, we are well
positioned to continue to deliver industry-leading returns and
shareholder value over time.”
Consolidated Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2023
2022
Change
2023
2022
Change
Underwriting gain (loss):
$
(640
)
$
113
$
(753
)
$
(273
)
$
772
$
(1,045
)
Underwriting gain
(loss) includes:
Net favorable prior year reserve
development
60
291
(231
)
165
444
(279
)
Catastrophes, net of reinsurance
(1,481
)
(746
)
(735
)
(2,016
)
(906
)
(1,110
)
Net investment income
712
707
5
1,375
1,344
31
Other income (expense), including
interest expense
(85
)
(68
)
(17
)
(193
)
(159
)
(34
)
Core income (loss) before income
taxes
(13
)
752
(765
)
909
1,957
(1,048
)
Income tax expense (benefit)
(28
)
127
(155
)
(76
)
295
(371
)
Core income
15
625
(610
)
985
1,662
(677
)
Net realized investment losses after
income taxes
(29
)
(74
)
45
(24
)
(93
)
69
Net income (loss)
$
(14
)
$
551
$
(565
)
$
961
$
1,569
$
(608
)
Combined ratio
106.5
%
98.3
%
8.2
pts
101.1
%
94.8
%
6.3
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(0.7
)
pts
(3.5
)
pts
2.8
pts
(0.9
)
pts
(2.7
)
pts
1.8
pts
Catastrophes, net of reinsurance
16.1
pts
9.0
pts
7.1
pts
11.2
pts
5.5
pts
5.7
pts
Underlying combined ratio
91.1
%
92.8
%
(1.7
)
pts
90.8
%
92.0
%
(1.2
)
pts
Net written premiums
Business Insurance
$
5,175
$
4,373
18
%
$
10,332
$
8,875
16
%
Bond & Specialty Insurance
964
962
—
1,850
1,844
—
Personal Insurance
4,179
3,685
13
7,532
6,668
13
Total
$
10,318
$
9,020
14
%
$
19,714
$
17,387
13
%
Second Quarter 2023 Results
(All comparisons vs. second quarter 2022, unless noted
otherwise)
The Company reported a net loss of $14 million compared to net
income of $551 million in the prior year quarter. Core income of
$15 million decreased $610 million, primarily due to higher
catastrophe losses. The underlying underwriting gain was higher,
while net favorable prior year reserve development was lower. The
underlying underwriting gain benefited from higher business
volumes. Net realized investment losses were $35 million pre-tax
($29 million after-tax), compared to $95 million pre-tax ($74
million after-tax) in the prior year quarter.
Combined ratio:
- The combined ratio of 106.5% increased 8.2 points due to higher
catastrophe losses (7.1 points) and lower net favorable prior year
reserve development (2.8 points), partially offset by a lower
underlying combined ratio (1.7 points).
- The underlying combined ratio of 91.1% improved 1.7 points. See
below for further details by segment.
- Net favorable prior year reserve development in Bond &
Specialty Insurance and Personal Insurance was partially offset by
net unfavorable prior year reserve development in Business
Insurance. See below for further details by segment.
- Catastrophe losses resulted from numerous severe wind and hail
storms in multiple states.
Net investment income of $712 million pre-tax ($594 million
after-tax) increased 1%. Income from the fixed income investment
portfolio increased over the prior year quarter due to a higher
average yield and growth in fixed maturity investments. Income from
the non-fixed income investment portfolio was solid but decreased
from very strong levels in the prior year quarter, primarily due to
lower private equity and real estate partnership returns. Non-fixed
income returns are generally reported on a one-quarter lagged basis
and directionally follow the broader equity markets.
Net written premiums of $10.318 billion increased 14%. See below
for further details by segment.
Year-to-Date 2023 Results
(All comparisons vs. year-to-date 2022, unless noted otherwise)
Net income of $961 million decreased $608 million, due to lower
core income, partially offset by lower net realized investment
losses. Core income of $985 million decreased $677 million,
primarily due to higher catastrophe losses. The underlying
underwriting gain was higher, while net favorable prior year
reserve development was lower. The underlying underwriting gain
benefited from higher business volumes. The underlying underwriting
gain in the current year period also included a one-time tax
benefit of $211 million due to the expiration of the statute of
limitations with respect to a tax item, while the prior year period
included a $47 million reduction in income tax expense as a result
of the resolution of prior year tax matters. These tax benefits are
included in the income tax line in the Consolidated Statement of
Income (Loss) and accordingly do not impact the combined ratio or
the underlying combined ratio. Net realized investment losses were
$29 million pre-tax ($24 million after-tax), compared to $118
million pre-tax ($93 million after-tax) in the prior year
period.
Combined ratio:
- The combined ratio of 101.1% increased 6.3 points due to higher
catastrophe losses (5.7 points) and lower net favorable prior year
reserve development (1.8 points), partially offset by a lower
underlying combined ratio (1.2 points).
- The underlying combined ratio of 90.8% improved 1.2 points. See
below for further details by segment.
- Net favorable prior year reserve development in Bond &
Specialty Insurance and Personal Insurance was partially offset by
net unfavorable prior year reserve development in Business
Insurance. See below for further details by segment.
- Catastrophe losses included the second quarter events described
above, as well as severe wind and hail storms in multiple states in
the first three months of 2023.
Net investment income of $1.375 billion pre-tax ($1.151 billion
after-tax) increased 2% driven by the same factors described above
for second quarter 2023.
Net written premiums of $19.714 billion increased 13%. See below
for further details by segment.
Shareholders’ Equity
Shareholders’ equity of $21.855 billion increased 1% over
year-end 2022, primarily due to net income of $961 million and
lower net unrealized investment losses, partially offset by common
share repurchases and dividends to shareholders. Net unrealized
investment losses included in shareholders’ equity were $5.815
billion pre-tax ($4.576 billion after-tax), compared to $6.220
billion pre-tax ($4.898 billion after-tax) at year-end 2022. The
decrease in net unrealized investment losses was driven by lower
interest rates. Book value per share of $95.46 decreased 1% from
June 30, 2022, and increased 3% over year-end 2022. Adjusted book
value per share of $115.45, which excludes net unrealized
investment gains (losses), increased 3% over June 30, 2022, and
increased 1% over year-end 2022.
The Company repurchased 2.2 million shares during the second
quarter at an average price of $180.13 per share for a total cost
of $400 million. At June 30, 2023, the Company had $6.205 billion
of capacity remaining under its share repurchase authorizations
approved by the Board of Directors. At the end of the quarter,
statutory capital and surplus was $22.934 billion, and the ratio of
debt-to-capital was 26.9%. The ratio of debt-to-capital excluding
after-tax net unrealized investment gains (losses) included in
shareholders’ equity was 23.3%, within the Company’s target range
of 15% to 25%.
The Board of Directors declared a regular quarterly dividend of
$1.00 per share. The dividend is payable September 29, 2023, to
shareholders of record at the close of business on September 8,
2023.
Business
Insurance Segment Financial Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2023
2022
Change
2023
2022
Change
Underwriting gain (loss):
$
(14
)
$
281
$
(295
)
$
259
$
639
$
(380
)
Underwriting gain
(loss) includes:
Net favorable (unfavorable) prior year
reserve development
(101
)
202
(303
)
(82
)
315
(397
)
Catastrophes, net of reinsurance
(396
)
(234
)
(162
)
(595
)
(313
)
(282
)
Net investment income
509
521
(12
)
982
989
(7
)
Other income (expense)
(10
)
12
(22
)
(43
)
(5
)
(38
)
Segment income before income
taxes
485
814
(329
)
1,198
1,623
(425
)
Income tax expense
83
148
(65
)
40
288
(248
)
Segment income
$
402
$
666
$
(264
)
$
1,158
$
1,335
$
(177
)
Combined ratio
100.1
%
93.2
%
6.9
pts
96.9
%
92.1
%
4.8
pts
Impact on combined
ratio
Net (favorable) unfavorable prior year
reserve development
2.2
pts
(4.8
)
pts
7.0
pts
0.9
pts
(3.8
)
pts
4.7
pts
Catastrophes, net of reinsurance
8.5
pts
5.6
pts
2.9
pts
6.5
pts
3.8
pts
2.7
pts
Underlying combined ratio
89.4
%
92.4
%
(3.0
)
pts
89.5
%
92.1
%
(2.6
)
pts
Net written premiums by market
Domestic
Select Accounts
$
883
$
807
9
%
$
1,791
$
1,626
10
%
Middle Market
2,618
2,329
12
5,544
4,945
12
National Accounts
277
240
15
571
543
5
National Property and Other
862
690
25
1,452
1,187
22
Total Domestic
4,640
4,066
14
9,358
8,301
13
International
535
307
74
974
574
70
Total
$
5,175
$
4,373
18
%
$
10,332
$
8,875
16
%
Second Quarter 2023 Results
(All comparisons vs. second quarter 2022, unless noted
otherwise)
Segment income for Business Insurance was $402 million
after-tax, a decrease of $264 million. Segment income decreased
primarily due to net unfavorable prior year reserve development
compared to net favorable prior year reserve development in the
same period of 2022 and higher catastrophe losses, partially offset
by a higher underlying underwriting gain. The underlying
underwriting gain benefited from higher business volumes.
Combined ratio:
- The combined ratio of 100.1% increased 6.9 points due to net
unfavorable prior year reserve development compared to net
favorable prior year reserve development in the same period of 2022
(7.0 points) and higher catastrophe losses (2.9 points), partially
offset by a lower underlying combined ratio (3.0 points).
- The underlying combined ratio improved 3.0 points to a very
strong 89.4%, primarily driven by a lower level of property losses
and the benefit of earned pricing.
- Net unfavorable prior year reserve development was primarily
driven by higher than expected loss experience in several liability
lines in the domestic operations and the Company’s run-off
operations, partially offset by better than expected loss
experience in the workers’ compensation product line.
Net written premiums of $5.175 billion increased 18%, reflecting
strong renewal premium change and retention, as well as higher
levels of new business. The increase in net written premiums also
included the impact of the Company’s quota share reinsurance
agreement with subsidiaries of Fidelis Insurance Holdings Limited
effective January 1, 2023, which is included in the segment’s
International results.
Year-to-Date 2023 Results
(All comparisons vs. year-to-date 2022, unless noted otherwise)
Segment income for Business Insurance was $1.158 billion
after-tax, a decrease of $177 million. Segment income decreased
primarily due to net unfavorable prior year reserve development
compared to net favorable prior year reserve development in the
same period of 2022 and higher catastrophe losses, partially offset
by a higher underlying underwriting gain. The underlying
underwriting gain benefited from higher business volumes. The
underlying underwriting gain in the current year period also
included a one-time tax benefit of $171 million due to the
expiration of the statute of limitations with respect to a tax
item, while the prior year period included a $3 million reduction
in income tax expense as a result of the resolution of prior year
tax matters.
Combined ratio:
- The combined ratio of 96.9% increased 4.8 points due to net
unfavorable prior year reserve development compared to net
favorable prior year reserve development in the same period of 2022
(4.7 points) and higher catastrophe losses (2.7 points), partially
offset by a lower underlying combined ratio (2.6 points).
- The underlying combined ratio improved 2.6 points to a very
strong 89.5%, primarily driven by a lower level of property losses
and the benefit of earned pricing.
- Net unfavorable prior year reserve development was primarily
driven by higher than expected loss experience in several liability
lines in the domestic operations and the Company’s run-off
operations, partially offset by better than expected loss
experience in the workers’ compensation product line.
Net written premiums of $10.332 billion increased 16%,
reflecting the same factors described above for the second quarter
of 2023.
Bond
& Specialty Insurance Segment Financial Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2023
2022
Change
2023
2022
Change
Underwriting gain:
$
205
$
218
$
(13
)
$
376
$
395
$
(19
)
Underwriting gain
includes:
Net favorable prior year reserve
development
119
73
46
177
108
69
Catastrophes, net of reinsurance
(21
)
(4
)
(17
)
(26
)
(5
)
(21
)
Net investment income
78
64
14
151
123
28
Other income
6
3
3
10
6
4
Segment income before income
taxes
289
285
4
537
524
13
Income tax expense
59
57
2
100
79
21
Segment income
$
230
$
228
$
2
$
437
$
445
$
(8
)
Combined ratio
77.1
%
74.0
%
3.1
pts
78.5
%
76.0
%
2.5
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(13.0
)
pts
(8.6
)
pts
(4.4
)
pts
(9.9
)
pts
(6.5
)
pts
(3.4
)
pts
Catastrophes, net of reinsurance
2.3
pts
0.4
pts
1.9
pts
1.5
pts
0.3
pts
1.2
pts
Underlying combined ratio
87.8
%
82.2
%
5.6
pts
86.9
%
82.2
%
4.7
pts
Net written premiums
Domestic
Management Liability
$
541
$
533
2
%
$
1,052
$
1,038
1
%
Surety
293
287
2
550
544
1
Total Domestic
834
820
2
1,602
1,582
1
International
130
142
(8
)
248
262
(5
)
Total
$
964
$
962
—
%
$
1,850
$
1,844
—
%
Second Quarter 2023 Results
(All comparisons vs. second quarter 2022, unless noted
otherwise)
Segment income for Bond & Specialty Insurance was $230
million after-tax, an increase of $2 million. Segment income
increased primarily due to higher net favorable prior year reserve
development and higher net investment income, partially offset by a
lower underlying underwriting gain and higher catastrophe losses.
The underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 77.1% increased 3.1 points due to a
higher underlying combined ratio (5.6 points) and higher
catastrophe losses (1.9 points), partially offset by higher net
favorable prior year reserve development (4.4 points).
- The underlying combined ratio increased 5.6 points, primarily
driven by losses from a small number of surety accounts and a
higher expense ratio.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the general
liability product line for management liability coverages lines and
in the domestic operations’ fidelity and surety product for recent
accident years.
Net written premiums of $964 million increased slightly over the
very strong prior year quarter, reflecting strong retention and new
business and positive renewal premium change in management
liability, as well as strong production in surety.
Year-to-Date 2023 Results
(All comparisons vs. year-to-date 2022, unless noted otherwise)
Segment income for Bond & Specialty Insurance was $437
million after-tax, a decrease of $8 million. Segment income
decreased primarily due to a lower underlying underwriting gain and
higher catastrophe losses, partially offset by higher net favorable
prior year reserve development and higher net investment income.
The underlying underwriting gain benefited from higher business
volumes. The underlying underwriting gain in the current year
period included a one-time tax benefit of $9 million due to the
expiration of the statute of limitations with respect to a tax
item, while the prior year period included a $24 million reduction
in income tax expense as a result of the resolution of prior year
tax matters.
Combined ratio:
- The combined ratio of 78.5% increased 2.5 points due to a
higher underlying combined ratio (4.7 points) and higher
catastrophe losses (1.2 points), partially offset by higher net
favorable prior year reserve development (3.4 points).
- The underlying combined ratio increased 4.7 points, primarily
driven by losses from a small number of surety accounts, loss
activity related to the disruption in the banking sector and a
higher expense ratio.
- Net favorable prior year reserve development was primarily
driven by the same factors described above for the second quarter
of 2023.
Net written premiums of $1.850 billion increased slightly over
the very strong prior year period, reflecting the same factors
described above for the second quarter of 2023.
Personal
Insurance Segment Financial Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2023
2022
Change
2023
2022
Change
Underwriting loss:
$
(831
)
$
(386
)
$
(445
)
$
(908
)
$
(262
)
$
(646
)
Underwriting loss
includes:
Net favorable prior year reserve
development
42
16
26
70
21
49
Catastrophes, net of reinsurance
(1,064
)
(508
)
(556
)
(1,395
)
(588
)
(807
)
Net investment income
125
122
3
242
232
10
Other income
21
14
7
39
32
7
Segment income (loss) before income
taxes
(685
)
(250
)
(435
)
(627
)
2
(629
)
Income tax benefit
(147
)
(57
)
(90
)
(172
)
(30
)
(142
)
Segment income (loss)
$
(538
)
$
(193
)
$
(345
)
$
(455
)
$
32
$
(487
)
Combined ratio
122.0
%
111.2
%
10.8
pts
112.0
%
103.4
%
8.6
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(1.2
)
pts
(0.5
)
pts
(0.7
)
pts
(1.0
)
pts
(0.3
)
pts
(0.7
)
pts
Catastrophes, net of reinsurance
29.1
pts
15.6
pts
13.5
pts
19.5
pts
9.2
pts
10.3
pts
Underlying combined ratio
94.1
%
96.1
%
(2.0
)
pts
93.5
%
94.5
%
(1.0
)
pts
Net written premiums
Domestic
Automobile
$
1,823
$
1,629
12
%
$
3,477
$
3,125
11
%
Homeowners and Other
2,173
1,868
16
3,738
3,212
16
Total Domestic
3,996
3,497
14
7,215
6,337
14
International
183
188
(3
)
317
331
(4
)
Total
$
4,179
$
3,685
13
%
$
7,532
$
6,668
13
%
Second Quarter 2023 Results
(All comparisons vs. second quarter 2022, unless noted
otherwise)
Segment loss for Personal Insurance was $538 million after-tax,
compared with a segment loss of $193 million in the prior year
quarter. Segment loss increased driven by higher catastrophe
losses, partially offset by a higher underlying underwriting gain
and higher net favorable prior year reserve development. The
underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 122.0% increased 10.8 points due to
higher catastrophe losses (13.5 points), partially offset by a
lower underlying combined ratio (2.0 points) and higher net
favorable prior year reserve development (0.7 points).
- The underlying combined ratio of 94.1% improved 2.0 points,
reflecting an improvement in the underlying combined ratio in
Homeowners and Other, partially offset by an increase in the
underlying combined ratio in Automobile.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the domestic
operations’ homeowners and other product line for recent accident
years.
Net written premiums of $4.179 billion increased 13%, primarily
reflecting higher pricing in both Domestic Homeowners and Other and
Domestic Automobile.
Year-to-Date 2023 Results
(All comparisons vs. year-to-date 2022, unless noted otherwise)
Segment loss for Personal Insurance was $455 million after-tax,
compared with segment income of $32 million in the same period of
2022. The decrease was driven by higher catastrophe losses,
partially offset by a higher underlying underwriting gain and
higher net favorable prior year reserve development. The underlying
underwriting gain benefited from higher business volumes. The
underlying underwriting gain in the current year period included a
one-time tax benefit of $31 million due to the expiration of the
statute of limitations with respect to a tax item, while the prior
year period included a $20 million reduction in income tax expense
as a result of the resolution of prior year tax matters.
Combined ratio:
- The combined ratio of 112.0% increased 8.6 points due to higher
catastrophe losses (10.3 points), partially offset by a lower
underlying combined ratio (1.0 points) and higher net favorable
prior year reserve development (0.7 points).
- The underlying combined ratio of 93.5% improved 1.0 points,
reflecting an improvement in the underlying combined ratio in
Homeowners and Other, partially offset by an increase in the
underlying combined ratio in Automobile.
- Net favorable prior year reserve development was primarily
driven by the same factors described above for the second quarter
of 2023.
Net written premiums of $7.532 billion increased 13%, reflecting
the same factors described above for the second quarter of
2023.
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 Thursday, July 20, 2023. Investors
can access the call via webcast at http://investor.travelers.com or
by dialing 1.888.440.6281 within the United States or
1.646.960.0218 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 1.800.770.2030 within the United States or
1.647.362.9199 outside the United States. All callers should use
conference ID 5449478.
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 more
than 30,000 employees and generated revenues of approximately $37
billion in 2022. 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, including 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. Personal Insurance’s 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,”
“probably,” “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,
such as the impact of elevated industrywide loss costs in Personal
Insurance, and its future results of operations and financial
condition;
- the impact of legislative or regulatory actions or court
decisions;
- 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;
- the cost and availability of reinsurance coverage;
- catastrophe losses and modeling;
- the impact of investment, economic and underwriting market
conditions, including interest rates, inflation and disruption in
the banking and commercial real estate sectors;
- the Company’s approach to managing its investment
portfolio;
- the impact of changing climate conditions;
- strategic and operational initiatives to improve profitability
and competitiveness;
- the Company’s competitive advantages and innovation agenda,
including executing on that agenda with respect to artificial
intelligence;
- 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, and any
future pandemics (including new variants of COVID-19);
- 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, including with respect to artificial intelligence;
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
(including the Inflation Reduction Act) 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 July 20, 2023, and in
our most recent annual report on Form 10-K filed with the SEC on
February 16, 2023, 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 (LOSS) 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 (Loss) to
Core Income (Loss) less Preferred Dividends
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, after-tax)
2023
2022
2023
2022
Net income (loss)
$
(14
)
$
551
$
961
$
1,569
Adjustments:
Net realized investment losses
29
74
24
93
Core income
$
15
$
625
$
985
$
1,662
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, pre-tax)
2023
2022
2023
2022
Net income (loss)
$
(48
)
$
657
$
880
$
1,839
Adjustments:
Net realized investment losses
35
95
29
118
Core income (loss)
$
(13
)
$
752
$
909
$
1,957
Twelve Months Ended December
31,
Average Annual
($ in millions, after-tax)
2022
2021
2020
2019
2018
2005 - 2017
Net income
$
2,842
$
3,662
$
2,697
$
2,622
$
2,523
$
3,074
Less: Loss from discontinued
operations
—
—
—
—
—
(34
)
Income from continuing
operations
2,842
3,662
2,697
2,622
2,523
3,108
Adjustments:
Net realized investment (gains) losses
156
(132
)
(11
)
(85
)
(93
)
(37
)
Impact of changes in tax laws and/or tax
rates (1) (2)
—
(8
)
—
—
—
10
Core income
2,998
3,522
2,686
2,537
2,430
3,081
Less: Preferred dividends
—
—
—
—
—
2
Core income, less preferred
dividends
$
2,998
$
3,522
$
2,686
$
2,537
$
2,430
$
3,079
(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 (Loss) per
Share to Core Income per Share on a Diluted Basis
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Diluted income
(loss) per share
Net income (loss)
$
(0.07
)
$
2.27
$
4.09
$
6.43
Adjustments:
Net realized investment losses,
after-tax
0.13
0.30
0.10
0.38
Core income
$
0.06
$
2.57
$
4.19
$
6.81
Reconciliation of Segment Income (Loss)
to Total Core Income
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, after-tax)
2023
2022
2023
2022
Business Insurance
$
402
$
666
$
1,158
$
1,335
Bond & Specialty Insurance
230
228
437
445
Personal Insurance
(538
)
(193
)
(455
)
32
Total segment income
94
701
1,140
1,812
Interest Expense and Other
(79
)
(76
)
(155
)
(150
)
Total core income
$
15
$
625
$
985
$
1,662
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 June 30,
($ in millions)
2023
2022
Shareholders’ equity
$
21,855
$
22,874
Adjustments:
Net unrealized investment losses, net of
tax, included in shareholders’ equity
4,576
3,792
Net realized investment losses, net of
tax
24
93
Adjusted shareholders’ equity
$
26,455
$
26,759
As of December 31,
Average Annual
($ in millions)
2022
2021
2020
2019
2018
2005 - 2017
Shareholders’ equity
$
21,560
$
28,887
$
29,201
$
25,943
$
22,894
$
24,794
Adjustments:
Net unrealized investment (gains) losses,
net of tax, included in shareholders’ equity
4,898
(2,415
)
(4,074
)
(2,246
)
113
(1,335
)
Net realized investment (gains) losses,
net of tax
156
(132
)
(11
)
(85
)
(93
)
(37
)
Impact of changes in tax laws and/or tax
rates (1) (2)
—
(8
)
—
—
—
22
Preferred stock
—
—
—
—
—
(49
)
Loss from discontinued operations
—
—
—
—
—
34
Adjusted shareholders’ equity
$
26,614
$
26,332
$
25,116
$
23,612
$
22,914
$
23,429
(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 June
30,
Six Months Ended June
30,
($ in millions, after-tax)
2023
2022
2023
2022
Annualized net income (loss)
$
(56
)
$
2,203
$
1,922
$
3,138
Average shareholders’ equity
22,453
24,203
22,380
25,706
Return on equity
(0.2
)%
9.1
%
8.6
%
12.2
%
Annualized core income
$
57
$
2,499
$
1,969
$
3,323
Adjusted average shareholders’ equity
26,690
26,831
26,688
26,768
Core return on equity
0.2
%
9.3
%
7.4
%
12.4
%
Twelve Months Ended
December 31,
Average Annual
($ in millions, after-tax)
2022
2021
2020
2019
2018
2005 - 2017
Net income, less preferred dividends
$
2,842
$
3,662
$
2,697
$
2,622
$
2,523
$
3,072
Average shareholders’ equity
23,384
28,735
26,892
24,922
22,843
24,818
Return on equity
12.2
%
12.7
%
10.0
%
10.5
%
11.0
%
12.4
%
Core income, less preferred dividends
$
2,998
$
3,522
$
2,686
$
2,537
$
2,430
$
3,079
Adjusted average shareholders’ equity
26,588
25,718
23,790
23,335
22,814
23,446
Core return on equity
11.3
%
13.7
%
11.3
%
10.9
%
10.7
%
13.1
%
RECONCILIATION OF NET INCOME (LOSS) TO UNDERWRITING GAIN
EXCLUDING CERTAIN ITEMS
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. Underwriting 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, underlying underwriting income or underlying
underwriting result.
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 2023 ranges from $20 million
to $30 million of losses before reinsurance and taxes.
Net favorable (unfavorable) prior year loss reserve
development is the increase or decrease in incurred claims and
claim adjustment expenses as a result of the re-estimation of
claims and claim adjustment expense reserves at successive
valuation dates for a given group of claims, which may be related
to one or more prior years. In the opinion of the Company’s
management, a discussion of loss reserve development is meaningful
to users of the financial statements as it allows them to assess
the impact between prior and current year development on incurred
claims and claim adjustment expenses, net and core income (loss),
and changes in claims and claim adjustment expense reserve levels
from period to period.
Reconciliation of Net Income (Loss) to
Pre-Tax Underlying Underwriting Income (also known as Underlying
Underwriting Gain)
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, after-tax, except as
noted)
2023
2022
2023
2022
Net income (loss)
$
(14
)
$
551
$
961
$
1,569
Net realized investment losses
29
74
24
93
Core income
15
625
985
1,662
Net investment income
(594
)
(595
)
(1,151
)
(1,134
)
Other (income) expense, including interest
expense
70
56
158
133
Underwriting income (loss)
(509
)
86
(8
)
661
Income tax expense (benefit) on
underwriting results
(131
)
27
(265
)
111
Pre-tax underwriting income
(loss)
(640
)
113
(273
)
772
Pre-tax impact of net favorable prior year
reserve development
(60
)
(291
)
(165
)
(444
)
Pre-tax impact of catastrophes
1,481
746
2,016
906
Pre-tax underlying underwriting
income
$
781
$
568
$
1,578
$
1,234
Reconciliation of Net Income (Loss) to
After-Tax Underlying Underwriting Income (also known as Underlying
Underwriting Gain)
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, after-tax)
2023
2022
2023
2022
Net income (loss)
$
(14
)
$
551
$
961
$
1,569
Net realized investment losses
29
74
24
93
Core income
15
625
985
1,662
Net investment income
(594
)
(595
)
(1,151
)
(1,134
)
Other (income) expense, including interest
expense
70
56
158
133
Underwriting income (loss)
(509
)
86
(8
)
661
Impact of net favorable prior year reserve
development
(47
)
(229
)
(130
)
(351
)
Impact of catastrophes
1,171
587
1,593
714
Underlying underwriting income
$
615
$
444
$
1,455
$
1,024
Twelve Months Ended December
31,
($ in millions, after-tax)
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Net income
$
2,842
$
3,662
$
2,697
$
2,622
$
2,523
$
2,056
$
3,014
$
3,439
$
3,692
$
3,673
$
2,473
Net realized investment (gains) losses
156
(132
)
(11
)
(85
)
(93
)
(142
)
(47
)
(2
)
(51
)
(106
)
(32
)
Impact of changes in tax laws and/or tax
rates (1) (2)
—
(8
)
—
—
—
129
—
—
—
—
—
Core income
2,998
3,522
2,686
2,537
2,430
2,043
2,967
3,437
3,641
3,567
2,441
Net investment income
(2,170
)
(2,541
)
(1,908
)
(2,097
)
(2,102
)
(1,872
)
(1,846
)
(1,905
)
(2,216
)
(2,186
)
(2,316
)
Other (income) expense, including interest
expense
277
235
232
214
248
179
78
193
159
61
171
Underwriting income
1,105
1,216
1,010
654
576
350
1,199
1,725
1,584
1,442
296
Impact of net (favorable) unfavorable
prior year reserve development
(512
)
(424
)
(276
)
47
(409
)
(378
)
(510
)
(617
)
(616
)
(552
)
(622
)
Impact of catastrophes
1,480
1,459
1,274
699
1,355
1,267
576
338
462
387
1,214
Underlying underwriting income
$
2,073
$
2,251
$
2,008
$
1,400
$
1,522
$
1,239
$
1,265
$
1,446
$
1,430
$
1,277
$
888
(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 June
30,
Six Months Ended June
30,
($ in millions, pre-tax)
2023
2022
2023
2022
Loss and loss
adjustment expense ratio
Claims and claim adjustment expenses
$
7,227
$
5,803
$
13,186
$
10,842
Less:
Policyholder dividends
10
6
22
17
Allocated fee income
40
39
82
74
Loss ratio numerator
$
7,177
$
5,758
$
13,082
$
10,751
Underwriting
expense ratio
Amortization of deferred acquisition
costs
$
1,519
$
1,365
$
2,981
$
2,675
General and administrative expenses
(G&A)
1,308
1,223
2,575
2,414
Less:
Non-insurance G&A
92
87
187
169
Allocated fee income
66
61
130
129
Billing and policy fees and other
28
27
56
54
Expense ratio numerator
$
2,641
$
2,413
$
5,183
$
4,737
Earned premium
$
9,216
$
8,317
$
18,070
$
16,331
Combined ratio (1)
Loss and loss adjustment expense ratio
77.9
%
69.3
%
72.4
%
65.8
%
Underwriting expense ratio
28.6
%
29.0
%
28.7
%
29.0
%
Combined ratio
106.5
%
98.3
%
101.1
%
94.8
%
Impact on combined ratio:
Net favorable prior year reserve
development
(0.7
)%
(3.5
)%
(0.9
)%
(2.7
)%
Catastrophes, net of reinsurance
16.1
%
9.0
%
11.2
%
5.5
%
Underlying combined ratio
91.1
%
92.8
%
90.8
%
92.0
%
(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 Losses, Net of Tax and Calculation of Book Value Per
Share, Adjusted Book Value Per Share and Tangible Book Value Per
Share
As of
($ in millions, except per share
amounts)
June 30, 2023
December 31,
2022
June 30, 2022
Shareholders’ equity
$
21,855
$
21,560
$
22,874
Less: Net unrealized investment losses,
net of tax, included in shareholders’ equity
(4,576
)
(4,898
)
(3,792
)
Shareholders’ equity, excluding net
unrealized investment losses, net of tax, included in shareholders’
equity
26,431
26,458
26,666
Less:
Goodwill
3,975
3,952
3,967
Other intangible assets
283
287
294
Impact of deferred tax on other intangible
assets
(67
)
(60
)
(59
)
Tangible shareholders’ equity,
excluding net unrealized investment losses, net of tax, included in
shareholders’ equity
$
22,240
$
22,279
$
22,464
Common shares outstanding
228.9
232.1
237.3
Book value per share
$
95.46
$
92.90
$
96.39
Adjusted book value per share
115.45
114.00
112.37
Tangible book value per share, excluding
net unrealized investment losses, net of tax, included in
shareholders’ equity
97.14
96.00
94.66
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
gains (losses) 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)
June 30, 2023
December 31,
2022
Debt
$
8,031
$
7,292
Shareholders’ equity
21,855
21,560
Total capitalization
29,886
28,852
Less: Net unrealized investment losses,
net of tax, included in shareholders’ equity
(4,576
)
(4,898
)
Total capitalization excluding net
unrealized losses on investments, net of tax, included in
shareholders’ equity
$
34,462
$
33,750
Debt-to-capital ratio
26.9
%
25.3
%
Debt-to-capital ratio excluding net
unrealized investment losses, net of tax, included in shareholders’
equity
23.3
%
21.6
%
RECONCILIATION OF INVESTED ASSETS TO
INVESTED ASSETS EXCLUDING NET UNREALIZED INVESTMENT GAINS
(LOSSES)
As of June 30,
($ in millions)
2023
2022
Invested assets
$
82,973
$
80,459
Less: Net unrealized investment losses,
pre-tax
(5,815
)
(4,817
)
Invested assets excluding net
unrealized investment losses
$
88,788
$
85,276
As of December 31,
($ in millions)
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
Invested assets
$
80,454
$
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
(6,220
)
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)
$
86,674
$
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 16, 2023, and subsequent
periodic filings with the SEC.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230718987635/en/
Media: Patrick Linehan
917.778.6267
Institutional Investors: Abbe
Goldstein 917.778.6825
The Travelers Companies (NYSE:TRV)
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