Third Quarter 2023 Net Income per Diluted
Share of $1.74 and Return on Equity of 7.7%
Third Quarter 2023 Core Income per Diluted
Share of $1.95 and Core Return on Equity of 6.9%
- Excellent underlying underwriting income of $868 million
pre-tax, up 43%.
- Consolidated combined ratio of 101.0%; and underlying combined
ratio of 90.6%, a 1.9 point improvement.
- Catastrophe losses of $850 million pre-tax compared to $512
million pre-tax in the prior year quarter.
- Net unfavorable prior year reserve development of $154 million
pre-tax primarily due to an addition to asbestos reserves of $284
million pre-tax.
- Record net written premiums of $10.493 billion, up 14% over the
prior year quarter, including growth in all three segments.
- Strong renewal premium change in all three segments, including
record levels in Business Insurance and Personal Automobile.
- Net investment income increased 30% pre-tax over the prior year
quarter primarily due to strong fixed income returns.
The Travelers Companies, Inc. today reported net income of $404
million, or $1.74 per diluted share, for the quarter ended
September 30, 2023, compared to $454 million, or $1.89 per diluted
share, in the prior year quarter. Core income in the current
quarter was $454 million, or $1.95 per diluted share, compared to
$526 million, or $2.20 per diluted share, in the prior year
quarter. Core income decreased primarily due to higher catastrophe
losses and net unfavorable prior year reserve development (driven
by the Company’s run-off businesses) compared to net favorable
prior year reserve development in the prior year quarter, partially
offset by a higher underlying underwriting gain (i.e., excluding
net prior year reserve development and catastrophe losses) and
higher net investment income. Net realized investment losses in the
current quarter were $65 million pre-tax ($50 million after-tax),
compared to $93 million pre-tax ($72 million after-tax) in the
prior year quarter. Per diluted share amounts benefited from the
impact of share repurchases.
Consolidated Highlights
($ in millions, except for per share
amounts, and after-tax, except for premiums and revenues)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
Change
2023
2022
Change
Net written premiums
$
10,493
$
9,198
14
%
$
30,207
$
26,585
14
%
Total revenues
$
10,635
$
9,303
14
$
30,437
$
27,248
12
Net income
$
404
$
454
(11
)
$
1,365
$
2,023
(33
)
per diluted share
$
1.74
$
1.89
(8
)
$
5.83
$
8.34
(30
)
Core income
$
454
$
526
(14
)
$
1,439
$
2,188
(34
)
per diluted share
$
1.95
$
2.20
(11
)
$
6.15
$
9.02
(32
)
Diluted weighted average shares
outstanding
231.1
237.9
(3
)
232.5
240.9
(3
)
Combined ratio
101.0
%
98.2
%
2.8
pts
101.0
%
96.0
%
5.0
pts
Underlying combined ratio
90.6
%
92.5
%
(1.9
)
pts
90.8
%
92.2
%
(1.4
)
pts
Return on equity
7.7
%
8.5
%
(0.8
)
pts
8.3
%
11.1
%
(2.8
)
pts
Core return on equity
6.9
%
7.9
%
(1.0
)
pts
7.2
%
10.9
%
(3.7
)
pts
As of
Change From
September 30,
2023
December 31,
2022
September 30,
2022
December 31,
2022
September 30,
2022
Book value per share
$
87.47
$
92.90
$
84.94
(6
)%
3
%
Adjusted book value per share
115.78
114.00
111.90
2
%
3
%
See Glossary of Financial
Measures for definitions and the statistical supplement for
additional financial data.
“Core income of $454 million for the quarter benefited from very
strong underlying underwriting returns and net investment income
but was also impacted by elevated catastrophe losses,” said Alan
Schnitzer, Chairman and Chief Executive Officer. “We are very
pleased with the underlying fundamentals of our business.
Underlying underwriting income of $868 million pre-tax was up 43%
over the prior year quarter, driven by record net earned premiums
of $9.7 billion and a consolidated underlying combined ratio which
improved 1.9 points to an excellent 90.6%. The underlying combined
ratio in our commercial segments remained excellent, and the
underlying combined ratio in Personal Insurance improved by more
than 5 points to 94.2%. Our high-quality investment portfolio
continued to perform extremely well, generating after-tax net
investment income of $640 million.
“Through excellent marketplace execution across all three
segments, we delivered growth of $1.3 billion, or 14%, in net
written premiums to a record $10.5 billion. In Business Insurance,
we grew net written premiums by 16%. Renewal premium change in the
segment was very strong at 12.9%. Renewal rate change accelerated
sequentially to 7.9%, while retention remained historically high at
87%. New business was strong and higher broadly across the segment.
In Bond & Specialty Insurance, we grew net written premiums to
a milestone $1 billion, achieved 91% retention of our high-quality
management liability business and grew net written premiums in our
industry-leading surety business by 13%. Given the attractive
returns, we are very pleased with the strong production results in
both of our commercial business segments. In Personal Insurance,
14% top-line growth was driven by higher pricing. Renewal premium
change was 19.4% in our Homeowners and Other business and increased
to a record high 18.2% in our Auto business.
“The fundamentals in our commercial businesses are terrific, the
underlying results in our personal insurance business are improving
and heading in the right direction and we are achieving steadily
rising returns in our growing fixed income portfolio. Alongside
that momentum, we are making excellent progress in the execution of
our focused innovation agenda. For those reasons and more, we are
very confident in the outlook across our diversified business.”
Consolidated Results
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions and pre-tax, unless
noted otherwise)
2023
2022
Change
2023
2022
Change
Underwriting gain (loss):
$
(136
)
$
115
$
(251
)
$
(409
)
$
887
$
(1,296
)
Underwriting gain
(loss) includes:
Net favorable (unfavorable) prior year
reserve development
(154
)
20
(174
)
11
464
(453
)
Catastrophes, net of reinsurance
(850
)
(512
)
(338
)
(2,866
)
(1,418
)
(1,448
)
Net investment income
769
593
176
2,144
1,937
207
Other income (expense), including
interest expense
(96
)
(87
)
(9
)
(289
)
(246
)
(43
)
Core income before income taxes
537
621
(84
)
1,446
2,578
(1,132
)
Income tax expense
83
95
(12
)
7
390
(383
)
Core income
454
526
(72
)
1,439
2,188
(749
)
Net realized investment losses after
income taxes
(50
)
(72
)
22
(74
)
(165
)
91
Net income
$
404
$
454
$
(50
)
$
1,365
$
2,023
$
(658
)
Combined ratio
101.0
%
98.2
%
2.8
pts
101.0
%
96.0
%
5.0
pts
Impact on combined
ratio
Net (favorable) unfavorable prior year
reserve development
1.6
pts
(0.2
)
pts
1.8
pts
(0.1
)
pts
(1.9
)
pts
1.8
pts
Catastrophes, net of reinsurance
8.8
pts
5.9
pts
2.9
pts
10.3
pts
5.7
pts
4.6
pts
Underlying combined ratio
90.6
%
92.5
%
(1.9
)
pts
90.8
%
92.2
%
(1.4
)
pts
Net written premiums
Business Insurance
$
5,080
$
4,370
16
%
$
15,412
$
13,245
16
%
Bond & Specialty Insurance
1,003
964
4
2,853
2,808
2
Personal Insurance
4,410
3,864
14
11,942
10,532
13
Total
$
10,493
$
9,198
14
%
$
30,207
$
26,585
14
%
Third Quarter 2023 Results
(All comparisons vs. third quarter 2022, unless noted
otherwise)
Net income of $404 million decreased $50 million, due to lower
core income, partially offset by lower net realized investment
losses. Core income of $454 million decreased $72 million,
primarily due to higher catastrophe losses and net unfavorable
prior year reserve development (driven by the Company’s run-off
businesses) compared to net favorable prior year reserve
development in the prior year quarter, partially offset by a higher
underlying underwriting gain and higher net investment income. The
underlying underwriting gain benefited from higher business
volumes. Net realized investment losses were $65 million pre-tax
($50 million after-tax), compared to $93 million pre-tax ($72
million after-tax) in the prior year quarter.
Combined ratio:
- The combined ratio of 101.0% increased 2.8 points due to higher
catastrophe losses (2.9 points) and net unfavorable prior year
reserve development compared to net favorable prior year reserve
development in the prior year quarter (1.8 points), partially
offset by a lower underlying combined ratio (1.9 points).
- The underlying combined ratio of 90.6% improved 1.9 points. See
below for further details by segment.
- Net unfavorable prior year reserve development in Business
Insurance was partially offset by net favorable prior year reserve
development in Bond & Specialty Insurance and Personal
Insurance. See below for further details by segment.
- Catastrophe losses primarily resulted from numerous severe wind
and hail storms in multiple states.
Net investment income of $769 million pre-tax ($640 million
after-tax) increased 30%. 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 increased over the prior
year quarter due to higher private equity 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 $10.493 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 $1.365 billion decreased $658 million, due to
lower core income, partially offset by lower net realized
investment losses. Core income of $1.439 billion decreased $749
million, primarily due to higher catastrophe losses and lower net
favorable prior year reserve development, partially offset by a
higher underlying underwriting gain and higher net investment
income. 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 and
accordingly do not impact the combined ratio or the underlying
combined ratio. Net realized investment losses were $94 million
pre-tax ($74 million after-tax), compared to $211 million pre-tax
($165 million after-tax) in the prior year period.
Combined ratio:
- The combined ratio of 101.0% increased 5.0 points due to higher
catastrophe losses (4.6 points) and lower net favorable prior year
reserve development (1.8 points), partially offset by a lower
underlying combined ratio (1.4 points).
- The underlying combined ratio of 90.8% improved 1.4 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 third quarter events described
above, as well as numerous severe wind and hail storms in multiple
states in the first six months of 2023.
Net investment income of $2.144 billion pre-tax ($1.791 billion
after-tax) increased 11%. Income from the fixed income investment
portfolio increased over the prior year period 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 a strong level in the prior year period, primarily due to
lower private equity and real estate partnership returns.
Net written premiums of $30.207 billion increased 14%. See below
for further details by segment.
Shareholders’ Equity
Shareholders’ equity of $19.978 billion decreased 7% from
year-end 2022, primarily due to higher net unrealized investment
losses, common share repurchases and dividends to shareholders,
partially offset by net income of $1.365 billion. Net unrealized
investment losses included in shareholders’ equity were $8.206
billion pre-tax ($6.466 billion after-tax), compared to $6.220
billion pre-tax ($4.898 billion after-tax) at year-end 2022. The
increase in net unrealized investment losses was driven by higher
interest rates. Book value per share of $87.47 increased 3% over
September 30, 2022, and decreased 6% from year-end 2022. Adjusted
book value per share of $115.78, which excludes net unrealized
investment gains (losses), increased 3% over September 30, 2022,
and increased 2% over year-end 2022.
The Company repurchased 0.6 million shares during the third
quarter at an average price of $164.50 per share for a total cost
of $101 million. At September 30, 2023, the Company had $6.105
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 $23.267 billion, and
the ratio of debt-to-capital was 28.7%. 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
$1.00 per share. The dividend is payable December 29, 2023, to
shareholders of record at the close of business on December 8,
2023.
Business
Insurance Segment Financial Results
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions and pre-tax, unless
noted otherwise)
2023
2022
Change
2023
2022
Change
Underwriting gain:
$
31
$
148
$
(117
)
$
290
$
787
$
(497
)
Underwriting gain
includes:
Net favorable (unfavorable) prior year
reserve development
(263
)
(61
)
(202
)
(345
)
254
(599
)
Catastrophes, net of reinsurance
(203
)
(216
)
13
(798
)
(529
)
(269
)
Net investment income
551
426
125
1,533
1,415
118
Other income (expense)
(13
)
(14
)
1
(56
)
(19
)
(37
)
Segment income before income
taxes
569
560
9
1,767
2,183
(416
)
Income tax expense
101
89
12
141
377
(236
)
Segment income
$
468
$
471
$
(3
)
$
1,626
$
1,806
$
(180
)
Combined ratio
99.1
%
96.3
%
2.8
pts
97.7
%
93.5
%
4.2
pts
Impact on combined
ratio
Net (favorable) unfavorable prior year
reserve development
5.3
pts
1.4
pts
3.9
pts
2.4
pts
(2.0
)
pts
4.4
pts
Catastrophes, net of reinsurance
4.1
pts
4.9
pts
(0.8
)
pts
5.7
pts
4.1
pts
1.6
pts
Underlying combined ratio
89.7
%
90.0
%
(0.3
)
pts
89.6
%
91.4
%
(1.8
)
pts
Net written premiums by market
Domestic
Select Accounts
$
824
$
739
12
%
$
2,615
$
2,365
11
%
Middle Market
2,750
2,465
12
8,294
7,410
12
National Accounts
247
247
—
818
790
4
National Property and Other
874
702
25
2,326
1,889
23
Total Domestic
4,695
4,153
13
14,053
12,454
13
International
385
217
77
1,359
791
72
Total
$
5,080
$
4,370
16
%
$
15,412
$
13,245
16
%
Third Quarter 2023 Results
(All comparisons vs. third quarter 2022, unless noted
otherwise)
Segment income for Business Insurance was $468 million
after-tax, a decrease of $3 million. Segment income decreased
primarily due to higher net unfavorable prior year reserve
development, partially offset by higher net investment income, a
higher underlying underwriting gain and lower catastrophe losses.
The underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 99.1% increased 2.8 points due to higher
net unfavorable prior year reserve development (3.9 points),
partially offset by lower catastrophe losses (0.8 points) and a
lower underlying combined ratio (0.3 points).
- The underlying combined ratio improved 0.3 points to a very
strong 89.7%.
- Net unfavorable prior year reserve development was primarily
driven by (i) net unfavorable prior year reserve development in the
run-off operations within the general liability product line,
including an addition to asbestos reserves of $284 million and
additions to reserves attributable to childhood sexual molestation
claims and environmental claims, partially offset by (ii) net
favorable prior year reserve development in the ongoing operations,
including better than expected loss experience in the domestic
operations’ workers’ compensation product line for multiple
accident years, partially offset by higher than expected loss
experience in the commercial automobile product line for recent
accident years. Net unfavorable prior year reserve development in
the prior year quarter included an addition to asbestos reserves of
$212 million. The Company completes its annual in-depth asbestos
claim review in the third quarter of each year.
Net written premiums of $5.080 billion increased 16%, 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 $1.626 billion
after-tax, a decrease of $180 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 and higher net investment
income. 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 97.7% increased 4.2 points due to net
unfavorable prior year reserve development compared to net
favorable prior year reserve development in the same period of 2022
(4.4 points) and higher catastrophe losses (1.6 points), partially
offset by a lower underlying combined ratio (1.8 points).
- The underlying combined ratio improved 1.8 points to a very
strong 89.6%.
- Net unfavorable prior year reserve development was primarily
driven by (i) net unfavorable prior year reserve development in the
run-off operations within the general liability product line,
including an addition to asbestos reserves and additions to
reserves attributable to childhood sexual molestation claims and
environmental claims, partially offset by (ii) net favorable prior
year reserve development in the ongoing operations, including
better than expected loss experience in the domestic operations’
workers’ compensation product line for multiple accident years,
partially offset by higher than expected loss experience in the
general liability product line for multiple accident years and
commercial automobile product line for recent accident years.
Net written premiums of $15.412 billion increased 16%,
reflecting the same factors described above for the third quarter
of 2023.
Bond
& Specialty Insurance Segment Financial Results
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions and pre-tax, unless
noted otherwise)
2023
2022
Change
2023
2022
Change
Underwriting gain:
$
241
$
234
$
7
$
617
$
629
$
(12
)
Underwriting gain
includes:
Net favorable prior year reserve
development
72
63
9
249
171
78
Catastrophes, net of reinsurance
(5
)
(11
)
6
(31
)
(16
)
(15
)
Net investment income
86
65
21
237
188
49
Other income
4
5
(1
)
14
11
3
Segment income before income
taxes
331
304
27
868
828
40
Income tax expense
66
62
4
166
141
25
Segment income
$
265
$
242
$
23
$
702
$
687
$
15
Combined ratio
73.6
%
72.5
%
1.1
pts
76.8
%
74.8
%
2.0
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(7.7
)
pts
(7.2
)
pts
(0.5
)
pts
(9.1
)
pts
(6.7
)
pts
(2.4
)
pts
Catastrophes, net of reinsurance
0.6
pts
1.3
pts
(0.7
)
pts
1.1
pts
0.6
pts
0.5
pts
Underlying combined ratio
80.7
%
78.4
%
2.3
pts
84.8
%
80.9
%
3.9
pts
Net written premiums
Domestic
Management Liability
$
551
$
554
(1
)%
$
1,603
$
1,592
1
%
Surety
321
284
13
871
828
5
Total Domestic
872
838
4
2,474
2,420
2
International
131
126
4
379
388
(2
)
Total
$
1,003
$
964
4
%
$
2,853
$
2,808
2
%
Third Quarter 2023 Results
(All comparisons vs. third quarter 2022, unless noted
otherwise)
Segment income for Bond & Specialty Insurance was $265
million after-tax, an increase of $23 million. Segment income
increased primarily due to higher net investment income, higher net
favorable prior year reserve development and lower catastrophe
losses, partially offset by a lower underlying underwriting gain.
The underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 73.6% increased 1.1 points due to a
higher underlying combined ratio (2.3 points), partially offset by
lower catastrophe losses (0.7 points) and higher net favorable
prior year reserve development (0.5 points).
- The underlying combined ratio of 80.7% increased 2.3 points,
primarily driven by a higher expense ratio.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the domestic
operations’ fidelity and surety product lines and in the general
liability product line for management liability coverages for
recent accident years.
Net written premiums of $1.003 billion increased 4%, reflecting
strong production in surety, as well as strong retention and new
business and positive renewal premium change in management
liability.
Year-to-Date 2023 Results
(All comparisons vs. year-to-date 2022, unless noted otherwise)
Segment income for Bond & Specialty Insurance was $702
million after-tax, an increase of $15 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. 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 76.8% increased 2.0 points due to a
higher underlying combined ratio (3.9 points) and higher
catastrophe losses (0.5 points), partially offset by higher net
favorable prior year reserve development (2.4 points).
- The underlying combined ratio of 84.8% increased 3.9 points,
primarily driven by losses from a small number of surety accounts
and loss activity related to the disruption in the banking sector,
as well as a higher expense ratio.
- Net favorable prior year reserve development was primarily
driven by the same factors described above for the third quarter of
2023.
Net written premiums of $2.853 billion increased 2%, reflecting
the same factors described above for the third quarter of 2023.
Personal
Insurance Segment Financial Results
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions and pre-tax, unless
noted otherwise)
2023
2022
Change
2023
2022
Change
Underwriting loss:
$
(408
)
$
(267
)
$
(141
)
$
(1,316
)
$
(529
)
$
(787
)
Underwriting loss
includes:
Net favorable prior year reserve
development
37
18
19
107
39
68
Catastrophes, net of reinsurance
(642
)
(285
)
(357
)
(2,037
)
(873
)
(1,164
)
Net investment income
132
102
30
374
334
40
Other income
20
18
2
59
50
9
Segment loss before income
taxes
(256
)
(147
)
(109
)
(883
)
(145
)
(738
)
Income tax benefit
(63
)
(36
)
(27
)
(235
)
(66
)
(169
)
Segment loss
$
(193
)
$
(111
)
$
(82
)
$
(648
)
$
(79
)
$
(569
)
Combined ratio
110.0
%
107.2
%
2.8
pts
111.3
%
104.7
%
6.6
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(1.0
)
pts
(0.5
)
pts
(0.5
)
pts
(1.0
)
pts
(0.4
)
pts
(0.6
)
pts
Catastrophes, net of reinsurance
16.8
pts
8.4
pts
8.4
pts
18.5
pts
8.9
pts
9.6
pts
Underlying combined ratio
94.2
%
99.3
%
(5.1
)
pts
93.8
%
96.2
%
(2.4
)
pts
Net written premiums
Domestic
Automobile
$
2,022
$
1,743
16
%
$
5,499
$
4,868
13
%
Homeowners and Other
2,216
1,952
14
5,954
5,164
15
Total Domestic
4,238
3,695
15
11,453
10,032
14
International
172
169
2
489
500
(2
)
Total
$
4,410
$
3,864
14
%
$
11,942
$
10,532
13
%
Third Quarter 2023 Results
(All comparisons vs. third quarter 2022, unless noted
otherwise)
Segment loss for Personal Insurance was $193 million after-tax,
compared with a segment loss of $111 million in the prior year
quarter. The increase in segment loss was driven by higher
catastrophe losses, partially offset by a higher underlying
underwriting gain, higher net investment income and higher net
favorable prior year reserve development. The underlying
underwriting gain benefited from higher business volumes.
Combined ratio:
- The combined ratio of 110.0% increased 2.8 points due to higher
catastrophe losses (8.4 points), partially offset by a lower
underlying combined ratio (5.1 points) and higher net favorable
prior year reserve development (0.5 points).
- The underlying combined ratio of 94.2% improved 5.1 points,
reflecting improvement in both Homeowners and Other and
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 $4.410 billion increased 14%, 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 $648 million after-tax,
compared with a segment loss of $79 million in the same period of
2022. The increase in segment loss was driven by higher catastrophe
losses, partially offset by a higher underlying underwriting gain,
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 $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 111.3% increased 6.6 points due to higher
catastrophe losses (9.6 points), partially offset by a lower
underlying combined ratio (2.4 points) and higher net favorable
prior year reserve development (0.6 points).
- The underlying combined ratio of 93.8% improved 2.4 points,
reflecting an improvement in Homeowners and Other, partially offset
by an increase in Automobile.
- Net favorable prior year reserve development was primarily
driven by the same factors described above for the third quarter of
2023.
Net written premiums of $11.942 billion increased 13%,
reflecting the same factors described above for the third 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 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 Wednesday, October 18, 2023.
Investors can access the call via webcast at 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 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 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 investor.travelers.com, our Facebook page at
facebook.com/travelers and our X account (@Travelers) at
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
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;
- the impact of developments in the geopolitical environment;
and
- the impact of a U.S. government shutdown.
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 October 18, 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 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 September
30,
Nine Months Ended September
30,
($ in millions, after-tax)
2023
2022
2023
2022
Net income
$
404
$
454
$
1,365
$
2,023
Adjustments:
Net realized investment losses
50
72
74
165
Core income
$
454
$
526
$
1,439
$
2,188
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions, pre-tax)
2023
2022
2023
2022
Net income
$
472
$
528
$
1,352
$
2,367
Adjustments:
Net realized investment losses
65
93
94
211
Core income
$
537
$
621
$
1,446
$
2,578
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 per Share
to Core Income per Share on a Diluted Basis
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Diluted income
per share
Net income
$
1.74
$
1.89
$
5.83
$
8.34
Adjustments:
Net realized investment losses,
after-tax
0.21
0.31
0.32
0.68
Core income
$
1.95
$
2.20
$
6.15
$
9.02
Reconciliation of Segment Income (Loss)
to Total Core Income
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions, after-tax)
2023
2022
2023
2022
Business Insurance
$
468
$
471
$
1,626
$
1,806
Bond & Specialty Insurance
265
242
702
687
Personal Insurance
(193
)
(111
)
(648
)
(79
)
Total segment income
540
602
1,680
2,414
Interest Expense and Other
(86
)
(76
)
(241
)
(226
)
Total core income
$
454
$
526
$
1,439
$
2,188
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 September 30,
($ in millions)
2023
2022
Shareholders’ equity
$
19,978
$
19,906
Adjustments:
Net unrealized investment losses, net of
tax, included in shareholders’ equity
6,466
6,317
Net realized investment losses, net of
tax
74
165
Adjusted shareholders’ equity
$
26,518
$
26,388
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 September
30,
Nine Months Ended September
30,
($ in millions, after-tax)
2023
2022
2023
2022
Annualized net income
$
1,615
$
1,815
$
1,820
$
2,697
Average shareholders’ equity
20,916
21,390
21,892
24,267
Return on equity
7.7
%
8.5
%
8.3
%
11.1
%
Annualized core income
$
1,818
$
2,104
$
1,919
$
2,917
Adjusted average shareholders’ equity
26,463
26,481
26,613
26,673
Core return on equity
6.9
%
7.9
%
7.2
%
10.9
%
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 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 $30 million of losses before reinsurance and taxes.
Net favorable (unfavorable) prior year loss reserve
development is the increase or decrease in incurred claims and
claim adjustment expenses as a result of the re-estimation of
claims and claim adjustment expense reserves at successive
valuation dates for a given group of claims, which may be related
to one or more prior years. In the opinion of the Company’s
management, a discussion of loss reserve development is meaningful
to users of the financial statements as it allows them to assess
the impact between prior and current year development on incurred
claims and claim adjustment expenses, net and core income (loss),
and changes in claims and claim adjustment expense reserve levels
from period to period.
Reconciliation of Net Income to Pre-Tax
Underlying Underwriting Income (also known as Underlying
Underwriting Gain)
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions, after-tax, except as
noted)
2023
2022
2023
2022
Net income
$
404
$
454
$
1,365
$
2,023
Net realized investment losses
50
72
74
165
Core income
454
526
1,439
2,188
Net investment income
(640
)
(505
)
(1,791
)
(1,639
)
Other (income) expense, including interest
expense
79
69
237
202
Underwriting income (loss)
(107
)
90
(115
)
751
Income tax expense (benefit) on
underwriting results
(29
)
25
(294
)
136
Pre-tax underwriting income
(loss)
(136
)
115
(409
)
887
Pre-tax impact of net (favorable)
unfavorable prior year reserve development
154
(20
)
(11
)
(464
)
Pre-tax impact of catastrophes
850
512
2,866
1,418
Pre-tax underlying underwriting
income
$
868
$
607
$
2,446
$
1,841
Reconciliation of Net Income to
After-Tax Underlying Underwriting Income (also known as Underlying
Underwriting Gain)
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions, after-tax)
2023
2022
2023
2022
Net income
$
404
$
454
$
1,365
$
2,023
Net realized investment losses
50
72
74
165
Core income
454
526
1,439
2,188
Net investment income
(640
)
(505
)
(1,791
)
(1,639
)
Other (income) expense, including interest
expense
79
69
237
202
Underwriting income (loss)
(107
)
90
(115
)
751
Impact of net (favorable) unfavorable
prior year reserve development
122
(16
)
(8
)
(367
)
Impact of catastrophes
669
404
2,262
1,118
Underlying underwriting income
$
684
$
478
$
2,139
$
1,502
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 September
30,
Nine Months Ended September
30,
($ in millions, pre-tax)
2023
2022
2023
2022
Loss and loss
adjustment expense ratio
Claims and claim adjustment expenses
$
7,149
$
6,088
$
20,335
$
16,930
Less:
Policyholder dividends
14
14
36
31
Allocated fee income
42
38
124
112
Loss ratio numerator
$
7,093
$
6,036
$
20,175
$
16,787
Underwriting
expense ratio
Amortization of deferred acquisition
costs
$
1,604
$
1,406
$
4,585
$
4,081
General and administrative expenses
(G&A)
1,312
1,193
3,887
3,607
Less:
Non-insurance G&A
99
83
286
252
Allocated fee income
70
66
200
195
Billing and policy fees and other
28
27
84
81
Expense ratio numerator
$
2,719
$
2,423
$
7,902
$
7,160
Earned premium
$
9,718
$
8,615
$
27,788
$
24,946
Combined ratio (1)
Loss and loss adjustment expense ratio
73.0
%
70.1
%
72.6
%
67.3
%
Underwriting expense ratio
28.0
%
28.1
%
28.4
%
28.7
%
Combined ratio
101.0
%
98.2
%
101.0
%
96.0
%
Impact on combined ratio:
Net (favorable) unfavorable prior year
reserve development
1.6
%
(0.2
)%
(0.1
)%
(1.9
)%
Catastrophes, net of reinsurance
8.8
%
5.9
%
10.3
%
5.7
%
Underlying combined ratio
90.6
%
92.5
%
90.8
%
92.2
%
(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)
September 30,
2023
December 31,
2022
September 30,
2022
Shareholders’ equity
$
19,978
$
21,560
$
19,906
Less: Net unrealized investment losses,
net of tax, included in shareholders’ equity
(6,466
)
(4,898
)
(6,317
)
Shareholders’ equity, excluding net
unrealized investment losses, net of tax, included in shareholders’
equity
26,444
26,458
26,223
Less:
Goodwill
3,955
3,952
3,922
Other intangible assets
278
287
287
Impact of deferred tax on other intangible
assets
(64
)
(60
)
(54
)
Tangible shareholders’ equity,
excluding net unrealized investment losses, net of tax, included in
shareholders’ equity
$
22,275
$
22,279
$
22,068
Common shares outstanding
228.4
232.1
234.3
Book value per share
$
87.47
$
92.90
$
84.94
Adjusted book value per share
115.78
114.00
111.90
Tangible book value per share, excluding
net unrealized investment losses, net of tax, included in
shareholders’ equity
97.53
96.00
94.17
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)
September 30,
2023
December 31,
2022
Debt
$
8,031
$
7,292
Shareholders’ equity
19,978
21,560
Total capitalization
28,009
28,852
Less: Net unrealized investment losses,
net of tax, included in shareholders’ equity
(6,466
)
(4,898
)
Total capitalization excluding net
unrealized losses on investments, net of tax, included in
shareholders’ equity
$
34,475
$
33,750
Debt-to-capital ratio
28.7
%
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 September 30,
($ in millions)
2023
2022
Invested assets
$
82,956
$
78,113
Less: Net unrealized investment losses,
pre-tax
(8,206
)
(8,021
)
Invested assets excluding net
unrealized investment losses
$
91,162
$
86,134
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/20231016218131/en/
Media: Patrick Linehan
917.778.6267
Institutional Investors: Abbe
Goldstein 917.778.6825
The Travelers Companies (NYSE:TRV)
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