First Quarter 2021 Core Income per Diluted
Share of $2.73, up 4%, and Core Return on Equity of 11.1%
Board of Directors Declares 4% Increase in
the Company’s Regular Quarterly Cash Dividend to $0.88 per Share
and Authorizes an Additional $5.0 Billion of Share
Repurchases
- First quarter net income of $733 million and core income of
$699 million.
- Consolidated combined ratio of 96.6%; underlying combined ratio
improved 1.8 points to a very strong 89.5%.
- Catastrophe losses of $835 million pre-tax compared to $333
million pre-tax in the prior year quarter.
- Net written premiums of $7.505 billion, up 2% compared to the
prior year quarter.
- Strong renewal premium change in all three segments.
- Total capital returned to shareholders of $613 million,
including $397 million of share repurchases.
- Book value per share of $112.42, up 13% from March 31, 2020;
adjusted book value per share of $101.21, up 9% from March 31,
2020.
The Travelers Companies, Inc. today reported net income of $733
million, or $2.87 per diluted share, for the quarter ended March
31, 2021, compared to $600 million, or $2.33 per diluted share, in
the prior year quarter. Core income in the current quarter was $699
million, or $2.73 per diluted share, compared to $676 million, or
$2.62 per diluted share, in the prior year quarter. Core income
increased primarily due to higher net favorable prior year reserve
development, a higher underlying underwriting gain (i.e., excluding
net prior year reserve development and catastrophe losses) and
higher net investment income, partially offset by higher
catastrophe losses. Net realized investment gains in the current
quarter were $44 million pre-tax ($34 million after-tax), compared
to net realized investment losses of $98 million pre-tax ($76
million after-tax) in the prior year quarter. Per diluted share
amounts benefited from the impact of share repurchases.
Consolidated Highlights
($ in millions, except for per share
amounts, and after-tax, except for premiums and revenues)
Three Months Ended March
31,
2021
2020
Change
Net written premiums
$
7,505
$
7,346
2
%
Total revenues
$
8,313
$
7,908
5
Net income
$
733
$
600
22
per diluted share
$
2.87
$
2.33
23
Core income
$
699
$
676
3
per diluted share
$
2.73
$
2.62
4
Diluted weighted average shares
outstanding
254.1
255.9
(1
)
Combined ratio
96.6
%
95.5
%
1.1
pts
Underlying combined ratio
89.5
%
91.3
%
(1.8
)
pts
Return on equity
10.2
%
9.4
%
0.8
pts
Core return on equity
11.1
%
11.5
%
(0.4
)
pts
As of
March 31, 2021
December 31, 2020
Change
Book value per share
$
112.42
$
115.68
(3
)
%
Adjusted book value per share
101.21
99.54
2
%
See Glossary of Financial Measures for definitions and the
statistical supplement for additional financial data.
“We are very pleased to report first quarter core income of $699
million, or $2.73 per diluted share, both up from the prior year
quarter despite our highest-ever level of first quarter catastrophe
losses,” said Alan Schnitzer, Chairman and Chief Executive Officer.
“Higher core income resulted from very strong underlying
underwriting income, as well as higher levels of favorable prior
year reserve development and net investment income, which together
more than offset the record level of catastrophe losses. Underlying
underwriting income was meaningfully higher than in the prior year
quarter, driven by higher net earned premiums and an underlying
combined ratio which improved to an excellent 89.5%. The underlying
underwriting result was strong in each of our three segments. In
Business Insurance, the underlying combined ratio improved by more
than 3 points. Bond and Specialty Insurance and Personal Insurance
both benefited from higher earned premiums and continued strong
margins. Our high-quality investment portfolio performed well,
generating net investment income of $590 million after-tax.
“These results, along with our strong balance sheet, enabled us
to return $613 million of excess capital to our shareholders this
quarter, including $397 million of share repurchases. In
recognition of our strong financial position and confidence in our
business, I am pleased to share that our Board of Directors
declared a 4% increase in our quarterly cash dividend to $0.88 per
share, marking 17 consecutive years of dividend increases with a
compound annual growth rate of 9% over that period. The Board also
authorized an additional $5 billion of share repurchases.
“For the quarter, net written premiums grew 2%, driven by
continued strong renewal premium change and retention in each of
our three segments. In Business Insurance, renewal premium change
increased to 9.2%, its highest level since 2013, while retention
remained strong. In Bond & Specialty Insurance, net written
premiums increased by 9%, driven by renewal premium change of 10.8%
in our management liability business, while retention remained
strong. In Personal Insurance, net written premiums increased by
7%, driven by strong renewal premium change of 7.7% in our
Homeowners business and strong retention and new business in both
Auto and Homeowners.
“The strength of our underwriting and investment expertise
enabled us to deliver strong profitability, notwithstanding the
severe winter weather. As a result, we are off to a terrific start
to the year. We are particularly pleased with the strong underlying
fundamentals in all three of our business segments. Our proven
strategy, strong track record of execution, leading analytics and
talent advantage give us confidence that we are well positioned to
capitalize on opportunities as the economy recovers and to continue
to create meaningful shareholder value over time.”
Consolidated Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
Underwriting gain:
$
217
$
288
$
(71
)
Underwriting gain
includes:
Net favorable prior year reserve
development
317
27
290
Catastrophes, net of reinsurance
(835
)
(333
)
(502
)
Net investment income
701
611
90
Other income (expense), including
interest expense
(71
)
(81
)
10
Core income before income taxes
847
818
29
Income tax expense
148
142
6
Core income
699
676
23
Net realized investment gains (losses)
after income taxes
34
(76
)
110
Net income
$
733
$
600
$
133
Combined ratio
96.6
%
95.5
%
1.1
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(4.2
)
pts
(0.4
)
pts
(3.8
)
pts
Catastrophes, net of reinsurance
11.3
pts
4.6
pts
6.7
pts
Underlying combined ratio
89.5
%
91.3
%
(1.8
)
pts
Net written premiums
Business Insurance
$
4,125
$
4,190
(2
)
%
Bond & Specialty Insurance
723
663
9
Personal Insurance
2,657
2,493
7
Total
$
7,505
$
7,346
2
%
First Quarter 2021 Results
(All comparisons vs. first quarter 2020, unless noted
otherwise)
Net income of $733 million increased $133 million due to higher
core income and net realized investment gains in the current
quarter, compared with net realized investment losses in the prior
year quarter. Core income of $699 million increased $23 million,
primarily due to higher net favorable prior year reserve
development, a higher underlying underwriting gain and higher net
investment income, partially offset by higher catastrophe losses.
The underlying underwriting gain was driven by higher business
volumes and a lower underlying combined ratio. Net realized
investment gains were $44 million pre-tax ($34 million after-tax),
compared to net realized investment losses of $98 million pre-tax
($76 million after-tax) in the prior year quarter. Net realized investment losses in the prior
year quarter were driven by the mark-to-market impact on the
Company’s equity
investments caused by disruption in global financial
markets.
Combined ratio:
- The combined ratio of 96.6% increased 1.1 points due to higher
catastrophe losses (6.7 points), partially offset by higher net
favorable prior year reserve development (3.8 points) and a lower
underlying combined ratio (1.8 points).
- The underlying combined ratio of 89.5% improved 1.8 points. See
below for further details by segment.
- Net favorable prior year reserve development occurred in all
segments. See below for further details by segment. Catastrophe
losses primarily resulted from winter storms and wind storms in
several regions of the United States.
Net investment income of $701 million pre-tax ($590 million
after-tax) increased 15%. Income from the non-fixed income
investment portfolio increased over the prior year quarter,
primarily due to higher private equity partnership returns. Income
from the fixed income investment portfolio decreased from the prior
year quarter, primarily due to lower interest rates, partially
offset by a higher average level of fixed maturity investments.
Net written premiums of $7.505 billion increased 2%. See below
for further details by segment.
Shareholders’ Equity
Shareholders’ equity of $28.269 billion decreased 3% from
year-end 2020, driven by lower net unrealized investment gains
resulting from higher interest rates, common share repurchases and
dividends to shareholders, partially offset by net income of $733
million. Net unrealized investment gains included in shareholders’
equity were $3.579 billion pre-tax ($2.817 billion after-tax),
compared to $5.175 billion pre-tax ($4.074 billion after-tax) at
year-end 2020. Book value per share of $112.42 increased 13% from
March 31, 2020, and decreased 3% from year-end 2020. Adjusted book
value per share of $101.21, which excludes net unrealized
investment gains, increased 9% from March 31, 2020, and 2% from
year-end 2020.
The Company repurchased 2.7 million shares during the first
quarter at an average price of $147.71 per share for a total of
$397 million. At the end of the quarter, statutory capital and
surplus was $22.403 billion, and the ratio of debt-to-capital was
18.8%. The ratio of debt-to-capital excluding after-tax net
unrealized investment gains included in shareholders’ equity was
20.5%, within the Company’s target range of 15% to 25%.
The Board of Directors declared a regular quarterly dividend of
$0.88 per share, an increase of 4%. The dividend is payable on June
30, 2021, to shareholders of record at the close of business on
June 10, 2021. The Board of Directors also authorized an additional
$5.0 billion of share repurchases. This amount is in addition to
the $805 million that remained from previous authorizations as of
March 31, 2021. This authorization does not have a stated
expiration date. The timing and actual number of shares to be
repurchased will depend on a variety of factors, including the
factors described below in the Forward-Looking Statement
section.
Business
Insurance Segment Financial Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
Underwriting loss:
$
(144
)
$
(99
)
$
(45
)
Underwriting loss
includes:
Net favorable prior year reserve
development
134
5
129
Catastrophes, net of reinsurance
(506
)
(195
)
(311
)
Net investment income
523
453
70
Other income (expense)
(7
)
(16
)
9
Segment income before income
taxes
372
338
34
Income tax expense
55
49
6
Segment income
$
317
$
289
$
28
Combined ratio
103.5
%
102.2
%
1.3
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(3.5
)
pts
(0.1
)
pts
(3.4
)
pts
Catastrophes, net of reinsurance
13.3
pts
5.0
pts
8.3
pts
Underlying combined ratio
93.7
%
97.3
%
(3.6
)
pts
Net written premiums by market
Domestic
Select Accounts
$
729
$
799
(9
)
%
Middle Market
2,384
2,408
(1
)
National Accounts
290
301
(4
)
National Property and Other
445
428
4
Total Domestic
3,848
3,936
(2
)
International
277
254
9
Total
$
4,125
$
4,190
(2
)
%
First Quarter 2021 Results
(All comparisons vs. first quarter 2020, unless noted
otherwise)
Segment income for Business Insurance was $317 million
after-tax, an increase of $28 million. Segment income increased
primarily due to a higher underlying underwriting gain, higher net
favorable prior year reserve development and higher net investment
income, partially offset by higher catastrophe losses.
Combined ratio:
- The combined ratio of 103.5% increased 1.3 points due to higher
catastrophe losses (8.3 points), partially offset by a lower
underlying combined ratio (3.6 points) and higher net favorable
prior year reserve development (3.4 points).
- The underlying combined ratio of 93.7% improved by 3.6 points,
primarily reflecting earned pricing that exceeded loss cost trends,
as well as a net charge related to COVID-19 and related economic
conditions in the prior year quarter.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the workers’
compensation product line for multiple accident years, partially
offset by an increase to environmental reserves.
Net written premiums of $4.125 billion decreased 2%. The
benefits of continued strong retention and higher renewal rate
change were more than offset primarily by lower net written
premiums in the workers’ compensation product line due to the
impact of COVID-19 and related economic conditions on payrolls.
Bond
& Specialty Insurance Segment Financial Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
Underwriting gain:
$
107
$
92
$
15
Underwriting gain
includes:
Net favorable prior year reserve
development
15
—
15
Catastrophes, net of reinsurance
(24
)
(1
)
(23
)
Net investment income
59
55
4
Other income
3
4
(1
)
Segment income before income
taxes
169
151
18
Income tax expense
32
29
3
Segment income
$
137
$
122
$
15
Combined ratio
85.2
%
85.9
%
(0.7
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(2.1
)
pts
—
pts
(2.1
)
pts
Catastrophes, net of reinsurance
3.1
pts
0.2
pts
2.9
pts
Underlying combined ratio
84.2
%
85.7
%
(1.5
)
pts
Net written premiums
Domestic
Management Liability
$
444
$
401
11
%
Surety
200
215
(7
)
Total Domestic
644
616
5
International
79
47
68
Total
$
723
$
663
9
%
First Quarter 2021 Results
(All comparisons vs. first quarter 2020, unless noted
otherwise)
Segment income for Bond & Specialty Insurance was $137
million after-tax, an increase of $15 million. Segment income
increased primarily due to a higher underlying underwriting gain
and net favorable prior year reserve development, partially offset
by higher catastrophe losses. The underlying underwriting gain
benefited from higher business volumes.
Combined ratio:
- The combined ratio of 85.2% improved 0.7 points due to higher
net favorable prior year reserve development (2.1 points) and a
lower underlying combined ratio (1.5 points), partially offset by
higher catastrophe losses (2.9 points).
- The underlying combined ratio of 84.2% improved 1.5 points,
primarily reflecting earned pricing that exceeded loss cost trends
and a lower expense ratio resulting primarily from higher premium
volumes, partially offset by other loss activity, including the
impact of COVID-19 and related economic conditions.
- Net favorable prior year reserve development was driven by
better than expected loss experience in the surety product line for
multiple accident years.
Net written premiums of $723 million increased 9%, reflecting
continued strong retention and increased levels of renewal premium
change in management liability.
Personal
Insurance Segment Financial Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
Underwriting gain:
$
254
$
295
$
(41
)
Underwriting gain
includes:
Net favorable prior year reserve
development
168
22
146
Catastrophes, net of reinsurance
(305
)
(137
)
(168
)
Net investment income
119
103
16
Other income
21
22
(1
)
Segment income before income
taxes
394
420
(26
)
Income tax expense
80
84
(4
)
Segment income
$
314
$
336
$
(22
)
Combined ratio
90.3
%
88.2
%
2.1
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(5.9
)
pts
(0.8
)
pts
(5.1
)
pts
Catastrophes, net of reinsurance
10.8
pts
5.0
pts
5.8
pts
Underlying combined ratio
85.4
%
84.0
%
1.4
pts
Net written premiums
Domestic
Automobile
$
1,375
$
1,333
3
%
Homeowners and Other
1,144
1,017
12
Total Domestic
2,519
2,350
7
International
138
143
(3
)
Total
$
2,657
$
2,493
7
%
First Quarter 2021 Results
(All comparisons vs. first quarter 2020, unless noted
otherwise)
Segment income for Personal Insurance was $314 million
after-tax, a decrease of $22 million. Segment income decreased
primarily due to higher catastrophe losses and a lower underlying
underwriting gain, partially offset by higher net favorable prior
year reserve development and higher net investment income. The
underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 90.3% increased 2.1 points due to higher
catastrophe losses (5.8 points) and a higher underlying combined
ratio (1.4 points), partially offset by higher net favorable prior
year reserve development (5.1 points).
- The underlying combined ratio of 85.4% increased 1.4 points,
driven by higher losses in the homeowners and other product line
primarily attributable to a comparison to a low level of
non-catastrophe weather-related losses in the prior year quarter,
partially offset by lower losses in the automobile product line due
to a decrease in miles driven primarily attributable to COVID-19
and related economic conditions.
- Net favorable prior year reserve development was driven by
better than expected loss experience in domestic operations in both
the homeowners and other and automobile product lines for recent
accident years. Included in net favorable prior year reserve
development was a subrogation benefit of $62 million from Southern
California Edison Company related to the 2018 Woolsey wildfire in
California.
Net written premiums of $2.657 billion increased 7%. Domestic
Automobile net written premiums increased 3%, driven by strong
retention and higher levels of new business. Domestic Homeowners
and Other net written premiums increased 12%, driven by strong
retention, renewal premium change of 8% and higher levels of new
business.
Financial Supplement and Conference Call
The information in this press release should be read in
conjunction with the financial supplement that is available on our
website at www.travelers.com. Travelers management will discuss the
contents of this release and other relevant topics via webcast at 9
a.m. Eastern (8 a.m. Central) on Tuesday, April 20, 2021. Investors
can access the call via webcast at http://investor.travelers.com or
by dialing 1.844.895.1976 within the United States and
1.647.689.5389 outside the United States. Prior to the webcast, a
slide presentation pertaining to the quarterly earnings will be
available on the Company’s website.
Following the live event, replays will be available via webcast
for one year at http://investor.travelers.com and by telephone for
30 days by dialing 800.585.8367 within the United States or
416.621.4642 outside the United States. All callers should use
conference ID 4055419.
About Travelers
The Travelers Companies, Inc. (NYSE: TRV) is a leading provider
of property casualty insurance for auto, home and business. A
component of the Dow Jones Industrial Average, Travelers has
approximately 30,000 employees and generated revenues of
approximately $32 billion in 2020. 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 and insurance-related
services to its customers, primarily in the United States, as well
as in Canada, the United Kingdom, the Republic of Ireland and
throughout other parts of the world as a corporate member of
Lloyd’s.
Bond & Specialty Insurance - Bond & Specialty
Insurance provides surety, fidelity, management liability,
professional liability, and other property and casualty coverages
and related risk management services to its customers in the United
States and certain specialty insurance products in Canada, the
United Kingdom and the Republic of Ireland, as well as Brazil
through a joint venture, utilizing various degrees of
financially-based underwriting approaches.
Personal Insurance - Personal Insurance writes a broad
range of property and casualty insurance covering individuals’
personal risks, primarily in the United States, as well as in
Canada. The primary products of automobile and homeowners insurance
are complemented by a broad suite of related coverages.
* * * * *
Forward-Looking Statements
This press release contains, and management may make, certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other
than statements of historical facts, may be forward-looking
statements. Words such as “may,” “will,” “should,” “likely,”
“anticipates,” “expects,” “intends,” “plans,” “projects,”
“believes,” “views,” “estimates” and similar expressions are used
to identify these forward-looking statements. These statements
include, among other things, the Company’s statements about:
- the Company’s outlook, the impact of trends on its business and
its future results of operations and financial condition;
- the impact of COVID-19 and related economic conditions;
- the impact of legislative or regulatory actions or court
decisions taken in response to COVID-19 or otherwise;
- share repurchase plans;
- future pension plan contributions;
- the sufficiency of the Company’s asbestos and other
reserves;
- the impact of emerging claims issues as well as other insurance
and non-insurance litigation;
- the cost and availability of reinsurance coverage;
- catastrophe losses;
- the impact of investment, economic and underwriting market
conditions;
- strategic and operational initiatives to improve profitability
and competitiveness;
- the Company’s competitive advantages;
- new product offerings;
- the impact of new or potential trade regulations imposed by the
United States or other nations; and
- the impact of developments in the tort 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;
- 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 impact of COVID-19 and related risks, including with
respect to revenues, claims and claim adjustment expenses, general
and administrative expenses, investments, inflation, adverse
legislative and/or regulatory action, operational disruptions and
heightened cyber security risks and foreign currency exchange rate
changes;
- the intense competition that the Company faces, 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, 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;
- the Company is subject to additional risks associated with its
business outside the United States; and
- 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.
Technology and Intellectual Property
Risks
- the Company’s dependence on effective information technology
systems and on continuing to develop and implement improvements in
technology;
- the Company may experience difficulties with technology, data
and network security or outsourcing relationships; 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 commensurate with the Company’s desired ratings from
independent rating agencies, 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 and other factors, including the
ongoing level of uncertainty related to COVID-19.
Our forward-looking statements speak only as of the date of this
press release or as of the date they are made, and we undertake no
obligation to update forward-looking statements. For a more
detailed discussion of these factors, see the information under the
captions “Risk Factors,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and “Forward Looking
Statements” in the quarterly report on Form 10-Q filed with the
Securities and Exchange Commission (SEC) on April 20, 2021, and in
our most recent annual report on Form 10-K filed with the SEC on
February 11, 2021, in each case as updated by our periodic filings
with the SEC.
*****
GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF GAAP
MEASURES TO NON-GAAP MEASURES
The following measures are used by the Company’s management to
evaluate financial performance against historical results, to
establish performance targets on a consolidated basis and for other
reasons as discussed below. In some cases, these measures are
considered non-GAAP financial measures under applicable SEC rules
because they are not displayed as separate line items in the
consolidated financial statements or are not required to be
disclosed in the notes to financial statements or, in some cases,
include or exclude certain items not ordinarily included or
excluded in the most comparable GAAP financial measure.
Reconciliations of these measures to the most comparable GAAP
measures also follow.
In the opinion of the Company’s management, a discussion of
these measures provides investors, financial analysts, rating
agencies and other financial statement users with a better
understanding of the significant factors that comprise the
Company’s periodic results of operations and how management
evaluates the Company’s financial performance.
Some of these measures exclude net realized investment gains
(losses), net of tax, and/or net unrealized investment gains
(losses), net of tax, included in shareholders’ equity, which can
be significantly impacted by both discretionary and other economic
factors and are not necessarily indicative of operating trends.
Other companies may calculate these measures differently, and,
therefore, their measures may not be comparable to those used by
the Company’s management.
RECONCILIATION OF NET INCOME TO CORE INCOME AND CERTAIN OTHER
NON-GAAP MEASURES
Core income (loss) is consolidated net income (loss)
excluding the after-tax impact of net realized investment gains
(losses), discontinued operations, the effect of a change in tax
laws and tax rates at enactment, and cumulative effect of changes
in accounting principles when applicable. Segment income
(loss) is determined in the same manner as core income (loss)
on a segment basis. Management uses segment income (loss) to
analyze each segment’s performance and as a tool in making business
decisions. Financial statement users also consider core income
(loss) when analyzing the results and trends of insurance
companies. Core income (loss) per share is core income
(loss) on a per common share basis.
Reconciliation of Net Income to Core
Income less Preferred Dividends
Three Months Ended March
31,
($ in millions, after-tax)
2021
2020
Net income
$
733
$
600
Less: Net realized investment (gains)
losses
(34
)
76
Core income
$
699
$
676
Three Months Ended March
31,
($ in millions, pre-tax)
2021
2020
Net income
$
891
$
720
Less: Net realized investment (gains)
losses
(44
)
98
Core income
$
847
$
818
Twelve Months Ended December
31,
($ in millions, after-tax)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Net income
$
2,697
$
2,622
$
2,523
$
2,056
$
3,014
$
3,439
$
3,692
$
3,673
$
2,473
$
1,426
$
3,216
$
3,622
$
2,924
$
4,601
$
4,208
$
1,622
Less: Loss from discontinued
operations
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(439
)
Income from continuing
operations
2,697
2,622
2,523
2,056
3,014
3,439
3,692
3,673
2,473
1,426
3,216
3,622
2,924
4,601
4,208
2,061
Adjustments:
Net realized investment (gains) losses
(11
)
(85
)
(93
)
(142
)
(47
)
(2
)
(51
)
(106
)
(32
)
(36
)
(173
)
(22
)
271
(101
)
(8
)
(35
)
Impact of TCJA at enactment (1)
—
—
—
129
—
—
—
—
—
—
—
—
—
—
—
—
Core income
2,686
2,537
2,430
2,043
2,967
3,437
3,641
3,567
2,441
1,390
3,043
3,600
3,195
4,500
4,200
2,026
Less: Preferred dividends
—
—
—
—
—
—
—
—
—
1
3
3
4
4
5
6
Core income, less preferred
dividends
$
2,686
$
2,537
$
2,430
$
2,043
$
2,967
$
3,437
$
3,641
$
3,567
$
2,441
$
1,389
$
3,040
$
3,597
$
3,191
$
4,496
$
4,195
$
2,020
(1) Tax Cuts and Jobs Act of 2017
(TCJA)
Reconciliation of Net Income per Share to Core Income per
Share on a Basic and Diluted Basis
Three Months Ended March
31,
2021
2020
Basic income per
share
Net income
$
2.89
$
2.34
Adjustments:
Net realized investment (gains) losses,
after-tax
(0.14
)
0.30
Core income
$
2.75
$
2.64
Diluted income
per share
Net income
$
2.87
$
2.33
Adjustments:
Net realized investment (gains) losses,
after-tax
(0.14
)
0.29
Core income
$
2.73
$
2.62
Reconciliation of Segment Income to Total Core Income
Three Months Ended March
31,
($ in millions, after-tax)
2021
2020
Business Insurance
$
317
$
289
Bond & Specialty Insurance
137
122
Personal Insurance
314
336
Total segment income
768
747
Interest Expense and Other
(69
)
(71
)
Total core income
$
699
$
676
RECONCILIATION OF SHAREHOLDERS’ EQUITY TO ADJUSTED
SHAREHOLDERS’ EQUITY AND CALCULATION OF RETURN ON EQUITY AND CORE
RETURN ON EQUITY
Adjusted shareholders’ equity is shareholders’ equity
excluding net unrealized investment gains (losses), net of tax,
included in shareholders’ equity, net realized investment gains
(losses), net of tax, for the period presented, the effect of a
change in tax laws and tax rates at enactment (excluding the
portion related to net unrealized investment gains (losses)),
preferred stock and discontinued operations.
Reconciliation of Shareholders’ Equity
to Adjusted Shareholders’ Equity
As of March 31,
($ in millions)
2021
2020
Shareholders’ equity
$
28,269
$
25,204
Adjustments:
Net unrealized investment gains, net of
tax, included in shareholders’ equity
(2,817
)
(1,785
)
Net realized investment (gains) losses,
net of tax
(34
)
76
Adjusted shareholders’ equity
$
25,418
$
23,495
As of December 31,
($ in millions)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Shareholders’ equity
$
29,201
$
25,943
$
22,894
$
23,731
$
23,221
$
23,598
$
24,836
$
24,796
$
25,405
$
24,477
$
25,475
$
27,415
$
25,319
$
26,616
$
25,135
$
22,303
Adjustments:
Net unrealized investment (gains) losses,
net of tax, included in shareholders’ equity
(4,074
)
(2,246
)
113
(1,112
)
(730
)
(1,289
)
(1,966
)
(1,322
)
(3,103
)
(2,871
)
(1,859
)
(1,856
)
146
(620
)
(453
)
(327
)
Net realized investment (gains) losses,
net of tax
(11
)
(85
)
(93
)
(142
)
(47
)
(2
)
(51
)
(106
)
(32
)
(36
)
(173
)
(22
)
271
(101
)
(8
)
(35
)
Impact of TCJA at enactment
—
—
—
287
—
—
—
—
—
—
—
—
—
—
—
—
Preferred stock
—
—
—
—
—
—
—
—
—
—
(68
)
(79
)
(89
)
(112
)
(129
)
(153
)
Loss from discontinued operations
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
439
Adjusted shareholders’ equity
$
25,116
$
23,612
$
22,914
$
22,764
$
22,444
$
22,307
$
22,819
$
23,368
$
22,270
$
21,570
$
23,375
$
25,458
$
25,647
$
25,783
$
24,545
$
22,227
Return on equity is the ratio of annualized net income
(loss) less preferred dividends to average shareholders’ equity for
the periods presented. Core return on equity is the ratio of
annualized core income (loss) less preferred dividends to adjusted
average shareholders’ equity for the periods presented. In the
opinion of the Company’s management, these are important indicators
of how well management creates value for its shareholders through
its operating activities and its capital management.
Average shareholders’ equity is (a) the sum of total
shareholders’ equity excluding preferred stock at the beginning and
end of each of the quarters for the period presented divided by (b)
the number of quarters in the period presented times two.
Adjusted average shareholders’ equity is (a) the sum of
total adjusted shareholders’ equity at the beginning and end of
each of the quarters for the period presented divided by (b) the
number of quarters in the period presented times two.
Calculation of Return on Equity and
Core Return on Equity
Three Months Ended March
31,
($ in millions, after-tax)
2021
2020
Annualized net income
$
2,934
$
2,398
Average shareholders’ equity
28,735
25,574
Return on equity
10.2
%
9.4
%
Annualized core income
$
2,796
$
2,702
Adjusted average shareholders’ equity
25,272
23,596
Core return on equity
11.1
%
11.5
%
Average annual core return on equity over a period is the
ratio of: (a) the sum of core income less preferred dividends for
the periods presented to (b) the sum of: (1) the sum of the
adjusted average shareholders’ equity for all full years in the
period presented and (2) for partial years in the period presented,
the number of quarters in that partial year divided by four,
multiplied by the adjusted average shareholders’ equity of the
partial year.
Calculation of Core Return on
Equity
Three Months Ended March
31,
($ in millions)
2021
2020
Core income
$
699
$
676
Annualized core income
2,796
2,702
Adjusted average shareholders’ equity
25,272
23,596
Core return on equity
11.1
%
11.5
%
Twelve Months Ended December
31,
($ in millions)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Core income, less preferred dividends
$
2,686
$
2,537
$
2,430
$
2,043
$
2,967
$
3,437
$
3,641
$
3,567
$
2,441
$
1,389
$
3,040
$
3,597
$
3,191
$
4,496
$
4,195
$
2,020
Adjusted average shareholders’ equity
23,790
23,335
22,814
22,743
22,386
22,681
23,447
23,004
22,158
22,806
24,285
25,777
25,668
25,350
23,381
21,118
Core return on equity
11.3
%
10.9
%
10.7
%
9.0
%
13.3
%
15.2
%
15.5
%
15.5
%
11.0
%
6.1
%
12.5
%
14.0
%
12.4
%
17.7
%
17.9
%
9.6
%
RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN
ITEMS TO NET INCOME
Underwriting gain (loss) is net earned premiums and fee
income less claims and claim adjustment expenses and
insurance-related expenses. In the opinion of the Company’s
management, it is important to measure the profitability of each
segment excluding the results of investing activities, which are
managed separately from the insurance business. This measure is
used to assess each segment’s business performance and as a tool in
making business decisions. Pre-tax 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 margin or underlying underwriting gain.
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 2021 ranges from $20 million
to $30 million of losses before reinsurance and taxes.
Net favorable (unfavorable) prior year loss reserve
development is the increase or decrease in incurred claims and
claim adjustment expenses as a result of the re-estimation of
claims and claim adjustment expense reserves at successive
valuation dates for a given group of claims, which may be related
to one or more prior years. In the opinion of the Company’s
management, a discussion of loss reserve development is meaningful
to users of the financial statements as it allows them to assess
the impact between prior and current year development on incurred
claims and claim adjustment expenses, net and core income (loss),
and changes in claims and claim adjustment expense reserve levels
from period to period.
Components of Net Income
Three Months Ended March
31,
($ in millions, after-tax except as
noted)
2021
2020
Pre-tax underwriting gain excluding the
impact of catastrophes and net prior year loss reserve
development
$
735
$
594
Pre-tax impact of catastrophes
(835
)
(333
)
Pre-tax impact of net favorable prior year
loss reserve development
317
27
Pre-tax underwriting gain
217
288
Income tax expense on underwriting
results
51
68
Underwriting gain
166
220
Net investment income
590
519
Other income (expense), including interest
expense
(57
)
(63
)
Core income
699
676
Net realized investment gains (losses)
34
(76
)
Net income
$
733
$
600
COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED
RATIO
Combined ratio: For Statutory Accounting Practices (SAP),
the combined ratio is the sum of the SAP loss and LAE ratio and the
SAP underwriting expense ratio as defined in the statutory
financial statements required by insurance regulators. The combined
ratio, as used in this earnings release, is the equivalent of, and
is calculated in the same manner as, the SAP combined ratio except
that the SAP underwriting expense ratio is based on net written
premiums and the underwriting expense ratio as used in this
earnings release is based on net earned premiums.
For SAP, the loss and LAE ratio is the ratio of incurred losses
and loss adjustment expenses less certain administrative services
fee income to net earned premiums as defined in the statutory
financial statements required by insurance regulators. The loss and
LAE ratio as used in this earnings release is calculated in the
same manner as the SAP ratio.
For SAP, the underwriting expense ratio is the ratio of
underwriting expenses incurred (including commissions paid), less
certain administrative services fee income and billing and policy
fees and other, to net written premiums as defined in the statutory
financial statements required by insurance regulators. The
underwriting expense ratio as used in this earnings release, is the
ratio of underwriting expenses (including the amortization of
deferred acquisition costs), less certain administrative services
fee income, billing and policy fees and other, to net earned
premiums.
The combined ratio, loss and LAE ratio, and underwriting expense
ratio are used as indicators of the Company’s underwriting
discipline, efficiency in acquiring and servicing its business and
overall underwriting profitability. A combined ratio under 100%
generally indicates an underwriting profit. A combined ratio over
100% generally indicates an underwriting loss.
Underlying combined ratio represents the combined ratio
excluding the impact of net prior year reserve development and
catastrophes. The underlying combined ratio is an indicator of the
Company’s underwriting discipline and underwriting profitability
for the current accident year.
Other companies’ method of computing similarly titled measures
may not be comparable to the Company’s method of computing these
ratios.
Calculation of the Combined
Ratio
Three Months Ended March
31,
($ in millions, pre-tax)
2021
2020
Loss and loss
adjustment expense ratio
Claims and claim adjustment expenses
$
4,970
$
4,789
Less:
Policyholder dividends
11
12
Allocated fee income
38
41
Loss ratio numerator
$
4,921
$
4,736
Underwriting
expense ratio
Amortization of deferred acquisition
costs
$
1,207
$
1,178
General and administrative expenses
(G&A)
1,163
1,137
Less:
Non-insurance G&A
70
55
Allocated fee income
63
67
Billing and policy fees and other
27
28
Expense ratio numerator
$
2,210
$
2,165
Earned premium
$
7,386
$
7,229
Combined ratio (1)
Loss and loss adjustment expense ratio
66.7
%
65.5
%
Underwriting expense ratio
29.9
%
30.0
%
Combined ratio
96.6
%
95.5
%
(1) For purposes of computing ratios, billing and policy fees
and other (which are a component of other revenues) are allocated
as a reduction of underwriting expenses. In addition, fee income is
allocated as a reduction of losses and loss adjustment expenses and
underwriting expenses. These allocations are to conform the
calculation of the combined ratio with statutory accounting.
Additionally, general and administrative expenses include
non-insurance expenses that are excluded from underwriting
expenses, and accordingly are excluded in calculating the combined
ratio.
RECONCILIATION OF BOOK VALUE PER SHARE AND SHAREHOLDERS’
EQUITY TO CERTAIN NON-GAAP MEASURES
Book value per share is total common shareholders’ equity
divided by the number of common shares outstanding. Adjusted
book value per share is total common shareholders’ equity
excluding net unrealized investment gains and losses, net of tax,
included in shareholders’ equity, divided by the number of common
shares outstanding. In the opinion of the Company’s management,
adjusted book value per share is useful in an analysis of a
property casualty company’s book value per share as it removes the
effect of changing prices on invested assets (i.e., net unrealized
investment gains (losses), net of tax), which do not have an
equivalent impact on unpaid claims and claim adjustment expense
reserves. Tangible book value per share is adjusted book
value per share excluding the after-tax value of goodwill and other
intangible assets divided by the number of common shares
outstanding. In the opinion of the Company’s management, tangible
book value per share is useful in an analysis of a property
casualty company’s book value on a nominal basis as it removes
certain effects of purchase accounting (i.e., goodwill and other
intangible assets), in addition to the effect of changing prices on
invested assets.
Reconciliation of Shareholders’ Equity
to Tangible Shareholders’ Equity, Excluding Net Unrealized
Investment Gains, Net of Tax
As of
($ in millions, except per share
amounts)
March 31, 2021
December 31, 2020
March 31, 2020
Shareholders’ equity
$
28,269
$
29,201
$
25,204
Less: Net unrealized investment gains, net
of tax, included in shareholders’ equity
2,817
4,074
1,785
Shareholders’ equity, excluding net
unrealized investment gains, net of tax, included in shareholders’
equity
25,452
25,127
23,419
Less:
Goodwill
4,017
3,976
3,915
Other intangible assets
318
317
322
Impact of deferred tax on other intangible
assets
(63
)
(59
)
(47
)
Tangible shareholders’ equity
$
21,180
$
20,893
$
19,229
Common shares outstanding
251.5
252.4
252.8
Book value per share
$
112.42
$
115.68
$
99.69
Adjusted book value per share
101.21
99.54
92.63
Tangible book value per share
84.23
82.77
76.06
RECONCILIATION OF TOTAL CAPITALIZATION TO TOTAL
CAPITALIZATION EXCLUDING NET UNREALIZED INVESTMENT GAINS, NET OF
TAX
Total capitalization is the sum of total shareholders’
equity and debt. Debt-to-capital ratio excluding net unrealized
gain on investments, net of tax, included in shareholders’
equity, is the ratio of debt to total capitalization excluding
the after-tax impact of net unrealized investment gains and losses
included in shareholders’ equity. In the opinion of the Company’s
management, the debt-to-capital ratio is useful in an analysis of
the Company’s financial leverage.
As of
($ in millions)
March 31, 2021
December 31,
2020
Debt
$
6,550
$
6,550
Shareholders’ equity
28,269
29,201
Total capitalization
34,819
35,751
Less: Net unrealized investment gains, net
of tax, included in shareholders’ equity
2,817
4,074
Total capitalization excluding net
unrealized gain on investments, net of tax, included in
shareholders’ equity
$
32,002
$
31,677
Debt-to-capital ratio
18.8
%
18.3
%
Debt-to-capital ratio excluding net
unrealized investment gains, net of tax, included in shareholders’
equity
20.5
%
20.7
%
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.
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 11, 2021, and subsequent
periodic filings with the SEC.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210420005637/en/
Media: Patrick Linehan 917.778.6267
Institutional Investors: Abbe
Goldstein 917.778.6825
The Travelers Companies (NYSE:TRV)
Gráfico Histórico do Ativo
De Mar 2024 até Abr 2024
The Travelers Companies (NYSE:TRV)
Gráfico Histórico do Ativo
De Abr 2023 até Abr 2024