Return on Equity and Operating Return on
Equity of 11.6% and 12.5%, Respectively
- Net and operating income of $716
million and $701 million, respectively, declined from the prior
year quarter, primarily due to lower net favorable prior year
reserve development and higher non-catastrophe weather-related
losses.
- Strong consolidated underwriting
results, as reflected in combined ratio of 92.9% and underlying
combined ratio of 92.1%.
- Record net written premiums of $6.389
billion, up 3% from prior year quarter.
- Total capital returned to shareholders
of $755 million in the quarter, including $562 million of share
repurchases. Year-to-date total capital returned to shareholders of
$2.292 billion, including $1.721 billion of share repurchases.
- Book value per share of $86.04
increased 9% from end of prior year quarter and 8% from year-end
2015. Adjusted book value per share of $78.82 increased 6% and 5%,
respectively, from the same dates.
- Board of Directors declared quarterly
dividend per share of $0.67.
The Travelers Companies, Inc. today reported net income of $716
million, or $2.45 per diluted share, for the quarter ended
September 30, 2016, compared to $928 million, or $2.97 per diluted
share, in the prior year quarter. Operating income in the current
quarter was $701 million, or $2.40 per diluted share, compared to
$918 million, or $2.93 per diluted share, in the prior year
quarter. These declines were primarily driven by lower net
favorable prior year reserve development and higher non-catastrophe
weather-related losses. Per diluted share amounts benefited from
the impact of share repurchases.
Consolidated Highlights
($ in millions, except for per share amounts, and after-tax,
Three Months Ended September 30, Nine Months Ended
September 30, except for premiums & revenues)
2016 2015 Change 2016 2015
Change Net written premiums
$ 6,389 $
6,191 3
% $ 18,900
$ 18,257
4
%
Total revenues $ 6,961 $ 6,798
2 $ 20,432 $ 20,137 1
Net income $ 716 $ 928
(23 ) $ 2,071 $ 2,573
(20 ) per diluted share $ 2.45 $ 2.97 (18 ) $ 7.00 $
8.04 (13 )
Operating income $ 701 $
918 (24 ) $ 2,048 $
2,551 (20 ) per diluted share $ 2.40 $ 2.93
(18 ) $ 6.92 $ 7.97 (13 )
Diluted weighted average
289.8 311.0 (7 ) 293.6
317.7 (8 ) shares outstanding
Combined ratio 92.9 % 86.9
% 6.0 pts 92.8 % 88.9
% 3.9 pts Underlying combined ratio
92.1 % 88.8 % 3.3 pts
91.5 % 89.9 % 1.6 pts
Return on equity 11.6 % 15.4
% (3.8 ) pts 11.4 %
14.0 % (2.6 ) pts Operating
return on equity 12.5
% 16.2 %
(3.7 ) pts
12.2 %
14.9 % (2.7 )
pts Change from September 30,
December 31, September 30, December 31,
September 30, 2016 2015 2015
2015 2015 Book value per share $
86.04 $ 79.75 $ 79.00 8
%
9
%
Adjusted book value per share 78.82 75.39
74.35 5 6 See Glossary of Financial
Measures for definitions and the statistical supplement for
additional financial data.
“We were pleased with our third quarter operating income of $701
million and operating return on equity of 12.5%, which brings our
year-to-date operating return on equity to 12.2%,” commented Alan
Schnitzer, Chief Executive Officer. “Underwriting results for the
quarter reflected lower net favorable prior year reserve
development, higher non-catastrophe weather-related losses and
higher-than-expected losses associated with auto bodily injury but
nonetheless remained strong as reflected in our 92.9% combined
ratio. While returns from our high-quality fixed income portfolio
declined in line with our expectations due to the continued low
interest rate environment, returns from our non-fixed income
portfolio improved from recent quarters and were comparable to the
prior year quarter. In terms of capital management, we returned
$755 million of excess capital to shareholders, including $562
million of share repurchases. Year to date, we have returned nearly
$2.3 billion to shareholders, including over $1.7 billion in share
repurchases.
“We are encouraged that the markets in which we operate continue
to remain stable. In our commercial businesses, we are pleased with
our historically high levels of retention and positive renewal
premium change. Once again, these results were due to the
successful execution of our strategy to retain those accounts that
meet our return thresholds and to take appropriate measures to
improve profitability on those accounts that do not, while also
seeking attractive new business opportunities. In Personal
Insurance, growth in auto, driven by the success of our Quantum
Auto 2.0 product, and in homeowners, which benefited from our
ability to offer a compelling account solution to our customers and
agents, resulted in record net written premiums of over $2.2
billion for the quarter. While we experienced a somewhat
higher-than-expected level of bodily injury claim severity across
our auto product portfolio, we believe this was attributable to
environmental factors and was not product-specific. Accordingly, we
continue to believe that growth from Quantum Auto 2.0 is adding
meaningful economic value, and the product remains positioned to
generate appropriate returns over time.
“Our results this quarter and year to date reflect our continued
focus on delivering superior returns. We are confident that our
competitive advantages and ability to execute on our marketplace
strategies, together with our balance sheet strength and active
capital management strategy, will continue to enable us to invest
in our businesses while delivering industry-leading returns over
time.”
Consolidated
Results
($ in millions and pre-tax, unless noted otherwise)
Three Months Ended September 30, Nine Months Ended
September 30, 2016 2015 Change 2016
2015 Change Underwriting gain: $
408 $ 759 $ (351 )
$ 1,224 $ 1,890 $ (666
)
Underwriting gain
includes:
Net favorable prior year reserve development 39 199 (160 ) 507 649
(142 ) Catastrophes, net of reinsurance (89 ) (85 ) (4 ) (740 )
(468 ) (272 )
Net investment income 582
614 (32 ) 1,675 1,838
(163 ) Other income/(expense), including
interest expense (66 ) (81
) 15 (181 )
(232 ) 51 Operating
income before income taxes 924 1,292 (368
) 2,718 3,496 (778 ) Income
tax expense 223 374
(151 ) 670
945 (275 ) Operating
income 701 918 (217 ) 2,048
2,551 (503 ) Net realized investment gains
after income taxes 15 10
5 23
22 1 Net Income $
716 $ 928 $ (212
) $ 2,071 $ 2,573
$ (502 )
Combined
ratio 92.9 % 86.9 % 6.0
pts 92.8 % 88.9 % 3.9
pts
Impact on combined
ratio
Net favorable prior year reserve development (0.6 ) (3.3 ) 2.7 pts
(2.8 ) (3.6 ) 0.8 pts Catastrophes, net of reinsurance 1.4 1.4 -
pts 4.1 2.6 1.5 pts
Underlying combined ratio
92.1 % 88.8 % 3.3 pts
91.5 % 89.9 % 1.6 pts
Net written premiums Business and
International Insurance $ 3,583 $ 3,590 - % $ 11,177 $ 11,066 1 %
Bond & Specialty Insurance 566 565 - 1,594 1,577 1 Personal
Insurance 2,240 2,036 10 6,129
5,614 9
Total $ 6,389
$ 6,191 3 % $
18,900 $ 18,257 4
%
Third Quarter 2016
Results(All comparisons vs. third quarter 2015, unless
noted otherwise)
Net income of $716 million after-tax and operating income of
$701 million after-tax decreased $212 million and $217 million,
respectively, primarily due to lower net favorable prior year
reserve development and higher non-catastrophe weather-related
losses.
Underwriting results
- The combined ratio remained strong at
92.9%. It increased 6.0 points due to a higher underlying combined
ratio (3.3 points) and lower net favorable prior year reserve
development (2.7 points).
- The underlying combined ratio of 92.1%
increased 3.3 points, primarily driven by higher non-catastrophe
weather-related losses, higher loss estimates in the personal
automobile product line for bodily injury liability coverages,
including the re-estimation of losses incurred in the first six
months of 2016 and the impact of loss cost trends that modestly
exceeded earned pricing in the Business and International Insurance
segment, as expected, partially offset by lower levels of what the
Company defines as large losses.
- Net favorable prior year reserve
development in Business and International Insurance and Bond &
Specialty Insurance of $60 million pre-tax was partially offset by
net unfavorable prior year reserve development in Personal
Insurance of $21 million pre-tax. Catastrophe losses in the third
quarter of 2016 primarily resulted from hail storms in the Western
region of the United States and flooding in the Southeast region of
the United States.
Net investment income of $582 million pre-tax ($472 million
after-tax) decreased due to lower returns in the fixed income
portfolio, while returns in the non-fixed income portfolio were
comparable to the prior year quarter and improved from recent
periods. Fixed income returns declined in line with our
expectations due to lower reinvestment rates available in the
market.
Record net written premiums of $6.389 billion increased 3%
driven by growth in Personal Insurance.
Year-to-Date 2016
Results(All comparisons vs. year-to-date 2015, unless
noted otherwise)
Net income of $2.071 billion after-tax and operating income of
$2.048 billion after-tax decreased $502 million and $503 million,
respectively, primarily driven by higher catastrophe losses, a
lower underlying underwriting gain (i.e., excluding net favorable
prior year reserve development and catastrophe losses), lower net
investment income and lower net favorable prior year reserve
development in the Personal Insurance segment.
Underwriting results
- The combined ratio remained strong at
92.8%. It increased 3.9 points due to a higher underlying combined
ratio (1.6 points), higher catastrophe losses (1.5 points) and
lower net favorable prior year reserve development (0.8
points).
- The underlying combined ratio of 91.5%
increased 1.6 points, primarily driven by higher non-catastrophe
weather-related losses, as expected, the impact of loss cost trends
that modestly exceeded earned pricing in the Business and
International Insurance segment, as expected, and higher loss
estimates in the personal automobile product line for bodily injury
liability coverages, partially offset by lower levels of what the
Company defines as large losses.
- Net favorable prior year reserve
development occurred in all segments. Catastrophe losses included
the third quarter events discussed above, as well as wind and hail
storms in several regions of the United States and wildfires in
Canada in the second quarter of 2016 and wind and hail storms in
Texas and several other regions of the United States and winter
storms in the eastern United States in the first quarter of
2016.
Net investment income of $1.675 billion pre-tax ($1.353 billion
after-tax) decreased due to lower returns in both the fixed income
and non-fixed income portfolios. Fixed income returns declined due
to the lower reinvestment rates available in the market. Non-fixed
income returns, which remained positive, declined due to lower
private equity and real estate partnership returns.
Other income/(expense) included proceeds from the favorable
settlement of a claims-related legal matter in the first quarter of
2016.
Record net written premiums of $18.900 billion increased 4%
driven by growth in Personal Insurance.
Shareholders’ Equity
Shareholders’ equity of $24.439 billion increased 4% from
year-end 2015, primarily due to an increase in after-tax net
unrealized investment gains. After-tax net unrealized investment
gains were $2.049 billion ($3.135 billion pre-tax), compared to
$1.289 billion after-tax ($1.974 billion pre-tax) at year-end 2015.
Book value per share of $86.04 and adjusted book value per share of
$78.82 increased 8% and 5%, respectively, from year-end 2015.
The Company repurchased 4.8 million shares during the third
quarter at an average price of $117.28 per share for a total cost
of $562 million. Capacity remaining under the existing share
repurchase authorization was $1.684 billion at the end of the
quarter. At the end of third quarter 2016, statutory capital and
surplus was $20.609 billion and the ratio of debt-to-capital was
20.8%. The ratio of debt-to-capital excluding after-tax net
unrealized investment gains was 22.3%, well within the Company’s
target range of 15% to 25%.
The Board of Directors today declared a quarterly dividend of
$0.67 per share. This dividend is payable on December 30, 2016, to
shareholders of record as of the close of business on December 9,
2016.
Business and
International Insurance Segment Financial Results
($ in millions and pre-tax, unless noted otherwise)
Three
Months Ended September 30, Nine Months Ended September
30, 2016 2015 Change 2016
2015 Change Underwriting gain: $
128 $ 272 $ (144 )
$ 377 $ 730 $ (353
)
Underwriting gain
includes:
Net favorable prior year reserve development 19 49 (30 ) 250 229 21
Catastrophes, net of reinsurance (72 ) (39 ) (33 ) (432 ) (246 )
(186 )
Net investment income 445 471
(26 ) 1,280 1,412 (132 )
Other income 10 5
5 51
18 33 Operating income before
income taxes 583 748 (165 )
1,708 2,160 (452 ) Income tax
expense 126 202
(76 ) 382
556 (174 ) Operating
income $ 457 $ 546
$ (89 ) $ 1,326 $
1,604 $ (278 )
Combined ratio 96.1 % 92.2
% 3.9 pts 96.2 % 92.9
% 3.3 pts
Impact on combined
ratio
Net favorable prior year reserve development (0.5 ) (1.4 ) 0.9 pts
(2.3 ) (2.1 ) (0.2 ) pts Catastrophes, net of reinsurance 1.9 1.1
0.8 pts 4.0 2.2 1.8 pts
Underlying combined ratio
94.7 % 92.5 % 2.2 pts
94.5 % 92.8 % 1.7 pts
Net written premiums by market Domestic
Select Accounts $ 657 $ 654 - % $ 2,090 $ 2,085 - % Middle Market
1,616 1,597 1 4,939 4,774 3 National Accounts 245 254 (4 ) 799 781
2 First Party 399 411 (3 ) 1,223 1,203 2 Specialized Distribution
263 277 (5 ) 851
845 1 Total Domestic 3,180 3,193 - 9,902 9,688 2
International 403 397 2 1,275
1,378 (7 )
Total $ 3,583
$ 3,590 - % $
11,177 $ 11,066 1
%
Third Quarter 2016
Results(All comparisons vs. third quarter 2015, unless
noted otherwise)
Operating income for Business and International Insurance was
$457 million after-tax, a decrease of $89 million, primarily due to
a lower underlying underwriting gain, higher catastrophe losses and
lower net favorable prior year reserve development.
Underwriting results
- The combined ratio of 96.1% increased
3.9 points due to a higher underlying combined ratio (2.2 points),
lower net favorable prior year reserve development (0.9 points) and
higher catastrophe losses (0.8 points).
- The underlying combined ratio of 94.7%
increased 2.2 points, primarily driven by higher non-catastrophe
weather-related losses, the impact of loss cost trends that
modestly exceeded earned pricing, as expected, and a modestly
higher expense ratio, partially offset by lower levels of what the
Company defines as large losses.
- Net favorable prior year reserve
development primarily resulted from better than expected loss
experience in the Company’s domestic operations in (i) the general
liability product line for both primary and excess coverages for
accident years 2006 and prior as well as accident years 2014 and
2015 (excluding an increase to asbestos reserves discussed below),
(ii) the workers’ compensation product line for accident years 2006
and prior as well as accident year 2015 and (iii) the commercial
auto product line for accident years 2011 and prior, partially
offset by (iv) a $225 million increase to asbestos reserves.
- The asbestos reserve strengthening,
which resulted from the Company’s annual in-depth asbestos claim
review that was completed in the third quarter, was driven by
increases in the Company’s estimate for projected settlement and
defense costs related to a broad number of policyholders. The
increase in the estimate of projected settlement and defense costs
resulted from recent payment trends that continue to be higher than
previously anticipated. While the overall view of the underlying
asbestos environment is essentially unchanged from recent periods,
there remains a high degree of uncertainty with respect to future
exposure to asbestos claims.
Net written premiums of $3.583 billion were comparable with the
prior year quarter.
Year-to-Date 2016
Results(All comparisons vs. year-to-date 2015, unless
noted otherwise)
Operating income for Business and International Insurance was
$1.326 billion after-tax, a decrease of $278 million, primarily
driven by higher catastrophe losses, a lower underlying
underwriting gain and lower net investment income, partially offset
by higher other income and higher net favorable prior year reserve
development. The prior year period also included a $12 million tax
benefit.
Underwriting results
- The combined ratio of 96.2% increased
3.3 points due to higher catastrophe losses (1.8 points) and a
higher underlying combined ratio (1.7 points), partially offset by
higher net favorable prior year reserve development (0.2
points).
- The underlying combined ratio of 94.5%
increased 1.7 points, primarily driven by the impact of loss cost
trends that modestly exceeded earned pricing, as expected, higher
non-catastrophe weather-related losses and a modestly higher
expense ratio, partially offset by lower levels of what the Company
defines as large losses.
- Net favorable prior year reserve
development primarily resulted from better than expected loss
experience in the Company’s domestic operations in (i) the workers’
compensation product line for accident years 2006 and prior as well
as accident year 2015 and (ii) the general liability product line,
related to both primary and excess coverages for accident years
2006 and prior as well as accident years 2011, 2013 and 2015
(excluding an increase to asbestos and environmental reserves
discussed below) and (iii) the commercial automobile product line
for accident years 2011 and prior, as well as in the Company’s
international operations in Europe and Canada. These factors
contributing to net favorable prior year reserve development were
partially offset by a $225 million increase to asbestos reserves
and by an $82 million increase to environmental reserves.
Other income included proceeds from the favorable settlement of
a claims-related legal matter in the first quarter of 2016.
Net written premiums of $11.177 billion increased 1% driven by
continued high retention rates, positive renewal premium changes
and an increase in new business volume in domestic Business
Insurance.
Bond &
Specialty Insurance Segment Financial Results
($ in millions and pre-tax, unless noted otherwise)
Three Months Ended September 30,
Nine Months Ended September 30, 2016 2015
Change 2016 2015 Change
Underwriting gain: $ 156 $ 229
$ (73 ) $ 554 $
483 $ 71
Underwriting gain
includes:
Net favorable prior year reserve development 41 103 (62 ) 251 178
73 Catastrophes, net of reinsurance (1 ) (1 ) - (5 ) (3 ) (2 )
Net investment income 53 56 (3
) 156 169 (13 ) Other
income 4 4 - 13 14 (1
) Operating
income before income taxes 213 289 (76
) 723 666 57 Income tax expense
67 93 (26
) 231 195
36 Operating income $ 146
$ 196 $ (50 ) $
492 $ 471 $ 21
Combined ratio 70.1
% 57.1 % 13.0
pts
64.0 % 68.8 % (4.8 )
pts
Impact on combined
ratio
Net favorable prior year reserve development (7.5 ) pts (19.1 ) pts
11.6 pts (16.1 ) pts (11.4 ) pts (4.7 ) pts Catastrophes, net of
reinsurance 0.2 pts 0.1 pts 0.1 pts 0.3 pts 0.2 pts 0.1 pts
Underlying combined ratio 77.4 % 76.1
% 1.3
pts
79.8 % 80.0 % (0.2 )
pts
Net written premiums Management
Liability $ 354 $ 350 1 % $ 1,010 $ 993 2 % Surety 212
215 (1 ) 584 584 -
Total $ 566 $ 565
- %
$
1,594
$
1,577
1 %
Third Quarter 2016
Results(All comparisons vs. third quarter 2015, unless
noted otherwise)
Operating income for Bond & Specialty Insurance was $146
million after-tax, a decrease of $50 million, primarily driven by
lower net favorable prior year reserve development.
Underwriting results
- The combined ratio of 70.1% increased
13.0 points due to lower net favorable prior year reserve
development (11.6 points), a higher underlying combined ratio (1.3
points) and higher catastrophe losses (0.1 points).
- The underlying combined ratio was
strong at 77.4%.
- Net favorable prior year reserve
development resulted from better than expected loss experience in
the fidelity and surety product line for accident years 2009
through 2015.
Net written premiums of $566 million were comparable to the
prior year quarter.
Year-to-Date 2016
Results(All comparisons vs. year-to-date 2015, unless
noted otherwise)
Operating income for Bond & Specialty Insurance was $492
million after-tax, an increase of $21 million, primarily driven by
higher net favorable prior year reserve development, partially
offset by lower net investment income. The prior year period also
included a $16 million tax benefit.
Underwriting results
- The combined ratio of 64.0% improved
4.8 points due to higher net favorable prior year reserve
development (4.7 points) and a lower underlying combined ratio (0.2
points), partially offset by higher catastrophe losses (0.1
points).
- The underlying combined ratio was
strong at 79.8%.
- Net favorable prior year reserve
development primarily resulted from better than expected loss
experience in (i) the fidelity and surety product line for accident
years 2009 through 2015 and (ii) the general liability product line
for accident years 2007 through 2011.
Net written premiums of $1.594 billion increased 1%, primarily
driven by continued high retention rates, positive renewal premium
changes and an increase in new business volume in Management
Liability.
Personal
Insurance Segment Financial Results
($ in millions and pre-tax, unless noted otherwise)
Three Months Ended September 30, Nine
Months Ended September 30, 2016 2015
Change 2016 2015 Change
Underwriting gain: $ 124 $ 258
$ (134 ) $ 293 $
677 $ (384 )
Underwriting gain
includes:
Net favorable/(unfavorable) prior year
reservedevelopment
(21 ) 47 (68 ) 6 242 (236 ) Catastrophes, net of reinsurance (16 )
(45 ) 29 (303 ) (219 ) (84 )
Net investment income
84 87 (3 ) 239 257
(18 ) Other income
14
9 5
42 33 9
Operating income before income taxes 222 354
(132 ) 574 967 (393 )
Income tax expense 64 113
(49 ) 161
300 (139 ) Operating
income $ 158 $ 241
$ (83 ) $ 413 $
667 $ (254 )
Combined ratio 92.9 % 85.1
% 7.8 pts 94.1 % 86.6
% 7.5 pts
Impact on combined
ratio
Net (favorable)/unfavorable prior
yearreserve development
1.1 pts (2.6 ) pts 3.7 pts (0.1 ) pts (4.5 ) pts 4.4 pts
Catastrophes, net of reinsurance 0.8 pts 2.5 pts (1.7 ) pts 5.3 pts
4.1 pts 1.2 pts
Underlying combined ratio 91.0
% 85.2 % 5.8 pts 88.9
% 87.0 % 1.9 pts
Net written premiums Agency Automobile1 $ 1,095 $ 934
17 % $ 3,045 $ 2,646 15 % Agency Homeowners & Other1 1,058
1,035 2 2,854 2,793 2 Direct to Consumer 87 67
30 230 175 31
Total
$ 2,240 $ 2,036 10
% $ 6,129 $ 5,614
9 % 1 Represents business sold through agents,
brokers and other intermediaries, and excludes direct to consumer.
Third Quarter 2016
Results(All comparisons vs. third quarter 2015, unless
noted otherwise)
Operating income for Personal Insurance was $158 million
after-tax, a decrease of $83 million, primarily driven by a lower
underlying underwriting gain and net unfavorable prior year reserve
development compared to net favorable prior year reserve
development in the prior year quarter, partially offset by lower
catastrophe losses.
Underwriting results
- The combined ratio of 92.9% increased
7.8 points due to a higher underlying combined ratio (5.8 points)
and net unfavorable prior year reserve development compared to net
favorable prior year reserve development in the prior year quarter
(3.7 points), partially offset by lower catastrophe losses (1.7
points).
- The underlying combined ratio of 91.0%
increased 5.8 points, primarily driven by higher non-catastrophe
weather-related losses, higher loss estimates in the automobile
product line for bodily injury liability coverages, including the
re-estimation of losses incurred in the first six months of 2016,
and the impact of a significant level of new business in recent
years, partially offset by a lower expense ratio.
- While net unfavorable prior year
reserve development primarily resulted from higher than expected
loss experience in a modest number of claims in the Homeowners and
Other product line for liability coverages for accident years 2013
and 2014, overall these accident years have developed net favorably
since inception.
Record net written premiums of $2.240 billion increased 10%.
Agency Automobile net written premiums grew 17% with an increase in
policies in force of 12% from the prior year period, driven by the
success of Quantum Auto 2.0. Agency Homeowners & Other net
written premiums increased 2% with an increase in policies in force
of 3% from the prior year period.
Year-to-Date 2016
Results(All comparisons vs. year-to-date 2015, unless
noted otherwise)
Operating income for Personal Insurance was $413 million
after-tax, a decrease of $254 million, primarily driven by lower
net favorable prior year reserve development, higher catastrophe
losses and a lower underlying underwriting gain. The prior year
period included a $4 million tax benefit.
Underwriting results
- The combined ratio of 94.1% increased
7.5 points due to lower net favorable prior year reserve
development (4.4 points), a higher underlying combined ratio (1.9
points) and higher catastrophe losses (1.2 points).
- The underlying combined ratio remained
strong at 88.9% and increased 1.9 points, primarily driven by
higher loss estimates in the automobile product line for bodily
injury liability coverages, higher non-catastrophe weather-related
losses and the impact of a significant level of new business in
recent years, partially offset by a lower expense ratio.
Record net written premiums of $6.129 billion increased 9% due
to the same factors as discussed above for third quarter 2016.
Financial Supplement and Conference Call
The information in this press release should be read in
conjunction with a financial supplement that is available on our
website at www.travelers.com. Travelers management will discuss the
contents of this release and other relevant topics via webcast at 9
a.m. Eastern (8 a.m. Central) on Thursday, October 20, 2016.
Investors can access the call via webcast at
http://investor.travelers.com or by dialing 1-800-732-5617 within
the U.S. and 1-212-231-2918 outside the U.S. (use passcode 14788
for both the U.S. and international calls). Prior to the webcast, a
slide presentation pertaining to the quarterly earnings will be
available on the Company’s website.
Following the live event, an audio playback of the webcast and
the slide presentation will be available on the same website. An
audio playback can also be accessed by phone at 1-800-633-8284
within the U.S. and 1-402-977-9140 outside the U.S. (use
reservation 21817065 for both the U.S. and international
calls).
About Travelers
The Travelers Companies, Inc. (NYSE:TRV) is a leading provider
of property casualty insurance for auto, home and business. A
component of the Dow Jones Industrial Average, Travelers has
approximately 30,000 employees and generated revenues of
approximately $27 billion in 2015. 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 and International Insurance – The Business and
International Insurance segment offers a broad array of property
and casualty insurance and insurance related services to its
clients, primarily in the United States and in Canada, as well as
in the United Kingdom, the Republic of Ireland, Brazil and
throughout other parts of the world as a corporate member of
Lloyd’s.
Bond & Specialty Insurance – The Bond & Specialty
Insurance segment provides surety, crime, management and
professional liability, and cyber risk coverages and related risk
management services to a wide range of primarily domestic
customers, utilizing various degrees of financially-based
underwriting approaches.
Personal Insurance – The Personal Insurance segment
writes a broad range of property and casualty insurance covering
individuals’ personal risks. The primary products of automobile and
homeowners insurance are complemented by a broad suite of related
coverages.
* * * * *
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,” “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 and its future
results of operations and financial condition (including, among
other things, anticipated premium volume, premium rates, margins,
net and operating income, investment income and performance, loss
costs, return on equity and expected current returns and combined
ratios);
- 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
(including rapid changes in commodity prices, such as a significant
decline in oil and gas prices, as well as fluctuations in foreign
currency exchange rates) and underwriting market conditions;
and
- strategic initiatives to improve
profitability and competitiveness.
The Company cautions investors that such statements are subject
to risks and uncertainties, many of which are difficult to predict
and generally beyond the Company’s control, that could cause actual
results to differ materially from those expressed in, or implied or
projected by, the forward-looking information and statements.
Some of the factors that could cause actual results to differ
include, but are not limited to, the following:
- catastrophe losses could materially and
adversely affect the Company’s results of operations, its financial
position and/or liquidity, and could adversely impact the Company’s
ratings, the Company’s ability to raise capital and the
availability and cost of reinsurance;
- during or following a period of
financial market disruption, economic downturn or prolonged period
of slow economic growth, the Company’s business could be materially
and adversely affected;
- if actual claims exceed the Company’s
claims and claim adjustment expense reserves, or if changes in the
estimated level of claims and claim adjustment expense reserves are
necessary, including as a result of, among other things, changes in
the legal, regulatory and economic environments in which the
Company operates, the Company’s financial results could be
materially and adversely affected;
- the Company’s investment portfolio may
suffer material realized or unrealized losses. The Company’s
investment portfolio may also suffer reduced or low returns,
particularly if interest rates remain at historically low levels
for a prolonged period of time or decline further as a result of
actions taken by central banks (a risk which potentially could be
increased by, among other things, the United Kingdom’s expected
withdrawal from the European Union);
- the Company’s business could be harmed
because of its potential exposure to asbestos and environmental
claims and related litigation;
- the Company is exposed to, and may face
adverse developments involving, mass tort claims such as those
relating to exposure to potentially harmful products or
substances;
- the effects of emerging claim and
coverage issues on the Company’s business are uncertain;
- the intense competition that the
Company faces could harm its ability to maintain or increase its
business volumes and its profitability;
- disruptions to the Company’s
relationships with its independent agents and brokers could
adversely affect the Company;
- the Company may not be able to collect
all amounts due to it from reinsurers and reinsurance coverage may
not be available to the Company in the future at commercially
reasonable rates or at all;
- the Company is exposed to credit risk
in certain of its business and investment operations including
through the utilization of reinsurance or structured settlements,
as well as guarantees or indemnifications from third parties;
- within the United States, the Company’s
businesses are heavily regulated by the states in which it conducts
business, including licensing and supervision, and changes in
regulation may reduce the Company’s profitability and limit its
growth;
- changes in federal regulation could
impose significant burdens on the Company and otherwise adversely
impact the Company’s results;
- a downgrade in the Company’s
claims-paying and financial strength ratings could adversely impact
the Company’s business volumes, adversely impact the Company’s
ability to access the capital markets and increase the Company’s
borrowing costs;
- the inability of the Company’s
insurance subsidiaries to pay dividends to the Company’s holding
company in sufficient amounts would harm the Company’s ability to
meet its obligations, pay future shareholder dividends or make
future share repurchases;
- the Company’s efforts to develop new
products or expand in targeted markets may not be successful and
may create enhanced risks;
- the Company may be adversely affected
if its pricing and capital models provide materially different
indications than actual results;
- the Company’s business success and
profitability depend, in part, on effective information technology
systems and on continuing to develop and implement improvements in
technology;
- if the Company experiences difficulties
with technology, data and network security, including as a result
of cyber attacks, outsourcing relationships, or cloud-based
technology, the Company’s ability to conduct its business could be
negatively impacted;
- the Company is also subject to a number
of additional risks associated with its business outside the United
States, including foreign currency exchange fluctuations and
restrictive regulations, as well as the risks and uncertainties
associated with the United Kingdom’s expected withdrawal from the
European Union;
- regulatory changes outside of the
United States, including in Canada and the European Union, could
adversely impact the Company’s results of operations and limit its
growth;
- 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 could reduce the Company’s
future profitability;
- acquisitions and integration of
acquired businesses may result in operating difficulties and other
unintended consequences;
- the Company could be adversely affected
if its controls designed to ensure compliance with guidelines,
policies and legal and regulatory standards are not effective;
- the Company’s businesses may be
adversely affected if it is unable to hire and retain qualified
employees;
- intellectual property is important to
the Company’s business, and the Company may be unable to protect
and enforce its own intellectual property or the Company may be
subject to claims for infringing the intellectual property of
others;
- changes to existing accounting
standards may adversely impact the Company’s reported results;
- changes in U.S. tax laws or in the tax
laws of other jurisdictions in which the Company operates could
adversely impact the Company; and
- the Company’s 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, funding of the Company’s qualified
pension plan, capital requirements of the Company’s operating
subsidiaries, legal requirements, regulatory constraints, other
investment opportunities (including mergers and acquisitions and
related financings), market conditions and other factors.
Our forward-looking statements speak only as of the date of this
press release or as of the date they are made, and we undertake no
obligation to update forward-looking statements. For a more
detailed discussion of these factors, see the information under the
captions “Risk Factors” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in our most
recent annual report on Form 10-K filed with the Securities and
Exchange Commission (SEC) on February 11, 2016, as updated by our
periodic filings with the SEC.
*****
GLOSSARY OF FINANCIAL MEASURES AND
RECONCILIATIONS OF NON-GAAP MEASURES TO GAAP MEASURES
The following measures are used by the Company’s management to
evaluate financial performance against historical results and
establish targets on a consolidated basis. In some cases, these
measures are considered non-GAAP financial measures under
applicable SEC rules because they are not displayed as separate
line items in the consolidated financial statements or are not
required to be disclosed in the notes to financial statements or,
in some cases, include or exclude certain items not ordinarily
included or excluded in the most comparable GAAP financial measure.
Reconciliations of non-GAAP measures to their most directly
comparable GAAP measures also follow.
In the opinion of the Company’s management, a discussion of
these measures provides investors, financial analysts, rating
agencies and other financial statement users with a better
understanding of the significant factors that comprise the
Company’s periodic results of operations and how management
evaluates the Company’s financial performance. Internally, the
Company’s management uses these measures to evaluate performance
against historical results, to establish financial targets on a
consolidated basis and for other reasons, which are discussed
below.
Some of these measures exclude net realized investment gains
(losses), net of tax, and/or net unrealized investment gains
(losses), net of tax, which can be significantly impacted by both
discretionary and other economic factors and are not necessarily
indicative of operating trends.
Other companies may calculate these measures differently, and,
therefore, their measures may not be comparable to those used by
the Company’s management.
RECONCILIATION OF OPERATING INCOME AND CERTAIN OTHER NON-GAAP
MEASURES TO NET INCOME
Operating income is net income excluding the after-tax
impact of net realized investment gains (losses) and discontinued
operations. Management uses operating income to analyze each
segment’s performance and as a tool in making business decisions.
Financial statement users also consider operating income when
analyzing the results and trends of insurance companies.
Operating earnings per share is operating income on a per
common share basis.
Reconciliation of Operating Income less
Preferred Dividends to Net Income
Three Months Ended
Nine Months Ended September 30,
September 30, ($ in millions, pre-tax)
2016 2015
2016 2015
Operating income $
924 $ 1,292 $ 2,718 $
3,496 Net realized investment gains
23 15
33 35
Net income
$ 947
$ 1,307 $
2,751 $ 3,531
Three Months Ended Nine
Months Ended September 30, September 30, ($ in
millions, after-tax)
2016
2015 2016
2015 Operating income $
701 $ 918 $ 2,048 $
2,551 Net realized investment gains
15 10
23 22
Net income
$ 716
$ 928 $
2,071 $ 2,573
Twelve Months Ended December 31,
($ in millions, after-tax)
2015
2014 2013
2012 2011
2010 2009
2008
2007 2006
2005 Operating income, less preferred
dividends $ 3,437 $ 3,641 $ 3,567 $ 2,441 $ 1,389 $ 3,040 $ 3,597 $
3,191 $ 4,496 $ 4,195 $ 2,020 Preferred dividends
- - -
- 1
3 3 4
4 5 6
Operating income 3,437 3,641
3,567 2,441 1,390 3,043 3,600
3,195 4,500 4,200 2,026 Net realized
investment gains/(losses) 2
51 106 32
36 173
22 (271 ) 101
8 35
Income
from continuing operations 3,439 3,692
3,673 2,473 1,426 3,216 3,622
2,924 4,601 4,208 2,061 Discontinued
operations - -
- -
- - -
- - -
(439 )
Net income
$ 3,439 $ 3,692
$ 3,673 $ 2,473
$ 1,426 $
3,216 $ 3,622
$ 2,924 $ 4,601
$ 4,208 $
1,622
Reconciliation of Operating Earnings
per Share to Net Income per Share on a Basic and Diluted
Basis
Three Months Ended
Nine Months Ended September 30,
September 30, 2016
2015 2016
2015
Basic earnings
per share
Operating income $ 2.43 $ 2.96
$ 7.01 $ 8.06
Net realized investment gains
0.05 0.04
0.08
0.07
Net income $ 2.48
$ 3.00
$ 7.09 $
8.13
Diluted earnings
per share
Operating income $ 2.40 $ 2.93
$ 6.92 $ 7.97 Net realized investment
gains 0.05
0.04 0.08
0.07
Net income $
2.45 $ 2.97
$ 7.00 $
8.04
Reconciliation of Operating Income by
Segment to Total Operating Income
Three Months Ended Nine
Months Ended September 30, September 30, ($ in
millions, after-tax)
2016
2015 2016
2015 Business and International
Insurance $ 457 $ 546 $ 1,326 $ 1,604 Bond & Specialty
Insurance 146 196 492 471 Personal Insurance
158 241
413
667 Total segment operating income 761 983 2,231 2,742
Interest Expense and Other (60 )
(65 ) (183
) (191 )
Total operating income
$ 701
$ 918
$ 2,048 $
2,551
RECONCILIATION OF ADJUSTED SHAREHOLDERS’ EQUITY TO
SHAREHOLDERS’ EQUITY AND OPERATING RETURN ON EQUITY TO RETURN ON
EQUITY
Adjusted shareholders’ equity is shareholders’ equity
excluding net unrealized investment gains (losses), net of tax, net
realized investment gains (losses), net of tax, for the period
presented, preferred stock and discontinued operations.
Reconciliation of Adjusted
Shareholders’ Equity to Shareholders’ Equity
As of September 30, ($ in millions)
2016
2015 Adjusted shareholders' equity $
22,367 $ 22,597 Net unrealized investment
gains, net of tax 2,049 1,414 Net realized investment gains, net of
tax 23
22
Shareholders' equity
$ 24,439
$ 24,033 As of December 31, ($
in millions)
2015 2014
2013 2012
2011 2010 2009
2008 2007
2006 2005
Adjusted shareholders' equity $ 22,307
$ 22,819 $ 23,368 $
22,270 $ 21,570 $ 23,375
$ 25,458 $ 25,647 $
25,783 $ 24,545 $ 22,227 Net
unrealized investment gains/(losses), net of tax 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 2 51 106 32 36 173 22 (271 ) 101 8 35
Preferred stock - - - - - 68 79 89 112 129 153 Discontinued
operations - - -
- - - -
- - - (439
)
Shareholders' equity $ 23,598
$ 24,836 $ 24,796
$ 25,405 $ 24,477
$ 25,475 $ 27,415
$ 25,319 $ 26,616
$ 25,135 $ 22,303
Return on equity is the ratio of annualized net income
less preferred dividends to average shareholders’ equity for the
periods presented. Operating return on equity is the ratio
of annualized operating income less preferred dividends to adjusted
average shareholders’ equity for the periods presented. In the
opinion of the Company’s management, these are important indicators
of how well management creates value for its shareholders through
its operating activities and its capital management.
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
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 Operating Return on
Equity and Return on Equity
Three Months Ended
Nine Months Ended September 30, September 30,
($ in millions, after-tax)
2016
2015
2016 2015
Annualized operating income $ 2,802 $ 3,671 $ 2,730 $ 3,401
Adjusted average shareholders' equity
22,373 22,676
22,373
22,750
Operating return on equity
12.5 %
16.2 %
12.2 % 14.9
% Annualized net income $ 2,863 $ 3,715 $
2,761 $ 3,431 Average shareholders' equity
24,576 24,077
24,300
24,467
Return on equity
11.6 %
15.4 %
11.4 % 14.0
%
Average annual operating return on equity over a period
is the ratio of:a) the sum of operating income less preferred
dividends for the periods presented tob) the sum of: 1) the sum of
the adjusted average shareholders’ equity for all full years in the
period presented, and 2) for partial years in the period presented,
the number of quarters in that partial year divided by four,
multiplied by the adjusted average shareholders’ equity of the
partial year.
Calculation of Average Annual Operating
Return on Equity from January 1, 2005 through September 30,
2016
Nine Months Ended September
30, Twelve Months
Ended December 31, ($ in millions)
2016 2015
2015 2014
2013 2012
2011
2010 2009
2008 2007
2006
2005 Operating income, less preferred
dividends $ 2,048 $ 2,551 $ 3,437 $ 3,641 $ 3,567 $ 2,441 $ 1,389 $
3,040 $ 3,597 $ 3,191 $ 4,496 $ 4,195 $ 2,020 Annualized operating
income 2,730 3,401 Adjusted average shareholders' equity 22,373
22,750 22,681 23,447 23,004 22,158 22,806 24,285 25,777 25,668
25,350 23,381 21,118 Operating return on equity
12.2 % 14.9 % 15.2 %
15.5 % 15.5 %
11.0 % 6.1 %
12.5 % 14.0 % 12.4
% 17.7 % 17.9 %
9.6 %
Average annual operating return on
equity 13.4 % for the period Jan. 1, 2005
through September 30, 2016
RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN
ITEMS TO NET INCOME
Underwriting gain is net earned premiums and fee income
less claims and claim adjustment expenses and insurance-related
expenses. In the opinion of the Company’s management, it is
important to measure the profitability of each segment excluding
the results of investing activities, which are managed separately
from the insurance business. This measure is used to assess each
segment’s business performance and as a tool in making business
decisions. Pre-tax underwriting gain, excluding the
impact of catastrophes and net favorable prior year loss reserve
development, is the underwriting gain adjusted to exclude
claims and claim adjustment expenses, reinstatement premiums and
assessments related to catastrophes and loss reserve development
related to time periods prior to the current year. In the opinion
of the Company’s management, this measure is meaningful to users of
the financial statements to understand the Company’s periodic
earnings and the variability of earnings caused by the
unpredictable nature (i.e., the timing and amount) of catastrophes
and loss reserve development. This measure is also referred to as
underlying underwriting margin or underlying underwriting
gain.
A catastrophe is a severe loss, resulting from natural
and man-made events, including risks such as fire, earthquake,
windstorm, explosion, terrorism and other similar events. Each
catastrophe has unique characteristics and catastrophes are not
predictable as to timing or amount. Their effects are included in
net and operating income and claims and claim adjustment expense
reserves upon occurrence. A catastrophe may result in the payment
of reinsurance reinstatement premiums and assessments from various
pools. In the opinion of the Company’s management, a discussion of
the impact of catastrophes is meaningful to users of the financial
statements to understand the Company’s periodic earnings and the
variability in periodic earnings caused by the unpredictable nature
of catastrophes.
Net favorable (unfavorable) prior year loss reserve
development is the increase or decrease in incurred claims and
claim adjustment expenses as a result of the re-estimation of
claims and claim adjustment expense reserves at successive
valuation dates for a given group of claims, which may be related
to one or more prior years. In the opinion of the Company’s
management, a discussion of loss reserve development is meaningful
to users of the financial statements as it allows them to assess
the impact between prior and current year development on incurred
claims and claim adjustment expenses, net and operating income
(loss), and changes in claims and claim adjustment expense reserve
levels from period to period.
Reconciliation of Pre-tax Underwriting
Gain (Excluding the Impact of Catastrophes and Net Favorable Prior
Year Loss Reserve Development) to Net Income
Three Months Ended Nine
Months Ended September 30,
September 30, ($ in millions, after-tax except as noted)
2016 2015
2016
2015 Pre-tax underwriting gain excluding the impact
of catastrophes and net favorable prior year loss reserve
development $ 458
$ 645 $ 1,457 $ 1,709 Pre-tax impact of catastrophes (89 ) (85 )
(740 ) (468 ) Pre-tax impact of net favorable prior year loss
reserve development 39
199
507 649 Pre-tax
underwriting gain 408 759 1,224 1,890 Income tax expense on
underwriting results 139
273
418 656 Underwriting gain
269 486 806 1,234 Net investment income 472 484 1,353 1,465 Other
expense, including interest expense (40
) (52 )
(111 ) (148 )
Operating
income 701 918 2,048 2,551 Net
realized investment gains 15
10
23 22
Net
income $ 716
$ 928
$ 2,071 $
2,573
COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED
RATIO
Combined ratio: For Statutory Accounting Practices (SAP),
the combined ratio is the sum of the SAP loss and LAE ratio and the
SAP underwriting expense ratio as defined in the statutory
financial statements required by insurance regulators. The combined
ratio as used in this earnings release is the equivalent of, and is
calculated in the same manner as, the SAP combined ratio except
that the SAP underwriting expense ratio is based on net written
premium and the underwriting expense ratio as used in this earnings
release is based on net earned premiums.
For SAP, 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, 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.
Other companies’ method of computing similarly titled measures
may not be comparable to the Company’s method of computing these
ratios.
Underlying combined ratio represents the combined ratio
excluding the impact of net prior year reserve development and
catastrophes. The underlying combined ratio is an indicator of
the Company’s underwriting discipline and underwriting
profitability for the current accident year.
Calculation of the Combined
Ratio
Three Months Ended Nine
Months Ended September 30, September 30, ($ in
millions, pre-tax)
2016
2015 2016
2015
Loss and loss
adjustment expense ratio
Claims and claim adjustment expenses $ 3,856 $ 3,382 $ 11,330 $
10,360 Less: Policyholder dividends 11 10 32 29 Allocated fee
income 44
44 133
129
Loss ratio numerator
$ 3,801
$ 3,328
$ 11,165 $
10,202
Underwriting
expense ratio
Amortization of deferred acquisition costs $ 1,012 $ 987 $ 2,972 $
2,913 General and administrative expenses (G&A) 1,057 1,028
3,106 3,055 Less: G&A included in Interest Expense and Other 8
8 23 22 Allocated fee income 72 72 219 216 Billing and policy fees
and other 23
20 67
65
Expense ratio
numerator $ 1,966
$ 1,915
$ 5,769
$ 5,665
Earned premium
$ 6,209 $
6,032 $
18,257 $ 17,851
Combined ratio 1 Loss and loss
adjustment expense ratio 61.2 % 55.2 % 61.2 % 57.2 % Underwriting
expense ratio 31.7 %
31.7 % 31.6 %
31.7 %
Combined ratio
92.9 %
86.9 %
92.8 % 88.9
%
1For 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.
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO BOOK VALUE PER
SHARE AND SHAREHOLDERS’ EQUITY
Book value per share is total common shareholders’ equity
divided by the number of common shares outstanding. Adjusted
book value per share is total common shareholders’ equity
excluding the after-tax impact of net unrealized investment gains
and losses, divided by the number of common shares outstanding. In
the opinion of the Company’s management, adjusted book value per
share is useful in an analysis of a property casualty company’s
book value per share as it removes the effect of changing prices on
invested assets (i.e., net unrealized investment gains (losses),
net of tax), which do not have an equivalent impact on unpaid
claims and claim adjustment expense reserves. Tangible book
value per share is adjusted book value per share excluding the
after-tax value of goodwill and other intangible assets divided by
the number of common shares outstanding. In the opinion of the
Company’s management, tangible book value per share is useful in an
analysis of a property casualty company’s book value on a nominal
basis as it removes certain effects of purchase accounting (i.e.,
goodwill and other intangible assets), in addition to the effect of
changing prices on invested assets.
Reconciliation of Tangible and
Shareholders’ Equity, excluding net unrealized investment gains,
net of tax, to Shareholders’ Equity
As of September
30, December 31,
September 30, ($ in millions, except per share
amounts)
2016
2015 2015
Tangible shareholders' equity $ 18,596
$ 18,517 $ 18,818 Goodwill 3,585 3,573
3,579 Other intangible assets 271 279 280 Less: Impact of deferred
tax on other intangible assets (62 )
(60 ) (58 )
Shareholders' equity, excluding net unrealized investment gains,
net of tax 22,390 22,309 22,619 Net
unrealized investment gains, net of tax
2,049 1,289
1,414
Shareholders' equity
$ 24,439
$ 23,598 $
24,033 Common shares outstanding
284.1 295.9
304.2 Tangible book value
per share $ 65.47 $ 62.58 $ 61.86 Adjusted book value per share
78.82 75.39 74.35 Book value per share
86.04 79.75
79.00
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO TOTAL
CAPITALIZATION
Total capitalization is the sum of total shareholders’
equity and debt. Debt-to-capital ratio excluding net unrealized
gain on investments is the ratio of
debt to total capitalization excluding the after-tax
impact of net unrealized investment gains and losses. In the
opinion of the Company’s management, the debt to capital ratio is
useful in an analysis of the Company’s financial leverage.
Reconciliation of Total Debt and Equity
Excluding Net Unrealized Investment Gain to Total
Capitalization
As
of September 30, December
31, September 30, ($ in millions)
2016 2015
2015 Debt $ 6,436 $ 6,344
$ 6,743 Shareholders' equity 24,439
23,598
24,033
Total capitalization
30,875
29,942
30,776 Net unrealized investment gains, net of tax
2,049
1,289 1,414
Total capitalization excluding net unrealized gain $
28,826 $ 28,653 $ 29,362 on
investments, net of tax
Debt-to-capital ratio 20.8 % 21.2 % 21.9 % Debt-to-capital ratio
excluding net unrealized investment gains, net of tax
22.3 % 22.1 %
23.0 %
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 the Business and International Insurance and Bond &
Specialty Insurance segments, retention is the amount of
premium available for renewal that was retained, excluding rate and
exposure changes. For the Personal Insurance segment,
retention is the ratio of the expected number of renewal
policies that will be retained throughout the annual policy period
to the number of available renewal base policies. For all of the
segments, 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 the
Business and International Insurance segment, retention, renewal
premium change and new business exclude National Accounts and
surety. For the Bond & Specialty Insurance segment, retention,
renewal premium change and new business exclude surety.
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 (SAP).
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, 2016.
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The Travelers Companies, Inc.Media:Patrick Linehan, 917-778-6267orInstitutional Investors:Gabriella Nawi,
917-778-6844
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