Return on Equity and Core Return on Equity
of 10.0% and 9.5%, Respectively
- Net income of $595 million and core
income of $543 million impacted by relatively high levels of
catastrophe and non-catastrophe weather-related losses.
- Combined ratio of 96.7%, included 6.4
points of catastrophe losses. Underlying combined ratio of
93.5%.
- Net investment income increased 9%
pre-tax (6% after-tax) over prior year quarter due to strong
private equity returns.
- Record net written premiums of $6.640
billion up 5% over prior year quarter, with growth in all
segments.
- Total capital returned to shareholders
of $676 million in the quarter, including $475 million of share
repurchases. Year-to-date total capital returned to shareholders of
$1.152 billion, including $761 million of share repurchases.
- Book value per share of $86.46 and
adjusted book value per share of $82.71, up 4% and 3%,
respectively, from year-end 2016.
- Board of Directors declared quarterly
dividend per share of $0.72.
The Travelers Companies, Inc. today reported net income of $595
million, or $2.11 per diluted share, for the quarter ended June 30,
2017, compared to $664 million, or $2.24 per diluted share, in the
prior year quarter due to lower core income, partially offset by
higher net realized investment gains. Core income in the current
quarter was $543 million, or $1.92 per diluted share, compared to
$649 million, or $2.20 per diluted share, in the prior year quarter
due to lower net favorable prior year reserve development, higher
catastrophe losses and a lower underlying underwriting gain (i.e.,
excluding net favorable prior year reserve development and
catastrophe losses), partially offset by higher net investment
income. The underlying underwriting gain declined due to the timing
impact of higher loss estimates in personal auto bodily injury
liability coverages that were consistent with the higher loss
trends recognized in the last half of 2016 and higher
non-catastrophe weather-related losses. Net realized investment
gains of $80 million pre-tax ($52 million after-tax) in the current
quarter, compared to $19 million pre-tax ($15 million after-tax) in
the prior year quarter, were primarily driven by gains on the sale
of equity securities. Per diluted share amounts benefited from the
impact of share repurchases.
Consolidated Highlights
($ in millions, except for per share amounts, and after-tax,
Three Months Ended June 30,
Six Months Ended June 30, except for premiums &
revenues)
2017 2016 Change 2017
2016 Change Net written premiums $
6,640 $ 6,345 5 % $
13,135 $ 12,511 5 %
Total revenues $ 7,184 $ 6,785
6 $ 14,126 $ 13,471 5
Net income $ 595 $ 664
(10 ) $ 1,212 $ 1,355
(11 ) per diluted share $ 2.11 $ 2.24 (6 ) $ 4.28 $
4.55 (6 )
Core income $ 543 $
649 (16 ) $ 1,157 $
1,347 (14 ) per diluted share $ 1.92 $ 2.20
(13 ) $ 4.08 $ 4.52 (10 )
Diluted weighted
average 280.0 293.6 (5 )
281.2 295.6 (5 ) shares
outstanding Combined ratio 96.7 %
93.1 % 3.6 pts 96.4 %
92.7 % 3.7 pts Underlying combined
ratio 93.5 % 92.3 % 1.2
pts 92.7 % 91.2 % 1.5
pts Return on equity 10.0 %
10.9 % (0.9 ) pts 10.3
% 11.2 % (0.9 ) pts
Core return on equity 9.5 % 11.6
% (2.1 ) pts 10.2 %
12.0 % (1.8 ) pts
Change from
June 30,
December 31,
June 30,
December 31,
June 30,
2017
2016
2016
2016
2016
Book value per share $ 86.46 $
83.05 $ 85.73 4 % 1
% Adjusted book value per share 82.71
80.44 77.61 3 7 See Glossary of
Financial Measures for definitions and the statistical supplement
for additional financial data.
“Second quarter core income of $543 million and core return on
equity of 9.5% were impacted by high levels of catastrophe and
non-catastrophe weather-related losses caused by significant U.S.
tornado and hail activity,” commented Alan Schnitzer, Chief
Executive Officer. “The storm activity had the greatest impact on
Personal Insurance, affecting results in both home and auto. Within
personal auto, we were pleased that the actions we have undertaken
to improve profitability remain on track. We were also pleased with
results in our commercial businesses this quarter. In Business
Insurance, segment income was up 7% and the underlying underwriting
gain improved. In Bond & Specialty Insurance, while segment
income was lower than in the prior year quarter, the decrease was
entirely due to lower net favorable prior year reserve development
as compared to a particularly high level in the prior year quarter.
Our investment portfolio performed very well, with after-tax net
investment income increasing 6% over the prior year quarter due to
strong private equity returns. Additionally, we were able to return
$676 million to shareholders in the quarter, including $475 million
in share repurchases.
“Consolidated net written premiums of a record $6.64 billion
were up 5% over the prior year quarter, and we remain very pleased
with the execution of our marketplace strategies in each of our
business segments. In our commercial businesses, retention levels
remained at historic highs, while renewal premium change improved
from recent quarters. Notably, in our core middle market business
we achieved rate increases more broadly across our portfolio as
compared to recent quarters. In Personal Insurance, auto renewal
premium change was 8%, consistent with our plans to improve
profitability, and we expect that number to reach double digits by
the end of the third quarter. We were also successful in
maintaining strong momentum in our homeowners business, where
policies in force grew by 4% year-over-year.
“Our significant competitive advantages, strong balance sheet,
superior talent and capital management strategy position us very
well to continue to deliver industry leading results. We remain
highly focused on innovation and leveraging the power of technology
in every aspect of our business. As one recent example, we look
forward to welcoming Simply Business under the Travelers umbrella
when that transaction closes in the third quarter.”
Consolidated
Results
($ in millions and pre-tax, unless noted otherwise)
Three Months
Ended June 30, Six Months Ended June 30, 2017
2016
Change 2017 2016 Change
Underwriting gain: $ 173 $ 388
$ (215 ) $ 384 $
816 $ (432 )
Underwriting gain
includes:
Net favorable prior year reserve development 203 288 (85 ) 284 468
(184 ) Catastrophes, net of reinsurance (403 ) (333 ) (70 ) (750 )
(651 ) (99 )
Net investment income 598
549 49 1,208 1,093 115
Other income/(expense), including interest expense
(61
) (69 ) 8
(127 ) (115 ) (12
) Core income before income taxes 710
868 (158 ) 1,465 1,794
(329 ) Income tax expense 167
219 (52 )
308 447 (139
) Core income 543 649 (106
) 1,157 1,347 (190 ) Net
realized investment gains after income taxes 52
15 37
55 8 47
Net income $ 595 $ 664
$ (69 ) $ 1,212
$ 1,355 $ (143 )
Combined ratio 96.7 %
93.1 % 3.6 pts 96.4 %
92.7 % 3.7 pts
Impact on combined
ratio
Net favorable prior year reserve development (3.2 ) pts (4.7 ) pts
1.5 pts (2.3 ) (3.9 ) 1.6 pts Catastrophes, net of reinsurance 6.4
pts 5.5 pts 0.9 pts 6.0 5.4 0.6 pts
Underlying combined
ratio 93.5 % 92.3 % 1.2
pts 92.7 % 91.2 % 1.5
pts
Net written premiums
Business Insurance $ 3,544 $ 3,472 2 % $ 7,399 $ 7,232 2 % Bond
& Specialty Insurance 598 570 5 1,142 1,092 5 Personal
Insurance 2,498 2,303 8 4,594
4,187 10
Total $ 6,640
$ 6,345 5 % $
13,135 $ 12,511 5
%
Second Quarter 2017
Results(All comparisons vs. second quarter 2016, unless
noted otherwise)
Net income of $595 million after-tax decreased $69 million due
to lower core income, partially offset by higher net realized
investment gains. Core income of $543 million after-tax decreased
$106 million, primarily driven by lower net favorable prior year
reserve development, higher catastrophe losses and a lower
underlying underwriting gain, partially offset by higher net
investment income. The underlying underwriting gain declined due to
the timing impact of higher loss estimates in personal auto bodily
injury liability coverages that were consistent with the higher
loss trends we recognized in the last half of 2016 and higher
non-catastrophe weather-related losses. Net realized investment
gains of $80 million pre-tax ($52 million after-tax) in the current
quarter, compared to $19 million pre-tax ($15 million after-tax) in
the prior year quarter, were primarily driven by gains on the sale
of equity securities.
Underwriting results
- The combined ratio of 96.7% increased
3.6 points due to lower net favorable prior year reserve
development (1.5 points), a higher underlying combined ratio (1.2
points) and higher catastrophe losses (0.9 points).
- The underlying combined ratio of 93.5%
increased 1.2 points, primarily driven by the timing impact of
higher loss estimates in personal auto bodily injury liability
coverages, as described above, and normal quarterly variability in
non-catastrophe weather-related losses, partially offset by a lower
expense ratio.
- Net favorable prior year reserve
development occurred in Business Insurance and Bond & Specialty
Insurance. Catastrophe losses in the second quarter of 2017
primarily resulted from wind and hail storms in several regions of
the United States.
Net investment income of $598 million pre-tax ($468 million
after-tax) increased 9% driven by higher private equity returns,
partially offset by fixed income returns that declined in line with
our expectations due to lower reinvestment rates available in the
market.
Record net written premiums of $6.640 billion increased 5%,
reflecting growth in all segments.
Year-to-Date 2017
Results(All comparisons vs. year-to-date 2016, unless
noted otherwise)
Net income of $1.212 billion after-tax decreased $143 million,
due to lower core income, partially offset by higher net realized
investment gains. Core income of $1.157 billion after-tax decreased
$190 million, primarily driven by lower net favorable prior year
reserve development, a lower underlying underwriting gain and
higher catastrophe losses, partially offset by higher net
investment income. The underlying underwriting gain declined due to
the same factors as discussed above for the second quarter 2017.
The current period benefited from a $39 million resolution of prior
year income tax matters, while the prior year period benefited
modestly from the favorable settlement of a claims-related legal
matter. Net realized investment gains of $85 million pre-tax ($55
million after-tax) in the current period, compared to $10 million
pre-tax ($8 million after-tax) in the prior year period, were
primarily driven by gains on the sale of equity securities.
Underwriting results
- The combined ratio of 96.4% increased
3.7 points due to lower net favorable prior year reserve
development (1.6 points), a higher underlying combined ratio (1.5
points) and higher catastrophe losses (0.6 points).
- The underlying combined ratio of 92.7%
increased 1.5 points, primarily driven by the same factors as
discussed above for the second quarter 2017
- Net favorable prior year reserve
development occurred in all segments. Catastrophe losses included
the second quarter events described above, as well as wind and hail
storms in several other regions of the United States and a winter
storm in the eastern United States in the first quarter of
2017.
Net investment income of $1.208 billion pre-tax ($948 million
after-tax) increased 11% driven by the same factors as discussed
above for the second quarter 2017.
Record net written premiums of $13.135 billion increased 5%,
reflecting growth in all segments.
Shareholders’ Equity
Shareholders’ equity of $23.858 billion increased 3% from
year-end 2016. Pre-tax net unrealized investment gains were $1.585
billion ($1.035 billion after-tax) compared to $1.112 billion
pre-tax ($730 million after-tax) at year-end 2016. Book value per
share of $86.46 and adjusted book value per share of $82.71
increased 4% and 3%, respectively, from year-end 2016.
The Company repurchased 3.8 million shares during the second
quarter at an average price of $123.04 per share for a total cost
of $475 million. Capacity remaining under the existing share
repurchase authorization was $5.234 billion at the end of the
quarter. At the end of second quarter 2017, statutory capital and
surplus was $20.607 billion and the ratio of debt-to-capital was
22.5%. The ratio of debt-to-capital excluding after-tax net
unrealized investment gains was 23.3%, within the Company’s target
range of 15% to 25%.
The Board of Directors today declared a quarterly dividend of
$0.72 per share. This dividend is payable on September 29, 2017, to
shareholders of record as of the close of business on September 8,
2017.
Business
Insurance Segment Financial Results
($ in millions and pre-tax, unless noted otherwise)
Three Months Ended
June 30, Six Months Ended June 30, 2017
2016 Change 2017 2016 Change
Underwriting gain: $ 107 $
108 $ (1 ) $ 216 $
262 $ (46 )
Underwriting gain
includes:
Net favorable prior year reserve development 125 125 - 186 199 (13
) Catastrophes, net of reinsurance (184 ) (167 ) (17 ) (316 ) (315
) (1 )
Net investment income 447 404
43 900 803 97 Other
income 15 8 7
24 38
(14 ) Segment income before income taxes
569 520 49 1,140 1,103 37
Income tax expense 140
119 21 269
255 14 Segment
income $ 429 $ 401
$ 28 $ 871 $
848 $ 23
Combined
ratio 96.5 % 96.5 % -
pts 96.5 % 95.8 % 0.7
pts
Impact on combined
ratio
Net favorable prior year reserve development (3.6 ) pts (3.6 ) pts
- pts (2.7 ) (2.9 ) 0.2 pts Catastrophes, net of reinsurance 5.3
pts 4.8 pts 0.5 pts 4.6 4.6 - pts
Underlying combined
ratio 94.8 % 95.3 % (0.5
) pts 94.6 % 94.1 %
0.5 pts
Net written premiums by
market Domestic Select Accounts $ 720 $ 709 2 % $ 1,475 $ 1,433
3 % Middle Market 1,820 1,741 5 3,997 3,804 5 National Accounts 219
234 (6 ) 507 554 (8 ) National Property and Other 496
521 (5 ) 882 931 (5 )
Total Domestic 3,255 3,205 2 6,861 6,722 2 International 289
267 8 538 510 5
Total $ 3,544 $ 3,472
2 % $ 7,399 $
7,232 2 %
Second Quarter 2017
Results(All comparisons vs. second quarter 2016, unless
noted otherwise)
Segment income for Business Insurance was $429 million
after-tax, an increase of $28 million, primarily driven by higher
net investment income and a slightly higher underlying underwriting
gain, partially offset by higher catastrophe losses.
Underwriting results
- The combined ratio of 96.5% was
consistent with the prior year quarter.
- The underlying combined ratio of 94.8%
improved 0.5 points due to a lower expense ratio.
- Net favorable prior year reserve
development primarily resulted from better than expected loss
experience in the Company’s domestic operations in the workers’
compensation product line for multiple accident years, the
commercial multi-peril product line for liability coverages for
multiple accident years and the general liability product line
(excluding an increase to environmental reserves) for both primary
and excess coverages for multiple accident years. These factors
were partially offset by a $65 million pre-tax increase to
environmental reserves.
Net written premiums of $3.544 billion increased 2% and
benefited from continued strong retention and improved renewal
premium change.
Year-to-Date 2017
Results(All comparisons vs. year-to-date 2016, unless
noted otherwise)
Segment income for Business Insurance was $871 million
after-tax, an increase of $23 million, primarily driven by higher
net investment income, partially offset by a slightly lower
underlying underwriting gain. The current period benefited from a
$15 million resolution of prior year income tax matters, while the
prior year period benefited modestly from the favorable settlement
of a claims-related legal matter.
Underwriting results
- The combined ratio of 96.5% increased
0.7 points due to a higher underlying combined ratio (0.5 points)
and lower net favorable prior year reserve development (0.2
points).
- The underlying combined ratio of 94.6%
increased 0.5 points.
- Net favorable prior year reserve
development primarily resulted from better than expected loss
experience in the Company’s domestic operations in the workers’
compensation product line for multiple accident years, the general
liability product line (excluding an increase to environmental
reserves) for both primary and excess coverages for multiple
accident years and the commercial multi-peril product line for
liability coverages for multiple accident years, partially offset
by net unfavorable prior year reserve development in the Company’s
international operations in Europe due to the U.K. Ministry of
Justice’s “Ogden” discount rate adjustment applied to lump sum
bodily injury payouts. These factors were partially offset by a $65
million pre-tax increase to environmental reserves.
Other income in the prior year period included proceeds from the
favorable settlement of a claims-related legal matter.
Net written premiums of $7.399 billion increased 2% and
benefited from the same factors discussed above for the second
quarter 2017.
Bond &
Specialty Insurance Segment Financial Results
($ in millions and pre-tax, unless noted otherwise)
Three Months
Ended June 30, Six Months Ended June 30, 2017
2016 Change 2017 2016 Change
Underwriting gain: $ 177 $
253 $ (76 ) $ 289
$ 417 $ (128 )
Underwriting gain
includes:
Net favorable prior year reserve development 78 159 (81 ) 92 225
(133 ) Catastrophes, net of reinsurance (1 ) (3 ) 2 (2 ) (4 ) 2
Net investment income 56 58 (2
) 117 118 (1 ) Other
income 6 5
1 11 9
2 Segment income before income taxes
239 316 (77 ) 417 544
(127 ) Income tax expense 76
101 (25 )
109 169 (60
) Segment income $ 163 $
215 $ (52 ) $ 308
$ 375 $ (67 )
Combined ratio 68.7 %
54.5 % 14.2 pts 74.0 %
62.1 % 11.9 pts
Impact on combined
ratio
Net favorable prior year reserve development (13.5 ) pts (28.4 )
pts 14.9 pts (8.2 ) pts (20.2 ) pts 12.0 pts Catastrophes, net of
reinsurance 0.2 pts 0.5 pts (0.3 ) pts 0.2 pts 0.3 pts (0.1 ) pts
Underlying combined ratio 82.0 %
82.4 % (0.4 ) pts 82.0
% 82.0 % - pts
Net written premiums Domestic Management Liability $
341 $ 331 3 % $ 671 $ 656 2 % Surety 211 205
3 385 372 3 Total Domestic 552
536 3 1,056 1,028 3 International 46 34
35 86 64 34
Total $
598 $ 570 5 %
$
1,142
$
1,092
5 %
Second Quarter 2017
Results(All comparisons vs. second quarter 2016, unless
noted otherwise)
Segment income for Bond & Specialty Insurance was $163
million after-tax, a decrease of $52 million, due to lower net
favorable prior year reserve development.
Underwriting results
- The combined ratio of 68.7% increased
14.2 points due to lower net favorable prior year reserve
development (14.9 points), partially offset by a lower underlying
combined ratio (0.4 points) and lower catastrophe losses (0.3
points).
- The underlying combined ratio remained
very strong at 82.0%.
- Net favorable prior year reserve
development resulted from better than expected loss experience in
the Company’s domestic operations in the general liability product
line for accident years 2012 through 2015.
Net written premiums of $598 million grew 5% from the prior year
quarter and benefited from strong retentions and higher renewal
premium change in the Domestic business, as well as increases in
management liability in the United Kingdom and contract surety in
Canada.
Year-to-Date 2017
Results(All comparisons vs. year-to-date 2016, unless
noted otherwise)
Segment income for Bond & Specialty Insurance was $308
million after-tax, a decrease of $67 million, due to lower net
favorable prior year reserve development, partially offset by the
current period benefit from a $17 million resolution of prior year
income tax matters.
Underwriting results
- The combined ratio of 74.0% increased
11.9 points due to lower net favorable prior year reserve
development (12.0 points), partially offset by lower catastrophe
losses (0.1 points).
- The underlying combined ratio remained
very strong at 82.0%.
- Net favorable prior year reserve
development resulted from better than expected loss experience in
the Company’s domestic operations in the general liability product
line for accident years 2012 through 2015.
Net written premiums of $1.142 billion grew 5% from the prior
year period and benefited from the same factors as discussed above
for second quarter 2017.
Personal
Insurance Segment Financial Results
($ in millions and pre-tax,
unless noted otherwise)
Three Months Ended June 30,
Six Months Ended June 30, 2017 2016
Change 2017 2016 Change
Underwriting gain/(loss): $ (111 )
$ 27 $ (138 ) $
(121 ) $ 137 $ (258
)
Underwriting gain
includes:
Net favorable prior year reserve development - 4 (4 ) 6 44 (38 )
Catastrophes, net of reinsurance (218 ) (163 ) (55 ) (432 ) (332 )
(100 )
Net investment income 95 87
8 191 172 19 Other income
15 15 -
31 31
- Segment income/(loss) before income taxes
(1 ) 129 (130 ) 101
340 (239 ) Income tax expense/(benefit)
(13 ) 34
(47 ) - 93
(93 ) Segment income $ 12
$ 95 $ (83 )
$ 101 $ 247 $
(146 )
Combined ratio 104.1 % 97.8 %
6.3 pts 101.9 % 95.8 %
6.1 pts
Impact on combined
ratio
Net favorable prior year reserve development - pts (0.2 ) pts 0.2
pts (0.2 ) pts (1.1 ) pts 0.9 pts Catastrophes, net of reinsurance
9.6 pts 7.8 pts 1.8 pts 9.7 pts 8.2 pts 1.5 pts
Underlying combined ratio 94.5 % 90.2
% 4.3 pts 92.4 % 88.7
% 3.7 pts
Net written premiums Domestic Agency 1 Automobile $
1,159 $ 1,018 14 % $ 2,246 $ 1,950 15 % Homeowners & Other
1,077 1,036 4 1,871
1,796 4 Total Agency 2,236 2,054 9 4,117 3,746 10
Direct to Consumer 88 75 17 171
143 20 Total Domestic 2,324 2,129 9 4,288
3,889 10 International 174 174 -
306 298 3
Total $ 2,498
$ 2,303 8 %
$
4,594
$ 4,187 10 % 1
Represents business sold through agents, brokers and other
intermediaries, and excludes direct to consumer.
Second Quarter 2017
Results(All comparisons vs. second quarter 2016, unless
noted otherwise)
Segment income for Personal Insurance of $12 million after-tax
was significantly impacted by catastrophe and non-catastrophe
weather-related losses. The decrease of $83 million was primarily
driven by a lower underlying underwriting gain and higher
catastrophe losses, partially offset by higher net investment
income. The underlying underwriting gain declined due to higher
non-catastrophe weather-related losses and the timing impact of
higher loss estimates in auto bodily injury liability coverages
that were consistent with the higher loss trends recognized in the
last half of 2016.
Underwriting results
- The combined ratio of 104.1% increased
6.3 points due to a higher underlying combined ratio (4.3 points),
higher catastrophe losses (1.8 points) and no net prior year
reserve development compared to net favorable prior year reserve
development in the prior year quarter (0.2 points).
- The underlying combined ratio of 94.5%
increased 4.3 points, primarily driven by normal quarterly
variability in non-catastrophe weather-related losses, the timing
impact of higher loss estimates in auto bodily injury liability
coverages, as described above, and the tenure impact of higher
levels of new business in auto, partially offset by a lower expense
ratio.
Net written premiums of $2.498 billion increased 8%. Agency
Automobile net written premiums growth of 14% benefited from the
impact of auto rate increases that were consistent with our plans
to improve profitability and an increase in policies in force of
11% from the prior year quarter. Agency Homeowners & Other net
written premiums grew 4%, with an increase in policies in force of
4% from the prior year quarter.
Year-to-Date 2017
Results(All comparisons vs. year-to-date 2016, unless
noted otherwise)
Segment income for Personal Insurance was $101 million
after-tax, a decrease of $146 million, primarily driven by a lower
underlying underwriting gain, higher catastrophe losses and lower
net prior year reserve development, partially offset by higher net
investment income. The underlying underwriting gain declined due to
the timing impact of higher loss estimates in auto bodily injury
liability coverages that were consistent with the higher loss
trends recognized in the last half of 2016 and normal variability
in non-catastrophe weather-related losses, partially offset by a
lower expense ratio. The current period benefited from a $7 million
resolution of prior year income tax matters.
Underwriting results
- The combined ratio of 101.9% increased
6.1 points due to a higher underlying combined ratio (3.7 points),
higher catastrophe losses (1.5 points) and lower net favorable
prior year reserve development (0.9 points).
- The underlying combined ratio of 92.4%
increased 3.7 points, primarily driven by the timing impact of
higher loss estimates in auto bodily injury liability coverages
that were consistent with the higher loss trends we recognized in
the last half of 2016, normal variability in non-catastrophe
weather-related losses and the tenure impact of higher levels of
new business in auto, partially offset by a lower expense
ratio.
Net written premiums of $4.594 billion increased 10%. Agency
Automobile net written premiums growth of 15% benefited from the
impact of auto rate increases that were consistent with our plans
to improve profitability and an increase in policies in force of
11% from the prior year period. Agency Homeowners & Other net
written premiums grew 4%, with an increase in policies in force of
4% from the prior year period.
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, July 20, 2017. Investors
can access the call via webcast at http://investor.travelers.com or
by dialing 1-800-747-0365 within the U.S. and 1-212-231-2934
outside the U.S. 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 21852852 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 $28 billion in 2016. 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:
Effective April 1, 2017, the Company’s results are reported in
the following three business segments – Business Insurance, Bond
& Specialty Insurance and Personal Insurance, reflecting a
change in the manner in which the Company’s businesses are managed
as of that date, as well as the aggregation of products and
services based on the type of customer, how the business is
marketed and the manner in which risks are underwritten. While the
segmentation of the Company’s domestic businesses is unchanged, the
Company’s international businesses, which were previously managed
and reported in total within the Business and International
Insurance segment, are now disaggregated by product type among the
three newly aligned reportable business segments. All prior periods
presented have been reclassified to conform to this presentation.
In connection with these changes, the Company has revised the names
and descriptions of certain businesses comprising the Company’s
segments and has reflected other related changes.
Business Insurance – Business Insurance offers a broad
array of property and casualty insurance and insurance related
services to its clients, primarily in the United States, as well as
in Canada, 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 – 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, the Republic of Ireland and Brazil, 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,” “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 core income, investment income and performance, loss costs,
return on equity, core 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 inflation, potential changes in tax law and 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;
- strategic initiatives to improve
profitability and competitiveness; and
- the potential closing date and impact
of the Company’s acquisition of Simply Business.
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;
- 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;
- during or following a period of
financial market disruption or an economic downturn, the Company’s
business could be materially and adversely affected;
- the Company’s investment portfolio is
subject to credit risk, and 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 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 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, 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 or the
Company’s inability to manage effectively a changing distribution
landscape could adversely affect the Company;
- 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 Company may not be able to collect
all amounts due to it from reinsurers, reinsurance coverage may not
be available to the Company in the future at commercially
reasonable rates or at all and we are exposed to credit risk
related to our structured settlements;
- the Company is also exposed to credit
risk in certain of its insurance operations and with respect to
certain guarantee or indemnification arrangements that we have with
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;
- 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;
- changes in U.S. tax laws or in the tax
laws of other jurisdictions in which the Company operates could
adversely impact the Company;
- 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 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 in federal regulation could
impose significant burdens on the Company and otherwise adversely
impact the Company’s results;
- changes to existing U.S. accounting
standards may adversely impact the Company’s reported results;
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 16, 2017, 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 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 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. 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 NET INCOME TO CORE INCOME AND CERTAIN OTHER
NON-GAAP MEASURES
Core income (loss) is net income (loss) excluding the
after-tax impact of net realized investment gains (losses),
discontinued operations and cumulative effect of changes in
accounting principles when applicable. Segment income (loss)
is comparable to 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 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
Six Months Ended June 30, June 30, ($
in millions, after-tax)
2017
2016 2017 2016
Net income $ 595 $
664 $ 1,212 $ 1,355 Less: Net
realized investment gains 52
15 55
8
Core income $
543 $ 649
$ 1,157 $ 1,347
Three Months Ended Six Months
Ended June 30, June 30, ($ in millions, pre-tax)
2017 2016
2017 2016 Net income
$ 790 $ 887 $ 1,550
$ 1,804 Less: Net realized investment gains
80 19
85 10
Core income
$ 710 $ 868
$ 1,465 $
1,794
Twelve Months Ended December 31, ($ in
millions, after-tax)
2016
2015 2014 2013
2012 2011 2010
2009 2008 2007
2006 2005
Net income
$ 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 3,014
3,439 3,692 3,673 2,473 1,426
3,216 3,622 2,924 4,601 4,208
2,061 Less: Net realized investment gains/(losses)
47 2
51 106 32
36 173 22
(271 ) 101
8 35
Core income 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
$ 2,967 $
3,437 $ 3,641
$ 3,567 $ 2,441
$ 1,389 $ 3,040
$ 3,597 $
3,191 $ 4,496
$ 4,195 $ 2,020
Reconciliation of
Net Income per Share to Core Income per Share on a Basic and
Diluted Basis
Three Months Ended Six Months Ended June
30, June 30, 2017
2016 2017
2016
Basic income per
share
Net income $ 2.13 $ 2.27
$ 4.32 $ 4.60 Less: Net realized
investment gains 0.19
0.05 0.20
0.02
Core income $
1.94 $ 2.22
$ 4.12 $ 4.58
Diluted income
per share
Net income $ 2.11 $ 2.24
$ 4.28 $ 4.55 Less: Net realized
investment gains 0.19
0.04 0.20
0.03
Core income $
1.92 $ 2.20
$ 4.08 $ 4.52
Reconciliation of
Segment Income to Total Core Income
Three Months Ended Six Months Ended
June 30, June 30, ($ in millions, after-tax)
2017
2016 2017
2016
Business Insurance $ 429 $ 401 $ 871 $ 848 Bond & Specialty
Insurance 163 215 308 375 Personal Insurance
12 95
101 247
Total segment income 604 711 1,280 1,470 Interest Expense and Other
(61 ) (62 )
(123 ) (123 )
Total core income $ 543
$ 649
$ 1,157 $
1,347
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, net
realized investment gains (losses), net of tax, for the period
presented, preferred stock and discontinued operations.
Reconciliation of Shareholders’ Equity
to Adjusted Shareholders’ Equity
As of June 30, ($ in millions)
2017 2016
Shareholders' equity $ 23,858
$ 24,714 Less: Net unrealized investment gains, net
of tax 1,035 2,341 Net realized investment gains, net
of tax
55
8
Adjusted shareholders' equity $
22,768 $ 22,365
As of December 31, ($ in millions)
2016 2015
2014 2013
2012 2011
2010 2009
2008 2007
2006 2005
Shareholders' equity $ 23,221 $
23,598 $ 24,836 $ 24,796
$ 25,405 $ 24,477 $
25,475 $ 27,415 $ 25,319
$ 26,616 $ 25,135 $
22,303 Less: Net unrealized investment gains (losses), net
of tax 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 47 2 51 106
32 36 173 22 (271 ) 101 8 35 Preferred stock - - - - - - 68 79 89
112 129 153 Loss from discontinued operations
- - -
- -
- - -
- -
- (439 )
Adjusted shareholders' equity
$ 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
less preferred dividends to average shareholders’ equity for the
periods presented. Core return on equity is the ratio of
annualized core 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
Return on Equity and Core Return on Equity
Three Months Ended Six Months Ended June 30,
June 30, ($ in millions, after-tax)
2017 2016
2017 2016
Annualized net income $ 2,379 $ 2,654 $ 2,424 $ 2,710 Average
shareholders' equity 23,735
24,440
23,576 24,161
Return
on equity 10.0 %
10.9 %
10.3 % 11.2
% Annualized core income $ 2,171 $ 2,598 $
2,313 $ 2,695 Adjusted average shareholders' equity
22,780 22,383
22,709
22,372
Core return on equity
9.5 % 11.6
% 10.2 %
12.0 %
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 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 Core
Return on Equity from January 1, 2005 through June 30, 2017
Six Months Ended June 30,
Twelve Months Ended December 31, ($ in millions)
2017 2016 2016
2015 2014
2013 2012 2011
2010 2009
2008 2007 2006
2005 Core income, less preferred
dividends $ 1,157 $ 1,347 $ 2,967 $ 3,437 $ 3,641 $ 3,567 $ 2,441 $
1,389 $ 3,040 $ 3,597 $ 3,191 $ 4,496 $ 4,195 $ 2,020 Annualized
core income 2,313 2,695 Adjusted average shareholders' equity
22,709 22,372 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
10.2 % 12.0 % 13.3
% 15.2 % 15.5 %
15.5 % 11.0 %
6.1 % 12.5 % 14.0
% 12.4 % 17.7 %
17.9 % 9.6 %
Average
annual core return on equity 13.3 % for the
period Jan. 1, 2005 through June 30, 2017
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 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,
radiological, cyber attacks, explosions and infrastructure
failures. 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.
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 Six Months Ended June 30, June
30, ($ in millions, after-tax except as noted)
2017 2016
2017 2016 Pre-tax underwriting gain
excluding the impact of catastrophes and net favorable prior year
loss reserve development $ 373 $ 433 $ 850 $ 999 Pre-tax impact of
catastrophes (403 ) (333 ) (750 ) (651 ) Pre-tax impact of net
favorable prior year loss reserve development
203 288
284 468
Pre-tax underwriting gain 173 388 384 816 Income tax expense on
underwriting results 61
140 97
279 Underwriting gain 112 248
287 537 Net investment income 468 442 948 881 Other
income/(expense), including interest expense
(37 ) (41 )
(78 ) (71 )
Core income
543 649 1,157 1,347 Net realized
investment gains 52
15 55
8
Net income
$ 595
$ 664 $
1,212 $ 1,355
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, 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 Six Months Ended June
30, June 30, ($ in millions, pre-tax)
2017 2016
2017 2016
Loss and loss
adjustment expense ratio
Claims and claim adjustment expenses $ 4,225 $ 3,762 $ 8,319 $
7,474 Less: Policyholder dividends 15 11 26 21 Allocated fee income
42
45 84
89
Loss ratio numerator
$ 4,168
$ 3,706
$ 8,209 $
7,364
Underwriting
expense ratio
Amortization of deferred acquisition costs $ 1,032 $ 989 $ 2,035 $
1,960 General and administrative expenses (G&A) 1,045 1,054
2,041 2,049 Less: G&A included in Interest Expense and Other 8
7 16 15 Allocated fee income 74 74 145 147 Billing and policy fees
and other 22
22
45 44
Expense ratio
numerator $ 1,973
$ 1,940
$ 3,870
$ 3,803
Earned premium
$ 6,351
$ 6,067
$ 12,534 $
12,048 Combined ratio 1 Loss and
loss adjustment expense ratio 65.6 % 61.1 % 65.5 % 61.1 %
Underwriting expense ratio 31.1
% 32.0 %
30.9 % 31.6 %
Combined
ratio 96.7 %
93.1 %
96.4 %
92.7 % 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.
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 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 Shareholders’ Equity
to Tangible Shareholders’ Equity, excluding Net Unrealized
Investment Gains, Net of Tax
As of June 30, December 31,
June 30, ($ in millions, except per share amounts)
2017 2016
2016 Shareholders' equity $
23,858 $ 23,221 $ 24,714 Less:
Net unrealized investment gains, net of tax
1,035 730
2,341
Shareholders' equity, excluding net
unrealized investment gains, net of tax 22,823
22,491 22,373 Less: Goodwill 3,589 3,580 3,588 Other
intangible assets 264 268 274 Impact of deferred tax on
other intangible assets (66 )
(64 ) (62 )
Tangible
shareholders' equity $
19,036 $ 18,707
$ 18,573 Common
shares outstanding 275.9
279.6 288.3
Book value per share $ 86.46 $ 83.05 $ 85.73 Adjusted book
value per share 82.71 80.44 77.61 Tangible book value per share
68.99 66.91
64.43
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 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.
As of June 30,
December 31, June 30, ($ in millions)
2017 2016
2016 Debt $ 6,920 $ 6,437 $ 6,436
Shareholders' equity 23,858
23,221
24,714
Total capitalization
30,778
29,658 31,150
Less: Net unrealized investment gains, net of tax
1,035 730
2,341
Total
capitalization excluding net unrealized gain $
29,743 $ 28,928 $ 28,809 on
investments, net of tax
Debt-to-capital ratio 22.5 % 21.7 % 20.7 % Debt-to-capital ratio
excluding net unrealized investment gains, net of tax
23.3 % 22.3 %
22.3 %
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 and surety. For
Bond & Specialty Insurance, 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.
Holding company liquidity is the total funds available at
the holding company level to fund general corporate purposes,
primarily the payment of shareholder dividends and debt service.
These funds consist of total cash, short-term invested assets and
other readily marketable securities held by the holding
company.
For a glossary of other financial terms used in this press
release, we refer you to the Company’s most recent annual report on
Form 10-K filed with the SEC on February 16, 2017, as updated by
our Form 8-K filed on June 20, 2017, and subsequent periodic
filings with the SEC.
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The Travelers Companies, Inc.Media:Patrick Linehan, 917.778.6267orInstitutional Investors:Gabriella Nawi,
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