First Quarter 2022 Net Income per Diluted
Share of $4.15, up 45%, and Return on Equity of 15.0%
First Quarter 2022 Core Income per Diluted
Share of $4.22, up 55%, and Core Return on Equity of 15.5%
Board of Directors Declares 6% Increase in
Regular Quarterly Cash Dividend to $0.93 per Share
- First quarter net income of $1.018 billion and core income of
$1.037 billion.
- Consolidated combined ratio of 91.3% and underlying combined
ratio of 91.2%.
- Record net written premiums of $8.367 billion, up 11% compared
to the prior year quarter.
- Net written premium growth in all three segments compared to
the prior year quarter; Business Insurance up 9%, Bond &
Specialty Insurance up 22% and Personal Insurance up 12%.
- Total capital returned to shareholders of $773 million,
including $559 million of share repurchases.
- Book value per share of $106.40, down 5% from March 31, 2021;
adjusted book value per share of $112.19, up 11% from March 31,
2021.
The Travelers Companies, Inc. today reported net income of
$1.018 billion, or $4.15 per diluted share, for the quarter ended
March 31, 2022, compared to $733 million, or $2.87 per diluted
share, in the prior year quarter. Core income in the current
quarter was $1.037 billion, or $4.22 per diluted share, compared to
$699 million, or $2.73 per diluted share, in the prior year
quarter. Core income increased primarily due to lower catastrophe
losses, partially offset by lower net favorable prior year reserve
development and lower net investment income. Net realized
investment losses in the current quarter were $23 million pre-tax
($19 million after-tax), compared to net realized investment gains
of $44 million pre-tax ($34 million after-tax) in the prior year
quarter. Per diluted share amounts benefited from the impact of
share repurchases.
Consolidated Highlights
($ in millions, except for per share
amounts, and after-tax, except for premiums and revenues)
Three Months Ended March
31,
2022
2021
Change
Net written premiums
$
8,367
$
7,505
11
%
Total revenues
$
8,809
$
8,313
6
Net income
$
1,018
$
733
39
per diluted share
$
4.15
$
2.87
45
Core income
$
1,037
$
699
48
per diluted share
$
4.22
$
2.73
55
Diluted weighted average shares
outstanding
243.7
254.1
(4
)
Combined ratio
91.3
%
96.6
%
(5.3
)
pts
Underlying combined ratio
91.2
%
89.5
%
1.7
pts
Return on equity
15.0
%
10.2
%
4.8
pts
Core return on equity
15.5
%
11.1
%
4.4
pts
As of
Change From
March 31, 2022
December 31, 2021
March 31, 2021
December 31, 2021
March 31, 2021
Book value per share
$
106.40
$
119.77
$
112.42
(11
)%
(5
)%
Adjusted book value per share
112.19
109.76
101.21
2
%
11
%
See Glossary of Financial Measures for
definitions and the statistical supplement for additional financial
data.
“We are off to a terrific start in 2022, with strong
contributions to our results from both underwriting and
investments,” said Alan Schnitzer, Chairman and Chief Executive
Officer. “Core income for the quarter was $1.0 billion, or $4.22
per diluted share, generating core return on equity of 15.5%. These
results were driven by net earned premiums of $8.0 billion, which
were 9% higher than in the prior year period, and an excellent
combined ratio of 91.3%. Underlying underwriting income in our
commercial business segments was particularly strong. Our
high-quality investment portfolio generated after-tax net
investment income of $539 million.
“These results, along with our strong balance sheet, enabled us
to return $773 million of excess capital to our shareholders this
quarter, including nearly $560 million of share repurchases. In
recognition of our strong financial position and confidence in the
outlook for our business, I am pleased to share that our Board of
Directors declared a 6% increase in our quarterly cash dividend to
$0.93 per share, marking 18 consecutive years of dividend increases
with a compound annual growth rate of 9% over that period.
“Our best-in-class marketplace execution produced 11% growth in
net written premiums this quarter to a record $8.4 billion, with
each of our three segments contributing. In Business Insurance, net
written premiums grew by 9%, with renewal premium change of 9.1%,
near all-time highs, and record retention of 87%. In addition, new
business was up 17% year over year. In Bond & Specialty
Insurance, net written premiums increased by 22%, driven by renewal
premium change of 12.0%, continued strong retention and 12% growth
in new business in our management liability business, as well as
terrific production in our surety business. In Personal Insurance,
renewal premium change was higher in both Auto and Homeowners,
contributing to net written premium growth of 12%.
“The significant innovation and technology investments we have
been making for some time are driving our performance today and
transforming Travelers into the insurance company of the future. We
are innovating on top of a foundation of excellence to ensure our
continued success through competitive advantages that are relevant,
differentiating and difficult to replicate. With that and our
talent advantage, we are confident in our ability to continue to
create shareholder value over time.”
Consolidated Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2022
2021
Change
Underwriting gain:
$
659
$
217
$
442
Underwriting gain
includes:
Net favorable prior year reserve
development
153
317
(164
)
Catastrophes, net of reinsurance
(160
)
(835
)
675
Net investment income
637
701
(64
)
Other income (expense), including
interest expense
(91
)
(71
)
(20
)
Core income before income taxes
1,205
847
358
Income tax expense
168
148
20
Core income
1,037
699
338
Net realized investment gains (losses)
after income taxes
(19
)
34
(53
)
Net income
$
1,018
$
733
$
285
Combined ratio
91.3
%
96.6
%
(5.3
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(1.9
)
pts
(4.2
)
pts
2.3
pts
Catastrophes, net of reinsurance
2.0
pts
11.3
pts
(9.3
)
pts
Underlying combined ratio
91.2
%
89.5
%
1.7
pts
Net written premiums
Business Insurance
$
4,502
$
4,125
9
%
Bond & Specialty Insurance
882
723
22
Personal Insurance
2,983
2,657
12
Total
$
8,367
$
7,505
11
%
First Quarter 2022 Results
(All comparisons vs. first quarter 2021, unless noted
otherwise)
Net income of $1.018 billion increased $285 million, due to
higher core income, partially offset by net realized investment
losses compared to net realized investment gains in the prior year
quarter. Core income of $1.037 billion increased $338 million,
primarily due to lower catastrophe losses, partially offset by
lower net favorable prior year reserve development and lower net
investment income. The underlying underwriting gain (i.e.,
excluding net prior year reserve development and catastrophe
losses) benefited from higher business volumes and a $47 million
benefit relating to the resolution of prior year income tax
matters. Net realized investment losses were $23 million pre-tax
($19 million after-tax), compared to net realized investment gains
of $44 million pre-tax ($34 million after-tax) in the prior year
quarter.
Combined ratio:
- The combined ratio of 91.3% improved 5.3 points due to lower
catastrophe losses (9.3 points), partially offset by lower net
favorable prior year reserve development (2.3 points) and a higher
underlying combined ratio (1.7 points).
- The underlying combined ratio of 91.2% increased 1.7 points.
See below for further details by segment.
- Net favorable prior year reserve development occurred in all
three segments. See below for further details by segment.
Catastrophe losses primarily resulted from wind storms in multiple
states.
Net investment income of $637 million pre-tax ($539 million
after-tax) decreased 9%. Income from the non-fixed income
investment portfolio decreased from the prior year quarter,
primarily due to lower private equity partnership returns as
compared to very strong returns in the prior year quarter.
Non-fixed income returns are generally reported on a one-quarter
lagged basis and directionally follow the broader equity markets.
Income from the fixed income investment portfolio increased over
the prior year quarter, primarily due to growth in fixed maturity
investments, partially offset by lower interest rates.
Net written premiums of $8.367 billion increased 11%. See below
for further details by segment.
Shareholders’ Equity
Shareholders’ equity of $25.531 billion decreased 12% from
year-end 2021, primarily due to net unrealized investment losses
compared to net unrealized investment gains at year-end 2021,
resulting from higher interest rates, common share repurchases and
dividends to shareholders, partially offset by net income of $1.018
billion. Net unrealized investment losses included in shareholders’
equity were $1.770 billion pre-tax ($1.391 billion after-tax)
compared to net unrealized investment gains of $3.060 billion
pre-tax ($2.415 billion after-tax) at year-end 2021. Book value per
share of $106.40 decreased 5% from March 31, 2021 and decreased 11%
from year-end 2021. Adjusted book value per share of $112.19, which
excludes net unrealized investment gains (losses), increased 11%
over March 31, 2021 and 2% over year-end 2021.
The Company repurchased 3.3 million shares during the first
quarter at an average price of $172.07 per share for a total of
$559 million. At March 31, 2022, the Company had $3.505 billion of
capacity remaining under its share repurchase authorization
approved by the Board of Directors. At the end of the quarter,
statutory capital and surplus was $24.168 billion, and the ratio of
debt-to-capital was 22.2%. The ratio of debt-to-capital excluding
after-tax net unrealized investment gains (losses) included in
shareholders’ equity was 21.3%, within the Company’s target range
of 15% to 25%.
The Board of Directors declared a 6% increase in the regular
quarterly dividend to $0.93 per share. The dividend is payable on
June 30, 2022 to shareholders of record at the close of business on
June 10, 2022.
Business
Insurance Segment Financial Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2022
2021
Change
Underwriting gain (loss):
$
358
$
(144
)
$
502
Underwriting gain
(loss) includes:
Net favorable prior year reserve
development
113
134
(21
)
Catastrophes, net of reinsurance
(79
)
(506
)
427
Net investment income
468
523
(55
)
Other income (expense)
(17
)
(7
)
(10
)
Segment income before income
taxes
809
372
437
Income tax expense
140
55
85
Segment income
$
669
$
317
$
352
Combined ratio
90.9
%
103.5
%
(12.6
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(2.8
)
pts
(3.5
)
pts
0.7
pts
Catastrophes, net of reinsurance
1.9
pts
13.3
pts
(11.4
)
pts
Underlying combined ratio
91.8
%
93.7
%
(1.9
)
pts
Net written premiums by market
Domestic
Select Accounts
$
819
$
729
12
%
Middle Market
2,616
2,384
10
National Accounts
303
290
4
National Property and Other
497
445
12
Total Domestic
4,235
3,848
10
International
267
277
(4
)
Total
$
4,502
$
4,125
9
%
First Quarter 2022 Results
(All comparisons vs. first quarter 2021, unless noted
otherwise)
Segment income for Business Insurance was $669 million
after-tax, an increase of $352 million. Segment income increased
primarily due to lower catastrophe losses and also a higher
underlying underwriting gain, partially offset by lower net
investment income and lower net favorable prior year reserve
development. The underlying underwriting gain benefited from higher
business volumes.
Combined ratio:
- The combined ratio of 90.9% improved 12.6 points due to lower
catastrophe losses (11.4 points) and a lower underlying combined
ratio (1.9 points), partially offset by lower net favorable prior
year reserve development (0.7 points).
- The underlying combined ratio of 91.8% improved 1.9 points,
reflecting improvements of 0.8 points in the loss ratio and 1.1
points in the expense ratio.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the domestic
operations’ workers’ compensation product line for multiple
accident years. Net prior year reserve development also included an
increase in environmental reserves.
Net written premiums of $4.502 billion increased 9%, reflecting
strong renewal premium change and retention, as well as higher
levels of new business.
Bond
& Specialty Insurance Segment Financial Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2022
2021
Change
Underwriting gain:
$
177
$
107
$
70
Underwriting gain
includes:
Net favorable prior year reserve
development
35
15
20
Catastrophes, net of reinsurance
(1
)
(24
)
23
Net investment income
59
59
—
Other income
3
3
—
Segment income before income
taxes
239
169
70
Income tax expense
22
32
(10
)
Segment income
$
217
$
137
$
80
Combined ratio
78.0
%
85.2
%
(7.2
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(4.3
)
pts
(2.1
)
pts
(2.2
)
pts
Catastrophes, net of reinsurance
0.1
pts
3.1
pts
(3.0
)
pts
Underlying combined ratio
82.2
%
84.2
%
(2.0
)
pts
Net written premiums
Domestic
Management Liability
$
505
$
444
14
%
Surety
257
200
29
Total Domestic
762
644
18
International
120
79
52
Total
$
882
$
723
22
%
First Quarter 2022 Results
(All comparisons vs. first quarter 2021, unless noted
otherwise)
Segment income for Bond & Specialty Insurance was $217
million after-tax, an increase of $80 million. Segment income
increased primarily due to a higher underlying underwriting gain,
lower catastrophe losses and higher net favorable prior year
reserve development. The underlying underwriting gain benefited
from higher business volumes. The current quarter also benefited by
$24 million relating to the resolution of prior year income tax
matters.
Combined ratio:
- The combined ratio of 78.0% improved 7.2 points due to lower
catastrophe losses (3.0 points), higher net favorable prior year
reserve development (2.2 points) and a lower underlying combined
ratio (2.0 points).
- The underlying combined ratio improved by 2.0 points to a very
strong 82.2%.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the domestic
operations’ fidelity and surety product lines for recent accident
years, partially offset by higher than expected loss experience in
the domestic operations’ general liability product line for
management liability coverages for multiple accident years.
Net written premiums of $882 million increased 22%, reflecting
strong renewal premium change, retention and new business in
management liability and strong production in surety.
Personal
Insurance Segment Financial Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2022
2021
Change
Underwriting gain:
$
124
$
254
$
(130
)
Underwriting gain
includes:
Net favorable prior year reserve
development
5
168
(163
)
Catastrophes, net of reinsurance
(80
)
(305
)
225
Net investment income
110
119
(9
)
Other income
18
21
(3
)
Segment income before income
taxes
252
394
(142
)
Income tax expense
27
80
(53
)
Segment income
$
225
$
314
$
(89
)
Combined ratio
95.3
%
90.3
%
5.0
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(0.1
)
pts
(5.9
)
pts
5.8
pts
Catastrophes, net of reinsurance
2.6
pts
10.8
pts
(8.2
)
pts
Underlying combined ratio
92.8
%
85.4
%
7.4
pts
Net written premiums
Domestic
Automobile
$
1,496
$
1,375
9
%
Homeowners and Other
1,344
1,144
17
Total Domestic
2,840
2,519
13
International
143
138
4
Total
$
2,983
$
2,657
12
%
First Quarter 2022 Results
(All comparisons vs. first quarter 2021, unless noted
otherwise)
Segment income for Personal Insurance was $225 million
after-tax, a decrease of $89 million. Segment income decreased
primarily due to a lower underlying underwriting gain and lower net
favorable prior year reserve development, partially offset by lower
catastrophe losses. The underlying underwriting gain benefited from
higher business volumes. The current quarter also benefited by $20
million relating to the resolution of prior year income tax
matters.
Combined ratio:
- The combined ratio of 95.3% increased 5.0 points due to a
higher underlying combined ratio (7.4 points) and lower net
favorable prior year reserve development (5.8 points), partially
offset by lower catastrophe losses (8.2 points).
- The underlying combined ratio of 92.8% increased 7.4 points,
driven primarily by a comparison to a low level of loss activity in
the prior year quarter in the automobile product line and elevated
severity in the current quarter in both the automobile and
homeowners and other product lines, partially offset by a lower
expense ratio.
- Net favorable prior year reserve development was not
significant in the quarter.
Net written premiums of $2.983 billion increased 12%. Domestic
Automobile net written premiums increased 9%, driven by strong
retention and renewal premium change of 3.1%. Domestic Homeowners
and Other net written premiums increased 17%, driven by strong
retention and renewal premium change of 12.3%.
Financial Supplement and Conference Call
The information in this press release should be read in
conjunction with the financial supplement that is available on our
website at www.travelers.com. Travelers management will discuss the
contents of this release and other relevant topics via webcast at 9
a.m. Eastern (8 a.m. Central) on Tuesday, April 19, 2022. Investors
can access the call via webcast at http://investor.travelers.com or
by dialing 1.844.895.1976 within the United States and
1.647.689.5389 outside the United States. Prior to the webcast, a
slide presentation pertaining to the quarterly earnings will be
available on the Company’s website.
Following the live event, replays will be available via webcast
for one year at http://investor.travelers.com and by telephone for
30 days by dialing 1.800.585.8367 within the United States or
1.416.621.4642 outside the United States. All callers should use
conference ID 1450817.
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 $35 billion in 2021. For more information, visit
www.travelers.com.
Travelers may use its website and/or social media outlets, such
as Facebook and Twitter, as distribution channels of material
Company information. Financial and other important information
regarding the Company is routinely accessible through and posted on
our website at http://investor.travelers.com, our Facebook page at
https://www.facebook.com/travelers and our Twitter account
(@Travelers) at https://twitter.com/travelers. In addition, you may
automatically receive email alerts and other information about
Travelers when you enroll your email address by visiting the Email
Notifications section at http://investor.travelers.com.
Travelers is organized into the following reportable business
segments:
Business Insurance - Business Insurance offers a broad
array of property and casualty insurance products and services to
its customers, primarily in the United States, as well as in
Canada, the United Kingdom, the Republic of Ireland and throughout
other parts of the world as a corporate member of Lloyd’s.
Bond & Specialty Insurance - Bond & Specialty
Insurance offers surety, fidelity, management liability,
professional liability, and other property and casualty coverages
and related risk management services to its customers, primarily in
the United States, and certain surety and specialty insurance
products in Canada, the United Kingdom and the Republic of Ireland,
as well as Brazil through a joint venture, in each case utilizing
various degrees of financially-based underwriting approaches.
Personal Insurance - Personal Insurance offers a broad
range of property and casualty insurance products and services
covering individuals’ personal risks, primarily in the United
States, as well as in Canada. The primary products of automobile
and homeowners insurance are complemented by a broad suite of
related coverages.
* * * * *
Forward-Looking Statements
This press release contains, and management may make, certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other
than statements of historical facts, may be forward-looking
statements. Words such as “may,” “will,” “should,” “likely,”
“anticipates,” “expects,” “intends,” “plans,” “projects,”
“believes,” “views,” “estimates” and similar expressions are used
to identify these forward-looking statements. These statements
include, among other things, the Company’s statements about:
- the Company’s outlook, the impact of trends on its business and
its future results of operations and financial condition;
- the impact of COVID-19 and related economic conditions;
- the impact of legislative or regulatory actions or court
decisions taken in response to COVID-19 or otherwise;
- share repurchase plans;
- future pension plan contributions;
- the sufficiency of the Company’s asbestos and other
reserves;
- the impact of emerging claims issues as well as other insurance
and non-insurance litigation;
- catastrophe losses and modeling;
- the impact of investment, economic and underwriting market
conditions, including interest rates and inflation;
- the impact of changing climate conditions;
- strategic and operational initiatives to improve profitability
and competitiveness;
- the Company’s competitive advantages and innovation
agenda;
- new product offerings;
- the impact of developments in the tort environment; and
- the impact of developments in the geopolitical
environment.
The Company cautions investors that such statements are subject
to risks and uncertainties, many of which are difficult to predict
and generally beyond the Company’s control, that could cause actual
results to differ materially from those expressed in, or implied or
projected by, the forward-looking information and statements.
Some of the factors that could cause actual results to differ
include, but are not limited to, the following:
Insurance-Related Risks
- high levels of catastrophe losses;
- actual claims may exceed the Company’s claims and claim
adjustment expense reserves, or the estimated level of claims and
claim adjustment expense reserves may increase, including as a
result of, among other things, changes in the legal/tort,
regulatory and economic environments, including increased
inflation;
- the Company’s potential exposure to asbestos and environmental
claims and related litigation;
- the Company is exposed to, and may face adverse developments
involving, mass tort claims; and
- the effects of emerging claim and coverage issues on the
Company’s business are uncertain, and court decisions or
legislative changes that take place after the Company issues its
policies can result in an unexpected increase in the number of
claims.
Financial, Economic and Credit
Risks
- a period of financial market disruption or an economic
downturn;
- the Company’s investment portfolio is subject to credit and
interest rate risk, and may suffer reduced or low returns or
material realized or unrealized losses;
- the Company is exposed to credit risk related to reinsurance
and structured settlements, and reinsurance coverage may not be
available to the Company;
- the Company is exposed to credit risk in certain of its
insurance operations and with respect to certain guarantee or
indemnification arrangements that it has with third parties;
- a downgrade in the Company’s claims-paying and financial
strength ratings; and
- the Company’s insurance subsidiaries may be unable to pay
dividends to the Company’s holding company in sufficient
amounts.
Business and Operational
Risks
- the ongoing impact of COVID-19 and related risks, including
with respect to revenues, claims and claim adjustment expenses,
general and administrative expenses, investments, inflation,
adverse legislative and/or regulatory action, operational
disruptions and heightened cyber security risks;
- the intense competition that the Company faces, including with
respect to attracting and retaining employees, and the impact of
innovation, technological change and changing customer preferences
on the insurance industry and the markets in which it
operates;
- disruptions to the Company’s relationships with its independent
agents and brokers or the Company’s inability to manage effectively
a changing distribution landscape;
- the Company’s efforts to develop new products or services,
expand in targeted markets, improve business processes and
workflows or make acquisitions may not be successful and may create
enhanced risks;
- the Company’s pricing and capital models may provide materially
different indications than actual results;
- loss of or significant restrictions on the use of particular
types of underwriting criteria, such as credit scoring, or other
data or methodologies, in the pricing and underwriting of the
Company’s products; and
- the Company is subject to additional risks associated with its
business outside the United States.
Technology and Intellectual Property
Risks
- as a result of cyber attacks (the risk of which could be
exacerbated by geopolitical tensions) or otherwise, the Company may
experience difficulties with technology, data and network security
or outsourcing relationships;
- the Company’s dependence on effective information technology
systems and on continuing to develop and implement improvements in
technology; and
- the Company may be unable to protect and enforce its own
intellectual property or may be subject to claims for infringing
the intellectual property of others.
Regulatory and Compliance
Risks
- changes in regulation, including higher tax rates; and
- the Company’s compliance controls may not be effective.
In addition, the Company’s share repurchase plans depend on a
variety of factors, including the Company’s financial position,
earnings, share price, catastrophe losses, maintaining capital
levels appropriate for the Company’s business operations, changes
in levels of written premiums, funding of the Company’s qualified
pension plan, capital requirements of the Company’s operating
subsidiaries, legal requirements, regulatory constraints, other
investment opportunities (including mergers and acquisitions and
related financings), market conditions, changes in tax laws and
other factors.
Our forward-looking statements speak only as of the date of this
press release or as of the date they are made, and we undertake no
obligation to update forward-looking statements. For a more
detailed discussion of these factors, see the information under the
captions “Risk Factors,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and “Forward Looking
Statements” in the quarterly report on Form 10-Q filed with the
Securities and Exchange Commission (SEC) on April 19, 2022, and in
our most recent annual report on Form 10-K filed with the SEC on
February 17, 2022, in each case as updated by our periodic filings
with the SEC.
GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF GAAP
MEASURES TO NON-GAAP MEASURES
The following measures are used by the Company’s management to
evaluate financial performance against historical results, to
establish performance targets on a consolidated basis and for other
reasons as discussed below. In some cases, these measures are
considered non-GAAP financial measures under applicable SEC rules
because they are not displayed as separate line items in the
consolidated financial statements or are not required to be
disclosed in the notes to financial statements or, in some cases,
include or exclude certain items not ordinarily included or
excluded in the most comparable GAAP financial measure.
Reconciliations of these measures to the most comparable GAAP
measures also follow.
In the opinion of the Company’s management, a discussion of
these measures provides investors, financial analysts, rating
agencies and other financial statement users with a better
understanding of the significant factors that comprise the
Company’s periodic results of operations and how management
evaluates the Company’s financial performance.
Some of these measures exclude net realized investment gains
(losses), net of tax, and/or net unrealized investment gains
(losses), net of tax, included in shareholders’ equity, which can
be significantly impacted by both discretionary and other economic
factors and are not necessarily indicative of operating trends.
Other companies may calculate these measures differently, and,
therefore, their measures may not be comparable to those used by
the Company’s management.
RECONCILIATION OF NET INCOME TO CORE INCOME AND CERTAIN OTHER
NON-GAAP MEASURES
Core income (loss) is consolidated net income (loss)
excluding the after-tax impact of net realized investment gains
(losses), discontinued operations, the effect of a change in tax
laws and tax rates at enactment, and cumulative effect of changes
in accounting principles when applicable. Segment income
(loss) is determined in the same manner as core income (loss)
on a segment basis. Management uses segment income (loss) to
analyze each segment’s performance and as a tool in making business
decisions. Financial statement users also consider core income
(loss) when analyzing the results and trends of insurance
companies. Core income (loss) per share is core income
(loss) on a per common share basis.
Reconciliation of Net Income to Core
Income less Preferred Dividends
Three Months Ended March
31,
($ in millions, after-tax)
2022
2021
Net income
$
1,018
$
733
Adjustments:
Net realized investment (gains) losses
19
(34
)
Core income
$
1,037
$
699
Three Months Ended March
31,
($ in millions, pre-tax)
2022
2021
Net income
$
1,182
$
891
Adjustments:
Net realized investment (gains) losses
23
(44
)
Core income
$
1,205
$
847
Twelve Months Ended December
31,
Average Annual
($ in millions, after-tax)
2021
2020
2019
2018
2017
2005 - 2016
Net income
$
3,662
$
2,697
$
2,622
$
2,523
$
2,056
$
3,159
Less: Loss from discontinued
operations
—
—
—
—
—
(37
)
Income from continuing
operations
3,662
2,697
2,622
2,523
2,056
3,196
Adjustments:
Net realized investment (gains) losses
(132
)
(11
)
(85
)
(93
)
(142
)
(29
)
Impact of changes in tax laws and/or tax
rates (1) (2)
(8
)
—
—
—
129
—
Core income
3,522
2,686
2,537
2,430
2,043
3,167
Less: Preferred dividends
—
—
—
—
—
2
Core income, less preferred
dividends
$
3,522
$
2,686
$
2,537
$
2,430
$
2,043
$
3,165
(1) Impact is recognized in the accounting period in which the
change is enacted (2) 2017 reflects impact of Tax Cuts and Jobs Act
of 2017 (TCJA)
Reconciliation of Net Income per Share
to Core Income per Share on a Basic and Diluted Basis
Three Months Ended March
31,
2022
2021
Basic income per
share
Net income
$
4.20
$
2.89
Adjustments:
Net realized investment (gains) losses,
after-tax
0.07
(0.14
)
Core income
$
4.27
$
2.75
Diluted income
per share
Net income
$
4.15
$
2.87
Adjustments:
Net realized investment (gains) losses,
after-tax
0.07
(0.14
)
Core income
$
4.22
$
2.73
Reconciliation of Segment Income to
Total Core Income
Three Months Ended March
31,
($ in millions, after-tax)
2022
2021
Business Insurance
$
669
$
317
Bond & Specialty Insurance
217
137
Personal Insurance
225
314
Total segment income
1,111
768
Interest Expense and Other
(74
)
(69
)
Total core income
$
1,037
$
699
RECONCILIATION OF SHAREHOLDERS’ EQUITY TO ADJUSTED
SHAREHOLDERS’ EQUITY AND CALCULATION OF RETURN ON EQUITY AND CORE
RETURN ON EQUITY
Adjusted shareholders’ equity is shareholders’ equity
excluding net unrealized investment gains (losses), net of tax,
included in shareholders’ equity, net realized investment gains
(losses), net of tax, for the period presented, the effect of a
change in tax laws and tax rates at enactment (excluding the
portion related to net unrealized investment gains (losses)),
preferred stock and discontinued operations.
Reconciliation of Shareholders’ Equity
to Adjusted Shareholders’ Equity
As of March 31,
($ in millions)
2022
2021
Shareholders’ equity
$
25,531
$
28,269
Adjustments:
Net unrealized investment (gains) losses,
net of tax, included in shareholders’ equity
1,391
(2,817
)
Net realized investment (gains) losses,
net of tax
19
(34
)
Adjusted shareholders’ equity
$
26,941
$
25,418
As of December 31,
Average Annual
($ in millions)
2021
2020
2019
2018
2017
2005 - 2016
Shareholders’ equity
$
28,887
$
29,201
$
25,943
$
22,894
$
23,731
$
24,883
Adjustments:
Net unrealized investment (gains) losses,
net of tax, included in shareholders’ equity
(2,415
)
(4,074
)
(2,246
)
113
(1,112
)
(1,354
)
Net realized investment (gains) losses,
net of tax
(132
)
(11
)
(85
)
(93
)
(142
)
(29
)
Impact of changes in tax laws and/or tax
rates (1) (2)
(8
)
—
—
—
287
—
Preferred stock
—
—
—
—
—
(53
)
Loss from discontinued operations
—
—
—
—
—
37
Adjusted shareholders’ equity
$
26,332
$
25,116
$
23,612
$
22,914
$
22,764
$
23,484
(1) Impact is recognized in the accounting period in which the
change is enacted (2) 2017 reflects impact of Tax Cuts and Jobs Act
of 2017 (TCJA)
Return on equity is the ratio of annualized net income
(loss) less preferred dividends to average shareholders’ equity for
the periods presented. Core return on equity is the ratio of
annualized core income (loss) less preferred dividends to adjusted
average shareholders’ equity for the periods presented. In the
opinion of the Company’s management, these are important indicators
of how well management creates value for its shareholders through
its operating activities and its capital management.
Average shareholders’ equity is (a) the sum of total
shareholders’ equity excluding preferred stock at the beginning and
end of each of the quarters for the period presented divided by (b)
the number of quarters in the period presented times two.
Adjusted average shareholders’ equity is (a) the sum of
total adjusted shareholders’ equity at the beginning and end of
each of the quarters for the period presented divided by (b) the
number of quarters in the period presented times two.
Calculation of Return on Equity and
Core Return on Equity
Three Months Ended March
31,
($ in millions, after-tax)
2022
2021
Annualized net income
$
4,073
$
2,934
Average shareholders’ equity
27,209
28,735
Return on equity
15.0
%
10.2
%
Annualized core income
$
4,148
$
2,796
Adjusted average shareholders’ equity
26,706
25,272
Core return on equity
15.5
%
11.1
%
Twelve Months Ended December
31,
Average Annual
($ in millions, after-tax)
2021
2020
2019
2018
2017
2005 - 2016
Net income, less preferred dividends
$
3,662
$
2,697
$
2,622
$
2,523
$
2,056
$
3,157
Average shareholders’ equity
28,735
26,892
24,922
22,843
23,671
24,913
Return on equity
12.7
%
10.0
%
10.5
%
11.0
%
8.7
%
12.7
%
Core income, less preferred dividends
$
3,522
$
2,686
$
2,537
$
2,430
$
2,043
$
3,165
Adjusted average shareholders’ equity
25,718
23,790
23,335
22,814
22,743
23,505
Core return on equity
13.7
%
11.3
%
10.9
%
10.7
%
9.0
%
13.5
%
RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN
ITEMS TO NET INCOME
Underwriting gain (loss) is net earned premiums and fee
income less claims and claim adjustment expenses and
insurance-related expenses. In the opinion of the Company’s
management, it is important to measure the profitability of each
segment excluding the results of investing activities, which are
managed separately from the insurance business. This measure is
used to assess each segment’s business performance and as a tool in
making business decisions. Pre-tax underwriting gain,
excluding the impact of catastrophes and net favorable
(unfavorable) prior year loss reserve development, is the
underwriting gain adjusted to exclude claims and claim adjustment
expenses, reinstatement premiums and assessments related to
catastrophes and loss reserve development related to time periods
prior to the current year. In the opinion of the Company’s
management, this measure is meaningful to users of the financial
statements to understand the Company’s periodic earnings and the
variability of earnings caused by the unpredictable nature (i.e.,
the timing and amount) of catastrophes and loss reserve
development. This measure is also referred to as underlying
underwriting gain, underlying underwriting margin or
underlying underwriting income.
A catastrophe is a severe loss designated a catastrophe
by internationally recognized organizations that track and report
on insured losses resulting from catastrophic events, such as
Property Claim Services (PCS) for events in the United States and
Canada. Catastrophes can be caused by various natural events,
including, among others, hurricanes, tornadoes and other
windstorms, earthquakes, hail, wildfires, severe winter weather,
floods, tsunamis, volcanic eruptions and other naturally-occurring
events, such as solar flares. Catastrophes can also be man-made,
such as terrorist attacks and other intentionally destructive acts
including those involving nuclear, biological, chemical and
radiological events, cyber events, explosions and destruction of
infrastructure. Each catastrophe has unique characteristics and
catastrophes are not predictable as to timing or amount. Their
effects are included in net and core income and claims and claim
adjustment expense reserves upon occurrence. A catastrophe may
result in the payment of reinsurance reinstatement premiums and
assessments from various pools.
The Company’s threshold for disclosing catastrophes is primarily
determined at the reportable segment level. If a threshold for one
segment or a combination thereof is exceeded and the other segments
have losses from the same event, losses from the event are
identified as catastrophe losses in the segment results and for the
consolidated results of the Company. Additionally, an aggregate
threshold is applied for international business across all
reportable segments. The threshold for 2022 ranges from $20 million
to $30 million of losses before reinsurance and taxes.
Net favorable (unfavorable) prior year loss reserve
development is the increase or decrease in incurred claims and
claim adjustment expenses as a result of the re-estimation of
claims and claim adjustment expense reserves at successive
valuation dates for a given group of claims, which may be related
to one or more prior years. In the opinion of the Company’s
management, a discussion of loss reserve development is meaningful
to users of the financial statements as it allows them to assess
the impact between prior and current year development on incurred
claims and claim adjustment expenses, net and core income (loss),
and changes in claims and claim adjustment expense reserve levels
from period to period.
Components of Net Income
Three Months Ended March
31,
($ in millions, after-tax, except as
noted)
2022
2021
Pre-tax underwriting gain excluding the
impact of catastrophes and net prior year loss reserve
development
$
666
$
735
Pre-tax impact of catastrophes
(160
)
(835
)
Pre-tax impact of net favorable prior year
loss reserve development
153
317
Pre-tax underwriting gain
659
217
Income tax expense on underwriting
results
84
51
Underwriting gain
575
166
Net investment income
539
590
Other income (expense), including interest
expense
(77
)
(57
)
Core income
1,037
699
Net realized investment gains (losses)
(19
)
34
Net income
$
1,018
$
733
Reconciliation of Net Income to
After-Tax Underlying Underwriting Income (also known as Underlying
Underwriting Gain)
Three Months Ended March
31,
($ in millions, after-tax)
2022
2021
Net income
$
1,018
$
733
Net realized investment (gains) losses
19
(34
)
Core income
1,037
699
Net investment income
(539
)
(590
)
Other (income) expense, including interest
expense
77
57
Underwriting income
575
166
Impact of net favorable prior year reserve
development
(122
)
(249
)
Impact of catastrophes
127
659
Underlying underwriting income
$
580
$
576
Twelve Months Ended December
31,
($ in millions, after-tax)
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
Net income
$
3,662
$
2,697
$
2,622
$
2,523
$
2,056
$
3,014
$
3,439
$
3,692
$
3,673
$
2,473
$
1,426
Net realized investment gains
(132
)
(11
)
(85
)
(93
)
(142
)
(47
)
(2
)
(51
)
(106
)
(32
)
(36
)
Impact of changes in tax laws and/or tax
rates (1) (2)
(8
)
—
—
—
129
—
—
—
—
—
—
Core income
3,522
2,686
2,537
2,430
2,043
2,967
3,437
3,641
3,567
2,441
1,390
Net investment income
(2,541
)
(1,908
)
(2,097
)
(2,102
)
(1,872
)
(1,846
)
(1,905
)
(2,216
)
(2,186
)
(2,316
)
(2,330
)
Other (income) expense, including interest
expense
235
232
214
248
179
78
193
159
61
171
195
Underwriting income (loss)
1,216
1,010
654
576
350
1,199
1,725
1,584
1,442
296
(745
)
Impact of net (favorable) unfavorable
prior year reserve development
(424
)
(276
)
47
(409
)
(378
)
(510
)
(617
)
(616
)
(552
)
(622
)
(473
)
Impact of catastrophes
1,459
1,274
699
1,355
1,267
576
338
462
387
1,214
1,669
Underlying underwriting income
$
2,251
$
2,008
$
1,400
$
1,522
$
1,239
$
1,265
$
1,446
$
1,430
$
1,277
$
888
$
451
(1) Impact is recognized in the accounting period in which the
change is enacted (2) 2017 reflects impact of Tax Cuts and Jobs Act
of 2017 (TCJA)
COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED
RATIO
Combined ratio: For Statutory Accounting Practices (SAP),
the combined ratio is the sum of the SAP loss and LAE ratio and the
SAP underwriting expense ratio as defined in the statutory
financial statements required by insurance regulators. The combined
ratio, as used in this earnings release, is the equivalent of, and
is calculated in the same manner as, the SAP combined ratio except
that the SAP underwriting expense ratio is based on net written
premiums and the underwriting expense ratio as used in this
earnings release is based on net earned premiums.
For SAP, the loss and LAE ratio is the ratio of incurred losses
and loss adjustment expenses less certain administrative services
fee income to net earned premiums as defined in the statutory
financial statements required by insurance regulators. The loss and
LAE ratio as used in this earnings release is calculated in the
same manner as the SAP ratio.
For SAP, the underwriting expense ratio is the ratio of
underwriting expenses incurred (including commissions paid), less
certain administrative services fee income and billing and policy
fees and other, to net written premiums as defined in the statutory
financial statements required by insurance regulators. The
underwriting expense ratio as used in this earnings release, is the
ratio of underwriting expenses (including the amortization of
deferred acquisition costs), less certain administrative services
fee income, billing and policy fees and other, to net earned
premiums.
The combined ratio, loss and LAE ratio, and underwriting expense
ratio are used as indicators of the Company’s underwriting
discipline, efficiency in acquiring and servicing its business and
overall underwriting profitability. A combined ratio under 100%
generally indicates an underwriting profit. A combined ratio over
100% generally indicates an underwriting loss.
Underlying combined ratio represents the combined ratio
excluding the impact of net prior year reserve development and
catastrophes. The underlying combined ratio is an indicator of the
Company’s underwriting discipline and underwriting profitability
for the current accident year.
Other companies’ method of computing similarly titled measures
may not be comparable to the Company’s method of computing these
ratios.
Calculation of the Combined
Ratio
Three Months Ended March
31,
($ in millions, pre-tax)
2022
2021
Loss and loss
adjustment expense ratio
Claims and claim adjustment expenses
$
5,039
$
4,970
Less:
Policyholder dividends
11
11
Allocated fee income
35
38
Loss ratio numerator
$
4,993
$
4,921
Underwriting
expense ratio
Amortization of deferred acquisition
costs
$
1,310
$
1,207
General and administrative expenses
(G&A)
1,191
1,163
Less:
Non-insurance G&A
82
70
Allocated fee income
68
63
Billing and policy fees and other
27
27
Expense ratio numerator
$
2,324
$
2,210
Earned premium
$
8,014
$
7,386
Combined ratio (1)
Loss and loss adjustment expense ratio
62.3
%
66.7
%
Underwriting expense ratio
29.0
%
29.9
%
Combined ratio
91.3
%
96.6
%
Impact on combined ratio:
Net favorable prior year reserve
development
(1.9
)%
(4.2
)%
Catastrophes, net of reinsurance
2.0
%
11.3
%
Underlying combined ratio
91.2
%
89.5
%
(1)
For purposes of computing ratios, billing
and policy fees and other (which are a component of other revenues)
are allocated as a reduction of underwriting expenses. In addition,
fee income is allocated as a reduction of losses and loss
adjustment expenses and underwriting expenses. These allocations
are to conform the calculation of the combined ratio with statutory
accounting. Additionally, general and administrative expenses
include non-insurance expenses that are excluded from underwriting
expenses, and accordingly are excluded in calculating the combined
ratio.
RECONCILIATION OF BOOK VALUE PER SHARE AND SHAREHOLDERS’
EQUITY TO CERTAIN NON-GAAP MEASURES
Book value per share is total common shareholders’ equity
divided by the number of common shares outstanding. Adjusted
book value per share is total common shareholders’ equity
excluding net unrealized investment gains and losses, net of tax,
included in shareholders’ equity, divided by the number of common
shares outstanding. In the opinion of the Company’s management,
adjusted book value per share is useful in an analysis of a
property casualty company’s book value per share as it removes the
effect of changing prices on invested assets (i.e., net unrealized
investment gains (losses), net of tax), which do not have an
equivalent impact on unpaid claims and claim adjustment expense
reserves. Tangible book value per share is adjusted book
value per share excluding the after-tax value of goodwill and other
intangible assets divided by the number of common shares
outstanding. In the opinion of the Company’s management, tangible
book value per share is useful in an analysis of a property
casualty company’s book value on a nominal basis as it removes
certain effects of purchase accounting (i.e., goodwill and other
intangible assets), in addition to the effect of changing prices on
invested assets.
Reconciliation of Shareholders’ Equity
to Tangible Shareholders’ Equity, Excluding Net Unrealized
Investment Gains (Losses), Net of Tax
As of
($ in millions, except per share
amounts)
March 31, 2022
December 31,
2021
March 31, 2021
Shareholders’ equity
$
25,531
$
28,887
$
28,269
Less: Net unrealized investment gains
(losses), net of tax, included in shareholders’ equity
(1,391
)
2,415
2,817
Shareholders’ equity, excluding net
unrealized investment gains (losses), net of tax, included in
shareholders’ equity
26,922
26,472
25,452
Less:
Goodwill
4,001
4,008
4,017
Other intangible assets
301
306
318
Impact of deferred tax on other intangible
assets
(64
)
(66
)
(63
)
Tangible shareholders’ equity
$
22,684
$
22,224
$
21,180
Common shares outstanding
240.0
241.2
251.5
Book value per share
$
106.40
$
119.77
$
112.42
Adjusted book value per share
112.19
109.76
101.21
Tangible book value per share
94.53
92.15
84.23
RECONCILIATION OF TOTAL CAPITALIZATION TO TOTAL
CAPITALIZATION EXCLUDING NET UNREALIZED INVESTMENT GAINS (LOSSES),
NET OF TAX
Total capitalization is the sum of total shareholders’
equity and debt. Debt-to-capital ratio excluding net unrealized
gain (loss) on investments, net of tax, included in shareholders’
equity, is the ratio of debt to total capitalization excluding
the after-tax impact of net unrealized investment gains and losses
included in shareholders’ equity. In the opinion of the Company’s
management, the debt-to-capital ratio is useful in an analysis of
the Company’s financial leverage.
As of
($ in millions)
March 31, 2022
December 31,
2021
Debt
$
7,291
$
7,290
Shareholders’ equity
25,531
28,887
Total capitalization
32,822
36,177
Less: Net unrealized investment gains
(losses), net of tax, included in shareholders’ equity
(1,391
)
2,415
Total capitalization excluding net
unrealized gain (loss) on investments, net of tax, included in
shareholders’ equity
$
34,213
$
33,762
Debt-to-capital ratio
22.2
%
20.2
%
Debt-to-capital ratio excluding net
unrealized investment gains (losses), net of tax, included in
shareholders’ equity
21.3
%
21.6
%
RECONCILIATION OF INVESTED ASSETS TO
INVESTED ASSETS EXCLUDING NET UNREALIZED INVESTMENT GAINS
(LOSSES)
Three Months Ended March
31,
($ in millions, pre-tax)
2022
2021
Invested assets
$
83,664
$
83,887
Less: Net unrealized investment gains
(losses), pre-tax
(1,770
)
3,579
Invested assets excluding net
unrealized investment gains (losses)
$
85,434
$
80,308
As of December 31,
($ in millions, pre-tax)
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
Invested assets
$
87,375
$
84,423
$
77,884
$
72,278
$
72,502
$
70,488
$
70,470
$
73,261
$
73,160
$
73,838
$
72,701
Less: Net unrealized investment gains
(losses), pre-tax
3,060
5,175
2,853
(137
)
1,414
1,112
1,974
3,008
2,030
4,761
4,399
Invested assets excluding net
unrealized investment gains (losses)
$
84,315
$
79,248
$
75,031
$
72,415
$
71,088
$
69,376
$
68,496
$
70,253
$
71,130
$
69,077
$
68,302
OTHER DEFINITIONS
Gross written premiums reflect the direct and assumed
contractually determined amounts charged to policyholders for the
effective period of the contract based on the terms and conditions
of the insurance contract. Net written premiums reflect
gross written premiums less premiums ceded to reinsurers.
For Business Insurance and Bond & Specialty Insurance,
retention is the amount of premium available for renewal
that was retained, excluding rate and exposure changes. For
Personal Insurance, retention is the ratio of the expected
number of renewal policies that will be retained throughout the
annual policy period to the number of available renewal base
policies. For all of the segments, renewal rate change
represents the estimated change in average premium on policies that
renew, excluding exposure changes. Exposure is the measure
of risk used in the pricing of an insurance product. The change in
exposure is the amount of change in premium on policies that renew
attributable to the change in portfolio risk. Renewal premium
change represents the estimated change in average premium on
policies that renew, including rate and exposure changes. New
business is the amount of written premium related to new
policyholders and additional products sold to existing
policyholders. These are operating statistics, which are in part
dependent on the use of estimates and are therefore subject to
change. For Business Insurance, retention, renewal premium change
and new business exclude National Accounts. For Bond &
Specialty Insurance, retention, renewal premium change and new
business exclude surety and other products that are generally sold
on a non-recurring, project specific basis. For each of the
segments, production statistics referred to herein are domestic
only unless otherwise indicated.
Statutory capital and surplus represents the excess of an
insurance company’s admitted assets over its liabilities, including
loss reserves, as determined in accordance with statutory
accounting practices.
Holding company liquidity is the total funds available at
the holding company level to fund general corporate purposes,
primarily the payment of shareholder dividends and debt service.
These funds consist of total cash, short-term invested assets and
other readily marketable securities held by the holding
company.
For a glossary of other financial terms used in this press
release, we refer you to the Company’s most recent annual report on
Form 10-K filed with the SEC on February 17, 2022, and subsequent
periodic filings with the SEC.
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version on businesswire.com: https://www.businesswire.com/news/home/20220415005196/en/
Media: Patrick Linehan 917.778.6267
Institutional Investors: Abbe
Goldstein 917.778.6825
The Travelers Companies (NYSE:TRV)
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