First Quarter 2024 Net Income per Diluted
Share of $4.80, up 16%, and Return on Equity of 18.0%
First Quarter 2024 Core Income per Diluted
Share of $4.69, up 14%, and Core Return on Equity of 15.4%
Board of Directors Declares 5% Increase in
Regular Quarterly Cash Dividend to $1.05 per Share
- First quarter net income of $1.123 billion and core income of
$1.096 billion.
- Quarter included an elevated level of catastrophe losses of
$712 million pre-tax, compared to $535 million pre-tax in the prior
year quarter.
- Excellent consolidated combined ratio of 93.9% improved 1.5
points; outstanding underlying combined ratio of 87.7% improved 2.9
points.
- Net written premiums of $10.182 billion, up 8% compared to the
prior year quarter, with growth in all three segments.
- Total capital of $620 million returned to shareholders,
including $388 million of share repurchases.
- Book value per share of $109.28, up 9% over March 31, 2023;
adjusted book value per share of $125.53, up 8% over March 31,
2023.
The Travelers Companies, Inc. today reported net income of
$1.123 billion, or $4.80 per diluted share, for the quarter ended
March 31, 2024, compared to $975 million, or $4.13 per diluted
share, in the prior year quarter. Core income in the current
quarter was $1.096 billion, or $4.69 per diluted share, compared to
$970 million, or $4.11 per diluted share, in the prior year
quarter. Core income increased primarily due to higher net
investment income and a higher underlying underwriting gain (i.e.,
excluding net prior year reserve development and catastrophe
losses), partially offset by higher catastrophe losses. The
underlying underwriting gain was higher than in the prior year
quarter, notwithstanding that the prior year quarter included a
$211 million one-time tax benefit. Net realized investment gains in
the current quarter were $35 million pre-tax ($27 million
after-tax), compared to $6 million pre-tax ($5 million after-tax)
in the prior year quarter. Per diluted share amounts benefited from
the impact of share repurchases.
Consolidated Highlights
($ in millions, except for per share
amounts, and after-tax, except for premiums and revenues)
Three Months Ended March
31,
2024
2023
Change
Net written premiums
$
10,182
$
9,396
8
%
Total revenues
$
11,228
$
9,704
16
Net income
$
1,123
$
975
15
per diluted share
$
4.80
$
4.13
16
Core income
$
1,096
$
970
13
per diluted share
$
4.69
$
4.11
14
Diluted weighted average shares
outstanding
232.0
234.4
(1
)
Combined ratio
93.9
%
95.4
%
(1.5
)
pts
Underlying combined ratio
87.7
%
90.6
%
(2.9
)
pts
Return on equity
18.0
%
17.5
%
0.5
pts
Core return on equity
15.4
%
14.5
%
0.9
pts
As of
Change From
March 31, 2024
December 31,
2023
March 31, 2023
December 31,
2023
March 31, 2023
Book value per share
$
109.28
$
109.19
$
99.80
—
%
9
%
Adjusted book value per share
125.53
122.90
116.55
2
%
8
%
See Glossary of Financial Measures for
definitions and the statistical supplement for additional financial
data.
“We are very pleased to report excellent top- and bottom-line
results for the first quarter,” said Alan Schnitzer, Chairman and
Chief Executive Officer. “Core income for the quarter was $1.1
billion, or $4.69 per diluted share, generating core return on
equity of 15.4%. Strong core income was driven by record net earned
premiums of $10.1 billion, up 14% compared to the prior year
period, and an excellent combined ratio of 93.9%. The combined
ratio improved 1.5 points, notwithstanding elevated catastrophe
activity, primarily in the central and eastern regions of the
United States. The underlying combined ratio improved 2.9 points to
an outstanding 87.7%, driven by strong underlying results in each
of our three segments. Our high-quality investment portfolio
generated after-tax net investment income of $698 million for the
quarter, driven by strong and reliable returns from our growing
fixed income portfolio and higher returns from our non-fixed income
portfolio. During the quarter, we returned $620 million of capital
to shareholders, including $388 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 5% increase in our quarterly cash dividend to
$1.05 per share, marking 20 consecutive years of dividend increases
with a compound annual growth rate of 8% over that period.
“Through terrific marketplace execution across all three
segments, we grew net written premiums in the quarter by 8% to
$10.2 billion. In Business Insurance, we grew net written premiums
by 9% to $5.6 billion. Renewal premium change in the segment
remained very strong at 10.6%, while retention remained high at 86%
and new business increased 8% to a record $691 million. In Bond
& Specialty Insurance, we grew net written premiums by 6% to
more than $940 million with strong retention and new business in
our high-quality management liability business. In our
industry-leading surety business, we grew net written premiums by
15%. Given the attractive returns, we are very pleased with the
strong production results in both of our commercial business
segments. In Personal Insurance, continued strong pricing drove 9%
growth in net written premiums. Renewal premium change was 16.6% in
our Auto business and 13.4% in our Homeowners and Other
business.
“The year is off to a terrific start with strong profitability
and production in all three segments, as well as higher investment
income. In short, we’re firing on all cylinders. We also continue
to invest in important strategic initiatives. We have demonstrated
success in executing our innovation strategy, which has contributed
to superior returns with industry-low volatility, growth in our
premium base and higher adjusted book value per share. With this
momentum and the best talent in the industry, we remain well
positioned for success this year and beyond.”
Consolidated Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2024
2023
Change
Underwriting gain:
$
577
$
367
$
210
Underwriting gain
includes:
Net favorable prior year reserve
development
91
105
(14
)
Catastrophes, net of reinsurance
(712
)
(535
)
(177
)
Net investment income
846
663
183
Other income (expense), including
interest expense
(88
)
(108
)
20
Core income before income taxes
1,335
922
413
Income tax expense (benefit)
239
(48
)
287
Core income
1,096
970
126
Net realized investment gains after
income taxes
27
5
22
Net income
$
1,123
$
975
$
148
Combined ratio
93.9
%
95.4
%
(1.5
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(0.9
)
pts
(1.2
)
pts
0.3
pts
Catastrophes, net of reinsurance
7.1
pts
6.0
pts
1.1
pts
Underlying combined ratio
87.7
%
90.6
%
(2.9
)
pts
Net written premiums
Business Insurance
$
5,596
$
5,157
9
%
Bond & Specialty Insurance
943
886
6
Personal Insurance
3,643
3,353
9
Total
$
10,182
$
9,396
8
%
First Quarter 2024 Results
(All comparisons vs. first quarter 2023, unless noted
otherwise)
Net income of $1.123 billion increased $148 million, due to
higher core income and higher net realized investment gains. Core
income of $1.096 billion increased $126 million, primarily due to
higher net investment income and a higher underlying underwriting
gain, partially offset by higher catastrophe losses. The underlying
underwriting gain benefited from higher business volumes. The
underlying underwriting gain in the prior year quarter included a
one-time tax benefit of $211 million due to the expiration of the
statute of limitations with respect to a tax item. Net realized
investment gains were $35 million pre-tax ($27 million after-tax),
compared to $6 million pre-tax ($5 million after-tax) in the prior
year quarter.
Combined ratio:
- The combined ratio of 93.9% improved 1.5 points due to an
improvement in the underlying combined ratio (2.9 points),
partially offset by higher catastrophe losses (1.1 points) and
lower net favorable prior year reserve development (0.3
points).
- The underlying combined ratio of 87.7% improved 2.9 points. See
below for further details by segment.
- Net favorable prior year reserve development occurred in
Personal Insurance and Bond & Specialty Insurance. There was no
net prior year reserve development in Business Insurance. See below
for further details by segment.
- Catastrophe losses primarily resulted from severe wind and hail
storms in the central and eastern regions of the United
States.
Net investment income of $846 million pre-tax ($698 million
after-tax) increased 28%. Income from the fixed income investment
portfolio increased over the prior year quarter due to a higher
average yield and growth in fixed maturity investments. Income from
the non-fixed income investment portfolio increased over the prior
year quarter primarily due to higher private equity partnership
returns. Non-fixed income returns are generally reported on a
one-quarter lagged basis and directionally follow the broader
equity markets.
Net written premiums of $10.182 billion increased 8%. See below
for further details by segment.
Shareholders’ Equity
Shareholders’ equity of $25.022 billion increased slightly over
year-end 2023, primarily due to net income of $1.123 billion,
largely offset by higher net unrealized investment losses, common
share repurchases and dividends to shareholders. Net unrealized
investment losses included in shareholders’ equity were $4.720
billion pre-tax ($3.721 billion after-tax), compared to $3.970
billion pre-tax ($3.129 billion after-tax) at year-end 2023. The
increase in net unrealized investment losses was driven by higher
interest rates. Book value per share of $109.28 increased slightly
over year-end 2023. Adjusted book value per share of $125.53, which
excludes net unrealized investment gains (losses), increased 2%
over year-end 2023.
The Company repurchased 1.2 million common shares in the open
market during the first quarter under its share repurchase
authorizations for a total cost of $250 million. The average cost
per share repurchased was $217.31. In addition, the Company
acquired 0.6 million common shares for a total cost of $138 million
in connection with employee share-based compensation. At March 31,
2024, the Company had $5.790 billion of capacity remaining under
its share repurchase authorizations approved by the Board of
Directors.
At the end of the quarter, statutory capital and surplus was
$25.329 billion, and the ratio of debt-to-capital was 24.3%. The
ratio of debt-to-capital excluding after-tax net unrealized
investment gains (losses) included in shareholders’ equity was
21.8%, within the Company’s target range of 15% to 25%.
The Board of Directors declared a 5% increase in the regular
quarterly dividend to $1.05 per share. The dividend is payable June
28, 2024, to shareholders of record at the close of business on
June 10, 2024.
Business
Insurance Segment Financial Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2024
2023
Change
Underwriting gain:
$
334
$
273
$
61
Underwriting gain
includes:
Net favorable prior year reserve
development
—
19
(19
)
Catastrophes, net of reinsurance
(209
)
(199
)
(10
)
Net investment income
609
473
136
Other income (expense)
(9
)
(33
)
24
Segment income before income
taxes
934
713
221
Income tax expense (benefit)
170
(43
)
213
Segment income
$
764
$
756
$
8
Combined ratio
93.3
%
93.6
%
(0.3
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
—
pts
(0.4
)
pts
0.4
pts
Catastrophes, net of reinsurance
4.1
pts
4.4
pts
(0.3
)
pts
Underlying combined ratio
89.2
%
89.6
%
(0.4
)
pts
Net written premiums by market
Domestic
Select Accounts
$
974
$
908
7
%
Middle Market
3,213
2,926
10
National Accounts
327
294
11
National Property and Other
642
590
9
Total Domestic
5,156
4,718
9
International
440
439
—
Total
$
5,596
$
5,157
9
%
First Quarter 2024 Results
(All comparisons vs. first quarter 2023, unless noted
otherwise)
Segment income for Business Insurance was $764 million
after-tax, an increase of $8 million. Segment income increased
primarily due to higher net investment income, partially offset by
a lower underlying underwriting gain. The underlying underwriting
gain benefited from higher business volumes. The underlying
underwriting gain in the prior year quarter included a one-time tax
benefit of $171 million due to the expiration of the statute of
limitations with respect to a tax item.
Combined ratio:
- The combined ratio of 93.3% improved 0.3 points due to a lower
underlying combined ratio (0.4 points) and lower catastrophe losses
(0.3 points), partially offset by no net prior year reserve
development compared with net favorable prior year reserve
development in the prior year quarter (0.4 points).
- The underlying combined ratio improved 0.4 points to a very
strong 89.2%.
- There was no net prior year reserve development in the current
quarter, as better than expected loss experience in the domestic
operations’ workers’ compensation product line for multiple
accident years was offset primarily by higher than expected loss
experience in the general liability product line for recent
accident years, as well as an addition to reserves related to
run-off operations.
Net written premiums of $5.596 billion increased 9%, reflecting
strong renewal premium change and retention, as well as higher
levels of new business.
Bond
& Specialty Insurance Segment Financial Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2024
2023
Change
Underwriting gain:
$
144
$
171
$
(27
)
Underwriting gain
includes:
Net favorable prior year reserve
development
24
58
(34
)
Catastrophes, net of reinsurance
(5
)
(5
)
—
Net investment income
90
73
17
Other income
6
4
2
Segment income before income
taxes
240
248
(8
)
Income tax expense
45
41
4
Segment income
$
195
$
207
$
(12
)
Combined ratio
84.5
%
80.0
%
4.5
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(2.5
)
pts
(6.7
)
pts
4.2
pts
Catastrophes, net of reinsurance
0.5
pts
0.6
pts
(0.1
)
pts
Underlying combined ratio
86.5
%
86.1
%
0.4
pts
Net written premiums
Domestic
Management Liability
$
543
$
511
6
%
Surety
296
257
15
Total Domestic
839
768
9
International
104
118
(12
)
Total
$
943
$
886
6
%
First Quarter 2024 Results
(All comparisons vs. first quarter 2023, unless noted
otherwise)
Segment income for Bond & Specialty Insurance was $195
million after-tax, a decrease of $12 million. Segment income
decreased primarily due to lower net favorable prior year reserve
development, partially offset by higher net investment income. The
underlying underwriting gain benefited from higher business
volumes. The underlying underwriting gain in the prior year quarter
included a one-time tax benefit of $9 million due to the expiration
of the statute of limitations with respect to a tax item.
Combined ratio:
- The combined ratio of 84.5% increased 4.5 points due to lower
net favorable prior year reserve development (4.2 points) and a
higher underlying combined ratio (0.4 points), partially offset by
a smaller impact from catastrophe losses (0.1 points).
- The underlying combined ratio of 86.5% increased 0.4
points.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in multiple product
lines within domestic operations.
Net written premiums of $943 million increased 6%, reflecting
strong production in both surety and management liability.
Personal
Insurance Segment Financial Results
Three Months Ended March
31,
($ in millions and pre-tax, unless
noted otherwise)
2024
2023
Change
Underwriting gain (loss):
$
99
$
(77
)
$
176
Underwriting gain
(loss) includes:
Net favorable prior year reserve
development
67
28
39
Catastrophes, net of reinsurance
(498
)
(331
)
(167
)
Net investment income
147
117
30
Other income
21
18
3
Segment income before income
taxes
267
58
209
Income tax expense (benefit)
47
(25
)
72
Segment income
$
220
$
83
$
137
Combined ratio
96.9
%
101.5
%
(4.6
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(1.6
)
pts
(0.8
)
pts
(0.8
)
pts
Catastrophes, net of reinsurance
12.4
pts
9.4
pts
3.0
pts
Underlying combined ratio
86.1
%
92.9
%
(6.8
)
pts
Net written premiums
Domestic
Automobile
$
1,859
$
1,654
12
%
Homeowners and Other
1,635
1,565
4
Total Domestic
3,494
3,219
9
International
149
134
11
Total
$
3,643
$
3,353
9
%
First Quarter 2024 Results
(All comparisons vs. first quarter 2023, unless noted
otherwise)
Segment income for Personal Insurance was $220 million
after-tax, an increase of $137 million. Segment income increased
primarily due to a higher underlying underwriting gain, higher net
favorable prior year reserve development and higher net investment
income, partially offset by higher catastrophe losses. The
underlying underwriting gain benefited from higher business
volumes. The underlying underwriting gain in the prior year quarter
included a one-time tax benefit of $31 million due to the
expiration of the statute of limitations with respect to a tax
item.
Combined ratio:
- The combined ratio of 96.9% improved 4.6 points due to an
improvement in the underlying combined ratio (6.8 points) and
higher net favorable prior year reserve development (0.8 points),
partially offset by higher catastrophe losses (3.0 points).
- The underlying combined ratio of 86.1% improved 6.8 points,
reflecting improvement in both Automobile and Homeowners and
Other.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the domestic
operations’ automobile product line for recent accident years.
Net written premiums of $3.643 billion increased 9%, reflecting
strong renewal premium change in both Domestic Automobile and
Homeowners and Other.
Financial Supplement and Conference Call
The information in this press release should be read in
conjunction with the financial supplement that is available on our
website at Travelers.com. Travelers management will discuss the
contents of this release and other relevant topics via webcast at 9
a.m. Eastern (8 a.m. Central) on Wednesday, April 17, 2024.
Investors can access the call via webcast at investor.travelers.com
or by dialing 1.888.440.6281 within the United States or
1.646.960.0218 outside the United States. Prior to the webcast, a
slide presentation pertaining to the quarterly earnings will be
available on the Company’s website.
Following the live event, replays will be available via webcast
for one year at investor.travelers.com and by telephone for 30 days
by dialing 1.800.770.2030 within the United States or
1.647.362.9199 outside the United States. All callers should use
conference ID 5449478.
About Travelers
The Travelers Companies, Inc. (NYSE: TRV) is a leading provider
of property casualty insurance for auto, home and business. A
component of the Dow Jones Industrial Average, Travelers has more
than 30,000 employees and generated revenues of more than $41
billion in 2023. For more information, visit Travelers.com.
Travelers may use its website and/or social media outlets, such
as Facebook and X, as distribution channels of material Company
information. Financial and other important information regarding
the Company is routinely accessible through and posted on our
website at investor.travelers.com, our Facebook page at
facebook.com/travelers and our X account (@Travelers) at
twitter.com/travelers. In addition, you may automatically receive
email alerts and other information about Travelers when you enroll
your email address by visiting the Email Notifications section at
investor.travelers.com.
Travelers is organized into the following reportable business
segments:
Business Insurance - Business Insurance offers a broad
array of property and casualty insurance products and services to
its customers, primarily in the United States, as well as in
Canada, the United Kingdom, the Republic of Ireland and throughout
other parts of the world, including as a corporate member of
Lloyd’s.
Bond & Specialty Insurance - Bond & Specialty
Insurance offers surety, fidelity, management liability,
professional liability, and other property and casualty coverages
and related risk management services to its customers, primarily in
the United States, and certain surety and specialty insurance
products in Canada, the United Kingdom and the Republic of Ireland,
as well as Brazil through a joint venture, in each case utilizing
various degrees of financially-based underwriting approaches.
Personal Insurance - Personal Insurance offers a broad
range of property and casualty insurance products and services
covering individuals’ personal risks, primarily in the United
States, as well as in Canada. Personal Insurance’s primary products
of automobile and homeowners insurance are complemented by a broad
suite of related coverages.
* * * * *
Forward-Looking Statements
This press release contains, and management may make, certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other
than statements of historical facts, may be forward-looking
statements. Words such as “may,” “will,” “should,” “likely,”
“probably,” “anticipates,” “expects,” “intends,” “plans,”
“projects,” “believes,” “views,” “ensures,” “estimates” and similar
expressions are used to identify these forward-looking statements.
These statements include, among other things, the Company’s
statements about:
- the Company’s outlook, the impact of trends on its business,
such as the impact of elevated industrywide loss costs in Personal
Insurance, and its future results of operations and financial
condition;
- the impact of legislative or regulatory actions or court
decisions;
- share repurchase plans;
- future pension plan contributions;
- the sufficiency of the Company’s asbestos and other
reserves;
- the impact of emerging claims issues as well as other insurance
and non-insurance litigation;
- the cost and availability of reinsurance coverage;
- catastrophe losses and modeling;
- the impact of investment, economic and underwriting market
conditions, including interest rates and inflation;
- the Company’s approach to managing its investment
portfolio;
- the impact of changing climate conditions;
- strategic and operational initiatives to improve profitability
and competitiveness;
- the Company’s competitive advantages and innovation agenda,
including executing on that agenda with respect to artificial
intelligence;
- the Company’s cybersecurity policies and practices;
- new product offerings;
- the impact of developments in the tort environment;
- the impact of developments in the geopolitical environment;
and
- the impact of the Company’s acquisition of Corvus Insurance
Holdings, Inc.
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 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;
- the Company is subject to additional risks associated with its
business outside the United States; and
- future pandemics (including new variants of COVID-19).
Technology and Intellectual Property
Risks
- as a result of cyber attacks (the risk of which could be
exacerbated by geopolitical tensions) or otherwise, the Company may
experience difficulties with technology, data and network security
or outsourcing relationships;
- the Company’s dependence on effective information technology
systems and on continuing to develop and implement improvements in
technology, including with respect to artificial intelligence;
and
- the Company may be unable to protect and enforce its own
intellectual property or may be subject to claims for infringing
the intellectual property of others.
Regulatory and Compliance
Risks
- changes in regulation, including higher tax rates; and
- the Company’s compliance controls may not be effective.
In addition, the Company’s share repurchase plans depend on a
variety of factors, including the Company’s financial position,
earnings, share price, catastrophe losses, maintaining capital
levels appropriate for the Company’s business operations, changes
in levels of written premiums, funding of the Company’s qualified
pension plan, capital requirements of the Company’s operating
subsidiaries, legal requirements, regulatory constraints, other
investment opportunities (including mergers and acquisitions and
related financings), market conditions, changes in tax laws
(including the Inflation Reduction Act of 2022) 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 our most recent annual report on Form 10-K filed
with the Securities and Exchange Commission (SEC) on February 15,
2024, 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)
2024
2023
Net income
$
1,123
$
975
Adjustments:
Net realized investment gains
(27
)
(5
)
Core income
$
1,096
$
970
Three Months Ended March
31,
($ in millions, pre-tax)
2024
2023
Net income
$
1,370
$
928
Adjustments:
Net realized investment gains
(35
)
(6
)
Core income
$
1,335
$
922
Twelve Months Ended December
31,
Average Annual
($ in millions, after-tax)
2023
2022
2021
2020
2019
2005 - 2018
Net income
$
2,991
$
2,842
$
3,662
$
2,697
$
2,622
$
3,035
Less: Loss from discontinued
operations
—
—
—
—
—
(31
)
Income from continuing
operations
2,991
2,842
3,662
2,697
2,622
3,066
Adjustments:
Net realized investment (gains) losses
81
156
(132
)
(11
)
(85
)
(41
)
Impact of changes in tax laws and/or tax
rates (1) (2)
—
—
(8
)
—
—
9
Core income
3,072
2,998
3,522
2,686
2,537
3,034
Less: Preferred dividends
—
—
—
—
—
2
Core income, less preferred
dividends
$
3,072
$
2,998
$
3,522
$
2,686
$
2,537
$
3,032
(1) Impact is recognized in the accounting
period in which the change is enacted
(2) 2017 reflects impact of Tax Cuts and
Jobs Act of 2017 (TCJA)
Reconciliation of Net Income per Share
to Core Income per Share on a Diluted Basis
Three Months Ended March
31,
2024
2023
Diluted income
per share
Net income
$
4.80
$
4.13
Adjustments:
Net realized investment gains,
after-tax
(0.11
)
(0.02
)
Core income
$
4.69
$
4.11
Reconciliation of Segment Income to
Total Core Income
Three Months Ended March
31,
($ in millions, after-tax)
2024
2023
Business Insurance
$
764
$
756
Bond & Specialty Insurance
195
207
Personal Insurance
220
83
Total segment income
1,179
1,046
Interest Expense and Other
(83
)
(76
)
Total core income
$
1,096
$
970
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)
2024
2023
Shareholders’ equity
$
25,022
$
23,052
Adjustments:
Net unrealized investment losses, net of
tax, included in shareholders’ equity
3,721
3,868
Net realized investment gains, net of
tax
(27
)
(5
)
Adjusted shareholders’ equity
$
28,716
$
26,915
As of December 31,
Average Annual
($ in millions)
2023
2022
2021
2020
2019
2005 - 2018
Shareholders’ equity
$
24,921
$
21,560
$
28,887
$
29,201
$
25,943
$
24,659
Adjustments:
Net unrealized investment (gains) losses,
net of tax, included in shareholders’ equity
3,129
4,898
(2,415
)
(4,074
)
(2,246
)
(1,232
)
Net realized investment (gains) losses,
net of tax
81
156
(132
)
(11
)
(85
)
(41
)
Impact of changes in tax laws and/or tax
rates (1) (2)
—
—
(8
)
—
—
20
Preferred stock
—
—
—
—
—
(45
)
Loss from discontinued operations
—
—
—
—
—
31
Adjusted shareholders’ equity
$
28,131
$
26,614
$
26,332
$
25,116
$
23,612
$
23,392
(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)
2024
2023
Annualized net income
$
4,493
$
3,900
Average shareholders’ equity
24,972
22,306
Return on equity
18.0
%
17.5
%
Annualized core income
$
4,384
$
3,881
Adjusted average shareholders’ equity
28,383
26,687
Core return on equity
15.4
%
14.5
%
Twelve Months Ended
December 31,
Average Annual
($ in millions, after-tax)
2023
2022
2021
2020
2019
2005 - 2018
Net income, less preferred dividends
$
2,991
$
2,842
$
3,662
$
2,697
$
2,622
$
3,033
Average shareholders’ equity
22,031
23,384
28,735
26,892
24,922
24,677
Return on equity
13.6
%
12.2
%
12.7
%
10.0
%
10.5
%
12.3
%
Core income, less preferred dividends
$
3,072
$
2,998
$
3,522
$
2,686
$
2,537
$
3,032
Adjusted average shareholders’ equity
26,772
26,588
25,718
23,790
23,335
23,401
Core return on equity
11.5
%
11.3
%
13.7
%
11.3
%
10.9
%
13.0
%
RECONCILIATION OF NET INCOME TO UNDERWRITING GAIN EXCLUDING
CERTAIN ITEMS
Underwriting gain (loss) is net earned premiums and fee
income less claims and claim adjustment expenses and
insurance-related expenses. In the opinion of the Company’s
management, it is important to measure the profitability of each
segment excluding the results of investing activities, which are
managed separately from the insurance business. This measure is
used to assess each segment’s business performance and as a tool in
making business decisions. Underwriting gain, excluding the
impact of catastrophes and net favorable (unfavorable) prior year
loss reserve development, is the underwriting gain adjusted to
exclude claims and claim adjustment expenses, reinstatement
premiums and assessments related to catastrophes and loss reserve
development related to time periods prior to the current year. In
the opinion of the Company’s management, this measure is meaningful
to users of the financial statements to understand the Company’s
periodic earnings and the variability of earnings caused by the
unpredictable nature (i.e., the timing and amount) of catastrophes
and loss reserve development. This measure is also referred to as
underlying underwriting gain, underlying underwriting
margin, underlying underwriting income or underlying
underwriting result.
A catastrophe is a severe loss designated a catastrophe
by internationally recognized organizations that track and report
on insured losses resulting from catastrophic events, such as
Property Claim Services (PCS) for events in the United States and
Canada. Catastrophes can be caused by various natural events,
including, among others, hurricanes, tornadoes and other
windstorms, earthquakes, hail, wildfires, severe winter weather,
floods, tsunamis, volcanic eruptions and other naturally-occurring
events, such as solar flares. Catastrophes can also be man-made,
such as terrorist attacks and other intentionally destructive acts
including those involving nuclear, biological, chemical and
radiological events, cyber events, explosions and destruction of
infrastructure. Each catastrophe has unique characteristics and
catastrophes are not predictable as to timing or amount. Their
effects are included in net and core income and claims and claim
adjustment expense reserves upon occurrence. A catastrophe may
result in the payment of reinsurance reinstatement premiums and
assessments from various pools.
The Company’s threshold for disclosing catastrophes is primarily
determined at the reportable segment level. If a threshold for one
segment or a combination thereof is exceeded and the other segments
have losses from the same event, losses from the event are
identified as catastrophe losses in the segment results and for the
consolidated results of the Company. Additionally, an aggregate
threshold is applied for international business across all
reportable segments. The threshold for 2024 ranges from $20 million
to $30 million of losses before reinsurance and taxes.
Net favorable (unfavorable) prior year loss reserve
development is the increase or decrease in incurred claims and
claim adjustment expenses as a result of the re-estimation of
claims and claim adjustment expense reserves at successive
valuation dates for a given group of claims, which may be related
to one or more prior years. In the opinion of the Company’s
management, a discussion of loss reserve development is meaningful
to users of the financial statements as it allows them to assess
the impact between prior and current year development on incurred
claims and claim adjustment expenses, net and core income (loss),
and changes in claims and claim adjustment expense reserve levels
from period to period.
Reconciliation of Net Income to Pre-Tax
Underlying Underwriting Income (also known as Underlying
Underwriting Gain)
Three Months Ended March
31,
($ in millions, after-tax, except as
noted)
2024
2023
Net income
$
1,123
$
975
Net realized investment gains
(27
)
(5
)
Core income
1,096
970
Net investment income
(698
)
(557
)
Other (income) expense, including interest
expense
74
88
Underwriting income
472
501
Income tax expense (benefit) on
underwriting results
105
(134
)
Pre-tax underwriting income
577
367
Pre-tax impact of net favorable prior year
reserve development
(91
)
(105
)
Pre-tax impact of catastrophes
712
535
Pre-tax underlying underwriting
income
$
1,198
$
797
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)
2024
2023
Net income
$
1,123
$
975
Net realized investment gains
(27
)
(5
)
Core income
1,096
970
Net investment income
(698
)
(557
)
Other (income) expense, including interest
expense
74
88
Underwriting income
472
501
Impact of net favorable prior year reserve
development
(71
)
(83
)
Impact of catastrophes
563
422
Underlying underwriting income
$
964
$
840
Twelve Months Ended December
31,
($ in millions, after-tax)
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Net income
$
2,991
$
2,842
$
3,662
$
2,697
$
2,622
$
2,523
$
2,056
$
3,014
$
3,439
$
3,692
$
3,673
$
2,473
Net realized investment (gains) losses
81
156
(132
)
(11
)
(85
)
(93
)
(142
)
(47
)
(2
)
(51
)
(106
)
(32
)
Impact of changes in tax laws and/or tax
rates (1) (2)
—
—
(8
)
—
—
—
129
—
—
—
—
—
Core income
3,072
2,998
3,522
2,686
2,537
2,430
2,043
2,967
3,437
3,641
3,567
2,441
Net investment income
(2,436
)
(2,170
)
(2,541
)
(1,908
)
(2,097
)
(2,102
)
(1,872
)
(1,846
)
(1,905
)
(2,216
)
(2,186
)
(2,316
)
Other (income) expense, including interest
expense
337
277
235
232
214
248
179
78
193
159
61
171
Underwriting income
973
1,105
1,216
1,010
654
576
350
1,199
1,725
1,584
1,442
296
Impact of net (favorable) unfavorable
prior year reserve development
(113
)
(512
)
(424
)
(276
)
47
(409
)
(378
)
(510
)
(617
)
(616
)
(552
)
(622
)
Impact of catastrophes
2,361
1,480
1,459
1,274
699
1,355
1,267
576
338
462
387
1,214
Underlying underwriting income
$
3,221
$
2,073
$
2,251
$
2,008
$
1,400
$
1,522
$
1,239
$
1,265
$
1,446
$
1,430
$
1,277
$
888
(1) Impact is recognized in the accounting
period in which the change is enacted
(2) 2017 reflects impact of Tax Cuts and
Jobs Act of 2017 (TCJA)
COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED
RATIO
Combined ratio: For Statutory Accounting Practices (SAP),
the combined ratio is the sum of the SAP loss and LAE ratio and the
SAP underwriting expense ratio as defined in the statutory
financial statements required by insurance regulators. The combined
ratio, as used in this earnings release, is the equivalent of, and
is calculated in the same manner as, the SAP combined ratio except
that the SAP underwriting expense ratio is based on net written
premiums and the underwriting expense ratio as used in this
earnings release is based on net earned premiums.
For SAP, the loss and LAE ratio is the ratio of incurred losses
and loss adjustment expenses less certain administrative services
fee income to net earned premiums as defined in the statutory
financial statements required by insurance regulators. The loss and
LAE ratio as used in this earnings release is calculated in the
same manner as the SAP ratio.
For SAP, the underwriting expense ratio is the ratio of
underwriting expenses incurred (including commissions paid), less
certain administrative services fee income and billing and policy
fees and other, to net written premiums as defined in the statutory
financial statements required by insurance regulators. The
underwriting expense ratio as used in this earnings release, is the
ratio of underwriting expenses (including the amortization of
deferred acquisition costs), less certain administrative services
fee income, billing and policy fees and other, to net earned
premiums.
The combined ratio, loss and LAE ratio, and underwriting expense
ratio are used as indicators of the Company’s underwriting
discipline, efficiency in acquiring and servicing its business and
overall underwriting profitability. A combined ratio under 100%
generally indicates an underwriting profit. A combined ratio over
100% generally indicates an underwriting loss.
Underlying combined ratio represents the combined ratio
excluding the impact of net prior year reserve development and
catastrophes. The underlying combined ratio is an indicator of the
Company’s underwriting discipline and underwriting profitability
for the current accident year.
Other companies’ method of computing similarly titled measures
may not be comparable to the Company’s method of computing these
ratios.
Calculation of the Combined
Ratio
Three Months Ended March
31,
($ in millions, pre-tax)
2024
2023
Loss and loss
adjustment expense ratio
Claims and claim adjustment expenses
$
6,656
$
5,959
Less:
Policyholder dividends
12
12
Allocated fee income
39
42
Loss ratio numerator
$
6,605
$
5,905
Underwriting
expense ratio
Amortization of deferred acquisition
costs
$
1,698
$
1,462
General and administrative expenses
(G&A)
1,406
1,267
Less:
Non-insurance G&A
102
95
Allocated fee income
70
64
Billing and policy fees and other
30
28
Expense ratio numerator
$
2,902
$
2,542
Earned premium
$
10,126
$
8,854
Combined ratio (1)
Loss and loss adjustment expense ratio
65.2
%
66.7
%
Underwriting expense ratio
28.7
%
28.7
%
Combined ratio
93.9
%
95.4
%
Impact on combined ratio:
Net favorable prior year reserve
development
(0.9
)%
(1.2
)%
Catastrophes, net of reinsurance
7.1
%
6.0
%
Underlying combined ratio
87.7
%
90.6
%
(1) For purposes of computing ratios,
billing and policy fees and other (which are a component of other
revenues) are allocated as a reduction of underwriting expenses. In
addition, fee income is allocated as a reduction of losses and loss
adjustment expenses and underwriting expenses. These allocations
are to conform the calculation of the combined ratio with statutory
accounting. Additionally, general and administrative expenses
include non-insurance expenses that are excluded from underwriting
expenses, and accordingly are excluded in calculating the combined
ratio.
RECONCILIATION OF BOOK VALUE PER SHARE AND SHAREHOLDERS’
EQUITY TO CERTAIN NON-GAAP MEASURES
Book value per share is total common shareholders’ equity
divided by the number of common shares outstanding. Adjusted
book value per share is total common shareholders’ equity
excluding net unrealized investment gains and losses, net of tax,
included in shareholders’ equity, divided by the number of common
shares outstanding. In the opinion of the Company’s management,
adjusted book value per share is useful in an analysis of a
property casualty company’s book value per share as it removes the
effect of changing prices on invested assets (i.e., net unrealized
investment gains (losses), net of tax), which do not have an
equivalent impact on unpaid claims and claim adjustment expense
reserves. Tangible book value per share is adjusted book
value per share excluding the after-tax value of goodwill and other
intangible assets divided by the number of common shares
outstanding. In the opinion of the Company’s management, tangible
book value per share is useful in an analysis of a property
casualty company’s book value on a nominal basis as it removes
certain effects of purchase accounting (i.e., goodwill and other
intangible assets), in addition to the effect of changing prices on
invested assets.
Reconciliation of Shareholders’ Equity
to Tangible Shareholders’ Equity, Excluding Net Unrealized
Investment Losses, Net of Tax and Calculation of Book Value Per
Share, Adjusted Book Value Per Share and Tangible Book Value Per
Share
As of
($ in millions, except per share
amounts)
March 31, 2024
December 31,
2023
March 31, 2023
Shareholders’ equity
$
25,022
$
24,921
$
23,052
Less: Net unrealized investment losses,
net of tax, included in shareholders’ equity
(3,721
)
(3,129
)
(3,868
)
Shareholders’ equity, excluding net
unrealized investment losses, net of tax, included in shareholders’
equity
28,743
28,050
26,920
Less:
Goodwill
4,251
3,976
3,959
Other intangible assets
376
277
285
Impact of deferred tax on other intangible
assets
(85
)
(69
)
(63
)
Tangible shareholders’ equity,
excluding net unrealized investment losses, net of tax, included in
shareholders’ equity
$
24,201
$
23,866
$
22,739
Common shares outstanding
229.0
228.2
231.0
Book value per share
$
109.28
$
109.19
$
99.80
Adjusted book value per share
125.53
122.90
116.55
Tangible book value per share, excluding
net unrealized investment losses, net of tax, included in
shareholders’ equity
105.69
104.57
98.45
RECONCILIATION OF TOTAL CAPITALIZATION TO TOTAL
CAPITALIZATION EXCLUDING NET UNREALIZED INVESTMENT GAINS (LOSSES),
NET OF TAX
Total capitalization is the sum of total shareholders’
equity and debt. Debt-to-capital ratio excluding net unrealized
gains (losses) on investments, net of tax, included in
shareholders’ equity, is the ratio of debt to total
capitalization excluding the after-tax impact of net unrealized
investment gains and losses included in shareholders’ equity. In
the opinion of the Company’s management, the debt-to-capital ratio
is useful in an analysis of the Company’s financial leverage.
As of
($ in millions)
March 31, 2024
December 31,
2023
Debt
$
8,032
$
8,031
Shareholders’ equity
25,022
24,921
Total capitalization
33,054
32,952
Less: Net unrealized investment losses,
net of tax, included in shareholders’ equity
(3,721
)
(3,129
)
Total capitalization excluding net
unrealized losses on investments, net of tax, included in
shareholders’ equity
$
36,775
$
36,081
Debt-to-capital ratio
24.3
%
24.4
%
Debt-to-capital ratio excluding net
unrealized investment losses, net of tax, included in shareholders’
equity
21.8
%
22.3
%
RECONCILIATION OF INVESTED ASSETS TO
INVESTED ASSETS EXCLUDING NET UNREALIZED INVESTMENT GAINS
(LOSSES)
As of March 31,
($ in millions)
2024
2023
Invested assets
$
88,657
$
82,035
Less: Net unrealized investment losses,
pre-tax
(4,720
)
(4,912
)
Invested assets excluding net
unrealized investment losses
$
93,377
$
86,947
As of December 31,
($ in millions)
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Invested assets
$
88,810
$
80,454
$
87,375
$
84,423
$
77,884
$
72,278
$
72,502
$
70,488
$
70,470
$
73,261
$
73,160
$
73,838
Less: Net unrealized investment gains
(losses), pre-tax
(3,970
)
(6,220
)
3,060
5,175
2,853
(137
)
1,414
1,112
1,974
3,008
2,030
4,761
Invested assets excluding net
unrealized investment gains (losses)
$
92,780
$
86,674
$
84,315
$
79,248
$
75,031
$
72,415
$
71,088
$
69,376
$
68,496
$
70,253
$
71,130
$
69,077
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 15, 2024, and subsequent
periodic filings with the SEC.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240415073250/en/
Media: Patrick Linehan
917.778.6267
Institutional Investors: Abbe
Goldstein 917.778.6825
The Travelers Companies (NYSE:TRV)
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