Third Quarter 2021 Core Income per Diluted
Share of $2.60 and Core Return on Equity of 10.1%
- Third quarter net income of $662 million and core income of
$655 million.
- Consolidated combined ratio of 98.6% and underlying combined
ratio of 91.4%.
- Catastrophe losses of $501 million pre-tax compared to $397
million pre-tax in the prior year quarter.
- Record net written premiums of $8.324 billion, up 7% compared
to the prior year quarter; growth in all three segments.
- Total capital returned to shareholders of $821 million,
including $601 million of share repurchases.
- Book value per share of $115.74, up 5% from September 30, 2020;
adjusted book value per share of $104.77, up 10% from September 30,
2020.
- Board of Directors declares regular quarterly cash dividend of
$0.88 per share.
The Travelers Companies, Inc. today reported net income of $662
million, or $2.62 per diluted share, for the quarter ended
September 30, 2021, compared to $827 million, or $3.23 per diluted
share, in the prior year quarter. Core income in the current
quarter was $655 million, or $2.60 per diluted share, compared to
$798 million, or $3.12 per diluted share, in the prior year
quarter. Core income decreased primarily due to net unfavorable
prior year reserve development compared to net favorable prior year
reserve development in the prior year quarter and higher
catastrophe losses, partially offset by higher net investment
income and a higher underlying underwriting gain (i.e., excluding
net prior year reserve development and catastrophe losses). Net
favorable prior year reserve development in the prior year quarter
included a $403 million pre-tax ($318 million after-tax)
subrogation benefit from Pacific Gas and Electric Company
(PG&E) related to the 2017 and 2018 California wildfires. Net
realized investment gains in the current quarter were $8 million
pre-tax ($7 million after-tax), compared to $37 million pre-tax
($29 million after-tax) in the prior year quarter. Per diluted
share amounts benefited from the impact of share repurchases.
Consolidated Highlights
($ in millions, except for per share
amounts, and after-tax, except for premiums and revenues)
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
Change
2021
2020
Change
Net written premiums
$
8,324
$
7,771
7
%
$
23,964
$
22,463
7
%
Total revenues
$
8,805
$
8,275
6
$
25,805
$
23,584
9
Net income
$
662
$
827
(20
)
$
2,329
$
1,387
68
per diluted share
$
2.62
$
3.23
(19
)
$
9.16
$
5.41
69
Core income
$
655
$
798
(18
)
$
2,233
$
1,424
57
per diluted share
$
2.60
$
3.12
(17
)
$
8.78
$
5.56
58
Diluted weighted average shares
outstanding
250.1
254.3
(2
)
252.4
254.5
(1
)
Combined ratio
98.6
%
94.9
%
3.7
pts
96.8
%
97.9
%
(1.1
)
pts
Underlying combined ratio
91.4
%
91.5
%
(0.1
)
pts
90.8
%
91.4
%
(0.6
)
pts
Return on equity
9.2
%
12.1
%
(2.9
)
pts
10.8
%
7.0
%
3.8
pts
Core return on equity
10.1
%
13.5
%
(3.4
)
pts
11.6
%
8.1
%
3.5
pts
As of
Change From
September 30, 2021
December 31, 2020
September 30, 2020
December 31, 2020
September 30, 2020
Book value per share
$
115.74
$
115.68
$
109.94
—
%
5
%
Adjusted book value per share
104.77
99.54
94.89
5
%
10
%
See Glossary of Financial Measures for
definitions and the statistical supplement for additional financial
data.
“We are very pleased to report excellent underlying underwriting
and investment results, contributing to third quarter core income
of $655 million, or $2.60 per diluted share, and core return on
equity of 10.1%, a strong result despite significant catastrophe
losses in the quarter,” said Alan Schnitzer, Chairman and Chief
Executive Officer. “Higher underlying underwriting income compared
to the prior year was driven by record net earned premiums of $7.8
billion and a strong underlying combined ratio of 91.4%. Our
high-quality investment portfolio generated net investment income
of $645 million after-tax, reflecting reliable performance in our
fixed income portfolio and very strong returns in our non-fixed
income portfolio. These results, together with our strong balance
sheet, enabled us to return $821 million of excess capital to
shareholders this quarter, including $601 million of share
repurchases.
“For the quarter, net written premiums grew 7% to a record $8.3
billion, with each of our three segments contributing. In Business
Insurance, net written premiums grew by 5%, with renewal premium
change of 9.9% near an all-time high, driven by continued strong
renewal rate change and higher exposure growth. At the same time,
retention was higher, reflecting stability in the pricing
environment. In Bond & Specialty Insurance, net written
premiums increased by 19%, driven by record renewal premium change
of 13.6% and continued strong retention in our management liability
business and terrific production in our surety business. In
Personal Insurance, net written premiums increased by 7%. Policies
in force in both Auto and Homeowners increased to record levels,
driven by continued strong retention and growth in new
business.
“Our strong top and bottom line results this quarter and year to
date reflect the continued successful execution of our innovation
strategy to develop and deploy capabilities designed to position
Travelers for growth at attractive returns. Our below-market-share
losses from Hurricane Ida, for example, benefited from investments
in all three of our innovation priorities: extending our lead in
risk expertise, providing great experiences to our customers and
optimizing productivity and efficiency. We continue to make
investments consistent with those priorities in everything from
talent to technology. With our significant and hard to replicate
competitive advantages and the best team in the industry, we are
well positioned to continue to deliver meaningful shareholder value
over time.”
Consolidated Results
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
2021
2020
Change
Underwriting gain:
$
75
$
339
$
(264
)
$
616
$
347
$
269
Underwriting gain
includes:
Net favorable (unfavorable) prior year
reserve development
(56
)
142
(198
)
443
171
272
Catastrophes, net of reinsurance
(501
)
(397
)
(104
)
(1,811
)
(1,584
)
(227
)
Net investment income
771
671
100
2,290
1,550
740
Other income (expense), including
interest expense
(68
)
(61
)
(7
)
(211
)
(228
)
17
Core income before income taxes
778
949
(171
)
2,695
1,669
1,026
Income tax expense
123
151
(28
)
462
245
217
Core income
655
798
(143
)
2,233
1,424
809
Net realized investment gains (losses)
after income taxes
7
29
(22
)
88
(37
)
125
Impact of changes in tax laws and/or
tax rates (1)
—
—
—
8
—
8
Net income
$
662
$
827
$
(165
)
$
2,329
$
1,387
$
942
Combined ratio
98.6
%
94.9
%
3.7
pts
96.8
%
97.9
%
(1.1
)
pts
Impact on combined
ratio
Net (favorable) unfavorable prior year
reserve development
0.8
pts
(1.9
)
pts
2.7
pts
(1.9
)
pts
(0.8
)
pts
(1.1
)
pts
Catastrophes, net of reinsurance
6.4
pts
5.3
pts
1.1
pts
7.9
pts
7.3
pts
0.6
pts
Underlying combined ratio
91.4
%
91.5
%
(0.1
)
pts
90.8
%
91.4
%
(0.6
)
pts
Net written premiums
Business Insurance
$
4,021
$
3,833
5
%
$
12,126
$
11,800
3
%
Bond & Specialty Insurance
894
754
19
2,471
2,151
15
Personal Insurance
3,409
3,184
7
9,367
8,512
10
Total
$
8,324
$
7,771
7
%
$
23,964
$
22,463
7
%
(1) Impact is recognized in the accounting
period in which the change is enacted
Third Quarter 2021 Results
(All comparisons vs. third quarter 2020, unless noted
otherwise)
Net income of $662 million decreased $165 million due to lower
core income and lower net realized investment gains. Core income of
$655 million decreased $143 million primarily due to net
unfavorable prior year reserve development compared to net
favorable prior year reserve development in the prior year quarter
and higher catastrophe losses, partially offset by higher net
investment income and a higher underlying underwriting gain. The
underlying underwriting gain benefited from higher business
volumes. Catastrophe and non-catastrophe weather-related losses in
the third quarter of 2021 were reduced by $95 million of recoveries
available under the Company’s 2021 Underlying Property Aggregate
Catastrophe Excess-of-Loss Reinsurance Treaty. Catastrophe and
non-catastrophe weather-related losses in the third quarter of 2020
were reduced by $280 million of recoveries available under the
Company’s 2020 Underlying Property Aggregate Catastrophe
Excess-of-Loss Reinsurance Treaty. Net realized investment gains
were $8 million pre-tax ($7 million after-tax) compared to $37
million pre-tax ($29 million after-tax) in the prior year
quarter.
Combined ratio:
- The combined ratio of 98.6% increased 3.7 points due to net
unfavorable prior year reserve development compared to net
favorable prior year reserve development in the prior year quarter
(2.7 points) and higher catastrophe losses (1.1 points), partially
offset by a lower underlying combined ratio (0.1 points).
- The underlying combined ratio of 91.4% improved 0.1 points. See
below for further details by segment.
- Net unfavorable prior year reserve development in Business
Insurance was partially offset by net favorable prior year reserve
development in Personal Insurance and Bond & Specialty
Insurance. Net prior year reserve development in the third quarter
of 2021 included a $225 million increase to asbestos reserves,
compared to a $295 million increase in the prior year quarter. Net
favorable prior year reserve development in the prior year quarter
also included a $403 million subrogation benefit from PG&E
related to the 2017 and 2018 California wildfires. See below for
further details by segment.
- Catastrophe losses primarily resulted from Hurricane Ida and
severe storms in several regions of the United States.
Net investment income of $771 million pre-tax ($645 million
after-tax) increased 15%. Income from the non-fixed income
investment portfolio increased over the prior year quarter,
primarily due to higher private equity partnership returns.
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 decreased
slightly from the prior year quarter, primarily due to lower
interest rates, partially offset by a higher average level of fixed
maturity investments.
Net written premiums of $8.324 billion increased 7%. See below
for further details by segment.
Year-to-Date 2021 Results
(All comparisons vs. year-to-date 2020, unless noted otherwise)
Net income of $2.329 billion increased $942 million due to
higher core income and net realized investment gains in the current
period compared to net realized investment losses in the prior year
period. Core income of $2.233 billion increased by $809 million
primarily due to higher net investment income, higher net favorable
prior year reserve development and a higher underlying underwriting
gain, partially offset by higher catastrophe losses (net of
recoveries under the property aggregate catastrophe reinsurance
treaties discussed above). The underlying underwriting gain
benefited from higher business volumes. Net realized investment
gains were $113 million pre-tax ($88 million after-tax) compared to
net realized investment losses of $48 million pre-tax ($37 million
after-tax) in the prior year period.
Combined ratio:
- The combined ratio of 96.8% improved 1.1 points due to higher
net favorable prior year reserve development (1.1 points) and a
lower underlying combined ratio (0.6 points), partially offset by
higher catastrophe losses (0.6 points).
- The underlying combined ratio of 90.8% improved 0.6 points. See
below for further details by segment.
- Net favorable prior year reserve development occurred in all
segments. See below for further details by segment.
- Catastrophe losses included the third quarter events described
above, as well as winter storms and severe wind and hail storms in
several regions of the United States in the first six months of
2021.
Net investment income of $2.290 billion pre-tax ($1.917 billion
after-tax) increased 48%. Income from the non-fixed income
investment portfolio increased over the prior year period,
primarily due to higher private equity partnership returns. Income
from the fixed income investment portfolio decreased slightly from
the prior year period, primarily due to lower interest rates,
partially offset by a higher average level of fixed maturity
investments.
Net written premiums of $23.964 billion increased 7%. See below
for further details by segment.
Shareholders’ Equity
Shareholders’ equity of $28.474 billion decreased 2% from
year-end 2020, primarily due to lower net unrealized investment
gains resulting from higher interest rates and common share
repurchases and dividends to shareholders, partially offset by net
income of $2.329 billion. Net unrealized investment gains included
in shareholders’ equity were $3.426 billion pre-tax ($2.699 billion
after-tax) compared to $5.175 billion pre-tax ($4.074 billion
after-tax) at year-end 2020. Book value per share of $115.74
increased 5% from September 30, 2020 and was comparable to year-end
2020. Adjusted book value per share of $104.77, which excludes net
unrealized investment gains, increased 10% from September 30, 2020
and increased 5% from year-end 2020.
The Company repurchased 3.8 million shares during the third
quarter at an average price of $155.56 per share for a total of
$601 million. At the end of the quarter, statutory capital and
surplus was $22.987 billion, and the ratio of debt-to-capital was
20.4%. The ratio of debt-to-capital excluding after-tax net
unrealized investment gains included in shareholders’ equity was
22.0%, within the Company’s target range of 15% to 25%.
The Board of Directors declared a regular quarterly dividend of
$0.88 per share. The dividend is payable on December 31, 2021 to
shareholders of record at the close of business on December 10,
2021.
Business
Insurance Segment Financial Results
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
2021
2020
Change
Underwriting income (loss):
$
88
$
(100
)
$
188
$
117
$
(472
)
$
589
Underwriting income
(loss) includes:
Net favorable (unfavorable) prior year
reserve development
(108
)
(220
)
112
99
(215
)
314
Catastrophes, net of reinsurance
(181
)
(97
)
(84
)
(836
)
(669
)
(167
)
Net investment income
575
498
77
1,713
1,131
582
Other income (expense)
1
6
(5
)
(14
)
(16
)
2
Segment income before income
taxes
664
404
260
1,816
643
1,173
Income tax expense
106
39
67
298
47
251
Segment income
$
558
$
365
$
193
$
1,518
$
596
$
922
Combined ratio
97.5
%
102.3
%
(4.8
)
pts
98.7
%
103.8
%
(5.1
)
pts
Impact on combined
ratio
Net (favorable) unfavorable prior year
reserve development
2.7
pts
5.8
pts
(3.1
)
pts
(0.9
)
pts
1.9
pts
(2.8
)
pts
Catastrophes, net of reinsurance
4.6
pts
2.5
pts
2.1
pts
7.2
pts
5.8
pts
1.4
pts
Underlying combined ratio
90.2
%
94.0
%
(3.8
)
pts
92.4
%
96.1
%
(3.7
)
pts
Net written premiums by market
Domestic
Select Accounts
$
685
$
658
4
%
$
2,140
$
2,191
(2
)
%
Middle Market
2,252
2,131
6
6,723
6,499
3
National Accounts
228
239
(5
)
731
755
(3
)
National Property and Other
638
602
6
1,730
1,615
7
Total Domestic
3,803
3,630
5
11,324
11,060
2
International
218
203
7
802
740
8
Total
$
4,021
$
3,833
5
%
$
12,126
$
11,800
3
%
Third Quarter 2021 Results
(All comparisons vs. third quarter 2020, unless noted
otherwise)
Segment income for Business Insurance was $558 million
after-tax, an increase of $193 million. Segment income increased
primarily due to a higher underlying underwriting gain, lower net
unfavorable prior year reserve development and higher net
investment income, partially offset by higher catastrophe losses.
The underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 97.5% improved 4.8 points due to a lower
underlying combined ratio (3.8 points) and lower net unfavorable
prior year reserve development (3.1 points), partially offset by
higher catastrophe losses (2.1 points).
- The underlying combined ratio of 90.2% improved by 3.8 points,
primarily reflecting earned pricing that exceeded loss cost trends,
a favorable impact associated with the pandemic and a lower level
of property losses.
- Net unfavorable prior year reserve development was primarily
driven by an increase in asbestos reserves of $225 million,
partially offset by better than expected loss experience in
domestic operations in the workers’ compensation product line for
multiple accident years. Net unfavorable prior year reserve
development in the prior year quarter included an increase in
asbestos reserves of $295 million, which was partially offset by
$81 million of recoveries from the PG&E subrogation described
above.
Net written premiums of $4.021 billion increased 5%, reflecting
strong renewal premium change and retention.
Year-to-Date 2021 Results
(All comparisons vs. year-to-date 2020, unless noted otherwise)
Segment income for Business Insurance was $1.518 billion
after-tax, an increase of $922 million. Segment income increased
primarily due to higher net investment income, a higher underlying
underwriting gain and net favorable prior year reserve development
compared to net unfavorable prior year reserve development in the
prior year period, partially offset by higher catastrophe losses.
The underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 98.7% improved 5.1 points due to a lower
underlying combined ratio (3.7 points) and net favorable prior year
reserve development compared to net unfavorable prior year reserve
development in the prior year period (2.8 points), partially offset
by higher catastrophe losses (1.4 points).
- The underlying combined ratio of 92.4% improved 3.7 points,
primarily reflecting earned pricing that exceeded loss cost trends
and a favorable impact associated with the pandemic.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in domestic
operations in the workers’ compensation product line for multiple
accident years and in the commercial automobile and commercial
property product lines for recent accident years and better than
expected loss experience in the segment’s international operations,
partially offset by an increase in asbestos reserves of $225
million, an increase in other reserves related to run-off
operations and an increase to environmental reserves. Net
unfavorable prior year reserve development in the prior year period
included an increase in asbestos reserves of $295 million, which
was partially offset by $81 million of recoveries from the PG&E
subrogation described above.
Net written premiums of $12.126 billion increased 3%. The
benefits of continued strong retention and higher renewal rate
change were partially offset by lower net written premiums in the
workers’ compensation product line due to the impact of the
pandemic on payrolls.
Bond
& Specialty Insurance Segment Financial Results
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
2021
2020
Change
Underwriting gain:
$
150
$
76
$
74
$
422
$
208
$
214
Underwriting gain
includes:
Net favorable (unfavorable) prior year
reserve development
22
—
22
81
(33)
114
Catastrophes, net of reinsurance
(3)
(2)
(1)
(30)
(10)
(20)
Net investment income
63
58
5
186
155
31
Other income
4
5
(1)
13
13
—
Segment income before income
taxes
217
139
78
621
376
245
Income tax expense
43
24
19
123
67
56
Segment income
$
174
$
115
$
59
$
498
$
309
$
189
Combined ratio
81.1
%
89.3
%
(8.2)
pts
81.4
%
89.7
%
(8.3)
pts
Impact on combined
ratio
Net (favorable) unfavorable prior year
reserve development
(2.6)
pts
—
pts
(2.6)
pts
(3.5)
pts
1.5
pts
(5.0)
pts
Catastrophes, net of reinsurance
0.3
pts
0.3
pts
—
pts
1.3
pts
0.5
pts
0.8
pts
Underlying combined ratio
83.4
%
89.0
%
(5.6)
pts
83.6
%
87.7
%
(4.1)
pts
Net written premiums
Domestic
Management Liability
$
532
$
467
14
%
$
1,473
$
1,306
13
%
Surety
241
208
16
673
643
5
Total Domestic
773
675
15
2,146
1,949
10
International
121
79
53
325
202
61
Total
$
894
$
754
19
%
$
2,471
$
2,151
15
%
Third Quarter 2021 Results
(All comparisons vs. third quarter 2020, unless noted
otherwise)
Segment income for Bond & Specialty Insurance was $174
million after-tax, an increase of $59 million. Segment income
increased primarily due to a higher underlying underwriting gain
and net favorable prior year reserve development in the current
quarter compared with no net prior year reserve development in the
prior year quarter. The underlying underwriting gain benefited from
higher business volumes.
Combined ratio:
- The combined ratio of 81.1% improved 8.2 points due to a lower
underlying combined ratio (5.6 points) and net favorable prior year
reserve development in the current quarter compared to no net prior
year reserve development in the prior year quarter (2.6
points).
- The underlying combined ratio of 83.4% improved 5.6 points,
primarily reflecting a lower level of losses related to the
pandemic, earned pricing that exceeded loss cost trends and a lower
expense ratio.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the segment’s
domestic operations in the fidelity and surety product lines for
recent accident years.
Net written premiums of $894 million increased 19%, reflecting
strong retention and renewal premium change in management liability
and strong production in surety.
Year-to-Date 2021 Results
(All comparisons vs. year-to-date 2020, unless noted otherwise)
Segment income for Bond & Specialty Insurance was $498
million after-tax, an increase of $189 million. Segment income
increased primarily due to a higher underlying underwriting gain,
net favorable prior year reserve development in the current year
compared to net unfavorable prior year reserve development in the
prior year period and higher net investment income, partially
offset by higher catastrophe losses. The underlying underwriting
gain benefited from higher business volumes.
Combined ratio:
- The combined ratio of 81.4% improved 8.3 points due to net
favorable prior year reserve development in the current year
compared to net unfavorable prior year reserve development in the
prior year period (5.0 points) and a lower underlying combined
ratio (4.1 points), partially offset by higher catastrophe losses
(0.8 points).
- The underlying combined ratio of 83.6% improved 4.1 points,
primarily reflecting earned pricing that exceeded loss cost trends,
a lower level of losses associated with the pandemic and a lower
expense ratio.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the segment’s
domestic operations in the fidelity and surety product lines for
recent accident years, partially offset by higher than expected
loss experience in the general liability product line for
management liability coverages for multiple accident years.
Net written premiums of $2.471 billion increased 15%, driven by
the same factors described above for the third quarter of 2021.
Personal
Insurance Segment Financial Results
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
2021
2020
Change
Underwriting gain (loss):
$
(163
)
$
363
$
(526
)
$
77
$
611
$
(534
)
Underwriting gain
(loss) includes:
Net favorable prior year reserve
development
30
362
(332
)
263
419
(156
)
Catastrophes, net of reinsurance
(317
)
(298
)
(19
)
(945
)
(905
)
(40
)
Net investment income
133
115
18
391
264
127
Other income
22
21
1
64
53
11
Segment income (loss) before income
taxes
(8
)
499
(507
)
532
928
(396
)
Income tax expense (benefit)
(6
)
107
(113
)
99
190
(91
)
Segment income (loss)
$
(2
)
$
392
$
(394
)
$
433
$
738
$
(305
)
Combined ratio
104.6
%
86.4
%
18.2
pts
98.3
%
91.7
%
6.6
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(1.0
)
pts
(12.8
)
pts
11.8
pts
(3.0
)
pts
(5.2
)
pts
2.2
pts
Catastrophes, net of reinsurance
10.4
pts
10.5
pts
(0.1
)
pts
10.6
pts
11.3
pts
(0.7
)
pts
Underlying combined ratio
95.2
%
88.7
%
6.5
pts
90.7
%
85.6
%
5.1
pts
Net written premiums
Domestic
Automobile
$
1,529
$
1,484
3
%
$
4,371
$
4,021
9
%
Homeowners and Other
1,698
1,524
11
4,476
3,999
12
Total Domestic
3,227
3,008
7
8,847
8,020
10
International
182
176
3
520
492
6
Total
$
3,409
$
3,184
7
%
$
9,367
$
8,512
10
%
Third Quarter 2021 Results
(All comparisons vs. third quarter 2020, unless noted
otherwise)
Segment loss for Personal Insurance was $2 million after-tax,
compared with segment income of $392 million after-tax in the prior
year quarter. The difference was primarily due to lower net
favorable prior year reserve development and a lower underlying
underwriting gain. The underlying underwriting gain benefited from
higher business volumes.
Combined ratio:
- The combined ratio of 104.6% increased 18.2 points due to lower
net favorable prior year reserve development (11.8 points) and a
higher underlying combined ratio (6.5 points), partially offset by
a smaller impact from catastrophe losses (0.1 points).
- The underlying combined ratio of 95.2% increased 6.5 points,
primarily driven by higher losses in the automobile product line
due to a comparison to a low level of loss activity in the prior
year quarter as a result of the pandemic, partially offset by lower
losses in the homeowners and other product line due to a comparison
to a high level of loss activity in the prior year quarter.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the segment’s
domestic operations in the homeowners and other product line for
recent accident years. Net favorable prior year reserve development
in the prior year quarter included $322 million of recoveries from
the PG&E subrogation described above.
Net written premiums of $3.409 billion increased 7%. Domestic
Automobile net written premiums increased 3%, driven by strong
retention and higher levels of new business. Domestic Homeowners
and Other net written premiums increased 11%, driven by strong
retention, renewal premium change of 8.8% and higher levels of new
business.
Year-to-Date 2021 Results
(All comparisons vs. year-to-date 2020, unless noted otherwise)
Segment income for Personal Insurance was $433 million
after-tax, a decrease of $305 million. Segment income decreased
primarily due to a lower underlying underwriting gain and lower net
favorable prior year reserve development, partially offset by
higher net investment income. The underlying underwriting gain
benefited from higher business volumes.
Combined ratio:
- The combined ratio of 98.3% increased 6.6 points due to a
higher underlying combined ratio (5.1 points) and lower net
favorable prior year reserve development (2.2 points), partially
offset by a smaller impact from catastrophe losses (0.7
points).
- The underlying combined ratio of 90.7% increased 5.1 points,
primarily driven by higher losses in the automobile product line
due to a comparison to a low level of loss activity (net of premium
refunds) in the prior year period as a result of the pandemic and
higher losses in the homeowners and other product line.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the segment’s
domestic operations in both the homeowners and other and automobile
product lines for recent accident years. Net favorable prior year
reserve development in the prior year period included $322 million
of recoveries from the PG&E subrogation described above.
Net written premiums of $9.367 billion increased 10%. Excluding
premium refunds provided to personal automobile customers primarily
in the second quarter of 2020, net written premiums increased 7%.
Domestic Automobile net written premiums increased 9%. Excluding
the impact of the premium refunds, Domestic Automobile net written
premiums increased 3%, driven by strong retention and higher levels
of new business. Domestic Homeowners and Other net written premiums
increased 12%, driven by strong retention, renewal premium change
of 8.2% and higher levels of new business.
Financial Supplement and Conference Call
The information in this press release should be read in
conjunction with the financial supplement that is available on our
website at www.travelers.com. Travelers management will discuss the
contents of this release and other relevant topics via webcast at 9
a.m. Eastern (8 a.m. Central) on Tuesday, October 19, 2021.
Investors can access the call via webcast at
http://investor.travelers.com or by dialing 1.844.895.1976 within
the United States and 1.647.689.5389 outside the United States.
Prior to the webcast, a slide presentation pertaining to the
quarterly earnings will be available on the Company’s website.
Following the live event, replays will be available via webcast
for one year at http://investor.travelers.com and by telephone for
30 days by dialing 1.800.585.8367 within the United States or
1.416.621.4642 outside the United States. All callers should use
conference ID 1999992.
About Travelers
The Travelers Companies, Inc. (NYSE: TRV) is a leading provider
of property casualty insurance for auto, home and business. A
component of the Dow Jones Industrial Average, Travelers has
approximately 30,000 employees and generated revenues of
approximately $32 billion in 2020. For more information, visit
www.travelers.com.
Travelers may use its website and/or social media outlets, such
as Facebook and Twitter, as distribution channels of material
Company information. Financial and other important information
regarding the Company is routinely accessible through and posted on
our website at http://investor.travelers.com, our Facebook page at
https://www.facebook.com/travelers and our Twitter account
(@Travelers) at https://twitter.com/travelers. In addition, you may
automatically receive email alerts and other information about
Travelers when you enroll your email address by visiting the Email
Notifications section at http://investor.travelers.com.
Travelers is organized into the following reportable business
segments:
Business Insurance - Business Insurance offers a broad
array of property and casualty insurance and insurance-related
services to its customers, primarily in the United States, as well
as in Canada, the United Kingdom, the Republic of Ireland and
throughout other parts of the world as a corporate member of
Lloyd’s.
Bond & Specialty Insurance - Bond & Specialty
Insurance provides surety, fidelity, management liability,
professional liability, and other property and casualty coverages
and related risk management services to its customers in the United
States and certain specialty insurance products in Canada, the
United Kingdom and the Republic of Ireland, as well as Brazil
through a joint venture, utilizing various degrees of
financially-based underwriting approaches.
Personal Insurance - Personal Insurance writes a broad
range of property and casualty insurance covering individuals’
personal risks, primarily in the United States, as well as in
Canada. The primary products of automobile and homeowners insurance
are complemented by a broad suite of related coverages.
* * * * *
Forward-Looking Statements
This press release contains, and management may make, certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other
than statements of historical facts, may be forward-looking
statements. Words such as “may,” “will,” “should,” “likely,”
“anticipates,” “expects,” “intends,” “plans,” “projects,”
“believes,” “views,” “estimates” and similar expressions are used
to identify these forward-looking statements. These statements
include, among other things, the Company’s statements about:
- the Company’s outlook, the impact of trends on its business and
its future results of operations and financial condition;
- the impact of COVID-19 and related economic conditions;
- the impact of legislative or regulatory actions or court
decisions taken in response to COVID-19 or otherwise;
- share repurchase plans;
- 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;
- the impact of investment, economic and underwriting market
conditions, including inflation;
- strategic and operational initiatives to improve profitability
and competitiveness;
- the Company’s competitive advantages and innovation
agenda;
- new product offerings; and
- the impact of developments in the tort environment.
The Company cautions investors that such statements are subject
to risks and uncertainties, many of which are difficult to predict
and generally beyond the Company’s control, that could cause actual
results to differ materially from those expressed in, or implied or
projected by, the forward-looking information and statements.
Some of the factors that could cause actual results to differ
include, but are not limited to, the following:
Insurance-Related Risks
- high levels of catastrophe losses;
- actual claims may exceed the Company’s claims and claim
adjustment expense reserves, or the estimated level of claims and
claim adjustment expense reserves may increase, including as a
result of, among other things, changes in the legal/tort,
regulatory and economic environments;
- the Company’s potential exposure to asbestos and environmental
claims and related litigation;
- the Company is exposed to, and may face adverse developments
involving, mass tort claims; and
- the effects of emerging claim and coverage issues on the
Company’s business are uncertain, and court decisions or
legislative changes that take place after the Company issues its
policies can result in an unexpected increase in the number of
claims.
Financial, Economic and Credit
Risks
- a period of financial market disruption or an economic
downturn;
- the Company’s investment portfolio is subject to credit and
interest rate risk, and may suffer reduced or low returns or
material realized or unrealized losses;
- the Company is exposed to credit risk related to reinsurance
and structured settlements, and reinsurance coverage may not be
available to the Company;
- the Company is exposed to credit risk in certain of its
insurance operations and with respect to certain guarantee or
indemnification arrangements that it has with third parties;
- a downgrade in the Company’s claims-paying and financial
strength ratings; and
- the Company’s insurance subsidiaries may be unable to pay
dividends to the Company’s holding company in sufficient
amounts.
Business and Operational
Risks
- the impact of COVID-19 and related risks, including with
respect to revenues, claims and claim adjustment expenses, general
and administrative expenses, investments, inflation, adverse
legislative and/or regulatory action, operational disruptions and
heightened cyber security risks and foreign currency exchange rate
changes;
- the intense competition that the Company faces, and the impact
of innovation, technological change and changing customer
preferences on the insurance industry and the markets in which it
operates;
- disruptions to the Company’s relationships with its independent
agents and brokers or the Company’s inability to manage effectively
a changing distribution landscape;
- the Company’s efforts to develop new products, expand in
targeted markets, improve business processes and workflows or make
acquisitions may not be successful and may create enhanced
risks;
- the Company’s pricing and capital models may provide materially
different indications than actual results;
- 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 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 commensurate with the Company’s desired ratings from
independent rating agencies, changes in levels of written premiums,
funding of the Company’s qualified pension plan, capital
requirements of the Company’s operating subsidiaries, legal
requirements, regulatory constraints, other investment
opportunities (including mergers and acquisitions and related
financings), market conditions, changes in tax laws and other
factors, including the ongoing level of uncertainty related to
COVID-19.
Our forward-looking statements speak only as of the date of this
press release or as of the date they are made, and we undertake no
obligation to update forward-looking statements. For a more
detailed discussion of these factors, see the information under the
captions “Risk Factors,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and “Forward Looking
Statements” in the quarterly report on Form 10-Q filed with the
Securities and Exchange Commission (SEC) on October 19, 2021, and
in our most recent annual report on Form 10-K filed with the SEC on
February 11, 2021, in each case as updated by our periodic filings
with the SEC.
*****
GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF GAAP
MEASURES TO NON-GAAP MEASURES
The following measures are used by the Company’s management to
evaluate financial performance against historical results, to
establish performance targets on a consolidated basis and for other
reasons as discussed below. In some cases, these measures are
considered non-GAAP financial measures under applicable SEC rules
because they are not displayed as separate line items in the
consolidated financial statements or are not required to be
disclosed in the notes to financial statements or, in some cases,
include or exclude certain items not ordinarily included or
excluded in the most comparable GAAP financial measure.
Reconciliations of these measures to the most comparable GAAP
measures also follow.
In the opinion of the Company’s management, a discussion of
these measures provides investors, financial analysts, rating
agencies and other financial statement users with a better
understanding of the significant factors that comprise the
Company’s periodic results of operations and how management
evaluates the Company’s financial performance.
Some of these measures exclude net realized investment gains
(losses), net of tax, and/or net unrealized investment gains
(losses), net of tax, included in shareholders’ equity, which can
be significantly impacted by both discretionary and other economic
factors and are not necessarily indicative of operating trends.
Other companies may calculate these measures differently, and,
therefore, their measures may not be comparable to those used by
the Company’s management.
RECONCILIATION OF NET INCOME TO CORE INCOME AND CERTAIN OTHER
NON-GAAP MEASURES
Core income (loss) is consolidated net income (loss)
excluding the after-tax impact of net realized investment gains
(losses), discontinued operations, the effect of a change in tax
laws and tax rates at enactment, and cumulative effect of changes
in accounting principles when applicable. Segment income
(loss) is determined in the same manner as core income (loss)
on a segment basis. Management uses segment income (loss) to
analyze each segment’s performance and as a tool in making business
decisions. Financial statement users also consider core income
(loss) when analyzing the results and trends of insurance
companies. Core income (loss) per share is core income
(loss) on a per common share basis.
Reconciliation of Net Income to Core Income less
Preferred Dividends
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions, after-tax)
2021
2020
2021
2020
Net income
$
662
$
827
$
2,329
$
1,387
Less: Net realized investment (gains)
losses
(7
)
(29
)
(88
)
37
Impact of changes in tax laws and/or tax
rates (1)
—
—
(8
)
—
Core income
$
655
$
798
$
2,233
$
1,424
(1) Impact is recognized in the accounting
period in which the change is enacted
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions, pre-tax)
2021
2020
2021
2020
Net income
$
786
$
986
$
2,808
$
1,621
Less: Net realized investment (gains)
losses
(8
)
(37
)
(113
)
48
Core income
$
778
$
949
$
2,695
$
1,669
Twelve Months Ended December
31,
($ in millions, after-tax)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Net income
$
2,697
$
2,622
$
2,523
$
2,056
$
3,014
$
3,439
$
3,692
$
3,673
$
2,473
$
1,426
$
3,216
$
3,622
$
2,924
$
4,601
$
4,208
$
1,622
Less: Loss from discontinued
operations
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(439
)
Income from continuing
operations
2,697
2,622
2,523
2,056
3,014
3,439
3,692
3,673
2,473
1,426
3,216
3,622
2,924
4,601
4,208
2,061
Adjustments:
Net realized investment (gains) losses
(11
)
(85
)
(93
)
(142
)
(47
)
(2
)
(51
)
(106
)
(32
)
(36
)
(173
)
(22
)
271
(101
)
(8
)
(35
)
Impact of changes in tax laws and/or tax
rates (1) (2)
—
—
—
129
—
—
—
—
—
—
—
—
—
—
—
—
Core income
2,686
2,537
2,430
2,043
2,967
3,437
3,641
3,567
2,441
1,390
3,043
3,600
3,195
4,500
4,200
2,026
Less: Preferred dividends
—
—
—
—
—
—
—
—
—
1
3
3
4
4
5
6
Core income, less preferred
dividends
$
2,686
$
2,537
$
2,430
$
2,043
$
2,967
$
3,437
$
3,641
$
3,567
$
2,441
$
1,389
$
3,040
$
3,597
$
3,191
$
4,496
$
4,195
$
2,020
(1) Impact is recognized in the accounting
period in which the change is enacted
(2) 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 September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Basic income per
share
Net income
$
2.65
$
3.24
$
9.24
$
5.44
Adjustments:
Net realized investment (gains) losses,
after-tax
(0.02
)
(0.11
)
(0.35
)
0.14
Impact of changes in tax laws and/or tax
rates (1)
—
—
(0.03
)
—
Core income
$
2.63
$
3.13
$
8.86
$
5.58
Diluted income
per share
Net income
$
2.62
$
3.23
$
9.16
$
5.41
Adjustments:
Net realized investment (gains) losses,
after-tax
(0.02
)
(0.11
)
(0.35
)
0.15
Impact of changes in tax laws and/or tax
rates (1)
—
—
(0.03
)
—
Core income
$
2.60
$
3.12
$
8.78
$
5.56
(1) Impact is recognized in the accounting
period in which the change is enacted
Reconciliation of Segment Income (Loss) to Total Core
Income
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions, after-tax)
2021
2020
2021
2020
Business Insurance
$
558
$
365
$
1,518
$
596
Bond & Specialty Insurance
174
115
498
309
Personal Insurance
(2
)
392
433
738
Total segment income
730
872
2,449
1,643
Interest Expense and Other
(75
)
(74
)
(216
)
(219
)
Total core income
$
655
$
798
$
2,233
$
1,424
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 September 30,
($ in millions)
2021
2020
Shareholders’ equity
$
28,474
$
27,849
Adjustments:
Net unrealized investment gains, net of
tax, included in shareholders’ equity
(2,699
)
(3,812
)
Net realized investment (gains) losses,
net of tax
(88
)
37
Impact of changes in tax laws and/or tax
rates (1)
(8
)
—
Adjusted shareholders’ equity
$
25,679
$
24,074
(1) Impact is recognized in the accounting
period in which the change is enacted
As of December 31,
($ in millions)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Shareholders’ equity
$
29,201
$
25,943
$
22,894
$
23,731
$
23,221
$
23,598
$
24,836
$
24,796
$
25,405
$
24,477
$
25,475
$
27,415
$
25,319
$
26,616
$
25,135
$
22,303
Adjustments:
Net unrealized investment (gains) losses,
net of tax, included in shareholders’ equity
(4,074
)
(2,246
)
113
(1,112
)
(730
)
(1,289
)
(1,966
)
(1,322
)
(3,103
)
(2,871
)
(1,859
)
(1,856
)
146
(620
)
(453
)
(327
)
Net realized investment (gains) losses,
net of tax
(11
)
(85
)
(93
)
(142
)
(47
)
(2
)
(51
)
(106
)
(32
)
(36
)
(173
)
(22
)
271
(101
)
(8
)
(35
)
Impact of changes in tax laws and/or tax
rates (1) (2)
—
—
—
287
—
—
—
—
—
—
—
—
—
—
—
—
Preferred stock
—
—
—
—
—
—
—
—
—
—
(68
)
(79
)
(89
)
(112
)
(129
)
(153
)
Loss from discontinued operations
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
439
Adjusted shareholders’ equity
$
25,116
$
23,612
$
22,914
$
22,764
$
22,444
$
22,307
$
22,819
$
23,368
$
22,270
$
21,570
$
23,375
$
25,458
$
25,647
$
25,783
$
24,545
$
22,227
(1) Impact is recognized in the accounting period in which the
change is enacted
(2) 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 September
30,
Nine Months Ended September
30,
($ in millions, after-tax)
2021
2020
2021
2020
Annualized net income
$
2,645
$
3,309
$
3,105
$
1,850
Average shareholders’ equity
28,815
27,396
28,754
26,348
Return on equity
9.2
%
12.1
%
10.8
%
7.0
%
Annualized core income
$
2,620
$
3,193
$
2,977
$
1,899
Adjusted average shareholders’ equity
25,842
23,652
25,590
23,534
Core return on equity
10.1
%
13.5
%
11.6
%
8.1
%
Twelve Months Ended December
31,
($ in millions)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Core income, less preferred dividends
$
2,686
$
2,537
$
2,430
$
2,043
$
2,967
$
3,437
$
3,641
$
3,567
$
2,441
$
1,389
$
3,040
$
3,597
$
3,191
$
4,496
$
4,195
$
2,020
Adjusted average shareholders’ equity
23,790
23,335
22,814
22,743
22,386
22,681
23,447
23,004
22,158
22,806
24,285
25,777
25,668
25,350
23,381
21,118
Core return on equity
11.3
%
10.9
%
10.7
%
9.0
%
13.3
%
15.2
%
15.5
%
15.5
%
11.0
%
6.1
%
12.5
%
14.0
%
12.4
%
17.7
%
17.9
%
9.6
%
RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN
ITEMS TO NET INCOME
Underwriting gain (loss) is net earned premiums and fee
income less claims and claim adjustment expenses and
insurance-related expenses. In the opinion of the Company’s
management, it is important to measure the profitability of each
segment excluding the results of investing activities, which are
managed separately from the insurance business. This measure is
used to assess each segment’s business performance and as a tool in
making business decisions. Pre-tax underwriting gain,
excluding the impact of catastrophes and net favorable
(unfavorable) prior year loss reserve development, is the
underwriting gain adjusted to exclude claims and claim adjustment
expenses, reinstatement premiums and assessments related to
catastrophes and loss reserve development related to time periods
prior to the current year. In the opinion of the Company’s
management, this measure is meaningful to users of the financial
statements to understand the Company’s periodic earnings and the
variability of earnings caused by the unpredictable nature (i.e.,
the timing and amount) of catastrophes and loss reserve
development. This measure is also referred to as underlying
underwriting margin or underlying underwriting gain.
A catastrophe is a severe loss designated a catastrophe
by internationally recognized organizations that track and report
on insured losses resulting from catastrophic events, such as
Property Claim Services (PCS) for events in the United States and
Canada. Catastrophes can be caused by various natural events,
including, among others, hurricanes, tornadoes and other
windstorms, earthquakes, hail, wildfires, severe winter weather,
floods, tsunamis, volcanic eruptions and other naturally-occurring
events, such as solar flares. Catastrophes can also be man-made,
such as terrorist attacks and other intentionally destructive acts
including those involving nuclear, biological, chemical and
radiological events, cyber events, explosions and destruction of
infrastructure. Each catastrophe has unique characteristics and
catastrophes are not predictable as to timing or amount. Their
effects are included in net and core income and claims and claim
adjustment expense reserves upon occurrence. A catastrophe may
result in the payment of reinsurance reinstatement premiums and
assessments from various pools.
The Company’s threshold for disclosing catastrophes is primarily
determined at the reportable segment level. If a threshold for one
segment or a combination thereof is exceeded and the other segments
have losses from the same event, losses from the event are
identified as catastrophe losses in the segment results and for the
consolidated results of the Company. Additionally, an aggregate
threshold is applied for international business across all
reportable segments. The threshold for 2021 ranges from $20 million
to $30 million of losses before reinsurance and taxes.
Net favorable (unfavorable) prior year loss reserve
development is the increase or decrease in incurred claims and
claim adjustment expenses as a result of the re-estimation of
claims and claim adjustment expense reserves at successive
valuation dates for a given group of claims, which may be related
to one or more prior years. In the opinion of the Company’s
management, a discussion of loss reserve development is meaningful
to users of the financial statements as it allows them to assess
the impact between prior and current year development on incurred
claims and claim adjustment expenses, net and core income (loss),
and changes in claims and claim adjustment expense reserve levels
from period to period.
Components of Net Income
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions, after-tax except as
noted)
2021
2020
2021
2020
Pre-tax underwriting gain excluding the
impact of catastrophes and net prior year loss reserve
development
$
632
$
594
$
1,984
$
1,760
Pre-tax impact of catastrophes
(501
)
(397
)
(1,811
)
(1,584
)
Pre-tax impact of net favorable
(unfavorable) prior year loss reserve development
(56
)
142
443
171
Pre-tax underwriting gain
75
339
616
347
Income tax expense on underwriting
results
7
58
129
78
Underwriting gain
68
281
487
269
Net investment income
645
566
1,917
1,336
Other income (expense), including interest
expense
(58
)
(49
)
(171
)
(181
)
Core income
655
798
2,233
1,424
Net realized investment gains (losses)
7
29
88
(37
)
Impact of changes in tax laws and/or tax
rates (1)
—
—
8
—
Net income
$
662
$
827
$
2,329
$
1,387
(1) Impact is recognized in the accounting period in which the
change is enacted
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 September
30,
Nine Months Ended September
30,
($ in millions, pre-tax)
2021
2020
2021
2020
Loss and loss
adjustment expense ratio
Claims and claim adjustment expenses
$
5,464
$
4,886
$
15,479
$
14,782
Less:
Policyholder dividends
10
11
31
31
Allocated fee income
36
35
113
120
Loss ratio numerator
$
5,418
$
4,840
$
15,335
$
14,631
Underwriting
expense ratio
Amortization of deferred acquisition
costs
$
1,281
$
1,207
$
3,742
$
3,558
General and administrative expenses
(G&A)
1,187
1,109
3,524
3,367
Less:
Non-insurance G&A
81
60
228
167
Allocated fee income
61
66
189
203
Billing and policy fees and other
27
24
81
69
Expense ratio numerator
$
2,299
$
2,166
$
6,768
$
6,486
Earned premium
$
7,829
$
7,380
$
22,831
$
21,564
Combined ratio (1)
Loss and loss adjustment expense ratio
69.2
%
65.6
%
67.2
%
67.8
%
Underwriting expense ratio
29.4
%
29.3
%
29.6
%
30.1
%
Combined ratio
98.6
%
94.9
%
96.8
%
97.9
%
(1) For purposes of computing ratios, billing and policy fees
and other (which are a component of other revenues) are allocated
as a reduction of underwriting expenses. In addition, fee income is
allocated as a reduction of losses and loss adjustment expenses and
underwriting expenses. These allocations are to conform the
calculation of the combined ratio with statutory accounting.
Additionally, general and administrative expenses include
non-insurance expenses that are excluded from underwriting
expenses, and accordingly are excluded in calculating the combined
ratio.
RECONCILIATION OF BOOK VALUE PER SHARE AND SHAREHOLDERS’
EQUITY TO CERTAIN NON-GAAP MEASURES
Book value per share is total common shareholders’ equity
divided by the number of common shares outstanding. Adjusted
book value per share is total common shareholders’ equity
excluding net unrealized investment gains and losses, net of tax,
included in shareholders’ equity, divided by the number of common
shares outstanding. In the opinion of the Company’s management,
adjusted book value per share is useful in an analysis of a
property casualty company’s book value per share as it removes the
effect of changing prices on invested assets (i.e., net unrealized
investment gains (losses), net of tax), which do not have an
equivalent impact on unpaid claims and claim adjustment expense
reserves. Tangible book value per share is adjusted book
value per share excluding the after-tax value of goodwill and other
intangible assets divided by the number of common shares
outstanding. In the opinion of the Company’s management, tangible
book value per share is useful in an analysis of a property
casualty company’s book value on a nominal basis as it removes
certain effects of purchase accounting (i.e., goodwill and other
intangible assets), in addition to the effect of changing prices on
invested assets.
Reconciliation of Shareholders’ Equity
to Tangible Shareholders’ Equity, Excluding Net Unrealized
Investment Gains, Net of Tax
As of
($ in millions, except per share
amounts)
September 30,
2021
December 31,
2020
September 30,
2020
Shareholders’ equity
$
28,474
$
29,201
$
27,849
Less: Net unrealized investment gains, net
of tax, included in shareholders’ equity
2,699
4,074
3,812
Shareholders’ equity, excluding net
unrealized investment gains, net of tax, included in shareholders’
equity
25,775
25,127
24,037
Less:
Goodwill
4,005
3,976
3,945
Other intangible assets
309
317
318
Impact of deferred tax on other intangible
assets
(63
)
(59
)
(55
)
Tangible shareholders’ equity
$
21,524
$
20,893
$
19,829
Common shares outstanding
246.0
252.4
253.3
Book value per share
$
115.74
$
115.68
$
109.94
Adjusted book value per share
104.77
99.54
94.89
Tangible book value per share
87.49
82.77
78.28
RECONCILIATION OF TOTAL CAPITALIZATION TO TOTAL
CAPITALIZATION EXCLUDING NET UNREALIZED INVESTMENT GAINS, NET OF
TAX
Total capitalization is the sum of total shareholders’
equity and debt. Debt-to-capital ratio excluding net unrealized
gain on investments, net of tax, included in shareholders’
equity, is the ratio of debt to total capitalization excluding
the after-tax impact of net unrealized investment gains and losses
included in shareholders’ equity. In the opinion of the Company’s
management, the debt-to-capital ratio is useful in an analysis of
the Company’s financial leverage.
As of
($ in millions)
September 30,
2021
December 31,
2020
Debt
$
7,290
$
6,550
Shareholders’ equity
28,474
29,201
Total capitalization
35,764
35,751
Less: Net unrealized investment gains, net
of tax, included in shareholders’ equity
2,699
4,074
Total capitalization excluding net
unrealized gain on investments, net of tax, included in
shareholders’ equity
$
33,065
$
31,677
Debt-to-capital ratio
20.4
%
18.3
%
Debt-to-capital ratio excluding net
unrealized investment gains, net of tax, included in shareholders’
equity
22.0
%
20.7
%
OTHER DEFINITIONS
Gross written premiums reflect the direct and assumed
contractually determined amounts charged to policyholders for the
effective period of the contract based on the terms and conditions
of the insurance contract. Net written premiums reflect
gross written premiums less premiums ceded to reinsurers.
For Business Insurance and Bond & Specialty Insurance,
retention is the amount of premium available for renewal
that was retained, excluding rate and exposure changes. For
Personal Insurance, retention is the ratio of the expected
number of renewal policies that will be retained throughout the
annual policy period to the number of available renewal base
policies. For all of the segments, renewal rate change
represents the estimated change in average premium on policies that
renew, excluding exposure changes. Exposure is the measure
of risk used in the pricing of an insurance product. The change in
exposure is the amount of change in premium on policies that renew
attributable to the change in portfolio risk. Renewal premium
change represents the estimated change in average premium on
policies that renew, including rate and exposure changes. New
business is the amount of written premium related to new
policyholders and additional products sold to existing
policyholders. These are operating statistics, which are in part
dependent on the use of estimates and are therefore subject to
change. For Business Insurance, retention, renewal premium change
and new business exclude National Accounts. For Bond &
Specialty Insurance, retention, renewal premium change and new
business exclude surety and other products that are generally sold
on a non-recurring, project specific basis. 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 11, 2021, and subsequent
periodic filings with the SEC.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211019005633/en/
Media: Patrick Linehan
917.778.6267
Institutional Investors: Abbe
Goldstein 917.778.6825
The Travelers Companies (NYSE:TRV)
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