Return on Equity and Core Return on Equity of 4.9% and 4.5%,
Respectively
-
Net income of $293 million and core income of $253 million impacted by
$700 million pre-tax ($455 million after-tax) of catastrophe losses.
-
Combined ratio of 103.2% (including 10.7 points of catastrophe losses)
and underlying combined ratio of 92.8%.
-
Net investment income of $588 million pre-tax ($457 million after-tax)
benefited from strong private equity returns.
-
Record net written premiums of $6.660 billion up 4% over prior year
quarter, with growth in all segments.
-
Total capital returned to shareholders of $528 million in the quarter,
including $328 million of share repurchases. Year-to-date total
capital returned to shareholders of $1.680 billion, including $1.089
billion of share repurchases.
-
Book value per share of $86.73 and adjusted book value per share of
$83.06, up 4% and 3%, respectively, from year-end 2016.
-
Board of Directors declared quarterly dividend per share of $0.72.
Company Website:
http://www.travelers.com/
NEW YORK -- (Business Wire)
The Travelers Companies, Inc. today reported net income of $293 million,
or $1.05 per diluted share, for the quarter ended September 30, 2017,
compared to $716 million, or $2.45 per diluted share, in the prior year
quarter. Core income in the current quarter was $253 million, or $0.91
per diluted share, compared to $701 million, or $2.40 per diluted share,
in the prior year quarter. The decrease in net income and core income
was primarily due to significantly higher catastrophe losses. In
addition, net income benefited from an increase in net realized
investment gains of $61 million pre-tax ($40 million after-tax) in the
current quarter, primarily driven by gains on the sale of equity
securities, compared to $23 million pre-tax ($15 million after-tax) in
the prior year quarter. Per diluted share amounts benefited from the
impact of share repurchases.
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Consolidated Highlights |
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($ in millions, except for per share amounts, and after-tax,
| | | Three Months Ended September 30, | | | | | | Nine Months Ended September 30, | | |
except for premiums & revenues)
| | | 2017 |
|
|
| 2016 | | | | Change | | | | | | 2017 |
| |
|
| 2016 | | | | | Change | | |
Net written premiums |
|
| $ | 6,660 |
|
|
|
| $ | 6,389 |
|
|
|
|
| 4 |
|
| % |
|
|
| $ | 19,795 |
|
|
|
|
| $ | 18,900 |
|
|
|
|
| 5 |
| | % |
Total revenues | | | $ | 7,325 | | | | | $ | 6,961 | | | | | | 5 | | | | | | | $ | 21,451 | | | | | | $ | 20,432 | | | | | | 5 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net income | | | $ | 293 | | | | | $ | 716 | | | | | | (59 | ) | | | | | | $ | 1,505 | | | | | | $ | 2,071 | | | | | | (27 | ) | | |
per diluted share | | | $ | 1.05 | | | | | $ | 2.45 | | | | | | (57 | ) | | | | | | $ | 5.34 | | | | | | $ | 7.00 | | | | | | (24 | ) | | |
Core income | | | $ | 253 | | | | | $ | 701 | | | | | | (64 | ) | | | | | | $ | 1,410 | | | | | | $ | 2,048 | | | | | | (31 | ) | | |
per diluted share | | | $ | 0.91 | | | | | $ | 2.40 | | | | | | (62 | ) | | | | | | $ | 5.01 | | | | | | $ | 6.92 | | | | | | (28 | ) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Diluted weighted average | | | | 276.6 | | | | | | 289.8 | | | | | | (5 | ) | | | | | | | 279.6 | | | | | | | 293.6 | | | | | | (5 | ) | | |
shares outstanding | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | 103.2 | % | | | | | 92.9 | % | | | | | 10.3 | | | pts | | | | | 98.7 | % | | | | | | 92.8 | % | | | | | 5.9 | | | pts |
Underlying combined ratio | | | | 92.8 | % | | | | | 92.1 | % | | | | | 0.7 | | | pts | | | | | 92.7 | % | | | | | | 91.5 | % | | | | | 1.2 | | | pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Return on equity | | | | 4.9 | % | | | | | 11.6 | % | | | | | (6.7 | ) | | pts | | | | | 8.5 | % | | | | | | 11.4 | % | | | | | (2.9 | ) | | pts |
Core return on equity |
|
|
| 4.5 | % |
|
|
|
| 12.5 | % |
|
|
|
| (8.0 | ) |
| pts |
|
|
|
| 8.3 | % |
|
|
|
|
| 12.2 | % |
|
|
|
| (3.9 | ) | | pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | Change from | | | | | | | |
| | | September 30, | | | | December 31, | | | | September 30, | | | | | | December 31, | | | | | September 30, | | | | | | | |
| | | 2017 | | | | 2016 | | | | 2016 | | | | | | 2016 | | | | | 2016 | | | | | | | |
Book value per share | | | $ | 86.73 | | | | | $ | 83.05 | | | | | $ | 86.04 | | | | | | | | 4 | | | % | | | | 1 | | | % | | | | | |
Adjusted book value per share | | | | 83.06 | | | | | | 80.44 | | | | | | 78.82 | | | | | | | | 3 | | | | | | | 5 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
See Glossary of Financial Measures for definitions and the
statistical supplement for additional financial data.
|
|
“In a quarter of unprecedented hurricane activity, our strength in
underwriting and our investment expertise enabled us to deliver core
income of $253 million and core return on equity of 4.5%,” commented
Alan Schnitzer, Chairman and Chief Executive Officer. “Our disciplined
coastal underwriting stood up to the storms, and we also delivered a
consolidated underlying combined ratio of 92.8%, with all three segments
contributing to the solid result. The results in Business Insurance
benefited from higher earned premiums and lower general and
administrative expenses, while Bond & Specialty Insurance delivered
another quarter of impressive profitability. Within Personal Insurance,
the underlying combined ratio in auto improved, reflecting the continued
successful execution of pricing and underwriting actions we began
implementing a year ago. Our high-quality investment portfolio continued
to perform well, benefiting from strong private equity returns.
Additionally, we were able to return $528 million to shareholders in the
quarter, including $328 million in share repurchases.
“We also continue to be pleased with the execution of our marketplace
strategies, which resulted in record net written premiums of $6.7
billion this quarter, a 4% increase over the prior year quarter. In our
commercial businesses, retention remained at historic highs, renewal
premium change remained positive and consistent with recent periods and
the level of new business increased. In Personal auto, renewal premium
change reached double digits in September, consistent with our plans to
improve profitability, and we maintained the positive momentum in our
homeowners business with 5% growth in policies in force
quarter-over-quarter.
“In the wake of the many devastating events this quarter, our thoughts
and prayers are with all who have been impacted. We also extend our deep
gratitude to our claim professionals, who tirelessly demonstrate to our
customers and agents the value of the Travelers promise.”
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Consolidated Results |
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($ in millions and pre-tax, unless noted otherwise)
| | | |
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|
| | | | | Three Months Ended September 30, | | | | | | | Nine Months Ended September 30, | | |
| | | | | 2017 | | | | 2016 | | | | Change | | | | | | | 2017 | | | | | 2016 | | | | | Change | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gain/(loss): | | | | | $ | (246 | ) | | | | $ | 408 | | | | | $ | (654 | ) | | | | | | | $ | 138 | | | | | | $ | 1,224 | | | | | | $ | (1,086 | ) | | |
Underwriting gain/(loss) includes: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | | | | 15 | | | | | | 39 | | | | | | (24 | ) | | | | | | | | 299 | | | | | | | 507 | | | | | | | (208 | ) | | |
Catastrophes, net of reinsurance | | | | | | (700 | ) | | | | | (89 | ) | | | | | (611 | ) | | | | | | | | (1,450 | ) | | | | | | (740 | ) | | | | | | (710 | ) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | | | 588 | | | | | | 582 | | | | | | 6 | | | | | | | | | 1,796 | | | | | | | 1,675 | | | | | | | 121 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Other income/(expense), including interest expense | | | | |
| (83 | ) | | | |
| (66 | ) | | | |
| (17 | ) | | | | | | |
| (210 | ) | | | | |
| (181 | ) | | | | |
| (29 | ) | | |
Core income before income taxes | | | | | | 259 | | | | | | 924 | | | | | | (665 | ) | | | | | | | | 1,724 | | | | | | | 2,718 | | | | | | | (994 | ) | | |
Income tax expense | | | | |
| 6 |
| | | |
| 223 |
| | | |
| (217 | ) | | | | | | |
| 314 |
| | | | |
| 670 |
| | | | |
| (356 | ) | | |
Core income | | | | | | 253 | | | | | | 701 | | | | | | (448 | ) | | | | | | | | 1,410 | | | | | | | 2,048 | | | | | | | (638 | ) | | |
Net realized investment gains after income taxes | | | | |
| 40 |
| | | |
| 15 |
| | | |
| 25 |
| | | | | | |
| 95 |
| | | | |
| 23 |
| | | | |
| 72 |
| | |
Net income | | | | | $ | 293 |
| | | | $ | 716 |
| | | | $ | (423 | ) | | | | | | | $ | 1,505 |
| | | | | $ | 2,071 |
| | | | | $ | (566 | ) | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | | 103.2 | % | | | | | 92.9 | % | | | | | 10.3 | | | pts | | | | | | 98.7 | % | |
| | | | 92.8 | % | |
| | | | 5.9 | | | pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | | | | |
(0.3
|
)
| |
pts
| | |
(0.6
|
)
| |
pts
| | |
0.3
| | |
pts
| | | | | |
(1.6
|
)
| |
pts
| | | |
(2.8
|
)
| |
pts
| | | |
1.2
| | |
pts
|
Catastrophes, net of reinsurance
| | | | | |
10.7
| | |
pts
| | |
1.4
| | |
pts
| | |
9.3
| | |
pts
| | | | | |
7.6
| | |
pts
| | | |
4.1
| | |
pts
| | | |
3.5
| | |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio |
|
|
|
|
| 92.8 | % |
|
|
|
| 92.1 | % |
|
|
|
| 0.7 |
|
| pts |
|
|
|
|
| 92.7 | % |
|
|
|
|
| 91.5 | % |
|
|
|
|
| 1.2 |
|
| pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Business Insurance
| | | | |
$
|
3,434
| | | | |
$
|
3,388
| | | | | |
1
| | |
%
| | | | |
$
|
10,833
| | | | | |
$
|
10,620
| | | | | | |
2
| | |
%
|
Bond & Specialty Insurance
| | | | | |
611
| | | | | |
600
| | | | | |
2
| | | | | | | | |
1,753
| | | | | | |
1,692
| | | | | | |
4
| | | |
Personal Insurance
| | | | |
|
2,615
|
| | | |
|
2,401
|
| | | | |
9
| | | | | | | |
|
7,209
|
| | | | |
|
6,588
|
| | | | | |
9
| | | |
Total | | | | | $ | 6,660 |
| | | | $ | 6,389 |
| | | | | 4 | | | % | | | | | $ | 19,795 |
| | | | | $ | 18,900 |
| | | | | | 5 | | | % |
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Third Quarter 2017 Results
(All
comparisons vs. third quarter 2016, unless noted otherwise)
Net income of $293 million after-tax decreased $423 million due to lower
core income, partially offset by higher net realized investment gains.
Core income of $253 million after-tax decreased $448 million, primarily
driven by significantly higher catastrophe losses. Net realized
investment gains of $61 million pre-tax ($40 million after-tax) in the
current quarter, compared to $23 million pre-tax ($15 million after-tax)
in the prior year quarter, were primarily driven by gains on the sale of
equity securities.
Underwriting results
-
The combined ratio of 103.2% increased 10.3 points due to higher
catastrophe losses (9.3 points), a higher underlying combined ratio
(0.7 points) and lower net favorable prior year reserve development
(0.3 points).
-
The underlying combined ratio of 92.8% increased 0.7 points, primarily
driven by a high level of non-catastrophe fire-related losses in
Business Insurance and loss cost trends that modestly exceeded earned
pricing, partially offset by a lower expense ratio.
-
Net favorable prior year reserve development occurred in Business
Insurance and Bond & Specialty Insurance. Net favorable prior year
reserve development in Business Insurance was net of a $225 million
increase in asbestos reserves, the same amount as in the prior year
quarter. Catastrophe losses in the third quarter of 2017 primarily
resulted from Hurricanes Harvey, Irma and Maria, as well as wind and
hail storms in the Southern region of the United States.
Net investment income of $588 million pre-tax ($457 million after-tax)
increased 1% driven by higher private equity returns, partially offset
by fixed income returns that declined in line with our expectations due
to lower reinvestment rates available in the market.
Record net written premiums of $6.660 billion increased 4%, reflecting
strong retention in all three segments and improved renewal premium
change in Personal Insurance, as well as an increase in new business in
our commercial businesses.
Year-to-Date 2017 Results
(All
comparisons vs. year-to-date 2016, unless noted otherwise)
Net income of $1.505 billion after-tax decreased $566 million, due to
lower core income, partially offset by higher net realized investment
gains. Core income of $1.410 billion after-tax decreased $638 million,
primarily driven by significantly higher catastrophe losses, lower net
favorable prior year reserve development, and a lower underlying
underwriting gain (i.e., excluding net favorable prior year reserve
development and catastrophe losses), partially offset by higher net
investment income. The current period benefited from a $39 million
resolution of prior year income tax matters, while the prior year period
benefited modestly from the favorable settlement of a claims-related
legal matter. Net realized investment gains of $146 million pre-tax ($95
million after-tax) in the current period, compared to $33 million
pre-tax ($23 million after-tax) in the prior year period, were primarily
driven by gains on the sale of equity securities.
Underwriting results
-
The combined ratio of 98.7% increased 5.9 points due to higher
catastrophe losses (3.5 points), lower net favorable prior year
reserve development (1.2 points) and a higher underlying combined
ratio (1.2 points).
-
The underlying combined ratio of 92.7% increased 1.2 points, primarily
driven by a high level of non-catastrophe fire-related losses in
Business Insurance, the tenure impact of higher levels of new business
in personal auto, the timing of higher loss estimates in personal
automobile bodily injury liability coverages that were consistent with
the higher loss trends recognized in the latter part of 2016 and loss
cost trends that modestly exceeded earned pricing, partially offset by
a lower expense ratio.
-
Net favorable prior year reserve development occurred in all segments.
Catastrophe losses included the third quarter events described above,
as well as wind and hail storms in several regions of the United
States and a winter storm in the eastern United States in the first
quarter of 2017.
Net investment income of $1.796 billion pre-tax ($1.405 billion
after-tax) increased 7% driven by the same factors as discussed above
for the third quarter 2017.
Record net written premiums of $19.795 billion increased 5%, reflecting
growth in all segments.
Shareholders’ Equity
Shareholders’ equity of $23.738 billion increased 2% from year-end 2016.
Pre-tax net unrealized investment gains were $1.545 billion ($1.006
billion after-tax) compared to $1.112 billion pre-tax ($730 million
after-tax) at year-end 2016. Book value per share of $86.73 and adjusted
book value per share of $83.06 increased 4% and 3%, respectively, from
year-end 2016.
The Company repurchased 2.6 million shares during the third quarter at
an average price of $128.11 per share for a total cost of $328 million.
Capacity remaining under the existing share repurchase authorization was
$4.906 billion at the end of the quarter. At the end of third quarter
2017, statutory capital and surplus was $20.740 billion and the ratio of
debt-to-capital was 22.6%. The ratio of debt-to-capital excluding
after-tax net unrealized investment gains was 23.3%, within the
Company’s target range of 15% to 25%.
The Board of Directors today declared a quarterly dividend of $0.72 per
share. This dividend is payable on December 29, 2017, to shareholders of
record as of the close of business on December 11, 2017.
|
Business Insurance Segment Financial
Results |
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($ in millions and pre-tax, unless noted otherwise)
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| |
| | | | | Three Months Ended September 30, | | | | | | | Nine Months Ended September 30, | | |
| | | | | 2017 | | | | 2016 | | | | Change | | | | | | | 2017 | | | | | 2016 | | | | | Change | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gain/(loss): | | | | | $ | (364 | ) | | | | $ | 121 | | | | | $ | (485 | ) | | | | | | | $ | (148 | ) | | | | | $ | 383 | | | | | | $ | (531 | ) | | |
Underwriting gain/(loss) includes: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | | | | 9 | | | | | | 4 | | | | | | 5 | | | | | | | | | 195 | | | | | | | 203 | | | | | | | (8 | ) | | |
Catastrophes, net of reinsurance | | | | | | (489 | ) | | | | | (74 | ) | | | | | (415 | ) | | | | | | | | (805 | ) | | | | | | (389 | ) | | | | | | (416 | ) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | | | 437 | | | | | | 431 | | | | | | 6 | | | | | | | | | 1,337 | | | | | | | 1,234 | | | | | | | 103 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Other income/(expense) | | | | |
| (2 | ) | | | |
| 7 |
| | | |
| (9 | ) | | | | | | |
| 22 |
| | | | |
| 45 |
| | | | |
| (23 | ) | | |
Segment income before income taxes | | | | | | 71 | | | | | | 559 | | | | | | (488 | ) | | | | | | | | 1,211 | | | | | | | 1,662 | | | | | | | (451 | ) | | |
Income tax expense/(benefit) | | | | |
| (34 | ) | | | |
| 126 |
| | | |
| (160 | ) | | | | | | |
| 235 |
| | | | |
| 381 |
| | | | |
| (146 | ) | | |
Segment income | | | | | $ | 105 |
| | | | $ | 433 |
| | | | $ | (328 | ) | | | | | | | $ | 976 |
| | | | | $ | 1,281 |
| | | | | $ | (305 | ) | | |
|
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | | 109.8 | % | | | | | 96.1 | % | | | | | 13.7 | | | pts | | | | | | 101.0 | % | | | | | | 95.9 | % | | | | | | 5.1 | | | pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | | | | |
(0.3
|
)
| |
pts
| | |
(0.1
|
)
| |
pts
| | |
(0.2
|
)
| |
pts
| | | | | |
(1.9
|
)
| |
pts
| | | |
(2.0
|
)
| |
pts
| | | |
0.1
| | |
pts
|
Catastrophes, net of reinsurance
| | | | | |
13.7
| | |
pts
| | |
2.1
| | |
pts
| | |
11.6
| | |
pts
| | | | | |
7.7
| | |
pts
| | | |
3.8
| | |
pts
| | | |
3.9
| | |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | | | 96.4 | % | | | | | 94.1 | % | | | | | 2.3 | | | pts | | | | | | 95.2 | % | | | | | | 94.1 | % | | | | | | 1.1 | | | pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums by market | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Select Accounts
| | | | |
$
|
664
| | | | |
$
|
657
| | | | | |
1
| | |
%
| | | | |
$
|
2,139
| | | | | |
$
|
2,090
| | | | | | |
2
| | |
%
|
Middle Market
| | | | | |
1,896
| | | | | |
1,824
| | | | | |
4
| | | | | | | | |
5,893
| | | | | | |
5,628
| | | | | | |
5
| | | |
National Accounts
| | | | | |
244
| | | | | |
245
| | | | | |
-
| | | | | | | | |
751
| | | | | | |
799
| | | | | | |
(6
|
)
| | |
National Property and Other
| | | | |
|
428
|
| | | |
|
454
|
| | | | |
(6
|
)
| | | | | | |
|
1,310
|
| | | | |
|
1,385
|
| | | | | |
(5
|
)
| | |
Total Domestic
| | | | | |
3,232
| | | | | |
3,180
| | | | | |
2
| | | | | | | | |
10,093
| | | | | | |
9,902
| | | | | | |
2
| | | |
International
| | | | |
|
202
|
| | | |
|
208
|
| | | | |
(3
|
)
| | | | | | |
|
740
|
| | | | |
|
718
|
| | | | | |
3
| | | |
Total | | | | | $ | 3,434 |
| | | | $ | 3,388 |
| | | | | 1 | | | % | | | | | $ | 10,833 |
| | | | | $ | 10,620 |
| | | | | | 2 | | | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 2017 Results
(All
comparisons vs. third quarter 2016, unless noted otherwise)
Segment income for Business Insurance was $105 million after-tax, a
decrease of $328 million, primarily driven by significantly higher
catastrophe losses and a lower underlying underwriting gain. The
underlying underwriting gain declined primarily due to the impact of a
high level of fire-related losses.
Underwriting results
-
The combined ratio of 109.8% increased 13.7 points due to higher
catastrophe losses (11.6 points) and a higher underlying combined
ratio (2.3 points), partially offset by higher net favorable prior
year reserve development (0.2 points).
-
The underlying combined ratio of 96.4% increased 2.3 points, driven by
a high level of non-catastrophe fire-related losses and loss cost
trends that modestly exceeded earned pricing, partially offset by a
lower expense ratio.
-
Net favorable prior year reserve development primarily resulted from
better than expected loss experience in the segment’s domestic
operations in (i) the workers’ compensation product line for multiple
accident years and (ii) the general liability product line (excluding
the increase to asbestos reserves) for both primary and excess
coverages for accident years 2007 and prior as well as accident year
2016, largely offset by (iii) a $225 million increase to asbestos
reserves and (iv) the impact of higher than expected loss experience
in the commercial automobile product line for accident years 2013
through 2016.
-
The asbestos reserve strengthening, which resulted from the Company’s
annual in-depth asbestos claim review that was completed in the third
quarter, was driven by increases in the Company’s estimate for
projected settlement and defense costs related to a broad number of
policyholders. The increase in the estimate of projected settlement
and defense costs resulted from recent payment trends that continue to
be higher than previously anticipated. While the overall view of the
underlying asbestos environment is essentially unchanged from recent
periods, there remains a high degree of uncertainty with respect to
future exposure to asbestos claims.
Net written premiums of $3.434 billion increased 1% and benefited from
continued strong retention, improved renewal premium change and an
increase in new business.
Year-to-Date 2017 Results
(All
comparisons vs. year-to-date 2016, unless noted otherwise)
Segment income for Business Insurance was $976 million after-tax, a
decrease of $305 million, primarily driven by significantly higher
catastrophe losses and a lower underlying underwriting gain, partially
offset by higher net investment income. The current period benefited
from a $15 million resolution of prior year income tax matters, while
the prior year period benefited modestly from the favorable settlement
of a claims-related legal matter.
Underwriting results
-
The combined ratio of 101.0% increased 5.1 points due to higher
catastrophe losses (3.9 points), a higher underlying combined ratio
(1.1 points) and lower net favorable prior year reserve development
(0.1 points).
-
The underlying combined ratio of 95.2% increased 1.1 points, driven by
a high level of non-catastrophe fire-related losses and the impact of
loss cost trends that modestly exceeded earned pricing, partially
offset by a lower expense ratio.
-
Net favorable prior year reserve development primarily resulted from
net favorable prior year reserve development in the segment’s domestic
operations due to better than expected loss experience in (i) the
workers’ compensation product line for multiple accident years, (ii)
the general liability product line (excluding an increase to asbestos
and environmental reserves) for both primary and excess coverages for
multiple accident years and (iii) the commercial multi-peril product
line for liability coverages for multiple accident years, partially
offset by (iv) a $225 million increase to asbestos reserves, (v) a $65
million increase to environmental reserves and (vi) the impact of
higher than expected loss experience in the commercial automobile
product line for accident years 2013 through 2016. The net favorable
prior year reserve development in the segment’s domestic operations
was partially offset by net unfavorable prior year reserve development
in the segment’s international operations in Europe due to the UK
Ministry of Justice’s “Ogden” discount rate adjustment applied to lump
sum bodily injury payouts.
Other income in the prior year period included proceeds from the
favorable settlement of a claims-related legal matter.
Net written premiums of $10.833 billion increased 2% and benefited from
strong retention and improved renewal premium change.
|
Bond & Specialty Insurance Segment
Financial Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions and pre-tax, unless noted otherwise)
|
|
|
|
| |
| |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
| |
| | | | | Three Months Ended September 30, | | | | | Nine Months Ended September 30, | | |
| | | | | 2017 | | | | 2016 | | | | Change | | | | | 2017 | | | | 2016 | | | | Change | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gain: | | | | | $ | 129 | | | | | $ | 166 | | | | | $ | (37 | ) | | | | | $ | 418 | | | | | $ | 583 | | | | | $ | (165 | ) | | |
Underwriting gain includes: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development | | | | | | 6 | | | | | | 46 | | | | | | (40 | ) | | | | | | 98 | | | | | | 271 | | | | | | (173 | ) | | |
Catastrophes, net of reinsurance | | | | | | (6 | ) | | | | | (1 | ) | | | | | (5 | ) | | | | | | (8 | ) | | | | | (5 | ) | | | | | (3 | ) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | | | 57 | | | | | | 59 | | | | | | (2 | ) | | | | | | 174 | | | | | | 177 | | | | | | (3 | ) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Other income | | | | |
| 5 |
| | | |
| 5 |
| | | |
| - |
| | | | |
| 16 |
| | | |
| 14 |
| | | |
| 2 |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Segment income before income taxes | | | | | | 191 | | | | | | 230 | | | | | | (39 | ) | | | | | | 608 | | | | | | 774 | | | | | | (166 | ) | | |
Income tax expense | | | | |
| 55 |
| | | |
| 65 |
| | | |
| (10 | ) | | | | |
| 164 |
| | | |
| 234 |
| | | |
| (70 | ) | | |
Segment income | | | | | $ | 136 |
| | | | $ | 165 |
| | | | $ | (29 | ) | | | | | $ | 444 |
| | | | $ | 540 |
| | | | $ | (96 | ) | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | | 77.7 | | | % | | | 70.6 | | | % | | | 7.1 | | | pts | | | | 75.3 | | | % | | | 65.0 | | | % | | | 10.3 | | | pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net favorable prior year reserve development
| | | | | |
(0.9
|
)
| |
pts
| | |
(8.1
|
)
| |
pts
| | |
7.2
| | |
pts
| | | |
(5.7
|
)
| |
pts
| | |
(16.1
|
)
| |
pts
| | |
10.4
| | |
pts
|
Catastrophes, net of reinsurance
| | | | | |
0.9
| | |
pts
| | |
0.2
| | |
pts
| | |
0.7
| | |
pts
| | | |
0.5
| | |
pts
| | |
0.3
| | |
pts
| | |
0.2
| | |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | | | 77.7 | | | % | | | 78.5 | | | % | | | (0.8 | ) | | pts | | | | 80.5 | | | % | | | 80.8 | | | % | | | (0.3 | ) | | pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Liability
| | | | |
$
|
359
| | | | |
$
|
354
| | | | | |
1
| | |
%
| | |
$
|
1,030
| | | | |
$
|
1,010
| | | | | |
2
| | |
%
|
Surety
| | | | |
|
212
|
| | | |
|
212
|
| | | | |
-
| | | | | |
|
597
|
| | | |
|
584
|
| | | | |
2
| | | |
Total Domestic
| | | | | |
571
| | | | | |
566
| | | | | |
1
| | | | | | |
1,627
| | | | | |
1,594
| | | | | |
2
| | | |
International
| | | | |
|
40
|
| | | |
|
34
|
| | | | |
18
| | | | | |
|
126
|
| | | |
|
98
|
| | | | |
29
| | | |
Total | | | | | $ | 611 |
| | | | $ | 600 |
| | | | | 2 | | | % | | | $ | 1,753 |
| | | | $ | 1,692 |
| | | | | 4 | | | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Third Quarter 2017 Results
(All
comparisons vs. third quarter 2016, unless noted otherwise)
Segment income for Bond & Specialty Insurance was $136 million
after-tax, a decrease of $29 million, due to lower net favorable prior
year reserve development.
Underwriting results
-
The combined ratio of 77.7% increased 7.1 points due to lower net
favorable prior year reserve development (7.2 points) and higher
catastrophe losses (0.7 points), partially offset by a lower
underlying combined ratio (0.8 points).
-
The underlying combined ratio remained very strong at 77.7%.
Net written premiums of $611 million grew 2% from the prior year quarter
and benefited from record retention and positive renewal premium change.
Year-to-Date 2017 Results
(All
comparisons vs. year-to-date 2016, unless noted otherwise)
Segment income for Bond & Specialty Insurance was $444 million
after-tax, a decrease of $96 million, due to lower net favorable prior
year reserve development, partially offset by the current period benefit
from a $17 million resolution of prior year income tax matters.
Underwriting results
-
The combined ratio of 75.3% increased 10.3 points due to lower net
favorable prior year reserve development (10.4 points) and higher
catastrophe losses (0.2 points), partially offset by a lower
underlying combined ratio (0.3 points).
-
The underlying combined ratio remained very strong at 80.5%.
-
Net favorable prior year reserve development resulted from better than
expected loss experience in the segment’s domestic operations in the
general liability product line for accident years 2012, 2014 and 2015.
Net written premiums of $1.753 billion grew 4% from the prior year
period and benefited from the same factors as discussed above for third
quarter 2017.
|
Personal Insurance Segment Financial
Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions and pre-tax, unless noted otherwise)
|
|
|
|
| |
| |
| |
| |
| |
| |
|
|
|
| |
| |
| |
| |
| |
| |
| | | | | Three Months Ended September 30, | | | | | | | Nine Months Ended September 30, | | |
| | | | | 2017 | | | | 2016 | | | | Change | | | | | | | 2017 | | | | 2016 | | | | Change | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underwriting gain/(loss): | | | | | $ | (11 | ) | | |
| $ | 121 | | | | | $ | (132 | ) | | | | | | | $ | (132 | ) | | | | $ | 258 | | | | | $ | (390 | ) | | |
Underwriting gain/(loss) includes: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net favorable/(unfavorable) prior year reserve development | | | | | | - | | | | | | (11 | ) | | | | | 11 | | | | | | | | | 6 | | | | | | 33 | | | | | | (27 | ) | | |
Catastrophes, net of reinsurance | | | | | | (205 | ) | | | | | (14 | ) | | | | | (191 | ) | | | | | | | | (637 | ) | | | | | (346 | ) | | | | | (291 | ) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net investment income | | | | | | 94 | | | | | | 92 | | | | | | 2 | | | | | | | | | 285 | | | | | | 264 | | | | | | 21 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Other income | | | | |
| 14 |
| | | |
| 16 |
| | | |
| (2 | ) | | | | | | |
| 45 |
| | | |
| 47 |
| | | |
| (2 | ) | | |
Segment income before income taxes | | | | | | 97 | | | | | | 229 | | | | | | (132 | ) | | | | | | | | 198 | | | | | | 569 | | | | | | (371 | ) | | |
Income tax expense | | | | |
| 20 |
| | | |
| 66 |
| | | |
| (46 | ) | | | | | | |
| 20 |
| | | |
| 159 |
| | | |
| (139 | ) | | |
Segment income | | | | | $ | 77 |
| | | | $ | 163 |
| | | | $ | (86 | ) | | | | | | | $ | 178 |
| | | | $ | 410 |
| | | | $ | (232 | ) | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Combined ratio | | | | | | 99.7 | | | % | | | 93.5 | | | % | | | 6.2 | | | pts | | | | | | 101.1 | | | % | | | 95.0 | | | % | | | 6.1 | | | pts |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Impact on combined ratio | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (favorable)/unfavorable prior year reserve development
| | | | | |
-
| | |
pts
| | |
0.5
| | |
pts
| | |
(0.5
|
)
| |
pts
| | | | | |
(0.1
|
)
| |
pts
| | |
(0.5
|
)
| |
pts
| | |
0.4
| | |
pts
|
Catastrophes, net of reinsurance
| | | | | |
8.7
| | |
pts
| | |
0.6
| | |
pts
| | |
8.1
| | |
pts
| | | | | |
9.3
| | |
pts
| | |
5.5
| | |
pts
| | |
3.8
| | |
pts
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Underlying combined ratio | | | | | | 91.0 | | | % | | | 92.4 | | | % | | | (1.4 | ) | | pts | | | | | | 91.9 | | | % | | | 90.0 | | | % | | | 1.9 | | | pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Net written premiums | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Agency 1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Automobile
| | | | |
$
|
1,228
| | | | |
$
|
1,095
| | | | | |
12
| | |
%
| | | | |
$
|
3,474
| | | | |
$
|
3,045
| | | | | |
14
| | |
%
|
Homeowners & Other
| | | | |
|
1,107
|
| | | |
|
1,058
|
| | | | |
5
| | | | | | | |
|
2,978
|
| | | |
|
2,854
|
| | | | |
4
| | | |
Total Agency
| | | | | |
2,335
| | | | | |
2,153
| | | | | |
8
| | | | | | | | |
6,452
| | | | | |
5,899
| | | | | |
9
| | | |
Direct to Consumer
| | | | |
|
100
|
| | | |
|
87
|
| | | | |
15
| | | | | | | |
|
271
|
| | | |
|
230
|
| | | | |
18
| | | |
Total Domestic
| | | | | |
2,435
| | | | | |
2,240
| | | | | |
9
| | | | | | | | |
6,723
| | | | | |
6,129
| | | | | |
10
| | | |
International
| | | | |
|
180
|
| | | |
|
161
|
| | | | |
12
| | | | | | | |
|
486
|
| | | |
|
459
|
| | | | |
6
| | | |
Total | | | | | $ | 2,615 |
| | | | $ | 2,401 |
| | | | | 9 | | | % | | | | | $ | 7,209 |
| | | | $ | 6,588 |
| | | | | 9 | | | % |
1 Represents business sold through agents, brokers and
other intermediaries, and excludes direct to consumer.
|
|
Third Quarter 2017 Results
(All
comparisons vs. third quarter 2016, unless noted otherwise)
Segment income for Personal Insurance of $77 million after-tax decreased
$86 million due to significantly higher catastrophe losses, partially
offset by a higher underlying underwriting gain.
Underwriting results
-
The combined ratio of 99.7% increased 6.2 points due to higher
catastrophe losses (8.1 points), partially offset by a lower
underlying combined ratio (1.4 points) and no net prior year reserve
development compared to net unfavorable prior year reserve development
in the prior year quarter (0.5 points).
-
The underlying combined ratio of 91.0% improved 1.4 points, primarily
driven by a lower expense ratio.
Net written premiums of $2.615 billion increased 9%. Agency Automobile
net written premiums grew 12%, including renewal premium change of 9.5%.
Agency Homeowners & Other net written premiums grew 5% and benefited
from policies in force growth of 5% year-over-year and positive renewal
premium change.
Year-to-Date 2017 Results
(All
comparisons vs. year-to-date 2016, unless noted otherwise)
Segment income for Personal Insurance was $178 million after-tax, a
decrease of $232 million, primarily driven by significantly higher
catastrophe losses, a lower underlying underwriting gain and lower net
prior year reserve development, partially offset by higher net
investment income. The current period benefited from a $7 million
resolution of prior year income tax matters.
Underwriting results
-
The combined ratio of 101.1% increased 6.1 points due to higher
catastrophe losses (3.8 points), a higher underlying combined ratio
(1.9 points) and lower net favorable prior year reserve development
(0.4 points).
-
The underlying combined ratio of 91.9% increased 1.9 points, primarily
driven by normal variability in non-catastrophe weather-related
losses, the tenure impact of higher levels of new business in auto and
the timing impact of higher loss estimates in auto bodily injury
liability coverages that were consistent with the higher loss trends
we recognized in the latter part of 2016, partially offset by a lower
expense ratio.
Net written premiums of $7.209 billion increased 9%, benefiting from the
same drivers as described above for the third quarter 2017.
Financial Supplement and Conference Call
The information in this press release should be read in conjunction with
a financial supplement that is available on our website at www.travelers.com.
Travelers management will discuss the contents of this release and other
relevant topics via webcast at 9 a.m. Eastern (8 a.m. Central) on
Thursday, October 19, 2017. Investors can access the call via webcast at http://investor.travelers.com
or by dialing 1-800-926-4951 within the U.S. and 1-212-231-2939 outside
the U.S. Prior to the webcast, a slide presentation pertaining to the
quarterly earnings will be available on the Company’s website.
Following the live event, an audio playback of the webcast and the slide
presentation will be available on the same website. An audio playback
can also be accessed by phone at 1-800-633-8284 within the U.S. and
1-402-977-9140 outside the U.S. (use reservation 21858140 for both the
U.S. and international calls).
About Travelers
The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of
property casualty insurance for auto,
home
and business.
A component of the Dow Jones Industrial Average, Travelers has
approximately 30,000 employees and generated revenues of approximately
$28 billion in 2016. For more information, visit www.travelers.com.
Travelers may use its website and/or social media outlets, such as
Facebook and Twitter, as distribution channels of material Company
information. Financial and other important information regarding the
Company is routinely accessible through and posted on our website at http://investor.travelers.com,
our Facebook page at https://www.facebook.com/travelers
and our Twitter account (@Travelers) at https://twitter.com/travelers.
In addition, you may automatically receive email alerts and other
information about Travelers when you enroll your email address by
visiting the Email Notifications section at http://investor.travelers.com.
Travelers is organized into the following reportable business
segments:
Effective April 1, 2017, the Company’s results are reported in the
following three business segments – Business Insurance, Bond & Specialty
Insurance and Personal Insurance, reflecting a change in the manner in
which the Company’s businesses were being managed as of that date, as
well as the aggregation of products and services based on the type of
customer, how the business is marketed and the manner in which risks are
underwritten. While the segmentation of the Company’s domestic
businesses was unchanged, the Company’s international businesses, which
were previously managed and reported in total within the Business and
International Insurance segment, were disaggregated by product type
among the three newly aligned reportable business segments. All prior
periods presented have been reclassified to conform to this
presentation. In connection with these changes, the Company revised the
names and descriptions of certain businesses comprising the Company’s
segments and has reflected other related changes.
Business Insurance – Business Insurance offers a broad array of
property and casualty insurance and insurance related services to its
customers, primarily in the United States, as well as in Canada, the
United Kingdom, the Republic of Ireland, Brazil and throughout other
parts of the world as a corporate member of Lloyd’s.
Bond & Specialty Insurance – Bond & Specialty Insurance
provides surety, fidelity, management liability, professional liability,
and other property and casualty coverages and related risk management
services to its customers in the United States and certain specialty
insurance products in Canada, the United Kingdom, the Republic of
Ireland and Brazil, utilizing various degrees of financially-based
underwriting approaches.
Personal Insurance – Personal Insurance writes a broad range of
property and casualty insurance covering individuals’ personal risks,
primarily in the United States, as well as in Canada. The primary
products of automobile and homeowners insurance are complemented by a
broad suite of related coverages.
* * * * *
Forward-Looking Statements
This press release contains, and management may make, certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other than
statements of historical facts, may be forward-looking statements. Words
such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,”
“intends,” “plans,” “projects,” “believes,” “estimates” and similar
expressions are used to identify these forward-looking statements. These
statements include, among other things, the Company’s statements about:
-
the Company’s outlook and its future results of operations and
financial condition (including, among other things, anticipated
premium volume, premium rates, margins, net and core income,
investment income and performance, loss costs, return on equity, core
return on equity and expected current returns and combined ratios);
-
share repurchase plans;
-
future pension plan contributions;
-
the sufficiency of the Company’s asbestos and other reserves;
-
the impact of emerging claims issues as well as other insurance and
non-insurance litigation;
-
the cost and availability of reinsurance coverage;
-
catastrophe losses (including recent California wildfires);
-
the impact of investment, economic (including inflation, potential
changes in tax law and rapid changes in commodity prices, as well as
fluctuations in foreign currency exchange rates) and underwriting
market conditions;
-
strategic initiatives to improve profitability and competitiveness; and
-
the impact of the Company’s acquisition of Simply Business.
The Company cautions investors that such statements are subject to risks
and uncertainties, many of which are difficult to predict and generally
beyond the Company’s control, that could cause actual results to differ
materially from those expressed in, or implied or projected by, the
forward-looking information and statements.
Some of the factors that could cause actual results to differ include,
but are not limited to, the following:
-
catastrophe losses, including those discussed above, could materially
and adversely affect the Company’s results of operations, its
financial position and/or liquidity, and could adversely impact the
Company’s ratings, the Company’s ability to raise capital and the
availability and cost of reinsurance;
-
if actual claims exceed the Company’s claims and claim adjustment
expense reserves, or if changes in the estimated level of claims and
claim adjustment expense reserves are necessary, including as a result
of, among other things, changes in the legal, regulatory and economic
environments in which the Company operates, the Company’s financial
results could be materially and adversely affected;
-
during or following a period of financial market disruption or an
economic downturn, the Company’s business could be materially and
adversely affected;
-
the Company’s investment portfolio is subject to credit risk, and may
suffer material realized or unrealized losses. The Company’s
investment portfolio may also suffer reduced or low returns,
particularly if interest rates remain at historically low levels for a
prolonged period of time or decline further as a result of actions
taken by central banks (a risk which potentially could be increased
by, among other things, the United Kingdom’s withdrawal from the
European Union);
-
the Company’s business could be harmed because of its potential
exposure to asbestos and environmental claims and related litigation;
-
the intense competition that the Company faces, and the impact of
innovation, technological change and changing customer preferences on
the insurance industry and the markets in which it operates, could
harm its ability to maintain or increase its business volumes and its
profitability;
-
disruptions to the Company’s relationships with its independent agents
and brokers or the Company’s inability to manage effectively a
changing distribution landscape could adversely affect the Company;
-
the Company is exposed to, and may face adverse developments
involving, mass tort claims such as those relating to exposure to
potentially harmful products or substances;
-
the effects of emerging claim and coverage issues on the Company’s
business are uncertain;
-
the Company may not be able to collect all amounts due to it from
reinsurers, reinsurance coverage may not be available to the Company
in the future at commercially reasonable rates or at all and we are
exposed to credit risk related to our structured settlements;
-
the Company is also exposed to credit risk in certain of its insurance
operations and with respect to certain guarantee or indemnification
arrangements that we have with third parties;
-
within the United States, the Company’s businesses are heavily
regulated by the states in which it conducts business, including
licensing and supervision, and changes in regulation may reduce the
Company’s profitability and limit its growth;
-
a downgrade in the Company’s claims-paying and financial strength
ratings could adversely impact the Company’s business volumes,
adversely impact the Company’s ability to access the capital markets
and increase the Company’s borrowing costs;
-
the inability of the Company’s insurance subsidiaries to pay dividends
to the Company’s holding company in sufficient amounts would harm the
Company’s ability to meet its obligations, pay future shareholder
dividends or make future share repurchases;
-
the Company’s efforts to develop new products or expand in targeted
markets may not be successful and may create enhanced risks;
-
the Company may be adversely affected if its pricing and capital
models provide materially different indications than actual results;
-
the Company’s business success and profitability depend, in part, on
effective information technology systems and on continuing to develop
and implement improvements in technology;
-
if the Company experiences difficulties with technology, data and
network security (including as a result of cyber attacks), outsourcing
relationships, or cloud-based technology, the Company’s ability to
conduct its business could be negatively impacted;
-
changes in U.S. tax laws or in the tax laws of other jurisdictions in
which the Company operates could adversely impact the Company;
-
the Company is also subject to a number of additional risks associated
with its business outside the United States, including foreign
currency exchange fluctuations and restrictive regulations, as well as
the risks and uncertainties associated with the United Kingdom’s
withdrawal from the European Union;
-
regulatory changes outside of the United States, including in Canada
and the European Union, could adversely impact the Company’s results
of operations and limit its growth;
-
loss of or significant restrictions on the use of particular types of
underwriting criteria, such as credit scoring, or other data or
methodologies, in the pricing and underwriting of the Company’s
products could reduce the Company’s future profitability;
-
acquisitions and integration of acquired businesses may result in
operating difficulties and other unintended consequences;
-
the Company could be adversely affected if its controls designed to
ensure compliance with guidelines, policies and legal and regulatory
standards are not effective;
-
the Company’s businesses may be adversely affected if it is unable to
hire and retain qualified employees;
-
intellectual property is important to the Company’s business, and the
Company may be unable to protect and enforce its own intellectual
property or the Company may be subject to claims for infringing the
intellectual property of others;
-
changes in federal regulation could impose significant burdens on the
Company and otherwise adversely impact the Company’s results;
-
changes to existing U.S. accounting standards may adversely impact the
Company’s reported results; and
-
the Company’s share repurchase plans depend on a variety of factors,
including the Company’s financial position, earnings, share price,
catastrophe losses, maintaining capital levels commensurate with the
Company’s desired ratings from independent rating agencies, funding of
the Company’s qualified pension plan, capital requirements of the
Company’s operating subsidiaries, legal requirements, regulatory
constraints, other investment opportunities (including mergers and
acquisitions and related financings), market conditions and other
factors.
Our forward-looking statements speak only as of the date of this press
release or as of the date they are made, and we undertake no obligation
to update forward-looking statements. For a more detailed discussion of
these factors, see the information under the captions “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in our most recent annual report on Form 10-K filed with
the Securities and Exchange Commission (SEC) on February 16, 2017, as
updated by our periodic filings with the SEC.
*****
GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF GAAP MEASURES
TO NON-GAAP MEASURES
The following measures are used by the Company’s management to evaluate
financial performance against historical results and establish targets
on a consolidated basis. In some cases, these measures are considered
non-GAAP financial measures under applicable SEC rules because they are
not displayed as separate line items in the consolidated financial
statements or are not required to be disclosed in the notes to financial
statements or, in some cases, include or exclude certain items not
ordinarily included or excluded in the most comparable GAAP financial
measure. Reconciliations of these measures to the most comparable GAAP
measures also follow.
In the opinion of the Company’s management, a discussion of these
measures provides investors, financial analysts, rating agencies and
other financial statement users with a better understanding of the
significant factors that comprise the Company’s periodic results of
operations and how management evaluates the Company’s financial
performance. Internally, the Company’s management uses these measures to
evaluate performance against historical results, to establish financial
targets on a consolidated basis and for other reasons, which are
discussed below.
Some of these measures exclude net realized investment gains (losses),
net of tax, and/or net unrealized investment gains (losses), net of tax,
which can be significantly impacted by both discretionary and other
economic factors and are not necessarily indicative of operating trends.
Other companies may calculate these measures differently, and,
therefore, their measures may not be comparable to those used by the
Company’s management.
RECONCILIATION OF NET INCOME TO CORE INCOME AND CERTAIN OTHER
NON-GAAP MEASURES
Core income (loss) is net income (loss) excluding the after-tax
impact of net realized investment gains (losses), discontinued
operations and cumulative effect of changes in accounting principles
when applicable. Segment income (loss) is comparable to core
income (loss) on a segment basis. Management uses segment income (loss)
to analyze each segment’s performance and as a tool in making business
decisions. Financial statement users also consider core income when
analyzing the results and trends of insurance companies. Core income
(loss) per share is core income (loss) on a per common share basis.
|
Reconciliation of Net Income to Core Income less Preferred
Dividends |
|
|
|
|
| | |
| |
|
|
| | |
| |
| | | | | Three Months Ended | | | | Nine Months Ended |
| | | | | September 30, | | | | September 30, |
($ in millions, after-tax)
|
|
|
|
| 2017 |
| 2016 |
|
|
| 2017 |
| 2016 |
| | | | | | | | | | | | | | |
|
Net income | | | | | $ | 293 | | | $ | 716 | | | | $ | 1,505 | | | $ | 2,071 |
Less: Net realized investment gains
|
|
|
|
|
|
40
|
|
|
|
15
|
|
|
|
|
95
|
|
|
|
23
|
Core income |
|
|
|
| $ | 253 |
|
| $ | 701 |
|
|
| $ | 1,410 |
|
| $ | 2,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | |
|
| | | | | Three Months Ended | | | | Nine Months Ended |
| | | | | September 30, | | | | September 30, |
($ in millions, pre-tax)
|
|
|
|
| 2017 |
| 2016 |
|
|
| 2017 |
| 2016 |
| | | | | | | | | | | | | | |
|
Net income | | | | | $ | 320 | | | $ | 947 | | | | $ | 1,870 | | | $ | 2,751 |
Less: Net realized investment gains
|
|
|
|
|
|
61
|
|
|
|
23
|
|
|
|
|
146
|
|
|
|
33
|
Core income |
|
|
|
| $ | 259 |
|
| $ | 924 |
|
|
| $ | 1,724 |
|
| $ | 2,718 |
| | | | | | | | | | | | | | | | | | |
|
|
|
|
|
|
|
| Twelve Months Ended December 31, |
($ in millions, after-tax)
|
|
|
| 2016 |
|
|
| 2015 |
|
|
| 2014 |
|
|
| 2013 |
|
|
| 2012 |
|
|
| 2011 |
|
|
| 2010 |
|
|
| 2009 |
|
|
| 2008 |
|
|
|
| 2007 |
|
|
| 2006 |
|
| 2005 |
|
| | | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
Net income | | | $ | 3,014 | | | $ | 3,439 | | | $ | 3,692 | | | $ | 3,673 | | | $ | 2,473 | | | $ | 1,426 | | | $ | 3,216 | | | $ | 3,622 | | | $ | 2,924 | | | | $ | 4,601 | | | $ | 4,208 | | $ | 1,622 | |
Less: Loss from discontinued operations
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
(439
|
)
|
Income from continuing operations | | | | 3,014 | | | | 3,439 | | | | 3,692 | | | | 3,673 | | | | 2,473 | | | | 1,426 | | | | 3,216 | | | | 3,622 | | | | 2,924 | | | | | 4,601 | | | | 4,208 | | | 2,061 | |
Less: Net realized investment gains/(losses)
|
|
|
|
47
|
|
|
|
2
|
|
|
|
51
|
|
|
|
106
|
|
|
|
32
|
|
|
|
36
|
|
|
|
173
|
|
|
|
22
|
|
|
|
(271
|
)
|
|
|
|
101
|
|
|
|
8
|
|
|
35
|
|
Core income | | | | 2,967 | | | | 3,437 | | | | 3,641 | | | | 3,567 | | | | 2,441 | | | | 1,390 | | | | 3,043 | | | | 3,600 | | | | 3,195 | | | | | 4,500 | | | | 4,200 | | | 2,026 | |
Less: Preferred dividends
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
3
|
|
|
|
3
|
|
|
|
4
|
|
|
|
|
4
|
|
|
|
5
|
|
|
6
|
|
Core income, less preferred dividends |
|
| $ | 2,967 |
|
| $ | 3,437 |
|
| $ | 3,641 |
|
| $ | 3,567 |
|
| $ | 2,441 |
|
| $ | 1,389 |
|
| $ | 3,040 |
|
| $ | 3,597 |
|
| $ | 3,191 |
|
|
| $ | 4,496 |
|
| $ | 4,195 |
| $ | 2,020 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
|
|
| |
|
|
| |
Reconciliation of Net Income per Share to Core Income per Share
on a Basic and Diluted Basis |
| | | | | | | |
|
| | | | Three Months Ended | | | | Nine Months Ended |
| | | | September 30, | | | | September 30, |
|
|
|
| 2017 |
| 2016 |
|
|
| 2017 |
| 2016 |
| | | | | |
| | | | | | |
| |
Basic income per share | | | | | | | | | | | | | | |
Net income | | | | $ | 1.06 | | | $ | 2.48 | | | | $ | 5.39 | | | $ | 7.09 |
Less: Net realized investment gains
|
|
|
|
|
0.14
|
|
|
|
0.05
|
|
|
|
|
0.34
|
|
|
|
0.08
|
Core income |
|
|
| $ | 0.92 |
|
| $ | 2.43 |
|
|
| $ | 5.05 |
|
| $ | 7.01 |
| | | | | | | | | | | | | |
|
Diluted income per share | | | | | | | | | | | | | | |
Net income | | | | $ | 1.05 | | | $ | 2.45 | | | | $ | 5.34 | | | $ | 7.00 |
Less: Net realized investment gains
|
|
|
|
|
0.14
|
|
|
|
0.05
|
|
|
|
|
0.33
|
|
|
|
0.08
|
Core income |
|
|
| $ | 0.91 |
|
| $ | 2.40 |
|
|
| $ | 5.01 |
|
| $ | 6.92 |
| | | | | | | | | | | | | | | | | |
|
|
Reconciliation of Segment Income to Total Core Income |
|
|
|
| |
|
|
| |
| | | | Three Months Ended | | | | Nine Months Ended |
| | | | September 30, |
| | | September 30, |
($ in millions, after-tax)
|
|
|
| 2017 |
| 2016 |
|
|
| 2017 |
| 2016 |
| | | | |
| | | | | |
| |
| | | | | | | | | | | |
|
Business Insurance
| | | |
$
|
105
| | |
$
|
433
| | | | |
$
|
976
| | |
$
|
1,281
| |
Bond & Specialty Insurance
| | | | |
136
| | | |
165
| | | | | |
444
| | | |
540
| |
Personal Insurance
|
|
|
|
|
77
|
|
|
|
163
|
|
|
|
|
|
178
|
|
|
|
410
|
|
Total segment income
| | | | |
318
| | | |
761
| | | | | |
1,598
| | | |
2,231
| |
Interest Expense and Other
|
|
|
|
|
(65
|
)
|
|
|
(60
|
)
|
|
|
|
|
(188
|
)
|
|
|
(183
|
)
|
Total core income |
|
|
| $ | 253 |
|
| $ | 701 |
|
|
|
| $ | 1,410 |
|
| $ | 2,048 |
|
| | | | | | | | | | | | | | | | | | | |
|
RECONCILIATION OF SHAREHOLDERS’ EQUITY TO ADJUSTED SHAREHOLDERS’
EQUITY AND CALCULATION OF RETURN ON EQUITY AND CORE RETURN ON EQUITY
Adjusted shareholders’ equity is shareholders’ equity excluding
net unrealized investment gains (losses), net of tax, net realized
investment gains (losses), net of tax, for the period presented,
preferred stock and discontinued operations.
|
|
Reconciliation of Shareholders’ Equity to Adjusted
Shareholders’ Equity |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| | | | | | | | | | | | | | | | | As of September 30, | | | | | | | | | | | | | | | | | |
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
|
|
| 2016 |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
Shareholders' equity | | | | | | | | | | | | | | | $ | 23,738 | | | $ | 24,439 | | | | | | | | | | | | | | | | | | |
Less:
| |
Net unrealized investment gains, net of tax
| | | | | | | | | | | | | | | |
1,006
| | | |
2,049
| | | | | | | | | | | | | | | | | | |
|
|
Net realized investment gains, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
|
|
|
|
23
|
| | | | | | | | | | | | | | | | | |
Adjusted shareholders' equity | | | | | | | | | | | | | | | $ | 22,637 | | | $ | 22,367 | | | | | | | | | | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | As of December 31, |
($ in millions)
|
|
|
| 2016 |
|
|
| 2015 |
|
|
| 2014 |
|
|
| 2013 |
|
|
| 2012 |
|
|
| 2011 |
|
|
| 2010 |
|
|
| 2009 |
|
|
| 2008 |
|
|
|
| 2007 |
|
|
| 2006 |
|
|
| 2005 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Shareholders' equity | | | $ | 23,221 | | | $ | 23,598 | | | $ | 24,836 | | | $ | 24,796 | | | $ | 25,405 | | | $ | 24,477 | | | $ | 25,475 | | | $ | 27,415 | | | $ | 25,319 | | | | $ | 26,616 | | | $ | 25,135 | | | $ | 22,303 | |
Less:
| |
Net unrealized investment gains (losses), net of tax
| | | |
730
| | | |
1,289
| | | |
1,966
| | | |
1,322
| | | |
3,103
| | | |
2,871
| | | |
1,859
| | | |
1,856
| | | |
(146
|
)
| | | |
620
| | | |
453
| | | |
327
| |
| |
Net realized investment gains (losses), net of tax
| | | |
47
| | | |
2
| | | |
51
| | | |
106
| | | |
32
| | | |
36
| | | |
173
| | | |
22
| | | |
(271
|
)
| | | |
101
| | | |
8
| | | |
35
| |
| |
Preferred stock
| | | |
-
| | | |
-
| | | |
-
| | | |
-
| | | |
-
| | | |
-
| | | |
68
| | | |
79
| | | |
89
| | | | |
112
| | | |
129
| | | |
153
| |
|
|
Loss from discontinued operations
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(439
|
)
|
Adjusted shareholders' equity |
|
| $ | 22,444 |
|
| $ | 22,307 |
|
| $ | 22,819 |
|
| $ | 23,368 |
|
| $ | 22,270 |
|
| $ | 21,570 |
|
| $ | 23,375 |
|
| $ | 25,458 |
|
| $ | 25,647 |
|
|
| $ | 25,783 |
|
| $ | 24,545 |
|
| $ | 22,227 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Return on equity is the ratio of annualized net income less
preferred dividends to average shareholders’ equity for the periods
presented. Core return on equity is the ratio of annualized core
income less preferred dividends to adjusted average shareholders’ equity
for the periods presented. In the opinion of the Company’s management,
these are important indicators of how well management creates value for
its shareholders through its operating activities and its capital
management.
Average shareholders’ equity is (a) the sum of total
shareholders’ equity excluding preferred stock at the beginning and end
of each of the quarters for the period presented divided by (b) the
number of quarters in the period presented times two.
Adjusted average shareholders’ equity is (a) the sum of adjusted
shareholders’ equity at the beginning and end of each of the quarters
for the period presented divided by (b) the number of quarters in the
period presented times two.
|
|
|
|
| |
|
|
| |
Calculation of Return on Equity and Core Return on Equity |
|
|
|
|
|
|
|
|
|
| | | | | Three Months Ended | | | | Nine Months Ended |
| | | | | September 30, | | | | September 30, |
($ in millions, after-tax)
|
|
|
|
| 2017 |
|
| 2016 |
|
|
| 2017 |
|
| 2016 |
| | | | | |
|
| | | | | |
|
| |
Annualized net income
| | | | |
$
|
1,172
| | | |
$
|
2,863
| | | | |
$
|
2,007
| | | |
$
|
2,761
| |
Average shareholders' equity
|
|
|
|
|
|
23,798
|
|
|
|
|
24,576
|
|
|
|
|
|
23,650
|
|
|
|
|
24,300
|
|
Return on equity |
|
|
|
|
| 4.9 | % |
|
|
| 11.6 | % |
|
|
|
| 8.5 | % |
|
|
| 11.4 | % |
| | | | | | | | | | | | | | |
|
Annualized core income
| | | | |
$
|
1,015
| | | |
$
|
2,802
| | | | |
$
|
1,880
| | | |
$
|
2,730
| |
Adjusted average shareholders' equity
|
|
|
|
|
|
22,758
|
|
|
|
|
22,373
|
|
|
|
|
|
22,725
|
|
|
|
|
22,373
|
|
Core return on equity |
|
|
|
|
| 4.5 | % |
|
|
| 12.5 | % |
|
|
|
| 8.3 | % |
|
|
| 12.2 | % |
| | | | | | | | | | | | | | | | | | | | | | |
|
Average annual core return on equity over a period is the ratio
of:
a) the sum of core income less preferred dividends for the
periods presented to
b) the sum of: 1) the sum of the adjusted
average shareholders’ equity for all full years in the period presented,
and 2) for partial years in the period presented, the number of quarters
in that partial year divided by four, multiplied by the adjusted average
shareholders’ equity of the partial year.
|
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Calculation of Average Annual Core Return on Equity from
January 1, 2005 through September 30, 2017 |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, | | | | Twelve Months Ended December 31, |
($ in millions)
|
|
|
| 2017 |
|
|
|
| 2016 |
| | | |
| 2016 |
|
|
|
| 2015 |
|
|
|
| 2014 |
|
|
|
| 2013 |
|
|
|
| 2012 |
|
|
|
| 2011 |
|
|
|
| 2010 |
|
|
|
| 2009 |
|
|
|
| 2008 |
|
|
|
| 2007 |
|
|
|
| 2006 |
|
|
|
| 2005 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Core income, less preferred dividends
| | |
$
|
1,410
| | | |
$
|
2,048
| | | | |
$
|
2,967
| | | |
$
|
3,437
| | | |
$
|
3,641
| | | |
$
|
3,567
| | | |
$
|
2,441
| | | |
$
|
1,389
| | | |
$
|
3,040
| | | |
$
|
3,597
| | | |
$
|
3,191
| | | |
$
|
4,496
| | | |
$
|
4,195
| | | |
$
|
2,020
| |
Annualized core income
| | | |
1,880
| | | | |
2,730
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted average shareholders' equity
| | | |
22,725
| | | | |
22,373
| | | | | |
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
|
|
|
|
8.3
|
%
|
|
|
|
12.2
|
%
| | | |
|
13.3
|
%
|
|
|
|
15.2
|
%
|
|
|
|
15.5
|
%
|
|
|
|
15.5
|
%
|
|
|
|
11.0
|
%
|
|
|
|
6.1
|
%
|
|
|
|
12.5
|
%
|
|
|
|
14.0
|
%
|
|
|
|
12.4
|
%
|
|
|
|
17.7
|
%
|
|
|
|
17.9
|
%
|
|
|
|
9.6
|
%
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Average annual core return on equity | | | | | | | | | | | 13.2 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
for the period Jan. 1, 2005 through Sept. 30, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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-taxunderwriting
gain, excluding the impact of catastrophes and net favorable prior year
loss reserve development, is the underwriting gain adjusted to
exclude claims and claim adjustment expenses, reinstatement premiums and
assessments related to catastrophes and loss reserve development related
to time periods prior to the current year. In the opinion of the
Company’s management, this measure is meaningful to users of the
financial statements to understand the Company’s periodic earnings and
the variability of earnings caused by the unpredictable nature (i.e.,
the timing and amount) of catastrophes and loss reserve development.
This measure is also referred to as underlying underwriting margin
or underlying underwriting gain.
A catastrophe is a severe loss caused by various natural events,
including, among others, hurricanes, tornadoes and other windstorms,
earthquakes, hail, wildfires, severe winter weather, floods, tsunamis,
volcanic eruptions and other naturally occurring events, such as solar
flares. Catastrophes can also be man-made, such as terrorist attacks and
other intentionally destructive acts including those involving nuclear,
biological, chemical, radiological, cyber attacks, explosions and
infrastructure failures. Each catastrophe has unique characteristics and
catastrophes are not predictable as to timing or amount. Their effects
are included in net and core income and claims and claim adjustment
expense reserves upon occurrence. A catastrophe may result in the
payment of reinsurance reinstatement premiums and assessments from
various pools.
Net favorable (unfavorable) prior year loss reserve development
is the increase or decrease in incurred claims and claim adjustment
expenses as a result of the re-estimation of claims and claim adjustment
expense reserves at successive valuation dates for a given group of
claims, which may be related to one or more prior years. In the opinion
of the Company’s management, a discussion of loss reserve development is
meaningful to users of the financial statements as it allows them to
assess the impact between prior and current year development on incurred
claims and claim adjustment expenses, net and core income (loss), and
changes in claims and claim adjustment expense reserve levels from
period to period.
|
|
|
|
| | |
|
| |
Components of Net Income |
|
|
|
|
|
|
|
|
|
| | | | | Three Months Ended | | | | Nine Months Ended |
| | | | | September 30, | | | September 30, |
($ in millions, after-tax except as noted)
|
|
|
|
| 2017 |
| 2016 |
|
| 2017 |
| 2016 |
| | | | | | |
| | | | | | |
| |
Pre-tax underwriting gain excluding the impact of catastrophes
| | | | | | | | | | | | | | | |
and net favorable prior year loss reserve development
| | | | |
$
|
439
| | | |
$
|
458
| | | | |
$
|
1,289
| | | |
$
|
1,457
| |
Pre-tax impact of catastrophes
| | | | | |
(700
|
)
| | | |
(89
|
)
| | | | |
(1,450
|
)
| | | |
(740
|
)
|
Pre-tax impact of net favorable prior year loss reserve development
|
|
|
|
|
|
15
|
|
|
|
|
39
|
|
|
|
|
|
299
|
|
|
|
|
507
|
|
Pre-tax underwriting gain/(loss)
| | | | | |
(246
|
)
| | | |
408
| | | | | |
138
| | | | |
1,224
| |
Income tax expense/(benefit) on underwriting results
|
|
|
|
|
|
(93
|
)
|
|
|
|
139
|
|
|
|
|
|
4
|
|
|
|
|
418
|
|
Underwriting gain/(loss)
| | | | | |
(153
|
)
| | | |
269
| | | | | |
134
| | | | |
806
| |
Net investment income
| | | | | |
457
| | | | |
472
| | | | | |
1,405
| | | | |
1,353
| |
Other income/(expense), including interest expense
|
|
|
|
|
|
(51
|
)
|
|
|
|
(40
|
)
|
|
|
|
|
(129
|
)
|
|
|
|
(111
|
)
|
Core income | | | | | | 253 | | | | | 701 | | | | | | 1,410 | | | | | 2,048 | |
Net realized investment gains
|
|
|
|
|
|
40
|
|
|
|
|
15
|
|
|
|
|
|
95
|
|
|
|
|
23
|
|
Net income |
|
|
|
| $ | 293 |
|
|
| $ | 716 |
|
|
|
| $ | 1,505 |
|
|
| $ | 2,071 |
|
| | | | | | | | | | | | | | | | | | | | | | |
|
COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED RATIO
Combined ratio: For Statutory Accounting Practices (SAP), the
combined ratio is the sum of the SAP loss and LAE ratio and the SAP
underwriting expense ratio as defined in the statutory financial
statements required by insurance regulators. The combined ratio as used
in this earnings release is the equivalent of, and is calculated in the
same manner as, the SAP combined ratio except that the SAP underwriting
expense ratio is based on net written premiums and the
underwriting expense ratio as used in this earnings release is based on
net earned premiums.
For SAP, the loss and LAE ratio is the ratio of incurred losses and loss
adjustment expenses less certain administrative services fee income to
net earned premiums as defined in the statutory financial statements
required by insurance regulators. The loss and LAE ratio as used in this
earnings release is calculated in the same manner as the SAP ratio.
For SAP, the underwriting expense ratio is the ratio of underwriting
expenses incurred (including commissions paid), less certain
administrative services fee income and billing and policy fees, to net written
premiums as defined in the statutory financial statements required by
insurance regulators. The underwriting expense ratio as used in this
earnings release, is the ratio of underwriting expenses (including the
amortization of deferred acquisition costs), less certain administrative
services fee income, billing and policy fees and other, to net earned
premiums.
The combined ratio, loss and LAE ratio, and underwriting expense ratio
are used as indicators of the Company’s underwriting discipline,
efficiency in acquiring and servicing its business and overall
underwriting profitability. A combined ratio under 100% generally
indicates an underwriting profit. A combined ratio over 100% generally
indicates an underwriting loss.
Underlying combined ratio represents the combined ratio excluding
the impact of net prior year reserve development and catastrophes. The
underlying combined ratio is an indicator of the Company’s underwriting
discipline and underwriting profitability for the current accident year.
Other companies’ method of computing similarly titled measures may not
be comparable to the Company’s method of computing these ratios.
|
|
|
| | |
|
| |
Calculation of the Combined Ratio |
|
|
|
|
|
|
|
|
| | | | Three Months Ended | | | Nine Months Ended |
| | | | September 30, | | | September 30, |
($ in millions, pre-tax)
|
|
|
| 2017 |
| 2016 |
|
| 2017 |
| 2016 |
| | | | | |
| | | | | | |
| |
Loss and loss adjustment expense ratio | | | | | | | | | | | | | | |
Claims and claim adjustment expenses
| | | |
$
|
4,806
| | | |
$
|
3,856
| | | | |
$
|
13,125
| | | |
$
|
11,330
| |
Less:
| | | | | | | | | | | | | | |
Policyholder dividends
| | | | |
12
| | | | |
11
| | | | | |
38
| | | | |
32
| |
Allocated fee income
|
|
|
|
|
42
|
|
|
|
|
44
|
|
|
|
|
|
126
|
|
|
|
|
133
|
|
Loss ratio numerator |
|
|
| $ | 4,752 |
|
|
| $ | 3,801 |
|
|
|
| $ | 12,961 |
|
|
| $ | 11,165 |
|
| | | | | | | | | | | | | |
|
Underwriting expense ratio | | | | | | | | | | | | | | |
Amortization of deferred acquisition costs
| | | |
$
|
1,059
| | | |
$
|
1,012
| | | | |
$
|
3,094
| | | |
$
|
2,972
| |
General and administrative expenses (G&A)
| | | | |
1,045
| | | | |
1,057
| | | | | |
3,086
| | | | |
3,106
| |
Less:
| | | | | | | | | | | | | | |
Non-insurance G&A
| | | | |
28
| | | | |
8
| | | | | |
44
| | | | |
23
| |
Allocated fee income
| | | | |
71
| | | | |
72
| | | | | |
216
| | | | |
219
| |
Billing and policy fees and other
|
|
|
|
|
22
|
|
|
|
|
23
|
|
|
|
|
|
67
|
|
|
|
|
67
|
|
Expense ratio numerator |
|
|
| $ | 1,983 |
|
|
| $ | 1,966 |
|
|
|
| $ | 5,853 |
|
|
| $ | 5,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premium |
|
|
| $ | 6,523 |
|
|
| $ | 6,209 |
|
|
|
| $ | 19,057 |
|
|
| $ | 18,257 |
|
| | | | | | | | | | | | | |
|
Combined ratio 1 | | | | | | | | | | | | | | |
Loss and loss adjustment expense ratio
| | | | |
72.8
|
%
| | | |
61.2
|
%
| | | | |
68.0
|
%
| | | |
61.2
|
%
|
Underwriting expense ratio
|
|
|
|
|
30.4
|
%
|
|
|
|
31.7
|
%
|
|
|
|
|
30.7
|
%
|
|
|
|
31.6
|
%
|
Combined ratio |
|
|
|
| 103.2 | % |
|
|
| 92.9 | % |
|
|
|
| 98.7 | % |
|
|
| 92.8 | % |
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. In addition, G&A
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 the after-tax
impact of net unrealized investment gains and losses, divided by the
number of common shares outstanding.In the opinion of the
Company’s management, adjusted book value per share is useful in an
analysis of a property casualty company’s book value per share as it
removes the effect of changing prices on invested assets (i.e., net
unrealized investment gains (losses), net of tax), which do not have an
equivalent impact on unpaid claims and claim adjustment expense
reserves. Tangible book value per share is adjusted book value
per share excluding the after-tax value of goodwill and other intangible
assets divided by the number of common shares outstanding. In the
opinion of the Company’s management, tangible book value per share is
useful in an analysis of a property casualty company’s book value on a
nominal basis as it removes certain effects of purchase accounting
(i.e., goodwill and other intangible assets), in addition to the effect
of changing prices on invested assets.
|
Reconciliation of Shareholders’ Equity to Tangible
Shareholders’ Equity, Excluding Net Unrealized Investment Gains,
Net of Tax |
|
| | | |
| | | | As of |
| | | | September 30, | |
| December 31, | |
| September 30, |
($ in millions, except per share amounts)
|
| 2017 |
| 2016 |
| 2016 |
| | | | | | | | | |
|
Shareholders' equity | | $ | 23,738 | | | | $ | 23,221 | | | | $ | 24,439 | |
Less: Net unrealized investment gains, net of tax
|
|
1,006
|
|
|
|
|
730
|
|
|
|
|
2,049
|
|
Shareholders' equity, excluding net unrealized investment gains,
net of tax | | 22,732 | | | | | 22,491 | | | | | 22,390 | |
Less:
| | | | | | | | |
| |
Goodwill
| | |
3,946
| | | | |
3,580
| | | | |
3,585
| |
| |
Other intangible assets
| | |
345
| | | | |
268
| | | | |
271
| |
|
|
Impact of deferred tax on other intangible assets
|
|
(66
|
)
|
|
|
|
(64
|
)
|
|
|
|
(62
|
)
|
Tangible shareholders' equity |
| $ | 18,507 |
|
|
| $ | 18,707 |
|
|
| $ | 18,596 |
|
| | | | | | | | | |
|
Common shares outstanding
|
|
|
273.7
|
|
|
|
|
279.6
|
|
|
|
|
284.1
|
|
| | | | | | | | | |
|
Book value per share
| |
$
|
86.73
| | | |
$
|
83.05
| | | |
$
|
86.04
| |
Adjusted book value per share
| | |
83.06
| | | | |
80.44
| | | | |
78.82
| |
Tangible book value per share
|
|
|
67.62
|
|
|
|
|
66.91
|
|
|
|
|
65.47
|
|
| | | | | | | | | | | | | |
|
RECONCILIATION OF TOTAL CAPITALIZATION TO TOTAL CAPITALIZATION
EXCLUDING NET UNREALIZED INVESTMENT GAINS, NET OF TAX
Total capitalization is the sum of total shareholders’ equity and
debt. Debt-to-capital ratio excluding net unrealized gain on
investments is the ratio of debt to total capitalization excluding
the after-tax impact of net unrealized investment gains and losses. In
the opinion of the Company’s management, the debt-to-capital ratio is
useful in an analysis of the Company’s financial leverage.
|
|
|
|
|
|
| As of |
| | | September 30, | |
| December 31, | |
| September 30, |
($ in millions)
|
|
| 2017 |
| 2016 |
| 2016 |
| | | | | | | | |
|
Debt
| | |
$
|
6,921
| | | |
$
|
6,437
| | | |
$
|
6,436
| |
Shareholders' equity
|
|
|
|
23,738
|
|
|
|
|
23,221
|
|
|
|
|
24,439
|
|
Total capitalization |
|
|
| 30,659 |
|
|
|
| 29,658 |
|
|
|
| 30,875 |
|
Less: Net unrealized investment gains, net of tax
|
|
|
|
1,006
|
|
|
|
|
730
|
|
|
|
|
2,049
|
|
Total capitalization excluding net unrealized gain | | | $ | 29,653 | | | | $ | 28,928 | | | | $ | 28,826 | |
on investments, net of tax |
|
|
|
|
|
|
|
|
|
| | | | | | | | |
|
Debt-to-capital ratio
| | | |
22.6
|
%
| | | |
21.7
|
%
| | | |
20.8
|
%
|
Debt-to-capital ratio excluding net unrealized investment gains, net
of tax
|
|
|
|
23.3
|
%
|
|
|
|
22.3
|
%
|
|
|
|
22.3
|
%
|
| | | | | | | | |
|
OTHER DEFINITIONS
Gross written premiums reflect the direct and assumed
contractually determined amounts charged to policyholders for the
effective period of the contract based on the terms and conditions of
the insurance contract. Net written premiums reflect gross
written premiums less premiums ceded to reinsurers.
For Business Insurance and Bond & Specialty Insurance, retention is
the amount of premium available for renewal that was retained, excluding
rate and exposure changes.For Personal Insurance, retention is
the ratio of the expected number of renewal policies that will be
retained throughout the annual policy period to the number of available
renewal base policies. For all of the segments, renewalrate
change represents the estimated change in average premium on
policies that renew, excluding exposure changes. Exposure is the
measure of risk used in the pricing of an insurance product. The change
in exposure is the amount of change in premium on policies that renew
attributable to the change in portfolio risk. Renewal premium change
represents the estimated change in average premium on policies that
renew, including rate and exposure changes. New business is the
amount of written premium related to new policyholders and additional
products sold to existing policyholders.These are operating
statistics, which are in part dependent on the use of estimates and are
therefore subject to change. For Business Insurance, retention, renewal
premium change and new business exclude National Accounts and surety.
For Bond & Specialty Insurance, retention, renewal premium change and
new business exclude surety.
Statutory capital and surplus represents the excess of an
insurance company’s admitted assets over its liabilities, including loss
reserves, as determined in accordance with statutory accounting
practices.
Holding company liquidity is the total funds available at the
holding company level to fund general corporate purposes, primarily the
payment of shareholder dividends and debt service. These funds consist
of total cash, short-term invested assets and other readily marketable
securities held by the holding company.
For a glossary of other financial terms used in this press release, we
refer you to the Company’s most recent annual report on Form 10-K filed
with the SEC on February 16, 2017, as updated by our Form 8-K filed on
October 19, 2017, and subsequent periodic filings with the SEC.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171019005651/en/
Contacts:
The Travelers Companies, Inc.
Media:
Patrick
Linehan, 917.778.6267
or
Institutional
Investors:
Gabriella Nawi, 917.778.6844
Source: The Travelers Companies, Inc.
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