Travelers Reports Third Quarter 2022 Net Income of $454 million and Core Income of $526 million, Strong Results in Light of Hurricane Ian
The Travelers Companies reported Q3 2022 net income of $454 million ($1.89 per diluted share), down from $662 million ($2.62 per share) a year earlier. Core income also decreased to $526 million ($2.20 per share) from $655 million. Despite challenges including $512 million in catastrophe losses from Hurricane Ian, net written premiums reached a record $9.198 billion, up 10% year-over-year. The combined ratio improved slightly to 98.2%. The company returned $722 million to shareholders, including $501 million in share repurchases, and declared a dividend of $0.93 per share.
- Record net written premiums of $9.198 billion, up 10% year-over-year.
- Combined ratio improved to 98.2%, reflecting better underwriting performance.
- Total capital returned to shareholders reached $722 million, including $501 million in share repurchases.
- Strong performance in Business Insurance segment with 9% growth in net written premiums.
- Net income decreased 31% year-over-year, from $662 million to $454 million.
- Core income down 20% from $655 million to $526 million.
- Net realized investment losses of $93 million impacted overall profitability.
- Book value per share declined 27% from $115.74 to $84.94, primarily due to higher interest rates.
Strong Year-to-Date 2022 Return on Equity of
Third Quarter 2022 Net Income per Diluted Share of
Third Quarter 2022 Core Income per Diluted Share of
-
Consolidated combined ratio of
98.2% and underlying combined ratio of92.5% . -
Catastrophe losses of
$512 million $501 million -
Record net written premiums of
$9.19 8 billion10% compared to the prior year quarter. -
Net written premium growth in all three segments compared to the prior year quarter;
Business Insurance up9% ,Bond & Specialty Insurance up8% andPersonal Insurance up13% . -
Total capital returned to shareholders of
$722 million $501 million -
Book value per share of
$84.94 27% fromSeptember 30, 2021 , driven by higher interest rates; adjusted book value per share of$111.90 7% fromSeptember 30, 2021 . -
Board of Directors declares regular cash dividend of
$0.93
Consolidated Highlights |
|||||||||||||||||||||||
($ in millions, except for per share amounts, and after-tax, except for premiums and revenues) |
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||||||||
|
2022 |
|
2021 |
|
Change |
|
2022 |
|
2021 |
|
Change |
|
|||||||||||
Net written premiums |
|
$ |
9,198 |
|
|
$ |
8,324 |
|
|
10 |
% |
|
$ |
26,585 |
|
|
$ |
23,964 |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenues |
|
$ |
9,303 |
|
|
$ |
8,805 |
|
|
6 |
|
|
$ |
27,248 |
|
|
$ |
25,805 |
|
|
6 |
|
|
Net income |
|
$ |
454 |
|
|
$ |
662 |
|
|
(31 |
) |
|
$ |
2,023 |
|
|
$ |
2,329 |
|
|
(13 |
) |
|
per diluted share |
|
$ |
1.89 |
|
|
$ |
2.62 |
|
|
(28 |
) |
|
$ |
8.34 |
|
|
$ |
9.16 |
|
|
(9 |
) |
|
Core income |
|
$ |
526 |
|
|
$ |
655 |
|
|
(20 |
) |
|
$ |
2,188 |
|
|
$ |
2,233 |
|
|
(2 |
) |
|
per diluted share |
|
$ |
2.20 |
|
|
$ |
2.60 |
|
|
(15 |
) |
|
$ |
9.02 |
|
|
$ |
8.78 |
|
|
3 |
|
|
Diluted weighted average shares outstanding |
|
|
237.9 |
|
|
|
250.1 |
|
|
(5 |
) |
|
|
240.9 |
|
|
|
252.4 |
|
|
(5 |
) |
|
Combined ratio |
|
|
98.2 |
% |
|
|
98.6 |
% |
|
(0.4 |
) |
pts |
|
96.0 |
% |
|
|
96.8 |
% |
|
(0.8 |
) |
pts |
Underlying combined ratio |
|
|
92.5 |
% |
|
|
91.4 |
% |
|
1.1 |
|
pts |
|
92.2 |
% |
|
|
90.8 |
% |
|
1.4 |
|
pts |
Return on equity |
|
|
8.5 |
% |
|
|
9.2 |
% |
|
(0.7 |
) |
pts |
|
11.1 |
% |
|
|
10.8 |
% |
|
0.3 |
|
pts |
Core return on equity |
|
|
7.9 |
% |
|
|
10.1 |
% |
|
(2.2 |
) |
pts |
|
10.9 |
% |
|
|
11.6 |
% |
|
(0.7 |
) |
pts |
|
|
As of |
|
Change From |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||
Book value per share |
|
$ |
84.94 |
|
$ |
119.77 |
|
$ |
115.74 |
|
(29 |
)% |
|
(27 |
)% |
Adjusted book value per share |
|
|
111.90 |
|
|
109.76 |
|
|
104.77 |
|
2 |
% |
|
7 |
% |
See Glossary of Financial Measures for definitions and the statistical supplement for additional financial data. |
|||||||||||||||
“We are pleased to report solid third quarter 2022 results, particularly in light of significant industry-wide losses from Hurricane Ian,” said
“Even in the face of challenging weather, we generated meaningful profit with core income for the quarter of
“Our best-in-class marketplace execution produced
“Our meaningful franchise value is reflected in our top- and bottom-line results for the quarter and year-to-date. Our terrific quarterly performance over the past two years builds on our excellent, decade-long track record of growing at industry-leading returns with industry-low volatility. At the same time, we continue to focus on, and invest in, our innovation priorities. Given the success with which we have executed on our Perform & Transform call to action, we are confident in our ability to continue to create meaningful shareholder value over time.”
Consolidated Results |
|||||||||||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||||||||||
($ in millions and pre-tax, unless noted otherwise) |
|
2022 |
|
2021 |
|
Change |
|
2022 |
|
2021 |
|
Change |
|
||||||||||||
Underwriting gain: |
|
$ |
115 |
|
|
$ |
75 |
|
|
$ |
40 |
|
|
$ |
887 |
|
|
$ |
616 |
|
|
$ |
271 |
|
|
Underwriting gain includes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net favorable (unfavorable) prior year reserve development |
|
|
20 |
|
|
|
(56 |
) |
|
|
76 |
|
|
|
464 |
|
|
|
443 |
|
|
|
21 |
|
|
Catastrophes, net of reinsurance |
|
|
(512 |
) |
|
|
(501 |
) |
|
|
(11 |
) |
|
|
(1,418 |
) |
|
|
(1,811 |
) |
|
|
393 |
|
|
Net investment income |
|
|
593 |
|
|
|
771 |
|
|
|
(178 |
) |
|
|
1,937 |
|
|
|
2,290 |
|
|
|
(353 |
) |
|
Other income (expense), including interest expense |
|
|
(87 |
) |
|
|
(68 |
) |
|
|
(19 |
) |
|
|
(246 |
) |
|
|
(211 |
) |
|
|
(35 |
) |
|
Core income before income taxes |
|
|
621 |
|
|
|
778 |
|
|
|
(157 |
) |
|
|
2,578 |
|
|
|
2,695 |
|
|
|
(117 |
) |
|
Income tax expense |
|
|
95 |
|
|
|
123 |
|
|
|
(28 |
) |
|
|
390 |
|
|
|
462 |
|
|
|
(72 |
) |
|
Core income |
|
|
526 |
|
|
|
655 |
|
|
|
(129 |
) |
|
|
2,188 |
|
|
|
2,233 |
|
|
|
(45 |
) |
|
Net realized investment gains (losses) after income taxes |
|
|
(72 |
) |
|
|
7 |
|
|
|
(79 |
) |
|
|
(165 |
) |
|
|
88 |
|
|
|
(253 |
) |
|
Impact of changes in tax laws and/or tax rates (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
(8 |
) |
|
Net income |
|
$ |
454 |
|
|
$ |
662 |
|
|
$ |
(208 |
) |
|
$ |
2,023 |
|
|
$ |
2,329 |
|
|
$ |
(306 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Combined ratio |
|
|
98.2 |
% |
|
|
98.6 |
% |
|
|
(0.4 |
) |
pts |
|
96.0 |
% |
|
|
96.8 |
% |
|
|
(0.8 |
) |
pts |
Impact on combined ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net (favorable) unfavorable prior year reserve development |
|
|
(0.2 |
) |
pts |
|
0.8 |
|
pts |
|
(1.0 |
) |
pts |
|
(1.9 |
) |
pts |
|
(1.9 |
) |
pts |
|
— |
|
pts |
Catastrophes, net of reinsurance |
|
|
5.9 |
|
pts |
|
6.4 |
|
pts |
|
(0.5 |
) |
pts |
|
5.7 |
|
pts |
|
7.9 |
|
pts |
|
(2.2 |
) |
pts |
Underlying combined ratio |
|
|
92.5 |
% |
|
|
91.4 |
% |
|
|
1.1 |
|
pts |
|
92.2 |
% |
|
|
90.8 |
% |
|
|
1.4 |
|
pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net written premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
$ |
4,370 |
|
|
$ |
4,021 |
|
|
|
9 |
% |
|
$ |
13,245 |
|
|
$ |
12,126 |
|
|
|
9 |
% |
|
|
|
|
964 |
|
|
|
894 |
|
|
|
8 |
|
|
|
2,808 |
|
|
|
2,471 |
|
|
|
14 |
|
|
|
|
|
3,864 |
|
|
|
3,409 |
|
|
|
13 |
|
|
|
10,532 |
|
|
|
9,367 |
|
|
|
12 |
|
|
Total |
|
$ |
9,198 |
|
|
$ |
8,324 |
|
|
|
10 |
% |
|
$ |
26,585 |
|
|
$ |
23,964 |
|
|
|
11 |
% |
|
(1) Impact is recognized in the accounting period in which the change is enacted |
|||||||||||||||||||||||||
Third Quarter 2022 Results
(All comparisons vs. third quarter 2021, unless noted otherwise)
Net income of
Combined ratio:
-
The combined ratio of
98.2% improved 0.4 points due to net favorable prior year reserve development compared to net unfavorable prior year reserve development in the prior year quarter (1.0 points) and a smaller impact from catastrophe losses (0.5 points), partially offset by a higher underlying combined ratio (1.1 points).
-
The underlying combined ratio of
92.5% increased 1.1 points. See below for further details by segment.
-
Net favorable prior year reserve development in
Bond & Specialty Insurance andPersonal Insurance was partially offset by net unfavorable prior year reserve development inBusiness Insurance . Net prior year reserve development in the third quarter of 2022 included a$212 million $225 million
-
Catastrophe losses primarily resulted from Hurricanes Ian and Fiona, as well as severe storms in several regions of
the United States .
Net investment income of
Net written premiums of
Year-to-Date 2022 Results
(All comparisons vs. year-to-date 2021, unless noted otherwise)
Net income of
Combined ratio:
-
The combined ratio of
96.0% improved 0.8 points due to lower catastrophe losses (2.2 points), partially offset by a higher underlying combined ratio (1.4 points).
-
The underlying combined ratio of
92.2% increased 1.4 points. See below for further details by segment.
-
Net favorable prior year reserve development occurred in all segments. See below for further details by segment. Catastrophe losses included the third quarter events described above, as well as severe wind and hail storms in several regions of
the United States in the first six months of 2022.
Net investment income of
Net written premiums of
Shareholders’ Equity
Shareholders’ equity of
The Company repurchased 3.1 million shares during the third quarter at an average price of
The Board of Directors declared a regular quarterly dividend of
Business Insurance Segment Financial Results |
|||||||||||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||||||||||||
($ in millions and pre-tax, unless noted otherwise) |
|
2022 |
|
2021 |
|
Change |
|
2022 |
|
2021 |
|
Change |
|
||||||||||||
Underwriting gain: |
|
$ |
148 |
|
|
$ |
88 |
|
|
$ |
60 |
|
|
$ |
787 |
|
|
$ |
117 |
|
|
$ |
670 |
|
|
Underwriting gain includes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net favorable (unfavorable) prior year reserve development |
|
|
(61 |
) |
|
|
(108 |
) |
|
|
47 |
|
|
|
254 |
|
|
|
99 |
|
|
|
155 |
|
|
Catastrophes, net of reinsurance |
|
|
(216 |
) |
|
|
(181 |
) |
|
|
(35 |
) |
|
|
(529 |
) |
|
|
(836 |
) |
|
|
307 |
|
|
Net investment income |
|
|
426 |
|
|
|
575 |
|
|
|
(149 |
) |
|
|
1,415 |
|
|
|
1,713 |
|
|
|
(298 |
) |
|
Other income (expense) |
|
|
(14 |
) |
|
|
1 |
|
|
|
(15 |
) |
|
|
(19 |
) |
|
|
(14 |
) |
|
|
(5 |
) |
|
Segment income before income taxes |
|
|
560 |
|
|
|
664 |
|
|
|
(104 |
) |
|
|
2,183 |
|
|
|
1,816 |
|
|
|
367 |
|
|
Income tax expense |
|
|
89 |
|
|
|
106 |
|
|
|
(17 |
) |
|
|
377 |
|
|
|
298 |
|
|
|
79 |
|
|
Segment income |
|
$ |
471 |
|
|
$ |
558 |
|
|
$ |
(87 |
) |
|
$ |
1,806 |
|
|
$ |
1,518 |
|
|
$ |
288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Combined ratio |
|
|
96.3 |
% |
|
|
97.5 |
% |
|
|
(1.2 |
) |
pts |
|
93.5 |
% |
|
|
98.7 |
% |
|
|
(5.2 |
) |
pts |
Impact on combined ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net (favorable) unfavorable prior year reserve development |
|
|
1.4 |
|
pts |
|
2.7 |
|
pts |
|
(1.3 |
) |
pts |
|
(2.0 |
) |
pts |
|
(0.9 |
) |
pts |
|
(1.1 |
) |
pts |
Catastrophes, net of reinsurance |
|
|
4.9 |
|
pts |
|
4.6 |
|
pts |
|
0.3 |
|
pts |
|
4.1 |
|
pts |
|
7.2 |
|
pts |
|
(3.1 |
) |
pts |
Underlying combined ratio |
|
|
90.0 |
% |
|
|
90.2 |
% |
|
|
(0.2 |
) |
pts |
|
91.4 |
% |
|
|
92.4 |
% |
|
|
(1.0 |
) |
pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net written premiums by market |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Domestic |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Select Accounts |
|
$ |
739 |
|
|
$ |
685 |
|
|
|
8 |
% |
|
$ |
2,365 |
|
|
$ |
2,140 |
|
|
|
11 |
% |
|
Middle Market |
|
|
2,465 |
|
|
|
2,252 |
|
|
|
9 |
|
|
|
7,410 |
|
|
|
6,723 |
|
|
|
10 |
|
|
National Accounts |
|
|
247 |
|
|
|
228 |
|
|
|
8 |
|
|
|
790 |
|
|
|
731 |
|
|
|
8 |
|
|
National Property and Other |
|
|
702 |
|
|
|
638 |
|
|
|
10 |
|
|
|
1,889 |
|
|
|
1,730 |
|
|
|
9 |
|
|
Total Domestic |
|
|
4,153 |
|
|
|
3,803 |
|
|
|
9 |
|
|
|
12,454 |
|
|
|
11,324 |
|
|
|
10 |
|
|
International |
|
|
217 |
|
|
|
218 |
|
|
|
— |
|
|
|
791 |
|
|
|
802 |
|
|
|
(1 |
) |
|
Total |
|
$ |
4,370 |
|
|
$ |
4,021 |
|
|
|
9 |
% |
|
$ |
13,245 |
|
|
$ |
12,126 |
|
|
|
9 |
% |
|
Third Quarter 2022 Results
(All comparisons vs. third quarter 2021, unless noted otherwise)
Segment income for
Combined ratio:
-
The combined ratio of
96.3% improved 1.2 points due to lower net unfavorable prior year reserve development (1.3 points) and a lower underlying combined ratio (0.2 points), partially offset by higher catastrophe losses (0.3 points).
-
The underlying combined ratio of
90.0% improved 0.2 points. The expense ratio improved 1.1 points. The loss ratio increased 0.9 points, as the benefit of earned pricing was more than offset by the comparison to both a low level of property losses and the favorable impact associated with the pandemic in the prior year quarter.
-
Net unfavorable prior year reserve development was primarily driven by an addition to asbestos reserves of
$212 million $225 million
Net written premiums of
Year-to-Date 2022 Results
(All comparisons vs. year-to-date 2021, unless noted otherwise)
Segment income for
Combined ratio:
-
The combined ratio of
93.5% improved 5.2 points due to lower catastrophe losses (3.1 points), higher net favorable prior year reserve development (1.1 points) and a lower underlying combined ratio (1.0 points).
-
The underlying combined ratio of
91.4% improved 1.0 points, reflecting an improvement of 1.0 points in the expense ratio.
- Net favorable prior year reserve development was primarily driven by better than expected loss experience in the domestic operations’ workers’ compensation product line for multiple accident years, and in the commercial multi-peril and commercial property product lines for recent accident years, partially offset by an addition to asbestos reserves, an addition to reserves in the domestic operations’ general liability product line (excluding asbestos and environmental), including for run-off operations, and an addition to environmental reserves.
Net written premiums of
Bond & Specialty Insurance Segment Financial Results |
|||||||||||||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
|
|||||||||||||||||||||
($ in millions and pre-tax, unless noted otherwise) |
2022 |
|
2021 |
|
Change |
|
2022 |
|
2021 |
|
Change |
|
|||||||||||||
Underwriting gain: |
$ |
234 |
|
|
$ |
150 |
|
|
$ |
84 |
|
|
$ |
629 |
|
|
$ |
422 |
|
|
$ |
207 |
|
|
|
Underwriting gain includes: |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net favorable prior year reserve development |
|
63 |
|
|
|
22 |
|
|
|
41 |
|
|
|
171 |
|
|
|
81 |
|
|
|
90 |
|
|
|
Catastrophes, net of reinsurance |
|
(11 |
) |
|
|
(3 |
) |
|
|
(8 |
) |
|
|
(16 |
) |
|
|
(30 |
) |
|
|
14 |
|
|
|
Net investment income |
|
65 |
|
|
|
63 |
|
|
|
2 |
|
|
|
188 |
|
|
|
186 |
|
|
|
2 |
|
|
|
Other income |
|
5 |
|
|
|
4 |
|
|
|
1 |
|
|
|
11 |
|
|
|
13 |
|
|
|
(2 |
) |
|
|
Segment income before income taxes |
|
304 |
|
|
|
217 |
|
|
|
87 |
|
|
|
828 |
|
|
|
621 |
|
|
|
207 |
|
|
|
Income tax expense |
|
62 |
|
|
|
43 |
|
|
|
19 |
|
|
|
141 |
|
|
|
123 |
|
|
|
18 |
|
|
|
Segment income |
$ |
242 |
|
|
$ |
174 |
|
|
$ |
68 |
|
|
$ |
687 |
|
|
$ |
498 |
|
|
$ |
189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Combined ratio |
|
72.5 |
% |
|
|
81.1 |
% |
|
|
(8.6 |
) |
pts |
|
74.8 |
% |
|
|
81.4 |
% |
|
|
(6.6 |
) |
pts |
|
Impact on combined ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net favorable prior year reserve development |
|
(7.2 |
) |
pts |
|
(2.6 |
) |
pts |
|
(4.6 |
) |
pts |
|
(6.7 |
) |
pts |
|
(3.5 |
) |
pts |
|
(3.2 |
) |
pts |
|
Catastrophes, net of reinsurance |
|
1.3 |
|
pts |
|
0.3 |
|
pts |
|
1.0 |
|
pts |
|
0.6 |
|
pts |
|
1.3 |
|
pts |
|
(0.7 |
) |
pts |
|
Underlying combined ratio |
|
78.4 |
% |
|
|
83.4 |
% |
|
|
(5.0 |
) |
pts |
|
80.9 |
% |
|
|
83.6 |
% |
|
|
(2.7 |
) |
pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net written premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Domestic |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Management Liability |
$ |
554 |
|
|
$ |
532 |
|
|
|
4 |
% |
|
$ |
1,592 |
|
|
$ |
1,473 |
|
|
|
8 |
% |
|
|
Surety |
|
284 |
|
|
|
241 |
|
|
|
18 |
|
|
|
828 |
|
|
|
673 |
|
|
|
23 |
|
|
|
Total Domestic |
|
838 |
|
|
|
773 |
|
|
|
8 |
|
|
|
2,420 |
|
|
|
2,146 |
|
|
|
13 |
|
|
|
International |
|
126 |
|
|
|
121 |
|
|
|
4 |
|
|
|
388 |
|
|
|
325 |
|
|
|
19 |
|
|
|
Total |
$ |
964 |
|
|
$ |
894 |
|
|
|
8 |
% |
|
$ |
2,808 |
|
|
$ |
2,471 |
|
|
|
14 |
% |
|
|
Third Quarter 2022 Results
(All comparisons vs. third quarter 2021, unless noted otherwise)
Segment income for
Combined ratio:
-
The combined ratio of
72.5% improved 8.6 points due to a lower underlying combined ratio (5.0 points) and higher net favorable prior year reserve development (4.6 points), partially offset by higher catastrophe losses (1.0 points).
-
The underlying combined ratio improved 5.0 points to a very strong
78.4% , driven primarily by the benefit of earned pricing and the favorable re-estimation of losses incurred for management liability coverages in the first six months of 2022.
- Net favorable prior year reserve development was primarily driven by better than expected loss experience in the domestic operations’ fidelity and surety product lines and in the general liability product line for management liability coverages for recent accident years.
Net written premiums of
Year-to-Date 2022 Results
(All comparisons vs. year-to-date 2021, unless noted otherwise)
Segment income for
Combined ratio:
-
The combined ratio of
74.8% improved 6.6 points due to higher net favorable prior year reserve development (3.2 points), a lower underlying combined ratio (2.7 points) and lower catastrophe losses (0.7 points).
-
The underlying combined ratio improved 2.7 points to a very strong
80.9% , primarily driven by the benefit of earned pricing.
- Net favorable prior year reserve development was primarily driven by better than expected loss experience in the domestic operations’ fidelity and surety product lines for recent accident years.
Net written premiums of
Personal Insurance Segment Financial Results |
|||||||||||||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
|
|||||||||||||||||||||
($ in millions and pre-tax, unless noted otherwise) |
2022 |
|
2021 |
|
Change |
|
2022 |
|
2021 |
|
Change |
|
|||||||||||||
Underwriting gain (loss): |
$ |
(267 |
) |
|
$ |
(163 |
) |
|
$ |
(104 |
) |
|
$ |
(529 |
) |
|
$ |
77 |
|
|
$ |
(606 |
) |
|
|
Underwriting gain (loss) includes: |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net favorable prior year reserve development |
|
18 |
|
|
|
30 |
|
|
|
(12 |
) |
|
|
39 |
|
|
|
263 |
|
|
|
(224 |
) |
|
|
Catastrophes, net of reinsurance |
|
(285 |
) |
|
|
(317 |
) |
|
|
32 |
|
|
|
(873 |
) |
|
|
(945 |
) |
|
|
72 |
|
|
|
Net investment income |
|
102 |
|
|
|
133 |
|
|
|
(31 |
) |
|
|
334 |
|
|
|
391 |
|
|
|
(57 |
) |
|
|
Other income |
|
18 |
|
|
|
22 |
|
|
|
(4 |
) |
|
|
50 |
|
|
|
64 |
|
|
|
(14 |
) |
|
|
Segment income (loss) before income taxes |
|
(147 |
) |
|
|
(8 |
) |
|
|
(139 |
) |
|
|
(145 |
) |
|
|
532 |
|
|
|
(677 |
) |
|
|
Income tax expense (benefit) |
|
(36 |
) |
|
|
(6 |
) |
|
|
(30 |
) |
|
|
(66 |
) |
|
|
99 |
|
|
|
(165 |
) |
|
|
Segment income (loss) |
$ |
(111 |
) |
|
$ |
(2 |
) |
|
$ |
(109 |
) |
|
$ |
(79 |
) |
|
$ |
433 |
|
|
$ |
(512 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Combined ratio |
|
107.2 |
% |
|
|
104.6 |
% |
|
|
2.6 |
|
pts |
|
104.7 |
% |
|
|
98.3 |
% |
|
|
6.4 |
|
pts |
|
Impact on combined ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net favorable prior year reserve development |
|
(0.5 |
) |
pts |
|
(1.0 |
) |
pts |
|
0.5 |
|
pts |
|
(0.4 |
) |
pts |
|
(3.0 |
) |
pts |
|
2.6 |
|
pts |
|
Catastrophes, net of reinsurance |
|
8.4 |
|
pts |
|
10.4 |
|
pts |
|
(2.0 |
) |
pts |
|
8.9 |
|
pts |
|
10.6 |
|
pts |
|
(1.7 |
) |
pts |
|
Underlying combined ratio |
|
99.3 |
% |
|
|
95.2 |
% |
|
|
4.1 |
|
pts |
|
96.2 |
% |
|
|
90.7 |
% |
|
|
5.5 |
|
pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net written premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Domestic |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Automobile |
$ |
1,743 |
|
|
$ |
1,529 |
|
|
|
14 |
% |
|
$ |
4,868 |
|
|
$ |
4,371 |
|
|
|
11 |
% |
|
|
Homeowners and Other |
|
1,952 |
|
|
|
1,698 |
|
|
|
15 |
|
|
|
5,164 |
|
|
|
4,476 |
|
|
|
15 |
|
|
|
Total Domestic |
|
3,695 |
|
|
|
3,227 |
|
|
|
15 |
|
|
|
10,032 |
|
|
|
8,847 |
|
|
|
13 |
|
|
|
International |
|
169 |
|
|
|
182 |
|
|
|
(7 |
) |
|
|
500 |
|
|
|
520 |
|
|
|
(4 |
) |
|
|
Total |
$ |
3,864 |
|
|
$ |
3,409 |
|
|
|
13 |
% |
|
$ |
10,532 |
|
|
$ |
9,367 |
|
|
|
12 |
% |
|
|
Third Quarter 2022 Results
(All comparisons vs. third quarter 2021, unless noted otherwise)
Segment loss for
Combined ratio:
-
The combined ratio of
107.2% increased 2.6 points due to a higher underlying combined ratio (4.1 points) and lower net favorable prior year reserve development (0.5 points), partially offset by lower catastrophe losses (2.0 points).
-
The underlying combined ratio of
99.3% increased 4.1 points, driven primarily by elevated severity in both the automobile and homeowners and other product lines, partially offset by a lower expense ratio.
- Net favorable prior year reserve development was not significant in the quarter.
Net written premiums of
Year-to-Date 2022 Results
(All comparisons vs. year-to-date 2021, unless noted otherwise)
Segment loss for
Combined ratio:
-
The combined ratio of
104.7% increased 6.4 points due to a higher underlying combined ratio (5.5 points) and lower net favorable prior year reserve development (2.6 points), partially offset by lower catastrophe losses (1.7 points).
-
The underlying combined ratio of
96.2% increased 5.5 points, driven primarily by elevated severity in the current year in both the automobile and homeowners and other product lines and a comparison to a low level of loss activity in the prior year period in the automobile product line, partially offset by a lower expense ratio.
- Net favorable prior year reserve development was not significant in the current year.
Net written premiums of
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
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 1.800.770.2030 within
About Travelers
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:
* * * * *
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;
- share repurchase plans;
- future pension plan contributions;
- the sufficiency of the Company’s asbestos and other reserves;
- the impact of emerging claims issues as well as other insurance and non-insurance litigation;
- the cost and availability of reinsurance coverage;
- catastrophe losses and modeling;
- the impact of investment, economic and underwriting market conditions, including interest rates and inflation;
- the impact of changing climate conditions;
- strategic and operational initiatives to improve profitability and competitiveness;
- the Company’s competitive advantages and innovation agenda;
- new product offerings;
- the impact of developments in the tort environment; and
- the impact of developments in the geopolitical environment.
The Company cautions investors that such statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond the Company’s control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Some of the factors that could cause actual results to differ include, but are not limited to, the following:
Insurance-Related Risks
- high levels of catastrophe losses;
- actual claims may exceed the Company’s claims and claim adjustment expense reserves, or the estimated level of claims and claim adjustment expense reserves may increase, including as a result of, among other things, changes in the legal/tort, regulatory and economic environments, including increased inflation;
- the Company’s potential exposure to asbestos and environmental claims and related litigation;
- the Company is exposed to, and may face adverse developments involving, mass tort claims; and
- the effects of emerging claim and coverage issues on the Company’s business are uncertain, and court decisions or legislative changes that take place after the Company issues its policies can result in an unexpected increase in the number of claims.
Financial, Economic and Credit Risks
- a period of financial market disruption or an economic downturn;
- the Company’s investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses;
- the Company is exposed to credit risk related to reinsurance and structured settlements, and reinsurance coverage may not be available to the Company;
- the Company is exposed to credit risk in certain of its insurance operations and with respect to certain guarantee or indemnification arrangements that it has with third parties;
- a downgrade in the Company’s claims-paying and financial strength ratings; and
- the Company’s insurance subsidiaries may be unable to pay dividends to the Company’s holding company in sufficient amounts.
Business and Operational Risks
- the ongoing impact of COVID-19 and related risks, including with respect to revenues, claims and claim adjustment expenses, general and administrative expenses, investments, inflation, adverse legislative and/or regulatory action, operational disruptions and heightened cyber security risks;
- the intense competition that the Company faces, including with respect to attracting and retaining employees, and the impact of innovation, technological change and changing customer preferences on the insurance industry and the markets in which it operates;
- disruptions to the Company’s relationships with its independent agents and brokers or the Company’s inability to manage effectively a changing distribution landscape;
- the Company’s efforts to develop new products or services, expand in targeted markets, improve business processes and workflows or make acquisitions may not be successful and may create enhanced risks;
- the Company’s pricing and capital models may provide materially different indications than actual results;
- loss of or significant restrictions on the use of particular types of underwriting criteria, such as credit scoring, or other data or methodologies, in the pricing and underwriting of the Company’s products; and
-
the Company is subject to additional risks associated with its business outside
the United States .
Technology and Intellectual Property Risks
- as a result of cyber attacks (the risk of which could be exacerbated by geopolitical tensions) or otherwise, the Company may experience difficulties with technology, data and network security or outsourcing relationships;
- the Company’s dependence on effective information technology systems and on continuing to develop and implement improvements in technology; and
- the Company may be unable to protect and enforce its own intellectual property or may be subject to claims for infringing the intellectual property of others.
Regulatory and Compliance Risks
- changes in regulation, including higher tax rates; and
- the Company’s compliance controls may not be effective.
In addition, the Company’s share repurchase plans depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, changes in levels of written premiums, funding of the Company’s qualified pension plan, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions, changes in tax laws (including the Inflation Reduction Act) and other factors.
Our forward-looking statements speak only as of the date of this press release or as of the date they are made, and we undertake no obligation to update forward-looking statements. For a more detailed discussion of these factors, see the information under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Forward Looking Statements” in the quarterly report on Form 10-Q filed with the
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
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
|
|
Nine Months Ended
|
||||||||||
($ in millions, after-tax) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||
Net income |
|
$ |
454 |
|
$ |
662 |
|
|
$ |
2,023 |
|
$ |
2,329 |
|
Adjustments: |
|
|
|
|
|
|
|
|
||||||
Net realized investment (gains) losses |
|
|
72 |
|
|
(7 |
) |
|
|
165 |
|
|
(88 |
) |
Impact of changes in tax laws and/or tax rates (1) |
|
|
— |
|
|
— |
|
|
|
— |
|
|
(8 |
) |
Core income |
|
$ |
526 |
|
$ |
655 |
|
|
$ |
2,188 |
|
$ |
2,233 |
|
(1) Impact is recognized in the accounting period in which the change is enacted |
||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||
($ in millions, pre-tax) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||
Net income |
|
$ |
528 |
|
$ |
786 |
|
|
$ |
2,367 |
|
$ |
2,808 |
|
Adjustments: |
|
|
|
|
|
|
|
|
||||||
Net realized investment (gains) losses |
|
|
93 |
|
|
(8 |
) |
|
|
211 |
|
|
(113 |
) |
Core income |
|
$ |
621 |
|
$ |
778 |
|
|
$ |
2,578 |
|
$ |
2,695 |
|
|
|
Twelve Months Ended |
|
|
Average
|
||||||||||||||||||||
($ in millions, after-tax) |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
2017 |
|
|
2005 - 2016 |
||||||||||||
Net income |
|
$ |
3,662 |
|
|
$ |
2,697 |
|
|
$ |
2,622 |
|
|
$ |
2,523 |
|
|
$ |
2,056 |
|
|
|
$ |
3,159 |
|
Less: Loss from discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
(37 |
) |
Income from continuing operations |
|
|
3,662 |
|
|
|
2,697 |
|
|
|
2,622 |
|
|
|
2,523 |
|
|
|
2,056 |
|
|
|
|
3,196 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net realized investment (gains) losses |
|
|
(132 |
) |
|
|
(11 |
) |
|
|
(85 |
) |
|
|
(93 |
) |
|
|
(142 |
) |
|
|
|
(29 |
) |
Impact of changes in tax laws and/or tax rates (1) (2) |
|
|
(8 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
129 |
|
|
|
|
— |
|
Core income |
|
|
3,522 |
|
|
|
2,686 |
|
|
|
2,537 |
|
|
|
2,430 |
|
|
|
2,043 |
|
|
|
|
3,167 |
|
Less: Preferred dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
2 |
|
Core income, less preferred dividends |
|
$ |
3,522 |
|
|
$ |
2,686 |
|
|
$ |
2,537 |
|
|
$ |
2,430 |
|
|
$ |
2,043 |
|
|
|
$ |
3,165 |
|
(1) Impact is recognized in the accounting period in which the change is enacted |
|||||||||||||||||||||||||
(2) 2017 reflects impact of Tax Cuts and Jobs Act of 2017 (TCJA) |
|||||||||||||||||||||||||
Reconciliation of Net Income per Share to Core Income per Share on a Basic and Diluted Basis |
||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||
Basic income per share |
|
|
|
|
|
|
|
|
||||||
Net income |
|
$ |
1.91 |
|
$ |
2.65 |
|
|
$ |
8.43 |
|
$ |
9.24 |
|
Adjustments: |
|
|
|
|
|
|
|
|
||||||
Net realized investment (gains) losses, after-tax |
|
|
0.31 |
|
|
(0.02 |
) |
|
|
0.69 |
|
|
(0.35 |
) |
Impact of changes in tax laws and/or tax rates (1) |
|
|
— |
|
|
— |
|
|
|
— |
|
|
(0.03 |
) |
Core income |
|
$ |
2.22 |
|
$ |
2.63 |
|
|
$ |
9.12 |
|
$ |
8.86 |
|
Diluted income per share |
|
|
|
|
|
|
|
|
||||||
Net income |
|
$ |
1.89 |
|
$ |
2.62 |
|
|
$ |
8.34 |
|
$ |
9.16 |
|
Adjustments: |
|
|
|
|
|
|
|
|
||||||
Net realized investment (gains) losses, after-tax |
|
|
0.31 |
|
|
(0.02 |
) |
|
|
0.68 |
|
|
(0.35 |
) |
Impact of changes in tax laws and/or tax rates (1) |
|
|
— |
|
|
— |
|
|
|
— |
|
|
(0.03 |
) |
Core income |
|
$ |
2.20 |
|
$ |
2.60 |
|
|
$ |
9.02 |
|
$ |
8.78 |
|
(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
|
|
Nine Months Ended
|
||||||||||||
($ in millions, after-tax) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
|
|
$ |
471 |
|
|
$ |
558 |
|
|
$ |
1,806 |
|
|
$ |
1,518 |
|
|
|
|
242 |
|
|
|
174 |
|
|
|
687 |
|
|
|
498 |
|
|
|
|
(111 |
) |
|
|
(2 |
) |
|
|
(79 |
) |
|
|
433 |
|
Total segment income |
|
|
602 |
|
|
|
730 |
|
|
|
2,414 |
|
|
|
2,449 |
|
Interest Expense and Other |
|
|
(76 |
) |
|
|
(75 |
) |
|
|
(226 |
) |
|
|
(216 |
) |
Total core income |
|
$ |
526 |
|
|
$ |
655 |
|
|
$ |
2,188 |
|
|
$ |
2,233 |
|
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 |
|||||
($ in millions) |
|
2022 |
|
2021 |
|||
Shareholders’ equity |
|
$ |
19,906 |
|
$ |
28,474 |
|
Adjustments: |
|
|
|
|
|||
Net unrealized investment (gains) losses, net of tax, included in shareholders’ equity |
|
|
6,317 |
|
|
(2,699 |
) |
Net realized investment (gains) losses, net of tax |
|
|
165 |
|
|
(88 |
) |
Impact of changes in tax laws and/or tax rates (1) |
|
|
— |
|
|
(8 |
) |
Adjusted shareholders’ equity |
|
$ |
26,388 |
|
$ |
25,679 |
|
(1) Impact is recognized in the accounting period in which the change is enacted |
|||||||
|
|
As of |
|
|
Average
|
||||||||||||||||||||
($ in millions) |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
2017 |
|
|
2005 - 2016 |
||||||||||||
Shareholders’ equity |
|
$ |
28,887 |
|
|
$ |
29,201 |
|
|
$ |
25,943 |
|
|
$ |
22,894 |
|
|
$ |
23,731 |
|
|
|
$ |
24,883 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net unrealized investment (gains) losses, net of tax, included in shareholders’ equity |
|
|
(2,415 |
) |
|
|
(4,074 |
) |
|
|
(2,246 |
) |
|
|
113 |
|
|
|
(1,112 |
) |
|
|
|
(1,354 |
) |
Net realized investment (gains) losses, net of tax |
|
|
(132 |
) |
|
|
(11 |
) |
|
|
(85 |
) |
|
|
(93 |
) |
|
|
(142 |
) |
|
|
|
(29 |
) |
Impact of changes in tax laws and/or tax rates (1) (2) |
|
|
(8 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
287 |
|
|
|
|
— |
|
Preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
(53 |
) |
Loss from discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
37 |
|
Adjusted shareholders’ equity |
|
$ |
26,332 |
|
|
$ |
25,116 |
|
|
$ |
23,612 |
|
|
$ |
22,914 |
|
|
$ |
22,764 |
|
|
|
$ |
23,484 |
|
(1) Impact is recognized in the accounting period in which the change is enacted |
|||||||||||||||||||||||||
(2) 2017 reflects impact of Tax Cuts and Jobs Act of 2017 (TCJA) |
|||||||||||||||||||||||||
Return on equity is the ratio of annualized net income (loss) less preferred dividends to average shareholders’ equity for the periods presented. Core return on equity is the ratio of annualized core income (loss) less preferred dividends to adjusted average shareholders’ equity for the periods presented. In the opinion of the Company’s management, these are important indicators of how well management creates value for its shareholders through its operating activities and its capital management.
Average shareholders’ equity is (a) the sum of total shareholders’ equity excluding preferred stock at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two. Adjusted average shareholders’ equity is (a) the sum of total adjusted shareholders’ equity at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.
Calculation of Return on Equity and Core Return on Equity |
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
($ in millions, after-tax) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
Annualized net income |
|
$ |
1,815 |
|
|
$ |
2,645 |
|
|
$ |
2,697 |
|
|
$ |
3,105 |
|
Average shareholders’ equity |
|
|
21,390 |
|
|
|
28,815 |
|
|
|
24,267 |
|
|
|
28,754 |
|
Return on equity |
|
|
8.5 |
% |
|
|
9.2 |
% |
|
|
11.1 |
% |
|
|
10.8 |
% |
Annualized core income |
|
$ |
2,104 |
|
|
$ |
2,620 |
|
|
$ |
2,917 |
|
|
$ |
2,977 |
|
Adjusted average shareholders’ equity |
|
|
26,481 |
|
|
|
25,842 |
|
|
|
26,673 |
|
|
|
25,590 |
|
Core return on equity |
|
|
7.9 |
% |
|
|
10.1 |
% |
|
|
10.9 |
% |
|
|
11.6 |
% |
|
|
Twelve Months Ended |
|
|
Average
|
||||||||||||||||||||
($ in millions, after-tax) |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
2017 |
|
|
2005 - 2016 |
||||||||||||
Net income, less preferred dividends |
|
$ |
3,662 |
|
|
$ |
2,697 |
|
|
$ |
2,622 |
|
|
$ |
2,523 |
|
|
$ |
2,056 |
|
|
|
$ |
3,157 |
|
Average shareholders’ equity |
|
|
28,735 |
|
|
|
26,892 |
|
|
|
24,922 |
|
|
|
22,843 |
|
|
|
23,671 |
|
|
|
|
24,913 |
|
Return on equity |
|
|
12.7 |
% |
|
|
10.0 |
% |
|
|
10.5 |
% |
|
|
11.0 |
% |
|
|
8.7 |
% |
|
|
|
12.7 |
% |
Core income, less preferred dividends |
|
$ |
3,522 |
|
|
$ |
2,686 |
|
|
$ |
2,537 |
|
|
$ |
2,430 |
|
|
$ |
2,043 |
|
|
|
$ |
3,165 |
|
Adjusted average shareholders’ equity |
|
|
25,718 |
|
|
|
23,790 |
|
|
|
23,335 |
|
|
|
22,814 |
|
|
|
22,743 |
|
|
|
|
23,505 |
|
Core return on equity |
|
|
13.7 |
% |
|
|
11.3 |
% |
|
|
10.9 |
% |
|
|
10.7 |
% |
|
|
9.0 |
% |
|
|
|
13.5 |
% |
RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN ITEMS TO NET INCOME
Underwriting gain (loss) is net earned premiums and fee income less claims and claim adjustment expenses and insurance-related expenses. In the opinion of the Company’s management, it is important to measure the profitability of each segment excluding the results of investing activities, which are managed separately from the insurance business. This measure is used to assess each segment’s business performance and as a tool in making business decisions. Pre-tax underwriting gain, excluding the impact of catastrophes and net favorable (unfavorable) prior year loss reserve development, is the underwriting gain adjusted to exclude claims and claim adjustment expenses, reinstatement premiums and assessments related to catastrophes and loss reserve development related to time periods prior to the current year. In the opinion of the Company’s management, this measure is meaningful to users of the financial statements to understand the Company’s periodic earnings and the variability of earnings caused by the unpredictable nature (i.e., the timing and amount) of catastrophes and loss reserve development. This measure is also referred to as underlying underwriting gain, underlying underwriting margin, underlying underwriting income or underlying underwriting result.
A catastrophe is a severe loss designated a catastrophe by internationally recognized organizations that track and report on insured losses resulting from catastrophic events, such as Property Claim Services (PCS) for events in
The Company’s threshold for disclosing catastrophes is primarily determined at the reportable segment level. If a threshold for one segment or a combination thereof is exceeded and the other segments have losses from the same event, losses from the event are identified as catastrophe losses in the segment results and for the consolidated results of the Company. Additionally, an aggregate threshold is applied for international business across all reportable segments. The threshold for 2022 ranges from
Net favorable (unfavorable) prior year loss reserve development is the increase or decrease in incurred claims and claim adjustment expenses as a result of the re-estimation of claims and claim adjustment expense reserves at successive valuation dates for a given group of claims, which may be related to one or more prior years. In the opinion of the Company’s management, a discussion of loss reserve development is meaningful to users of the financial statements as it allows them to assess the impact between prior and current year development on incurred claims and claim adjustment expenses, net and core income (loss), and changes in claims and claim adjustment expense reserve levels from period to period.
Reconciliation of Net Income to Pre-Tax Underlying Underwriting Income (also known as Underlying Underwriting Gain) |
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
($ in millions, after-tax, except as noted) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
Net income |
|
$ |
454 |
|
|
$ |
662 |
|
|
$ |
2,023 |
|
|
$ |
2,329 |
|
Net realized investment (gains) losses |
|
|
72 |
|
|
|
(7 |
) |
|
|
165 |
|
|
|
(88 |
) |
Impact of changes in tax laws and/or tax rates (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8 |
) |
Core income |
|
|
526 |
|
|
|
655 |
|
|
|
2,188 |
|
|
|
2,233 |
|
Net investment income |
|
|
(505 |
) |
|
|
(645 |
) |
|
|
(1,639 |
) |
|
|
(1,917 |
) |
Other (income) expense, including interest expense |
|
|
69 |
|
|
|
58 |
|
|
|
202 |
|
|
|
171 |
|
Underwriting income |
|
|
90 |
|
|
|
68 |
|
|
|
751 |
|
|
|
487 |
|
Income tax expense on underwriting results |
|
|
25 |
|
|
|
7 |
|
|
|
136 |
|
|
|
129 |
|
Pre-tax underwriting income |
|
|
115 |
|
|
|
75 |
|
|
|
887 |
|
|
|
616 |
|
Pre-tax impact of net (favorable) unfavorable prior year loss reserve development |
|
|
(20 |
) |
|
|
56 |
|
|
|
(464 |
) |
|
|
(443 |
) |
Pre-tax impact of catastrophes |
|
|
512 |
|
|
|
501 |
|
|
|
1,418 |
|
|
|
1,811 |
|
Pre-tax underlying underwriting income |
|
$ |
607 |
|
|
$ |
632 |
|
|
$ |
1,841 |
|
|
$ |
1,984 |
|
(1) Impact is recognized in the accounting period in which the change is enacted |
||||||||||||||||
Reconciliation of Net Income to After-Tax Underlying Underwriting Income (also known as Underlying Underwriting Gain) |
||||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
($ in millions, after-tax) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
Net income |
|
$ |
454 |
|
|
$ |
662 |
|
|
$ |
2,023 |
|
|
$ |
2,329 |
|
Net realized investment (gains) losses |
|
|
72 |
|
|
|
(7 |
) |
|
|
165 |
|
|
|
(88 |
) |
Impact of changes in tax laws and/or tax rates (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8 |
) |
Core income |
|
|
526 |
|
|
|
655 |
|
|
|
2,188 |
|
|
|
2,233 |
|
Net investment income |
|
|
(505 |
) |
|
|
(645 |
) |
|
|
(1,639 |
) |
|
|
(1,917 |
) |
Other (income) expense, including interest expense |
|
|
69 |
|
|
|
58 |
|
|
|
202 |
|
|
|
171 |
|
Underwriting income |
|
|
90 |
|
|
|
68 |
|
|
|
751 |
|
|
|
487 |
|
Impact of net (favorable) unfavorable prior year reserve development |
|
|
(16 |
) |
|
|
44 |
|
|
|
(367 |
) |
|
|
(349 |
) |
Impact of catastrophes |
|
|
404 |
|
|
|
395 |
|
|
|
1,118 |
|
|
|
1,430 |
|
Underlying underwriting income |
|
$ |
478 |
|
|
$ |
507 |
|
|
$ |
1,502 |
|
|
$ |
1,568 |
|
(1) Impact is recognized in the accounting period in which the change is enacted |
||||||||||||||||
|
|
Twelve Months Ended |
||||||||||||||||||||||||||||||||||||||||||
($ in millions, after-tax) |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
2017 |
|
2016 |
|
2015 |
|
2014 |
|
2013 |
|
2012 |
|
2011 |
||||||||||||||||||||||
Net income |
|
$ |
3,662 |
|
|
$ |
2,697 |
|
|
$ |
2,622 |
|
|
$ |
2,523 |
|
|
$ |
2,056 |
|
|
$ |
3,014 |
|
|
$ |
3,439 |
|
|
$ |
3,692 |
|
|
$ |
3,673 |
|
|
$ |
2,473 |
|
|
$ |
1,426 |
|
Net realized investment gains |
|
|
(132 |
) |
|
|
(11 |
) |
|
|
(85 |
) |
|
|
(93 |
) |
|
|
(142 |
) |
|
|
(47 |
) |
|
|
(2 |
) |
|
|
(51 |
) |
|
|
(106 |
) |
|
|
(32 |
) |
|
|
(36 |
) |
Impact of changes in tax laws and/or tax rates (1) (2) |
|
|
(8 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
129 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Core income |
|
|
3,522 |
|
|
|
2,686 |
|
|
|
2,537 |
|
|
|
2,430 |
|
|
|
2,043 |
|
|
|
2,967 |
|
|
|
3,437 |
|
|
|
3,641 |
|
|
|
3,567 |
|
|
|
2,441 |
|
|
|
1,390 |
|
Net investment income |
|
|
(2,541 |
) |
|
|
(1,908 |
) |
|
|
(2,097 |
) |
|
|
(2,102 |
) |
|
|
(1,872 |
) |
|
|
(1,846 |
) |
|
|
(1,905 |
) |
|
|
(2,216 |
) |
|
|
(2,186 |
) |
|
|
(2,316 |
) |
|
|
(2,330 |
) |
Other (income) expense, including interest expense |
|
|
235 |
|
|
|
232 |
|
|
|
214 |
|
|
|
248 |
|
|
|
179 |
|
|
|
78 |
|
|
|
193 |
|
|
|
159 |
|
|
|
61 |
|
|
|
171 |
|
|
|
195 |
|
Underwriting income (loss) |
|
|
1,216 |
|
|
|
1,010 |
|
|
|
654 |
|
|
|
576 |
|
|
|
350 |
|
|
|
1,199 |
|
|
|
1,725 |
|
|
|
1,584 |
|
|
|
1,442 |
|
|
|
296 |
|
|
|
(745 |
) |
Impact of net (favorable) unfavorable prior year reserve development |
|
|
(424 |
) |
|
|
(276 |
) |
|
|
47 |
|
|
|
(409 |
) |
|
|
(378 |
) |
|
|
(510 |
) |
|
|
(617 |
) |
|
|
(616 |
) |
|
|
(552 |
) |
|
|
(622 |
) |
|
|
(473 |
) |
Impact of catastrophes |
|
|
1,459 |
|
|
|
1,274 |
|
|
|
699 |
|
|
|
1,355 |
|
|
|
1,267 |
|
|
|
576 |
|
|
|
338 |
|
|
|
462 |
|
|
|
387 |
|
|
|
1,214 |
|
|
|
1,669 |
|
Underlying underwriting income |
|
$ |
2,251 |
|
|
$ |
2,008 |
|
|
$ |
1,400 |
|
|
$ |
1,522 |
|
|
$ |
1,239 |
|
|
$ |
1,265 |
|
|
$ |
1,446 |
|
|
$ |
1,430 |
|
|
$ |
1,277 |
|
|
$ |
888 |
|
|
$ |
451 |
|
(1) Impact is recognized in the accounting period in which the change is enacted |
||||||||||||||||||||||||||||||||||||||||||||
(2) 2017 reflects impact of Tax Cuts and Jobs Act of 2017 (TCJA) |
||||||||||||||||||||||||||||||||||||||||||||
COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED RATIO
Combined ratio: For Statutory Accounting Practices (SAP), the combined ratio is the sum of the SAP loss and LAE ratio and the SAP underwriting expense ratio as defined in the statutory financial statements required by insurance regulators. The combined ratio, as used in this earnings release, is the equivalent of, and is calculated in the same manner as, the SAP combined ratio except that the SAP underwriting expense ratio is based on net written premiums and the underwriting expense ratio as used in this earnings release is based on net earned premiums.
For SAP, the loss and LAE ratio is the ratio of incurred losses and loss adjustment expenses less certain administrative services fee income to net earned premiums as defined in the statutory financial statements required by insurance regulators. The loss and LAE ratio as used in this earnings release is calculated in the same manner as the SAP ratio.
For SAP, the underwriting expense ratio is the ratio of underwriting expenses incurred (including commissions paid), less certain administrative services fee income and billing and policy fees and other, to net written premiums as defined in the statutory financial statements required by insurance regulators. The underwriting expense ratio as used in this earnings release, is the ratio of underwriting expenses (including the amortization of deferred acquisition costs), less certain administrative services fee income, billing and policy fees and other, to net earned premiums.
The combined ratio, loss and LAE ratio, and underwriting expense ratio are used as indicators of the Company’s underwriting discipline, efficiency in acquiring and servicing its business and overall underwriting profitability. A combined ratio under
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
|
||||||||||||
($ in millions, pre-tax) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||
Loss and loss adjustment expense ratio |
|
|
|
|
|
|
|
|
||||||||
Claims and claim adjustment expenses |
|
$ |
6,088 |
|
|
$ |
5,464 |
|
|
$ |
16,930 |
|
|
$ |
15,479 |
|
Less: |
|
|
|
|
|
|
|
|
||||||||
Policyholder dividends |
|
|
14 |
|
|
|
10 |
|
|
|
31 |
|
|
|
31 |
|
Allocated fee income |
|
|
38 |
|
|
|
36 |
|
|
|
112 |
|
|
|
113 |
|
Loss ratio numerator |
|
$ |
6,036 |
|
|
$ |
5,418 |
|
|
$ |
16,787 |
|
|
$ |
15,335 |
|
Underwriting expense ratio |
|
|
|
|
|
|
|
|
||||||||
Amortization of deferred acquisition costs |
|
$ |
1,406 |
|
|
$ |
1,281 |
|
|
$ |
4,081 |
|
|
$ |
3,742 |
|
General and administrative expenses (G&A) |
|
|
1,193 |
|
|
|
1,187 |
|
|
|
3,607 |
|
|
|
3,524 |
|
Less: |
|
|
|
|
|
|
|
|
||||||||
Non-insurance G&A |
|
|
83 |
|
|
|
81 |
|
|
|
252 |
|
|
|
228 |
|
Allocated fee income |
|
|
66 |
|
|
|
61 |
|
|
|
195 |
|
|
|
189 |
|
Billing and policy fees and other |
|
|
27 |
|
|
|
27 |
|
|
|
81 |
|
|
|
81 |
|
Expense ratio numerator |
|
$ |
2,423 |
|
|
$ |
2,299 |
|
|
$ |
7,160 |
|
|
$ |
6,768 |
|
Earned premium |
|
$ |
8,615 |
|
|
$ |
7,829 |
|
|
$ |
24,946 |
|
|
$ |
22,831 |
|
Combined ratio (1) |
|
|
|
|
|
|
|
|
||||||||
Loss and loss adjustment expense ratio |
|
|
70.1 |
% |
|
|
69.2 |
% |
|
|
67.3 |
% |
|
|
67.2 |
% |
Underwriting expense ratio |
|
|
28.1 |
% |
|
|
29.4 |
% |
|
|
28.7 |
% |
|
|
29.6 |
% |
Combined ratio |
|
|
98.2 |
% |
|
|
98.6 |
% |
|
|
96.0 |
% |
|
|
96.8 |
% |
Impact on combined ratio: |
|
|
|
|
|
|
|
|
||||||||
Net (favorable) unfavorable prior year reserve development |
|
|
(0.2 |
) % |
|
|
0.8 |
% |
|
|
(1.9 |
) % |
|
|
(1.9 |
) % |
Catastrophes, net of reinsurance |
|
|
5.9 |
% |
|
|
6.4 |
% |
|
|
5.7 |
% |
|
|
7.9 |
% |
Underlying combined ratio |
|
|
92.5 |
% |
|
|
91.4 |
% |
|
|
92.2 |
% |
|
|
90.8 |
% |
(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. These allocations are to conform the calculation of the combined ratio with statutory accounting. Additionally, general and administrative expenses include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio. |
RECONCILIATION OF BOOK VALUE PER SHARE AND SHAREHOLDERS’ EQUITY TO CERTAIN NON-GAAP MEASURES
Book value per share is total common shareholders’ equity divided by the number of common shares outstanding. Adjusted book value per share is total common shareholders’ equity excluding net unrealized investment gains and losses, net of tax, included in shareholders’ equity, divided by the number of common shares outstanding. In the opinion of the Company’s management, adjusted book value per share is useful in an analysis of a property casualty company’s book value per share as it removes the effect of changing prices on invested assets (i.e., net unrealized investment gains (losses), net of tax), which do not have an equivalent impact on unpaid claims and claim adjustment expense reserves. Tangible book value per share is adjusted book value per share excluding the after-tax value of goodwill and other intangible assets divided by the number of common shares outstanding. In the opinion of the Company’s management, tangible book value per share is useful in an analysis of a property casualty company’s book value on a nominal basis as it removes certain effects of purchase accounting (i.e., goodwill and other intangible assets), in addition to the effect of changing prices on invested assets.
Reconciliation of Shareholders’ Equity to Tangible Shareholders’ Equity, Excluding Net Unrealized Investment Gains (Losses), Net of Tax |
||||||||||||
|
|
As of |
||||||||||
($ in millions, except per share amounts) |
|
|
|
|
|
|
||||||
Shareholders’ equity |
|
$ |
19,906 |
|
|
$ |
28,887 |
|
|
$ |
28,474 |
|
Less: Net unrealized investment gains (losses), net of tax, included in shareholders’ equity |
|
|
(6,317 |
) |
|
|
2,415 |
|
|
|
2,699 |
|
Shareholders’ equity, excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity |
|
|
26,223 |
|
|
|
26,472 |
|
|
|
25,775 |
|
Less: |
|
|
|
|
|
|
||||||
|
|
|
3,922 |
|
|
|
4,008 |
|
|
|
4,005 |
|
Other intangible assets |
|
|
287 |
|
|
|
306 |
|
|
|
309 |
|
Impact of deferred tax on other intangible assets |
|
|
(54 |
) |
|
|
(66 |
) |
|
|
(63 |
) |
Tangible shareholders’ equity, excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity |
|
$ |
22,068 |
|
|
$ |
22,224 |
|
|
$ |
21,524 |
|
Common shares outstanding |
|
|
234.3 |
|
|
|
241.2 |
|
|
|
246.0 |
|
Book value per share |
|
$ |
84.94 |
|
|
$ |
119.77 |
|
|
$ |
115.74 |
|
Adjusted book value per share |
|
|
111.90 |
|
|
|
109.76 |
|
|
|
104.77 |
|
Tangible book value per share, excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity |
|
|
94.17 |
|
|
|
92.15 |
|
|
|
87.49 |
|
RECONCILIATION OF TOTAL CAPITALIZATION TO TOTAL CAPITALIZATION EXCLUDING NET UNREALIZED INVESTMENT GAINS (LOSSES), NET OF TAX
Total capitalization is the sum of total shareholders’ equity and debt. Debt-to-capital ratio excluding net unrealized gain (loss) on investments, net of tax, included in shareholders’ equity, is the ratio of debt to total capitalization excluding the after-tax impact of net unrealized investment gains and losses included in shareholders’ equity. In the opinion of the Company’s management, the debt-to-capital ratio is useful in an analysis of the Company’s financial leverage.
|
|
As of |
||||||
($ in millions) |
|
|
|
|
||||
Debt |
|
$ |
7,291 |
|
|
$ |
7,290 |
|
Shareholders’ equity |
|
|
19,906 |
|
|
|
28,887 |
|
Total capitalization |
|
|
27,197 |
|
|
|
36,177 |
|
Less: Net unrealized investment gains (losses), net of tax, included in shareholders’ equity |
|
|
(6,317 |
) |
|
|
2,415 |
|
Total capitalization excluding net unrealized gain (loss) on investments, net of tax, included in shareholders’ equity |
|
$ |
33,514 |
|
|
$ |
33,762 |
|
Debt-to-capital ratio |
|
|
26.8 |
% |
|
|
20.2 |
% |
Debt-to-capital ratio excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity |
|
|
21.8 |
% |
|
|
21.6 |
% |
RECONCILIATION OF INVESTED ASSETS TO INVESTED ASSETS EXCLUDING NET UNREALIZED INVESTMENT GAINS (LOSSES)
|
|
As of |
|||||
($ in millions, pre-tax) |
|
2022 |
|
2021 |
|||
Invested assets |
|
$ |
78,113 |
|
|
$ |
87,506 |
Less: Net unrealized investment gains (losses), pre-tax |
|
|
(8,021 |
) |
|
|
3,426 |
Invested assets excluding net unrealized investment gains (losses) |
|
$ |
86,134 |
|
|
$ |
84,080 |
|
|
As of |
||||||||||||||||||||||||||||||||
($ in millions, pre-tax) |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
2017 |
|
2016 |
|
2015 |
|
2014 |
|
2013 |
|
2012 |
|
2011 |
||||||||||||
Invested assets |
|
$ |
87,375 |
|
$ |
84,423 |
|
$ |
77,884 |
|
$ |
72,278 |
|
|
$ |
72,502 |
|
$ |
70,488 |
|
$ |
70,470 |
|
$ |
73,261 |
|
$ |
73,160 |
|
$ |
73,838 |
|
$ |
72,701 |
Less: Net unrealized investment gains (losses), pre-tax |
|
|
3,060 |
|
|
5,175 |
|
|
2,853 |
|
|
(137 |
) |
|
|
1,414 |
|
|
1,112 |
|
|
1,974 |
|
|
3,008 |
|
|
2,030 |
|
|
4,761 |
|
|
4,399 |
Invested assets excluding net unrealized investment gains (losses) |
|
$ |
84,315 |
|
$ |
79,248 |
|
$ |
75,031 |
|
$ |
72,415 |
|
|
$ |
71,088 |
|
$ |
69,376 |
|
$ |
68,496 |
|
$ |
70,253 |
|
$ |
71,130 |
|
$ |
69,077 |
|
$ |
68,302 |
OTHER DEFINITIONS
Gross written premiums reflect the direct and assumed contractually determined amounts charged to policyholders for the effective period of the contract based on the terms and conditions of the insurance contract. Net written premiums reflect gross written premiums less premiums ceded to reinsurers.
For
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
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FAQ
What were Travelers' Q3 2022 net income results?
How did Travelers' core income change in Q3 2022?
What is the combined ratio for Travelers in Q3 2022?
How much did Travelers return to shareholders in Q3 2022?
What was the impact of catastrophe losses on Travelers' Q3 2022 results?
