Travelers Reports Record Net Income per Diluted Share of $2.41, Up 91% from Prior Year Quarter

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Travelers Reports Record Net Income per Diluted Share of $2.41, Up 91% from Prior Year Quarter

Operating Income per Diluted Share of $2.13, Up 69% from Prior Year Quarter

Return on Equity and Operating Return on Equity of 14.6% and 14.2%, Respectively

  • Net and operating income of $925 million and $816 million increased from $499 million and $495 million, respectively, in the prior year quarter.
  • Increase driven by lower catastrophe losses as well as continued improvement in underlying underwriting margins in all segments.
  • Net and operating income benefited $122 million after-tax from favorable tax and legal settlements. In addition, net income benefited $109 million after-tax from net realized investment gains.
  • Written rate gains continued to exceed expected loss cost trends in all segments.
  • Repurchased 3.6 million shares for $300 million in the quarter.
  • Adjusted book value per share (excludes after-tax net unrealized investment gains) of $62.12, up 5% from year-end 2012. Book value per share of $66.65, down 1% due to the impact of the increase in interest rates on net unrealized investment gains.

NEW YORK--(BUSINESS WIRE)-- The Travelers Companies, Inc. today reported net income of $925 million, or $2.41 per diluted share, for the quarter ended June 30, 2013, compared to $499 million, or $1.26 per diluted share, in the prior year quarter. Operating income in the current quarter was $816 million, or $2.13 per diluted share, compared to $495 million, or $1.26 per diluted share, in the prior year quarter. The increase in net and operating income compared to the prior year quarter primarily resulted from lower catastrophe losses, higher underlying underwriting margins (i.e., excluding net favorable prior year reserve development and catastrophe losses), and favorable tax and legal settlements, partially offset by lower net investment income and lower net favorable prior year reserve development. Net income also benefited from higher net realized investment gains.

Consolidated Highlights

        

($ in millions, except for per share amounts, and after-tax, except for premiums & revenues)

 Three Months Ended June 30,   Six Months Ended June 30, 
2013 2012 Change2013 2012 Change
 
Net written premiums$5,824$5,868(1)%$11,421$11,365

-

%

 
 
Total revenues$6,674$6,3595$13,002$12,7512
 
Operating income$816$49565$1,703$1,29631
per diluted share$2.13$1.2669$4.44$3.2736
 
Net income$925$49985$1,821$1,30540
per diluted share$2.41$1.2691$4.75$3.2944
 

Diluted weighted average shares outstanding

379.9391.6(3)380.8393.5(3)
 
GAAP combined ratio94.3%100.5%(6.2)pts91.4%96.3%(4.9)pts
 
Underlying GAAP combined ratio91.7%94.5%(2.8)pts91.3%94.6%(3.3)pts
 
Operating return on equity

14.2

%9.0%5.2pts15.0%11.8%3.2pts

 

 

Return on equity14.6%8.0%6.6pts14.4%10.5%3.9pts
 

Change from

June 30,

December 31,

June 30,

December 31,

June 30,

2013

2012

2012

2012

2012

 

Book value per share

$

66.65

$

67.31

$  64.90

 

(1

)%

 

3

%

 

 

Adjusted book value per share

 

62.12

 

59.09

57.18

 

5

 

9

 

 
See Glossary of Financial Measures for definitions and the statistical supplement for additional financial data.
 

"Results for the quarter were very strong, with net income of $925 million and return on equity of 14.6%," commented Jay Fishman, Chairman and Chief Executive Officer. "Operating return on equity was 14.2% for the quarter and 15.0% on a year-to-date basis, a significant improvement over prior year results primarily due to lower catastrophe losses and continued improvement in our underlying underwriting margins.

"We are very pleased with the pricing levels we achieved, which once again exceeded expected loss cost trends in all segments, while maintaining solid retentions. Across our commercial insurance businesses, our ability to segment, price and select risk positions us well to continue to improve profitability. In Personal Insurance, our strategy of seeking price increases and improved terms and conditions has improved profitability, but it has continued to negatively impact premiums.

"In June, we reached an agreement to acquire The Dominion of Canada General Insurance Company, part of our strategy of making targeted investments in attractive markets outside the United States. The Dominion will significantly improve Travelers' market position and scale in Canada, and we are very enthusiastic about this opportunity.

"Given our focus on improving profitability, the underwriting results over recent quarters are gratifying. However, given the environment of low interest rates and volatile weather patterns, we will continue to seek higher margins. With improved returns as well as our strategy of returning excess capital to shareholders, we remain well positioned to deliver shareholder value," concluded Mr. Fishman.

Consolidated Results

 
($ in millions and pre-tax, unless noted otherwise)             
Three Months Ended June 30,Six Months Ended June 30,
20132012Change20132012Change
 
Underwriting gain (loss):$281$(62)$343$883$331$552

Underwriting gain (loss) includes:

Net favorable prior year reserve development192221(29)423525(102)
Catastrophes, net of reinsurance(340)(549)209(439)(717)278
 
Net investment income687738(51)1,3571,478(121)
 
Other, including interest expense 42  (72) 114  (20) (138) 118 
Operating income before income taxes1,0106044062,2201,671549
Income tax expense 194  109  85  517  375  142 
Operating income8164953211,7031,296407
Net realized investment gains after income taxes 109  4  105  118  9  109 
Net Income$925 $499 $426 $1,821 $1,305 $516 
 
 
GAAP combined ratio94.3%100.5%(6.2)pts91.4%96.3%(4.9)pts
 

Impact on GAAP combined ratio

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