Travelers Reports Net Income per Diluted Share of $2.21 and Quarterly Record Operating Income per Di
Travelers Reports Net Income per Diluted Share of $2.21 and Quarterly Record Operating Income per Diluted Share of $2.22 for the Third Quarter
Operating Return on Equity and Return on Equity of 15.5% and 13.6%, Respectively
- Operating and net income of $867 million and $864 million, respectively.
- Underlying underwriting margin improvement continued across all segments, and net investment income remained strong due to alternative investment performance.
- Written rate gains were strong across all segments.
- Book value per share of $67.81, up 11% from end of prior year quarter and 9% from year-end 2011.
- Board of Directors approved quarterly dividend per share of $0.46.
NEW YORK--(BUSINESS WIRE)-- The Travelers Companies, Inc. today reported net income of $864 million, or $2.21 per diluted share, for the quarter ended September 30, 2012, compared to $333 million, or $0.79 per diluted share, in the prior year quarter. Operating income in the current quarter was $867 million, or $2.22 per diluted share, compared to $332 million, or $0.79 per diluted share, in the prior year quarter. The increase in net and operating income in the current quarter compared to the prior year quarter was primarily driven by lower catastrophe losses and higher underlying underwriting results. Catastrophe losses in the current quarter were $59 million after tax ($91 million pre tax), compared to $394 million after tax ($606 million pre tax) in the prior year quarter.
|($ in millions, except for per share amounts, and after-tax, except for premiums & revenues)||Three Months Ended September 30,||Nine Months Ended September 30,|
|Net written premiums||$||5,697||$||5,672||-||%||$||17,062||$||16,926||1||%|
per diluted share
|per diluted share||$||2.21||$||0.79||180||$||5.50||$||1.88||193|
Diluted weighted average shares outstanding
|GAAP combined ratio||90.3||%||104.5||%||(14.2||)||pts||94.3||%||108.2||%||(13.9||)||pts|
|Operating return on equity||15.5||%||5.9||%||9.6||pts||13.1||%||4.5||%||8.6||pts|
|Return on equity||13.6||%||5.3||%||8.3||pts||11.6||%||4.3||%||7.3||pts|
|As of September 30,|
|Book value per share||$||67.81||$||60.98||11||%|
|Adjusted book value per share||$||59.13||$||54.53||8|
|See Glossary of Financial Measures for definitions and the statistical supplement for additional financial data.|
"We are very pleased with our strong results this quarter," commented Jay Fishman, Chairman and Chief Executive Officer. "Our underwriting performance reflected a GAAP combined ratio of 90.3%, which benefited from lower weather-related losses as well as the rate gains we have achieved during the past year. Net investment income benefited from strong results in our non-fixed income portfolio.
"We are also very pleased with our continued execution in the marketplace, noting in particular that we once again achieved written rate gains across each of our segments. In Business Insurance, we continue to leverage our data and analytics to achieve targeted rate gains in order to drive profitability. Our results this quarter demonstrate our success in this strategy as our underlying combined ratio improved meaningfully. In Financial, Professional and International Insurance, renewal rate change improvements from recent quarters were driven by Management Liability, which reported rate gains of more than 6 percent. In Personal Insurance, we again achieved strong increases in renewal premium change, which includes rate as well as changes in exposure, across the segment, as well as targeted changes in terms and conditions within Agency Homeowners & Other.
"We remain committed to continuing to improve profitability through a strategy of actively, but selectively, seeking price increases and improved terms and conditions, given historically low interest rates and uncertain weather patterns," concluded Fishman.
Third Quarter 2012 Consolidated Results
|($ in millions)||Three Months Ended September 30,|
|Underwriting gain (loss)||$||514||$||(289||)||$||327||$||(185||)|
Underwriting gain (loss) includes:
|Net favorable prior year reserve development||193||184||129||124|
|Catastrophes, net of reinsurance||(91||)||(606||)||(59||)||(394||)|
|Net investment income||722||690||578||561|
|Other, including interest expense||(64||)||(71||)||(38||)||(44||)|
|Net realized investment gains (losses)||(2||)||2||(3||)||1|
|Income before income taxes||$||1,170||$||332|
|GAAP combined ratio||90.3||%||104.5||%|
GAAP combined ratio excluding incremental impact of direct to consumer initiative
Impact on GAAP combined ratio
|Net favorable prior year reserve development||(3.4||)||pts||(3.3||)||pts|
|Catastrophes, net of reinsurance||1.6||pts||10.8||pts|
Operating income of $867 million after tax increased $535 million from the prior year quarter mostly due to a $512 million after-tax improvement in the underwriting results, reflecting lower catastrophe losses and higher underlying underwriting margins.
The underwriting gain in the current quarter reflected a GAAP combined ratio of 90.3 percent, as compared to 104.5 percent in the prior year quarter. This improvement of 14.2 points in the combined ratio was primarily due to lower catastrophe losses (9.2 points) and higher underlying underwriting margins (4.9 points). Catastrophe losses in the current quarter were primarily driven by increases in estimated losses related to wind and hail storms that occurred in the second quarter 2012. Also included in the current quarter underwriting gain was net favorable prior year reserve development in all three segments.
The current quarter underlying underwriting gain, which excludes net favorable prior year reserve development and catastrophe losses, reflected a GAAP combined ratio of 92.1 percent, as compared to 97.0 percent in the prior year quarter. This improvement of 4.9 points primarily resulted from lower non-catastrophe weather-related losses as well as earned rate increases exceeding loss cost trends.
Total revenues of $6.512 billion in the current quarter increased $105 million or 2 percent from the prior year quarter. Within total revenues, earned premiums and net investment income increased $61 million and $32 million, respectively. The modest increase in net investment income was due to the non-fixed income portfolio driven by real estate partnerships and hedge fund performance. Net investment income in the fixed income portfolio decreased slightly from the prior year quarter primarily due to lower reinvestment rates.
Net written premiums of $5.697 billion in the current quarter were approximately the same as the prior year quarter. Renewal rate gains continued across all segments. Retention rates remained strong across each segment and were generally consistent with recent quarters. New business volumes were lower than the prior year quarter in all segments, largely as a result of the company's pricing strategy. Net written premiums in Business Insurance also benefited from continued positive exposure change at renewal, as well as a meaningfully higher level of positive audit premiums compared to the prior year quarter.
"Our $1.5 billion of cash flows from operating activities during the quarter were the highest level since the third quarter of 2007," commented Jay S. Benet, Vice Chairman and Chief Financial Officer. "We repurchased 5.4 million shares for $350 million and dividends were $179 million, bringing the year-to-date total capital returned to shareholders to over $1.5 billion."
At the end of the third quarter of 2012, shareholders' equity was $25.905 billion, a 6 percent increase from the end of the prior year. Included in shareholders' equity at the end of the third quarter of 2012 were after-tax net unrealized investment gains of $3.315 billion, compared to $2.871 billion at year-end 2011. Statutory surplus was $20.291 billion, up $1.117 billion from the beginning of the year. The company's debt-to-capital ratio (excluding after-tax net unrealized investment gains) was 21.9 percent, well within its target range, and holding company liquidity was $2.042 billion.
The Board of Directors declared a quarterly dividend of $0.46 per common share. This dividend is payable December 31, 2012, to shareholders of record as of the close of business on December 10, 2012.
Business Insurance Segment Financial Results
"In Business Insurance, our strong results this quarter were driven in large part by lower weather-related losses and previously achieved rate gains," commented Brian MacLean, President and Chief Operating Officer. "We continued to achieve broad based written rate increases across the segment, led by Workers' Compensation and Commercial Auto, along with improved retentions. We are encouraged by our progress so far and plan on continuing this strategy."
|($ in millions)||Three Months Ended September 30,|
|Underwriting gain (loss)||$||187||$||(167||)||$||117||$||(110||)|
Underwriting gain (loss) includes:
|Net favorable prior year reserve development||41||26||27||17|
|Catastrophes, net of reinsurance||(50||)||(195||)||(33||)||(127||)|
|Net investment income||524||487||419||398|
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