Second Quarter 2022 Net Income per Diluted
Share of $2.27 and Return on Equity of 9.1%
Second Quarter 2022 Core Income per Diluted
Share of $2.57 and Core Return on Equity of 9.3%
- Second quarter net income of $551 million and core income of
$625 million.
- Consolidated combined ratio of 98.3% and underlying combined
ratio of 92.8%.
- Catastrophe losses of $746 million pre-tax compared to $475
million pre-tax in the prior year quarter.
- Record net written premiums of $9.020 billion, up 11% compared
to the prior year quarter.
- Double-digit net written premium growth in all three segments
compared to the prior year quarter; Business Insurance up 10%, Bond
& Specialty Insurance up 13% and Personal Insurance up
12%.
- Total capital returned to shareholders of $725 million,
including $500 million of share repurchases.
- Book value per share of $96.39, down 18% from June 30, 2021
driven by higher interest rates; adjusted book value per share of
$112.37, up 8% from June 30, 2021.
- Board of Directors declares regular cash dividend of $0.93 per
share.
The Travelers Companies, Inc. today reported net income of $551
million, or $2.27 per diluted share, for the quarter ended June 30,
2022, compared to $934 million, or $3.66 per diluted share, in the
prior year quarter. Core income in the current quarter was $625
million, or $2.57 per diluted share, compared to $879 million, or
$3.45 per diluted share, in the prior year quarter. Core income
decreased primarily due to higher catastrophe losses, lower net
investment income and a lower underlying underwriting gain (i.e.,
excluding net prior year reserve development and catastrophe
losses), partially offset by higher net favorable prior year
reserve development. Core income in the prior year quarter
benefited from a low level of catastrophe losses and very strong
net investment income driven by record returns in the alternative
investment portfolio. Net realized investment losses in the current
quarter were $95 million pre-tax ($74 million after-tax), compared
to net realized investment gains of $61 million pre-tax ($47
million after-tax) in the prior year quarter. Net realized
investment gains (losses) for both quarters were primarily driven
by mark-to-market impacts on the Company’s equity investments. Per
diluted share amounts benefited from the impact of share
repurchases.
Consolidated Highlights
($ in millions, except for per share
amounts, and after-tax, except for premiums and revenues)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
Change
2022
2021
Change
Net written premiums
$
9,020
$
8,135
11
%
$
17,387
$
15,640
11
%
Total revenues
$
9,136
$
8,687
5
$
17,945
$
17,000
6
Net income
$
551
$
934
(41
)
$
1,569
$
1,667
(6
)
per diluted share
$
2.27
$
3.66
(38
)
$
6.43
$
6.53
(2
)
Core income
$
625
$
879
(29
)
$
1,662
$
1,578
5
per diluted share
$
2.57
$
3.45
(26
)
$
6.81
$
6.18
10
Diluted weighted average shares
outstanding
241.1
253.1
(5
)
242.4
253.6
(4
)
Combined ratio
98.3
%
95.3
%
3.0
pts
94.8
%
95.9
%
(1.1
)
pts
Underlying combined ratio
92.8
%
91.4
%
1.4
pts
92.0
%
90.5
%
1.5
pts
Return on equity
9.1
%
13.0
%
(3.9
)
pts
12.2
%
11.6
%
0.6
pts
Core return on equity
9.3
%
13.7
%
(4.4
)
pts
12.4
%
12.4
%
—
pts
As of
Change From
June 30, 2022
December 31,
2021
June 30, 2021
December 31,
2021
June 30, 2021
Book value per share
$
96.39
$
119.77
$
116.86
(20
)%
(18
)%
Adjusted book value per
share
112.37
109.76
103.88
2
%
8
%
See Glossary of Financial
Measures for definitions and the statistical supplement for
additional financial data.
“We are pleased to report very strong second quarter 2022
results, with both underwriting and investment income contributing
meaningfully to our performance,” said Alan Schnitzer, Chairman and
Chief Executive Officer. “Core income for the quarter was $625
million, or $2.57 per diluted share, generating core return on
equity of 9.3%. These results benefited from record net earned
premiums of $8.3 billion, which were 9% higher than in the prior
year period, and a solid underlying combined ratio of 92.8%.
Underwriting income in our commercial business segments was
particularly strong. Our high-quality investment portfolio
generated after-tax net investment income of $595 million. These
results, along with our strong balance sheet, enabled us to return
$725 million of excess capital to our shareholders this quarter,
including $500 million of share repurchases.
“Our best-in-class marketplace execution produced 11% growth in
net written premiums this quarter to a record $9 billion, with each
of our three segments growing double digits. In Business Insurance,
net written premiums grew by 10%. Renewal premium change was
historically high at 10.3% and included renewal rate change of
4.9%, both higher compared to the first quarter of 2022. Retention
remained very strong at 86%. In Bond & Specialty Insurance, net
written premiums increased by 13%, driven by excellent production
results in both our surety and management liability businesses. In
Personal Insurance, renewal premium change was meaningfully higher
both year over year and sequentially in both Auto and Homeowners,
driving net written premium growth of 12%.
“Building on our excellent results in the first half of the
year, we are confident about our outlook. Benefiting from the
investments we have made and continue to make as part of our
Perform and Transform call to action, guided by our decades of
experience successfully executing in a variety of macro-economic
conditions and supported by an outlook for improving fixed income
returns, we remain well positioned to deliver industry-leading
returns and shareholder value over time.”
Consolidated Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2022
2021
Change
2022
2021
Change
Underwriting gain:
$
113
$
324
$
(211
)
$
772
$
541
$
231
Underwriting gain
includes:
Net favorable prior year reserve
development
291
182
109
444
499
(55
)
Catastrophes, net of reinsurance
(746
)
(475
)
(271
)
(906
)
(1,310
)
404
Net investment income
707
818
(111
)
1,344
1,519
(175
)
Other income (expense), including
interest expense
(68
)
(72
)
4
(159
)
(143
)
(16
)
Core income before income taxes
752
1,070
(318
)
1,957
1,917
40
Income tax expense
127
191
(64
)
295
339
(44
)
Core income
625
879
(254
)
1,662
1,578
84
Net realized investment gains (losses)
after income taxes
(74
)
47
(121
)
(93
)
81
(174
)
Impact of changes in tax laws and/or
tax rates (1)
—
8
(8
)
—
8
(8
)
Net income
$
551
$
934
$
(383
)
$
1,569
$
1,667
$
(98
)
Combined ratio
98.3
%
95.3
%
3.0
pts
94.8
%
95.9
%
(1.1
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(3.5
)
pts
(2.4
)
pts
(1.1
)
pts
(2.7
)
pts
(3.3
)
pts
0.6
pts
Catastrophes, net of reinsurance
9.0
pts
6.3
pts
2.7
pts
5.5
pts
8.7
pts
(3.2
)
pts
Underlying combined ratio
92.8
%
91.4
%
1.4
pts
92.0
%
90.5
%
1.5
pts
Net written premiums
Business Insurance
$
4,373
$
3,980
10
%
$
8,875
$
8,105
10
%
Bond & Specialty Insurance
962
854
13
1,844
1,577
17
Personal Insurance
3,685
3,301
12
6,668
5,958
12
Total
$
9,020
$
8,135
11
%
$
17,387
$
15,640
11
%
(1) Impact is recognized in the
accounting period in which the change is enacted
Second Quarter 2022 Results
(All comparisons vs. second quarter 2021, unless noted
otherwise)
Net income of $551 million decreased $383 million, due to lower
core income and net realized investment losses compared to net
realized investment gains in the prior year quarter. Core income of
$625 million decreased $254 million, primarily due to higher
catastrophe losses, lower net investment income and a lower
underlying underwriting gain, partially offset by higher net
favorable prior year reserve development. The underlying
underwriting gain benefited from higher business volumes. Net
realized investment losses were $95 million pre-tax ($74 million
after-tax), compared to net realized investment gains of $61
million pre-tax ($47 million after-tax) in the prior year
quarter.
Combined ratio:
- The combined ratio of 98.3% increased 3.0 points due to higher
catastrophe losses (2.7 points) and a higher underlying combined
ratio (1.4 points), partially offset by higher net favorable prior
year reserve development (1.1 points).
- The underlying combined ratio of 92.8% increased 1.4 points.
See below for further details by segment.
- Net favorable prior year reserve development occurred in all
three segments. See below for further details by segment.
Catastrophe losses primarily resulted from severe wind and hail
storms in several regions of the United States.
Net investment income of $707 million pre-tax ($595 million
after-tax) decreased 14%. Income from the non-fixed income
investment portfolio decreased from the prior year quarter,
primarily due to lower private equity partnership returns as
compared to record returns in the prior year quarter. Non-fixed
income returns are generally reported on a one-quarter lagged basis
and directionally follow the broader equity markets. Income from
the fixed income investment portfolio increased over the prior year
quarter, primarily due to growth in fixed maturity investments,
partially offset by a lower average yield.
Net written premiums of $9.020 billion increased 11%. See below
for further details by segment.
Year-to-Date 2022 Results
(All comparisons vs. year-to-date 2021, unless noted otherwise)
Net income of $1.569 billion decreased $98 million, primarily
due to net realized investment losses compared to net realized
investment gains in the prior year period, partially offset by
higher core income. Core income of $1.662 billion increased $84
million, primarily due to lower catastrophe losses, partially
offset by lower net investment income, lower net favorable prior
year reserve development and a lower underlying underwriting gain.
The underlying underwriting gain benefited from higher business
volumes and a $47 million benefit relating to the resolution of
prior year income tax matters. Net realized investment losses were
$118 million pre-tax ($93 million after-tax), compared to net
realized investment gains of $105 million pre-tax ($81 million
after-tax) in the prior year period.
Combined ratio:
- The combined ratio of 94.8% improved 1.1 points due to lower
catastrophe losses (3.2 points), partially offset by a higher
underlying combined ratio (1.5 points) and lower net favorable
prior year reserve development (0.6 points).
- The underlying combined ratio of 92.0% increased 1.5 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 second quarter events described above, as well
as wind storms in multiple states in the first quarter of
2022.
Net investment income of $1.344 billion pre-tax ($1.134 billion
after-tax) decreased 12% driven by the same factors described above
for second quarter 2022.
Net written premiums of $17.387 billion increased 11%. See below
for further details by segment.
Shareholders’ Equity
Shareholders’ equity of $22.874 billion decreased 21% from
year-end 2021, primarily due to net unrealized investment losses
compared to net unrealized investment gains at year-end 2021,
common share repurchases and dividends to shareholders, partially
offset by net income of $1.569 billion. Net unrealized investment
losses included in shareholders’ equity were $4.817 billion pre-tax
($3.792 billion after-tax) compared to net unrealized investment
gains of $3.060 billion pre-tax ($2.415 billion after-tax) at
year-end 2021, resulting from higher interest rates. Book value per
share of $96.39 decreased 18% from June 30, 2021 and 20% from
year-end 2021. Adjusted book value per share of $112.37, which
excludes net unrealized investment gains (losses), increased 8%
over June 30, 2021 and 2% over year-end 2021.
The Company repurchased 2.9 million shares during the second
quarter at an average price of $172.57 per share for a total of
$500 million. At June 30, 2022, the Company had $3.005 billion of
capacity remaining under its share repurchase authorization
approved by the Board of Directors. At the end of the quarter,
statutory capital and surplus was $23.776 billion, and the ratio of
debt-to-capital was 24.2%. The ratio of debt-to-capital excluding
after-tax net unrealized investment gains (losses) included in
shareholders’ equity was 21.5%, within the Company’s target range
of 15% to 25%.
The Board of Directors declared a regular quarterly dividend of
$0.93 per share. The dividend is payable September 30, 2022 to
shareholders of record at the close of business on September 9,
2022.
Business
Insurance Segment Financial Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2022
2021
Change
2022
2021
Change
Underwriting gain:
$
281
$
173
$
108
$
639
$
29
$
610
Underwriting gain
includes:
Net favorable prior year reserve
development
202
73
129
315
207
108
Catastrophes, net of reinsurance
(234
)
(149
)
(85
)
(313
)
(655
)
342
Net investment income
521
615
(94
)
989
1,138
(149
)
Other income (expense)
12
(8
)
20
(5
)
(15
)
10
Segment income before income
taxes
814
780
34
1,623
1,152
471
Income tax expense
148
137
11
288
192
96
Segment income
$
666
$
643
$
23
$
1,335
$
960
$
375
Combined ratio
93.2
%
95.3
%
(2.1
)
pts
92.1
%
99.3
%
(7.2
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(4.8
)
pts
(1.9
)
pts
(2.9
)
pts
(3.8
)
pts
(2.7
)
pts
(1.1
)
pts
Catastrophes, net of reinsurance
5.6
pts
3.9
pts
1.7
pts
3.8
pts
8.5
pts
(4.7
)
pts
Underlying combined ratio
92.4
%
93.3
%
(0.9
)
pts
92.1
%
93.5
%
(1.4
)
pts
Net written premiums by market
Domestic
Select Accounts
$
807
$
726
11
%
$
1,626
$
1,455
12
%
Middle Market
2,329
2,087
12
4,945
4,471
11
National Accounts
240
213
13
543
503
8
National Property and Other
690
647
7
1,187
1,092
9
Total Domestic
4,066
3,673
11
8,301
7,521
10
International
307
307
—
574
584
(2
)
Total
$
4,373
$
3,980
10
%
$
8,875
$
8,105
10
%
Second Quarter 2022 Results
(All comparisons vs. second quarter 2021, unless noted
otherwise)
Segment income for Business Insurance was $666 million
after-tax, an increase of $23 million. Segment income increased
primarily due to higher net favorable prior year reserve
development and a higher underlying underwriting gain, partially
offset by lower net investment income and higher catastrophe
losses. The underlying underwriting gain benefited from higher
business volumes.
Combined ratio:
- The combined ratio of 93.2% improved 2.1 points due to higher
net favorable prior year reserve development (2.9 points) and a
lower underlying combined ratio (0.9 points), partially offset by
higher catastrophe losses (1.7 points).
- The underlying combined ratio of 92.4% improved 0.9 points. The
expense ratio improved by 0.8 points. The loss ratio improved by
0.1 point, which reflected the benefit of earned pricing as well as
elevated property loss activity in the current quarter.
- 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 product line for
recent accident years, partially offset by an increase in reserves
in the domestic operations’ general liability product line
including for run-off operations.
Net written premiums of $4.373 billion increased 10%, reflecting
strong renewal premium change and retention.
Year-to-Date 2022 Results
(All comparisons vs. year-to-date 2021, unless noted otherwise)
Segment income for Business Insurance was $1.335 billion
after-tax, an increase of $375 million. Segment income increased
primarily due to lower catastrophe losses, a higher underlying
underwriting gain and higher net favorable prior year reserve
development, partially offset by lower net investment income. The
underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 92.1% improved 7.2 points due to lower
catastrophe losses (4.7 points), a lower underlying combined ratio
(1.4 points) and higher net favorable prior year reserve
development (1.1 points).
- The underlying combined ratio of 92.1% improved 1.4 points,
reflecting improvements of 0.5 points in the loss ratio and 0.9
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 product line for
recent accident years, partially offset by an increase in reserves
in the domestic operations’ general liability product line
including for run-off operations. Net prior year reserve
development also included an increase in environmental
reserves.
Net written premiums of $8.875 billion increased 10%, reflecting
strong renewal premium change and retention, as well as higher
levels of new business.
Bond
& Specialty Insurance Segment Financial Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2022
2021
Change
2022
2021
Change
Underwriting gain:
$
218
$
165
$
53
$
395
$
272
$
123
Underwriting gain
includes:
Net favorable prior year reserve
development
73
44
29
108
59
49
Catastrophes, net of reinsurance
(4
)
(3
)
(1
)
(5
)
(27
)
22
Net investment income
64
64
—
123
123
—
Other income
3
6
(3
)
6
9
(3
)
Segment income before income
taxes
285
235
50
524
404
120
Income tax expense
57
48
9
79
80
(1
)
Segment income
$
228
$
187
$
41
$
445
$
324
$
121
Combined ratio
74.0
%
78.1
%
(4.1
)
pts
76.0
%
81.6
%
(5.6
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(8.6
)
pts
(5.7
)
pts
(2.9
)
pts
(6.5
)
pts
(3.9
)
pts
(2.6
)
pts
Catastrophes, net of reinsurance
0.4
pts
0.4
pts
—
pts
0.3
pts
1.7
pts
(1.4
)
pts
Underlying combined ratio
82.2
%
83.4
%
(1.2
)
pts
82.2
%
83.8
%
(1.6
)
pts
Net written premiums
Domestic
Management Liability
$
533
$
497
7
%
$
1,038
$
941
10
%
Surety
287
232
24
544
432
26
Total Domestic
820
729
12
1,582
1,373
15
International
142
125
14
262
204
28
Total
$
962
$
854
13
%
$
1,844
$
1,577
17
%
Second Quarter 2022 Results
(All comparisons vs. second quarter 2021, unless noted
otherwise)
Segment income for Bond & Specialty Insurance was $228
million after-tax, an increase of $41 million. Segment income
increased primarily due to higher net favorable prior year reserve
development and a higher underlying underwriting gain. The
underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 74.0% improved 4.1 points due to higher
net favorable prior year reserve development (2.9 points) and a
lower underlying combined ratio (1.2 points).
- The underlying combined ratio improved 1.2 points to a very
strong 82.2%.
- 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 $962 million increased 13%, reflecting
strong production in surety and strong renewal premium change,
retention and new business in management liability.
Year-to-Date 2022 Results
(All comparisons vs. year-to-date 2021, unless noted otherwise)
Segment income for Bond & Specialty Insurance was $445
million after-tax, an increase of $121 million. Segment income
increased primarily due to a higher underlying underwriting gain,
higher net favorable prior year reserve development and lower
catastrophe losses. The underlying underwriting gain benefited from
higher business volumes. The current year also benefited by $24
million relating to the resolution of prior year income tax
matters.
Combined ratio:
- The combined ratio of 76.0% improved 5.6 points due to higher
net favorable prior year reserve development (2.6 points), a lower
underlying combined ratio (1.6 points) and lower catastrophe losses
(1.4 points).
- The underlying combined ratio improved 1.6 points to a very
strong 82.2%.
- 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 $1.844 billion increased 17%, reflecting
the same factors described above for the second quarter of
2022.
Personal
Insurance Segment Financial Results
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions and pre-tax, unless
noted otherwise)
2022
2021
Change
2022
2021
Change
Underwriting gain (loss):
$
(386
)
$
(14
)
$
(372
)
$
(262
)
$
240
$
(502
)
Underwriting gain
(loss) includes:
Net favorable prior year reserve
development
16
65
(49
)
21
233
(212
)
Catastrophes, net of reinsurance
(508
)
(323
)
(185
)
(588
)
(628
)
40
Net investment income
122
139
(17
)
232
258
(26
)
Other income
14
21
(7
)
32
42
(10
)
Segment income (loss) before income
taxes
(250
)
146
(396
)
2
540
(538
)
Income tax expense (benefit)
(57
)
25
(82
)
(30
)
105
(135
)
Segment income (loss)
$
(193
)
$
121
$
(314
)
$
32
$
435
$
(403
)
Combined ratio
111.2
%
99.7
%
11.5
pts
103.4
%
95.1
%
8.3
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(0.5
)
pts
(2.2
)
pts
1.7
pts
(0.3
)
pts
(4.0
)
pts
3.7
pts
Catastrophes, net of reinsurance
15.6
pts
10.9
pts
4.7
pts
9.2
pts
10.8
pts
(1.6
)
pts
Underlying combined ratio
96.1
%
91.0
%
5.1
pts
94.5
%
88.3
%
6.2
pts
Net written premiums
Domestic
Automobile
$
1,629
$
1,467
11
%
$
3,125
$
2,842
10
%
Homeowners and Other
1,868
1,634
14
3,212
2,778
16
Total Domestic
3,497
3,101
13
6,337
5,620
13
International
188
200
(6
)
331
338
(2
)
Total
$
3,685
$
3,301
12
%
$
6,668
$
5,958
12
%
Second Quarter 2022 Results
(All comparisons vs. second quarter 2021, unless noted
otherwise)
Segment loss for Personal Insurance was $193 million after-tax,
compared with segment income of $121 million after-tax in the prior
year quarter. The difference was primarily due to higher
catastrophe losses, a lower underlying underwriting gain and lower
net favorable prior year reserve development. The underlying
underwriting gain benefited from higher business volumes.
Combined ratio:
- The combined ratio of 111.2% increased 11.5 points due to a
higher underlying combined ratio (5.1 points), higher catastrophe
losses (4.7 points) and lower net favorable prior year reserve
development (1.7 points).
- The underlying combined ratio of 96.1% increased 5.1 points,
driven primarily by elevated severity in the current quarter in
both the automobile and homeowners and other product lines and a
comparison to a low level of loss activity in the prior year
quarter in the automobile product line, partially offset by a lower
expense ratio.
- Net favorable prior year reserve development was not
significant in the quarter.
Net written premiums of $3.685 billion increased 12%. Domestic
Automobile net written premiums increased 11%, reflecting renewal
premium change of 6.3% and strong retention. Domestic Homeowners
and Other net written premiums increased 14%, reflecting renewal
premium change of 13.5% and strong retention.
Year-to-Date 2022 Results
(All comparisons vs. year-to-date 2021, unless noted otherwise)
Segment income for Personal Insurance was $32 million after-tax,
a decrease of $403 million. Segment income decreased primarily due
to a lower underlying underwriting gain and lower net favorable
prior year reserve development, partially offset by lower
catastrophe losses. The underlying underwriting gain benefited from
higher business volumes. The current year also benefited by $20
million relating to the resolution of prior year income tax
matters.
Combined ratio:
- The combined ratio of 103.4% increased 8.3 points due to a
higher underlying combined ratio (6.2 points) and lower net
favorable prior year reserve development (3.7 points), partially
offset by lower catastrophe losses (1.6 points).
- The underlying combined ratio of 94.5% increased 6.2 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 $6.668 billion increased 12%. Domestic
Automobile net written premiums increased 10%, reflecting renewal
premium change of 4.9% and strong retention. Domestic Homeowners
and Other net written premiums increased 16%, reflecting renewal
premium change of 12.9% and strong retention.
Financial Supplement and Conference Call
The information in this press release should be read in
conjunction with the financial supplement that is available on our
website at www.travelers.com. Travelers management will discuss the
contents of this release and other relevant topics via webcast at 9
a.m. Eastern (8 a.m. Central) on Thursday, July 21, 2022. Investors
can access the call via webcast at http://investor.travelers.com or
by dialing 1.888.440.6281 within the United States and
1.646.960.0218 outside the United States. Prior to the webcast, a
slide presentation pertaining to the quarterly earnings will be
available on the Company’s website.
Following the live event, replays will be available via webcast
for one year at http://investor.travelers.com and by telephone for
30 days by dialing 1.800.770.2030 within the United States or
1.647.362.9199 outside the United States. All callers should use
conference ID 5449478.
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 $35 billion in 2021. For more information, visit
www.travelers.com.
Travelers may use its website and/or social media outlets, such
as Facebook and Twitter, as distribution channels of material
Company information. Financial and other important information
regarding the Company is routinely accessible through and posted on
our website at http://investor.travelers.com, our Facebook page at
https://www.facebook.com/travelers and our Twitter account
(@Travelers) at https://twitter.com/travelers. In addition, you may
automatically receive email alerts and other information about
Travelers when you enroll your email address by visiting the Email
Notifications section at http://investor.travelers.com.
Travelers is organized into the following reportable business
segments:
Business Insurance - Business Insurance offers a broad
array of property and casualty insurance products and services to
its customers, primarily in the United States, as well as in
Canada, the United Kingdom, the Republic of Ireland and throughout
other parts of the world as a corporate member of Lloyd’s.
Bond & Specialty Insurance - Bond & Specialty
Insurance offers surety, fidelity, management liability,
professional liability, and other property and casualty coverages
and related risk management services to its customers, primarily in
the United States, and certain surety and specialty insurance
products in Canada, the United Kingdom and the Republic of Ireland,
as well as Brazil through a joint venture, in each case utilizing
various degrees of financially-based underwriting approaches.
Personal Insurance - Personal Insurance offers a broad
range of property and casualty insurance products and services
covering individuals’ personal risks, primarily in the United
States, as well as in Canada. The primary products of automobile
and homeowners insurance are complemented by a broad suite of
related coverages.
* * * * *
Forward-Looking Statements
This press release contains, and management may make, certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other
than statements of historical facts, may be forward-looking
statements. Words such as “may,” “will,” “should,” “likely,”
“anticipates,” “expects,” “intends,” “plans,” “projects,”
“believes,” “views,” “estimates” and similar expressions are used
to identify these forward-looking statements. These statements
include, among other things, the Company’s statements about:
- the Company’s outlook, the impact of trends on its business and
its future results of operations and financial condition;
- the impact of COVID-19 and related economic conditions;
- the impact of legislative or regulatory actions or court
decisions taken in response to COVID-19 or otherwise;
- share repurchase plans;
- 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 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
Securities and Exchange Commission (SEC) on July 21, 2022, and in
our most recent annual report on Form 10-K filed with the SEC on
February 17, 2022, in each case as updated by our periodic filings
with the SEC.
GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF GAAP
MEASURES TO NON-GAAP MEASURES
The following measures are used by the Company’s management to
evaluate financial performance against historical results, to
establish performance targets on a consolidated basis and for other
reasons as discussed below. In some cases, these measures are
considered non-GAAP financial measures under applicable SEC rules
because they are not displayed as separate line items in the
consolidated financial statements or are not required to be
disclosed in the notes to financial statements or, in some cases,
include or exclude certain items not ordinarily included or
excluded in the most comparable GAAP financial measure.
Reconciliations of these measures to the most comparable GAAP
measures also follow.
In the opinion of the Company’s management, a discussion of
these measures provides investors, financial analysts, rating
agencies and other financial statement users with a better
understanding of the significant factors that comprise the
Company’s periodic results of operations and how management
evaluates the Company’s financial performance.
Some of these measures exclude net realized investment gains
(losses), net of tax, and/or net unrealized investment gains
(losses), net of tax, included in shareholders’ equity, which can
be significantly impacted by both discretionary and other economic
factors and are not necessarily indicative of operating trends.
Other companies may calculate these measures differently, and,
therefore, their measures may not be comparable to those used by
the Company’s management.
RECONCILIATION OF NET INCOME TO CORE INCOME AND CERTAIN OTHER
NON-GAAP MEASURES
Core income (loss) is consolidated net income (loss)
excluding the after-tax impact of net realized investment gains
(losses), discontinued operations, the effect of a change in tax
laws and tax rates at enactment, and cumulative effect of changes
in accounting principles when applicable. Segment income
(loss) is determined in the same manner as core income (loss)
on a segment basis. Management uses segment income (loss) to
analyze each segment’s performance and as a tool in making business
decisions. Financial statement users also consider core income
(loss) when analyzing the results and trends of insurance
companies. Core income (loss) per share is core income
(loss) on a per common share basis.
Reconciliation of Net Income to Core
Income less Preferred Dividends
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, after-tax)
2022
2021
2022
2021
Net income
$
551
$
934
$
1,569
$
1,667
Adjustments:
Net realized investment (gains) losses
74
(47
)
93
(81
)
Impact of changes in tax laws and/or tax
rates (1)
—
(8
)
—
(8
)
Core income
$
625
$
879
$
1,662
$
1,578
(1) Impact is recognized in the
accounting period in which the change is enacted
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, pre-tax)
2022
2021
2022
2021
Net income
$
657
$
1,131
$
1,839
$
2,022
Adjustments:
Net realized investment (gains) losses
95
(61
)
118
(105
)
Core income
$
752
$
1,070
$
1,957
$
1,917
Twelve Months Ended December
31,
Average Annual
($ 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 June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Basic income per
share
Net income
$
2.29
$
3.70
$
6.50
$
6.58
Adjustments:
Net realized investment (gains) losses,
after-tax
0.31
(0.19
)
0.38
(0.32
)
Impact of changes in tax laws and/or tax
rates (1)
—
(0.03
)
—
(0.03
)
Core income
$
2.60
$
3.48
$
6.88
$
6.23
Diluted income
per share
Net income
$
2.27
$
3.66
$
6.43
$
6.53
Adjustments:
Net realized investment (gains) losses,
after-tax
0.30
(0.18
)
0.38
(0.32
)
Impact of changes in tax laws and/or tax
rates (1)
—
(0.03
)
—
(0.03
)
Core income
$
2.57
$
3.45
$
6.81
$
6.18
(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 June
30,
Six Months Ended June
30,
($ in millions, after-tax)
2022
2021
2022
2021
Business Insurance
$
666
$
643
$
1,335
$
960
Bond & Specialty Insurance
228
187
445
324
Personal Insurance
(193
)
121
32
435
Total segment income
701
951
1,812
1,719
Interest Expense and Other
(76
)
(72
)
(150
)
(141
)
Total core income
$
625
$
879
$
1,662
$
1,578
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 June 30,
($ in millions)
2022
2021
Shareholders’ equity
$
22,874
$
29,156
Adjustments:
Net unrealized investment (gains) losses,
net of tax, included in shareholders’ equity
3,792
(3,239
)
Net realized investment (gains) losses,
net of tax
93
(81
)
Impact of changes in tax laws and/or tax
rates (1)
—
(8
)
Adjusted shareholders’ equity
$
26,759
$
25,828
(1) Impact is recognized in the
accounting period in which the change is enacted
As of December 31,
Average Annual
($ 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 June
30,
Six Months Ended June
30,
($ in millions, after-tax)
2022
2021
2022
2021
Annualized net income
$
2,203
$
3,736
$
3,138
$
3,335
Average shareholders’ equity
24,203
28,712
25,706
28,723
Return on equity
9.1
%
13.0
%
12.2
%
11.6
%
Annualized core income
$
2,499
$
3,514
$
3,323
$
3,155
Adjusted average shareholders’ equity
26,831
25,656
26,768
25,464
Core return on equity
9.3
%
13.7
%
12.4
%
12.4
%
Twelve Months Ended December
31,
Average Annual
($ 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 or
underlying underwriting income.
A catastrophe is a severe loss designated a catastrophe
by internationally recognized organizations that track and report
on insured losses resulting from catastrophic events, such as
Property Claim Services (PCS) for events in the United States and
Canada. Catastrophes can be caused by various natural events,
including, among others, hurricanes, tornadoes and other
windstorms, earthquakes, hail, wildfires, severe winter weather,
floods, tsunamis, volcanic eruptions and other naturally-occurring
events, such as solar flares. Catastrophes can also be man-made,
such as terrorist attacks and other intentionally destructive acts
including those involving nuclear, biological, chemical and
radiological events, cyber events, explosions and destruction of
infrastructure. Each catastrophe has unique characteristics and
catastrophes are not predictable as to timing or amount. Their
effects are included in net and core income and claims and claim
adjustment expense reserves upon occurrence. A catastrophe may
result in the payment of reinsurance reinstatement premiums and
assessments from various pools.
The Company’s threshold for disclosing catastrophes is primarily
determined at the reportable segment level. If a threshold for one
segment or a combination thereof is exceeded and the other segments
have losses from the same event, losses from the event are
identified as catastrophe losses in the segment results and for the
consolidated results of the Company. Additionally, an aggregate
threshold is applied for international business across all
reportable segments. The threshold for 2022 ranges from $20 million
to $30 million of losses before reinsurance and taxes.
Net favorable (unfavorable) prior year loss reserve
development is the increase or decrease in incurred claims and
claim adjustment expenses as a result of the re-estimation of
claims and claim adjustment expense reserves at successive
valuation dates for a given group of claims, which may be related
to one or more prior years. In the opinion of the Company’s
management, a discussion of loss reserve development is meaningful
to users of the financial statements as it allows them to assess
the impact between prior and current year development on incurred
claims and claim adjustment expenses, net and core income (loss),
and changes in claims and claim adjustment expense reserve levels
from period to period.
Reconciliation of Net Income
to Pre-Tax Underlying Underwriting Income (also known as Underlying
Underwriting Gain)
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions, after-tax, except as
noted)
2022
2021
2022
2021
Net income
$
551
$
934
$
1,569
$
1,667
Net realized investment (gains) losses
74
(47
)
93
(81
)
Impact of changes in tax laws and/or tax
rates (1)
—
(8
)
—
(8
)
Core income
625
879
1,662
1,578
Net investment income
(595
)
(682
)
(1,134
)
(1,272
)
Other (income) expense, including interest
expense
56
56
133
113
Underwriting income
86
253
661
419
Income tax expense on underwriting
results
27
71
111
122
Pre-tax underwriting income
113
324
772
541
Pre-tax impact of net favorable prior year
loss reserve development
(291
)
(182
)
(444
)
(499
)
Pre-tax impact of catastrophes
746
475
906
1,310
Pre-tax underlying underwriting
income
$
568
$
617
$
1,234
$
1,352
(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 June
30,
Six Months Ended June
30,
($ in millions, after-tax)
2022
2021
2022
2021
Net income
$
551
$
934
$
1,569
$
1,667
Net realized investment (gains) losses
74
(47
)
93
(81
)
Impact of changes in tax laws and/or tax
rates (1)
—
(8
)
—
(8
)
Core income
625
879
1,662
1,578
Net investment income
(595
)
(682
)
(1,134
)
(1,272
)
Other (income) expense, including interest
expense
56
56
133
113
Underwriting income
86
253
661
419
Impact of net favorable prior year reserve
development
(229
)
(144
)
(351
)
(393
)
Impact of catastrophes
587
376
714
1,035
Underlying underwriting income
$
444
$
485
$
1,024
$
1,061
(1) Impact is recognized in the
accounting period in which the change is enacted
Twelve Months Ended December
31,
($ 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 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 June
30,
Six Months Ended June
30,
($ in millions, pre-tax)
2022
2021
2022
2021
Loss and loss
adjustment expense ratio
Claims and claim adjustment expenses
$
5,803
$
5,045
$
10,842
$
10,015
Less:
Policyholder dividends
6
10
17
21
Allocated fee income
39
39
74
77
Loss ratio numerator
$
5,758
$
4,996
$
10,751
$
9,917
Underwriting
expense ratio
Amortization of deferred acquisition
costs
$
1,365
$
1,254
$
2,675
$
2,461
General and administrative expenses
(G&A)
1,223
1,174
2,414
2,337
Less:
Non-insurance G&A
87
77
169
147
Allocated fee income
61
65
129
128
Billing and policy fees and other
27
27
54
54
Expense ratio numerator
$
2,413
$
2,259
$
4,737
$
4,469
Earned premium
$
8,317
$
7,616
$
16,331
$
15,002
Combined ratio (1)
Loss and loss adjustment expense ratio
69.3
%
65.6
%
65.8
%
66.1
%
Underwriting expense ratio
29.0
%
29.7
%
29.0
%
29.8
%
Combined ratio
98.3
%
95.3
%
94.8
%
95.9
%
Impact on combined ratio:
Net favorable prior year reserve
development
(3.5
) %
(2.4
) %
(2.7
) %
(3.3
) %
Catastrophes, net of reinsurance
9.0
%
6.3
%
5.5
%
8.7
%
Underlying combined ratio
92.8
%
91.4
%
92.0
%
90.5
%
(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)
June 30, 2022
December 31,
2021
June 30, 2021
Shareholders’ equity
$
22,874
$
28,887
$
29,156
Less: Net unrealized investment gains
(losses), net of tax, included in shareholders’ equity
(3,792
)
2,415
3,239
Shareholders’ equity, excluding net
unrealized investment gains (losses), net of tax, included in
shareholders’ equity
26,666
26,472
25,917
Less:
Goodwill
3,967
4,008
4,020
Other intangible assets
294
306
314
Impact of deferred tax on other intangible
assets
(59
)
(66
)
(63
)
Tangible shareholders’ equity
$
22,464
$
22,224
$
21,646
Common shares outstanding
237.3
241.2
249.5
Book value per share
$
96.39
$
119.77
$
116.86
Adjusted book value per share
112.37
109.76
103.88
Tangible book value per share
94.66
92.15
86.76
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)
June 30, 2022
December 31,
2021
Debt
$
7,291
$
7,290
Shareholders’ equity
22,874
28,887
Total capitalization
30,165
36,177
Less: Net unrealized investment gains
(losses), net of tax, included in shareholders’ equity
(3,792
)
2,415
Total capitalization excluding net
unrealized gain (loss) on investments, net of tax, included in
shareholders’ equity
$
33,957
$
33,762
Debt-to-capital ratio
24.2
%
20.2
%
Debt-to-capital ratio excluding net
unrealized investment gains (losses), net of tax, included in
shareholders’ equity
21.5
%
21.6
%
RECONCILIATION OF INVESTED ASSETS TO INVESTED ASSETS
EXCLUDING NET UNREALIZED INVESTMENT GAINS (LOSSES)
As of June 30,
($ in millions, pre-tax)
2022
2021
Invested assets
$
80,459
$
86,545
Less: Net unrealized investment gains
(losses), pre-tax
(4,817
)
4,112
Invested assets excluding net
unrealized investment gains (losses)
$
85,276
$
82,433
As of December 31,
($ 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 Business Insurance and Bond & Specialty Insurance,
retention is the amount of premium available for renewal
that was retained, excluding rate and exposure changes. For
Personal Insurance, retention is the ratio of the expected
number of renewal policies that will be retained throughout the
annual policy period to the number of available renewal base
policies. For all of the segments, renewal rate change
represents the estimated change in average premium on policies that
renew, excluding exposure changes. Exposure is the measure
of risk used in the pricing of an insurance product. The change in
exposure is the amount of change in premium on policies that renew
attributable to the change in portfolio risk. Renewal premium
change represents the estimated change in average premium on
policies that renew, including rate and exposure changes. New
business is the amount of written premium related to new
policyholders and additional products sold to existing
policyholders. These are operating statistics, which are in part
dependent on the use of estimates and are therefore subject to
change. For Business Insurance, retention, renewal premium change
and new business exclude National Accounts. For Bond &
Specialty Insurance, retention, renewal premium change and new
business exclude surety and other products that are generally sold
on a non-recurring, project specific basis. For each of the
segments, production statistics referred to herein are domestic
only unless otherwise indicated.
Statutory capital and surplus represents the excess of an
insurance company’s admitted assets over its liabilities, including
loss reserves, as determined in accordance with statutory
accounting practices.
Holding company liquidity is the total funds available at
the holding company level to fund general corporate purposes,
primarily the payment of shareholder dividends and debt service.
These funds consist of total cash, short-term invested assets and
other readily marketable securities held by the holding
company.
For a glossary of other financial terms used in this press
release, we refer you to the Company’s most recent annual report on
Form 10-K filed with the SEC on February 17, 2022, and subsequent
periodic filings with the SEC.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220719006075/en/
Media: Patrick Linehan
917.778.6267
Institutional Investors: Abbe
Goldstein 917.778.6825
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