Actionable news
0
All posts from Actionable news
Actionable news in TRV: THE TRAVELERS COMPANIES Inc,

Travelers Reports Second Quarter Net Income and Core Income

NEW YORK--(BUSINESS WIRE)--The Travelers Companies, Inc. today reported net income of $595 million, or $2.11 per diluted share, for the quarter ended June 30, 2017, compared to $664 million, or $2.24 per diluted share, in the prior year quarter due to lower core income, partially offset by higher net realized investment gains. Core income in the current quarter was $543 million, or $1.92 per diluted share, compared to $649 million, or $2.20 per diluted share, in the prior year quarter due to lower net favorable prior year reserve development, higher catastrophe losses and a lower underlying underwriting gain (i.e., excluding net favorable prior year reserve development and catastrophe losses), partially offset by higher net investment income. The underlying underwriting gain declined due to the timing impact of higher loss estimates in personal auto bodily injury liability coverages that were consistent with the higher loss trends recognized in the last half of 2016 and higher non-catastrophe weather-related losses. Net realized investment gains of $80 million pre-tax ($52 million after-tax) in the current quarter, compared to $19 million pre-tax ($15 million after-tax) in the prior year quarter, were primarily driven by gains on the sale of equity securities. Per diluted share amounts benefited from the impact of share repurchases.

“Second quarter core income of $543 million and core return on equity of 9.5% were impacted by high levels of catastrophe and non-catastrophe weather-related losses caused by significant U.S. tornado and hail activity,” commented Alan Schnitzer, Chief Executive Officer. “The storm activity had the greatest impact on Personal Insurance, affecting results in both home and auto. Within personal auto, we were pleased that the actions we have undertaken to improve profitability remain on track. We were also pleased with results in our commercial businesses this quarter. In Business Insurance, segment income was up 7% and the underlying underwriting gain improved. In Bond & Specialty Insurance, while segment income was lower than in the prior year quarter, the decrease was entirely due to lower net favorable prior year reserve development as compared to a particularly high level in the prior year quarter. Our investment portfolio performed very well, with after-tax net investment income increasing 6% over the prior year quarter due to strong private equity returns. Additionally, we were able to return $676 million to shareholders in the quarter, including $475 million in share repurchases.

“Consolidated net written premiums of a record $6.64 billion were up 5% over the prior year quarter, and we remain very pleased with the execution of our marketplace strategies in each of our business segments. In our commercial businesses, retention levels remained at historic highs, while renewal premium change improved from recent quarters. Notably, in our core middle market business we achieved rate increases more broadly across our portfolio as compared to recent quarters. In Personal Insurance, auto renewal premium change was 8%, consistent with our plans to improve profitability, and we expect that number to reach double digits by the end of the third quarter. We were also successful in maintaining strong momentum in our homeowners business, where policies in force grew by 4% year-over-year.

“Our significant competitive advantages, strong balance sheet, superior talent and capital management strategy position us very well to continue to deliver industry leading results. We remain highly focused on innovation and leveraging the power of technology in every aspect of our business. As one recent example, we look forward to welcoming Simply Business under the Travelers umbrella when that transaction closes in the third quarter.”

Second Quarter 2017 Results
(All comparisons vs. second quarter 2016, unless noted otherwise)

Net income of $595 million after-tax decreased $69 million due to lower core income, partially offset by higher net realized investment gains. Core income of $543 million after-tax decreased $106 million, primarily driven by lower net favorable prior year reserve development, higher catastrophe losses and a lower underlying underwriting gain, partially offset by higher net investment income. The underlying underwriting gain declined due to the timing impact of higher loss estimates in personal auto bodily injury liability coverages that were consistent with the higher loss trends we recognized in the last half of 2016 and higher non-catastrophe weather-related losses. Net realized investment gains of $80 million pre-tax ($52 million after-tax) in the current quarter, compared to $19 million pre-tax ($15 million after-tax) in the prior year quarter, were primarily driven by gains on the sale of equity securities.

Underwriting results

  • The combined ratio of 96.7% increased 3.6 points due to lower net favorable prior year reserve development (1.5 points), a higher underlying combined ratio (1.2 points) and higher catastrophe losses (0.9 points).
  • The underlying combined ratio of 93.5% increased 1.2 points, primarily driven by the timing impact of higher loss estimates in personal auto bodily injury liability coverages, as described above, and normal quarterly variability in non-catastrophe weather-related losses, partially offset by a lower expense ratio.
  • Net favorable prior year reserve development occurred in Business Insurance and Bond & Specialty Insurance. Catastrophe losses in the second quarter of 2017 primarily resulted from wind and hail storms in several regions of the United States.

Net investment income of $598 million pre-tax ($468 million after-tax) increased 9% driven by higher private equity returns, partially offset by fixed income returns that declined in line with our expectations due to lower reinvestment rates available in the market.

Record net written premiums of $6.640 billion increased 5%, reflecting growth in all segments.

Year-to-Date 2017 Results
(All comparisons vs. year-to-date 2016, unless noted otherwise)

Net income of $1.212 billion after-tax decreased $143 million, due to lower core income, partially offset by higher net realized investment gains. Core income of $1.157 billion after-tax decreased $190 million, primarily driven by lower net favorable prior year reserve development, a lower underlying underwriting gain and higher catastrophe losses, partially offset by higher net investment income. The underlying underwriting gain declined due to the same factors as discussed above for the second quarter 2017. The current period benefited from a $39 million resolution of prior year income tax matters, while the prior year period benefited modestly from the favorable settlement of a claims-related legal matter. Net realized investment gains of $85 million pre-tax ($55 million after-tax) in the current period, compared to $10 million pre-tax ($8 million after-tax) in the prior year period, were primarily driven by gains on the sale of equity securities.

Underwriting results

  • The combined ratio of 96.4% increased 3.7 points due to lower net favorable prior year reserve development (1.6 points), a higher underlying combined ratio (1.5 points) and higher catastrophe losses (0.6 points).
  • The underlying combined ratio of 92.7% increased 1.5 points, primarily driven by the same factors as discussed above for the second quarter 2017
  • Net favorable prior year reserve development occurred in all segments. Catastrophe losses included the second quarter events described above, as well as wind and hail storms in several other regions of the United States and a winter storm in the eastern United States in the first quarter of 2017.

Net investment income of $1.208 billion pre-tax ($948 million after-tax) increased 11% driven by the same factors as discussed above for the second quarter 2017.

Record net written premiums of $13.135 billion increased 5%, reflecting growth in all segments.

Shareholders’ Equity

Shareholders’ equity of $23.858 billion increased 3% from year-end 2016. Pre-tax net unrealized investment gains were $1.585 billion ($1.035 billion after-tax) compared to $1.112 billion pre-tax ($730 million after-tax) at year-end 2016. Book value per share of $86.46 and adjusted book value per share of $82.71 increased 4% and 3%, respectively, from year-end 2016.

The Company repurchased 3.8 million shares during the second quarter at an average price of $123.04 per share for a total cost of $475 million. Capacity remaining under the existing share repurchase authorization was $5.234 billion at the end of the quarter. At the end of second quarter 2017, statutory capital and surplus was $20.607 billion and the ratio of debt-to-capital was 22.5%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains was 23.3%, within the Company’s target range of 15% to 25%.

The Board of Directors today declared a quarterly dividend of $0.72 per share. This dividend is payable on September 29, 2017, to shareholders of record as of the close of business on September 8, 2017.

Second Quarter 2017 Results
(All comparisons vs. second quarter 2016, unless noted otherwise)

Segment income for Business Insurance was $429 million after-tax, an increase of $28 million, primarily driven by higher net investment income and a slightly higher underlying underwriting gain, partially offset by higher catastrophe losses.

Underwriting results

  • The combined ratio of 96.5% was consistent with the prior year quarter.
  • The underlying combined ratio of 94.8% improved 0.5 points due to a lower expense ratio.
  • Net favorable prior year reserve development primarily resulted from better than expected loss experience in the Company’s domestic operations in the workers’ compensation product line for multiple accident years, the commercial multi-peril product line for liability coverages for multiple accident years and the general liability product line (excluding an increase to environmental reserves) for both primary and excess coverages for multiple accident years. These factors were partially offset by a $65 million pre-tax increase to environmental reserves.

Net written premiums of $3.544 billion increased 2% and benefited from continued strong retention and improved renewal premium change.

Year-to-Date 2017 Results
(All comparisons vs. year-to-date 2016, unless noted otherwise)

Segment income for Business Insurance was $871 million after-tax, an increase of $23 million, primarily driven by higher net investment income, partially offset by a slightly lower underlying underwriting gain. The current period benefited from a $15 million resolution of prior year income tax matters, while the prior year period benefited modestly from the favorable settlement of a claims-related legal matter.

Underwriting results

  • The combined ratio of 96.5% increased 0.7 points due to a higher underlying combined ratio (0.5 points) and lower net favorable prior year reserve development (0.2 points).
  • The underlying combined ratio of 94.6% increased 0.5 points.
  • Net favorable prior year reserve development primarily resulted from better than expected loss experience in the Company’s domestic operations in the workers’ compensation product line for multiple accident years, the general liability product line (excluding an increase to environmental reserves) for both primary and excess coverages for multiple accident years and the commercial multi-peril product line for liability coverages for multiple accident years, partially offset by net unfavorable prior year reserve development in the Company’s international operations in Europe due to the U.K. Ministry of Justice’s “Ogden” discount rate adjustment applied to lump sum bodily injury payouts. These factors were partially offset by a $65 million pre-tax increase to environmental reserves.

Other income in the prior year period included proceeds from the favorable settlement of a claims-related legal matter.

Net written premiums of $7.399 billion increased 2% and benefited from the same factors discussed above for the second quarter 2017.

Second Quarter 2017 Results
(All comparisons vs. second quarter 2016, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $163 million after-tax, a decrease of $52 million, due to lower net favorable prior year reserve development.

Underwriting results

  • The combined ratio of 68.7% increased 14.2 points due to lower net favorable prior year reserve development (14.9 points), partially offset by a lower underlying combined ratio (0.4 points) and lower catastrophe losses (0.3 points).
  • The underlying combined ratio remained very strong at 82.0%.
  • Net favorable prior year reserve development resulted from better than expected loss experience in the Company’s domestic operations in the general liability product line for accident years 2012 through 2015.

Net written premiums of $598 million grew 5% from the prior year quarter and benefited from strong retentions and higher renewal premium change in the Domestic business, as well as increases in management liability in the United Kingdom and contract surety in Canada.

Year-to-Date 2017 Results
(All comparisons vs. year-to-date 2016, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $308 million after-tax, a decrease of $67 million, due to lower net favorable prior year reserve development, partially offset by the current period benefit from a $17 million resolution of prior year income tax matters.

Underwriting results

  • The combined ratio of 74.0% increased 11.9 points due to lower net favorable prior year reserve development (12.0 points), partially offset by lower catastrophe losses (0.1 points).
  • The underlying combined ratio remained very strong at 82.0%.
  • Net favorable prior year reserve development resulted from better than expected loss experience in the Company’s domestic operations in the general liability product line for accident years 2012 through 2015.

Net written premiums of $1.142 billion grew 5% from the prior year period and benefited from the same factors as discussed above for second quarter 2017.

Second Quarter 2017 Results
(All comparisons vs. second quarter 2016, unless noted otherwise)

Segment income for Personal Insurance of $12 million after-tax was significantly impacted by catastrophe and non-catastrophe weather-related losses. The decrease of $83 million was primarily driven by a lower underlying underwriting gain and higher catastrophe losses, partially offset by higher net investment income. The underlying underwriting gain declined due to higher non-catastrophe weather-related losses and the timing impact of higher loss estimates in auto bodily injury liability coverages that were consistent with the higher loss trends recognized in the last half of 2016.

Underwriting results

  • The combined ratio of 104.1% increased 6.3 points due to a higher underlying combined ratio (4.3 points), higher catastrophe losses (1.8 points) and no net prior year reserve development compared to net favorable prior year reserve development in the prior year quarter (0.2 points).
  • The underlying combined ratio of 94.5% increased 4.3 points, primarily driven by normal quarterly variability in non-catastrophe weather-related losses, the timing impact of higher loss estimates in auto bodily injury liability coverages, as described above, and the tenure impact of higher levels of new business in auto, partially offset by a lower expense ratio.

Net written premiums of $2.498 billion increased 8%...


More