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TRAVELERS COMPANIES, INC. Annual Report, Year Ended Dec 31, 1999

Filing Date
Filed March 30, 2000
Period End
December 31, 1999
Security
TRV
In the record · 2016–202610-K1110-Q338-K91

TRV filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 91 current reports (8-K) between 2016 and 2026.

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01—Abstract

Summary

Summary of the 10-K filed March 30, 2000. Cited figures are marked; the original filing is the authoritative source.

The St. Paul Companies, Inc. reported 1999 net income of $834 milliona, or $3.41 per diluted share, up from $89 million ($0.32 per diluted share) in 1998.

Income from continuing operations before cumulative effect of an accounting change was $779 millionb, compared with $199 million in 1998, and pretax income from continuing operations rose to $1.017 billion from $120 million. The company describes the improvement as concentrated in its property-liability operations, which benefited from USF&G merger efficiencies, two aggregate excess-of-loss reinsurance treaties worth a $261 million pretax benefit, and better commercial underwriting results, partly offset by a $60 million cost reduction charge. The combined ratio improved to 107.9 from 117.4, though the company notes that catastrophe losses exceeded $250 million and that the underwriting result remained a GAAP loss of $425 million.

During 1999 the company sold its standard personal insurance operations to Metropolitan Property and Casualty Insurance Company, agreed to sell its nonstandard auto operations to Prudential for $200 millionc (expected to close in the second quarter of 2000), agreed to acquire MMI Companies, Inc. for approximately $200 million in cash plus assumption of about $120 million of capital securities, and agreed to buy Pacific Select Insurance Holdings for about $37 million. It also repurchased 11.1 million common shares for $356 million. Shareholders' equity was $6.47 billion at year-end, and book value per common share was $28.68.

Debt rose to $1.47 billiond, and the debt-to-total-capitalization ratio was 18%, up from 15%. The company's asset management subsidiary, The John Nuveen Company, in which it holds a 79% interest, reported record results, with assets under management of $59.8 billion, and its life insurance subsidiary, Fidelity and Guaranty Life, reported sales of $1.0 billion, more than double the prior year. The filing also discloses a Weavers-related reinsurance dispute involving the company's UK subsidiary, which management says could materially affect results in the period of any adverse outcome.

02—Key points

Key Highlights

  1. Net income of $834 million ($3.41 diluted EPS) in 1999, versus $89 million ($0.32) in 1998
  2. Pretax income from continuing operations of $1.017 billion, up from $120 million in 1998
  3. Two aggregate excess-of-loss reinsurance treaties produced a $261 million pretax benefit; the combined ratio improved to 107.9 from 117.4
  4. Sold standard personal insurance business to Metropolitan for net proceeds of $251 million; nonstandard auto sale to Prudential for $200 million pending
  5. Agreed to acquire MMI Companies, Inc. (about $200 million cash plus about $120 million of capital securities) and Pacific Select (about $37 million)
  6. Repurchased 11.1 million common shares for $356 million; book value per share rose to $28.68 from $28.32
  7. Nuveen assets under management reached $59.8 billion; F&G Life sales reached $1.0 billion

03—Questions

Frequently Asked Questions

  1. Why did earnings improve so much in 1999?

    Pretax income from continuing operations rose to $1.017 billion from $120 million. The filing attributes the improvement mainly to property-liability operations, which benefited from USF&G merger efficiencies, the favorable impact of two aggregate excess-of-loss reinsurance treaties ($261 million pretax benefit), and improved certain commercial underwriting results. 1998 results had included $582 million of earnings charges, while 1999 included a $60 million cost reduction charge.

  2. What strategic changes did the company make in 1999?

    The company focused on specialty commercial and professional property-liability insurance. It sold its standard personal insurance operations to Metropolitan, agreed to sell its nonstandard auto operations to Prudential, agreed to acquire MMI Companies, Inc. for the healthcare insurance market, and agreed to buy Pacific Select Insurance Holdings for earthquake underwriting in California.

  3. How strong is the company's balance sheet?

    Total shareholders' equity was $6.47 billion at year-end 1999, and common shareholders' equity was $6.45 billion, down from $6.62 billion because rising interest rates reduced unrealized appreciation on the bond portfolio and the company repurchased $356 million of shares. Debt was $1.47 billion, and the debt-to-total-capitalization ratio was 18%, compared with 15% in 1998.

  4. What risks does the filing identify?

    The filing identifies catastrophe losses (more than $250 million in 1999), loss reserve uncertainty, and environmental and asbestos claims, whose ultimate cost is described as difficult to estimate. It also discloses the Weavers matter, in which reinsurers have challenged contracts related to a pool of a former UK subsidiary; the company says an adverse outcome may materially affect results in the period it occurs, but not its liquidity or overall financial position.

04—Continue

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