10-KPeriod: FY2009

TRAVELERS COMPANIES, INC. Annual Report, Year Ended Dec 31, 2009

Filed February 18, 2010For Securities:TRV

Summary

The Travelers Companies, Inc. (TRV) reported strong financial performance for the fiscal year ended December 31, 2009. Net income increased by 24% to $3.62 billion, or $6.33 per diluted share, compared to the previous year. This growth was primarily driven by a significant reduction in catastrophe losses, which fell to $457 million pretax from $1.41 billion in 2008. The company also benefited from net realized investment gains and favorable prior year reserve development. The company maintained a strong financial position with total investments of $74.97 billion and shareholders' equity of $27.42 billion. TRV continued its commitment to returning capital to shareholders, repurchasing approximately 69.4 million shares for $3.30 billion during the year, reflecting confidence in its ongoing operational strength and capital management strategy.

Financial Highlights

33 data points
Beta

Revenue

$24.68B

Net Income

$3.62B

14.7% Net Margin

EPS (Diluted)

$6.33

Total Assets

$109.56B

Cash & Equivalents

$255.00M

Free Cash Flow

$4.23B

Financial Statements
Beta
Revenue$24.68B
Operating Income$3.60B
Interest Expense$382.00M
Net Income$3.62B
EPS (Basic)$6.38
EPS (Diluted)$6.33
Shares Outstanding (Basic)563.20M
Shares Outstanding (Diluted)568.60M

Key Highlights

  • 1Net income grew 24% to $3.62 billion, or $6.33 per diluted share, compared to $2.92 billion in 2008.
  • 2Catastrophe losses decreased significantly to $457 million pretax, down from $1.41 billion in 2008, primarily due to reduced storm activity.
  • 3Net realized investment gains of $17 million in 2009 compared to net realized investment losses of $415 million in 2008, indicating improved investment performance in the latter part of the year.
  • 4The GAAP combined ratio improved to 89.2% from 91.9% in 2008, signaling enhanced underwriting efficiency.
  • 5Total investments increased to $74.97 billion, with a continued focus on high-quality, liquid fixed-maturity securities comprising 94% of the portfolio.
  • 6Shareholders' equity stood at $27.42 billion, and the company repurchased approximately 69.4 million shares for $3.30 billion, demonstrating a commitment to shareholder returns.
  • 7The company maintained strong retention levels across its business segments, with a slight decline in net written premiums primarily attributed to lower insured exposures reflecting economic conditions.

Frequently Asked Questions

The primary driver for the increase in net income was a significant reduction in catastrophe losses, which fell to $457 million pretax in 2009 from $1.41 billion in 2008. This, combined with net realized investment gains and improved prior year reserve development, contributed to the stronger net income.

The company's investment portfolio grew to $74.97 billion. Net investment income was $2.78 billion, a slight decrease from 2008, primarily due to lower short-term interest rates and a decline in long-term fixed maturity assets. However, returns from non-fixed maturity investments improved, and the company realized net investment gains of $17 million, a turnaround from the net realized investment losses of $415 million in 2008.

Travelers anticipates continued high retention levels across its segments. While expecting modest growth in Personal Insurance through its direct-to-consumer initiative, the company forecasts that premium volumes in Business Insurance and Financial, Professional & International Insurance may be impacted by economic conditions, with renewal premium changes being largely offset by a decline in insured exposures. The overall outlook suggests modestly reduced underwriting profitability due to competitive market conditions and expected modest increases in loss costs.

Travelers manages its catastrophe exposure through individual risk selection and the purchase of catastrophe reinsurance. This includes a general catastrophe reinsurance treaty, a catastrophe bond program, and a Northeast catastrophe reinsurance treaty. The company also utilizes sophisticated computer modeling techniques to analyze and manage these risks.