10-KPeriod: FY2013

TRAVELERS COMPANIES, INC. Annual Report, Year Ended Dec 31, 2013

Filed February 13, 2014For Securities:TRV

Summary

The Travelers Companies, Inc. (TRV) reported strong financial performance for the fiscal year ended December 31, 2013, with net income of $3.67 billion, a significant increase from $2.47 billion in 2012. Diluted earnings per share also rose to $9.74 from $6.30 in the prior year. This improvement was driven by lower catastrophe losses, improved underlying underwriting margins across its segments, and a gain from a legal settlement. The company's robust capital position is supported by a strong investment portfolio, primarily composed of high-quality fixed maturities. TRV continues to return capital to shareholders through significant share repurchases and dividends, underscoring its commitment to shareholder value. The company operates through three main segments: Business Insurance, Financial, Professional & International Insurance, and Personal Insurance. Each segment demonstrated resilience and growth, with Business Insurance showing a notable increase in operating income driven by improved pricing and reduced catastrophe losses. The Personal Insurance segment also saw a significant recovery in operating income, largely due to lower catastrophe losses and improved underwriting. TRV maintains a disciplined approach to underwriting and risk management, focusing on profitable growth. Overall, the financial report indicates a healthy and well-managed company with a strong market position, capable of navigating industry challenges and delivering value to its investors.

Financial Highlights

37 data points
Beta

Revenue

$26.19B

Net Income

$3.67B

14.0% Net Margin

EPS (Diluted)

$9.74

Total Assets

$103.81B

Cash & Equivalents

$294.00M

Free Cash Flow

$3.82B

Financial Statements
Beta
Revenue$26.19B
SG&A Expenses$3.76B
Operating Income$3.57B
Interest Expense$361.00M
Net Income$3.67B
EPS (Basic)$9.84
EPS (Diluted)$9.74
Shares Outstanding (Basic)370.30M
Shares Outstanding (Diluted)374.30M

Key Highlights

  • 1Net income increased by 49% to $3.67 billion, and diluted earnings per share grew by 55% to $9.74 in 2013.
  • 2The company's GAAP combined ratio improved significantly to 89.8% in 2013 from 97.1% in 2012, indicating improved underwriting profitability.
  • 3Catastrophe losses decreased substantially to $591 million in 2013 from $1.86 billion in 2012, positively impacting results.
  • 4Net favorable prior year reserve development remained strong, totaling $840 million in 2013, though slightly down from $940 million in 2012.
  • 5The company repurchased $2.40 billion of its common stock in 2013 and increased its share repurchase authorization by $5.0 billion, signaling confidence and commitment to returning capital to shareholders.
  • 6The acquisition of Dominion expanded the Financial, Professional & International Insurance segment, contributing to segment growth.
  • 7Total investments remained substantial at $73.16 billion, with a conservative allocation of 93% in high-quality fixed maturities and short-term securities.

Frequently Asked Questions

The primary drivers of Travelers' improved net income in 2013 were a significant reduction in catastrophe losses, higher underlying underwriting margins across its business segments due to pricing that exceeded loss cost trends, and a gain from the settlement of a legal proceeding. These positive factors were partially offset by lower net investment income and a decrease in net favorable prior year reserve development compared to 2012.

Travelers' underwriting performance improved significantly in 2013. The consolidated GAAP combined ratio decreased from 97.1% in 2012 to 89.8% in 2013. This improvement was primarily driven by a substantial decrease in catastrophe losses and a higher underlying loss and loss adjustment expense ratio, reflecting better-than-expected loss experience and the impact of earned pricing that exceeded loss cost trends.

Travelers is committed to returning capital to shareholders through dividends and share repurchases. In 2013, the company repurchased $2.40 billion of its common stock and paid $729 million in dividends. The board of directors also approved an additional $5.0 billion for share repurchases, indicating continued confidence in the company's financial strength and future prospects.

Travelers manages its exposure to catastrophe risk through a combination of individual risk selection and the purchase of catastrophe reinsurance. The company utilizes sophisticated proprietary and third-party computer modeling processes to analyze catastrophic events and make underwriting and reinsurance decisions. They also employ catastrophe bonds and specific reinsurance treaties to mitigate losses from certain events, particularly hurricanes in the Northeastern United States.