10-QPeriod: Q2 FY2001

TRAVELERS COMPANIES, INC. Quarterly Report for Q2 Ended Jun 30, 2001

Filed August 14, 2001For Securities:TRV

Summary

The St. Paul Companies, Inc. (TRV) reported financial results for the quarter and six months ended June 30, 2001. Total revenues for the first six months of 2001 were $4.33 billion, a slight increase from $4.12 billion in the prior year period. However, net income significantly decreased to $306 million from $569 million in the same period of 2000. This decline was primarily driven by a substantial drop in realized investment gains compared to the prior year, which benefited from the sale of venture capital investments. Additionally, underwriting results in the property-liability insurance segment deteriorated, largely due to adverse prior-year loss development in the Global Health Care segment. The company is actively restructuring its business, highlighted by the announced agreement to sell its life insurance subsidiary, Fidelity and Guaranty Life Insurance Company (F&G Life), expected to close in the third quarter of 2001. This strategic move aims to focus on core property-liability operations. Despite the decrease in net income, the company continues to repurchase its common stock and maintained a strong focus on price increases and expense reduction initiatives within its property-liability insurance segments, with particular growth noted in Commercial Lines Group and Other Specialty segments.

Key Highlights

  • 1Net income for the six months ended June 30, 2001, significantly decreased to $306 million from $569 million in the prior year, primarily due to lower realized investment gains.
  • 2Total revenues increased slightly to $4.33 billion for the first six months of 2001 from $4.12 billion in the same period of 2000.
  • 3The company announced an agreement to sell its life insurance subsidiary, F&G Life, expected to close in Q3 2001, which will result in a modest gain.
  • 4Underwriting results in the property-liability insurance segment worsened, mainly due to adverse prior-year loss development in the Global Health Care segment.
  • 5The company repurchased 8.3 million shares of common stock for $389 million in the first six months of 2001, indicating a commitment to returning capital to shareholders.
  • 6Property-liability insurance premiums written grew by 28% year-to-date, driven by price increases and strong retention, with notable growth in Commercial Lines Group and Other Specialty segments.
  • 7The company adopted SFAS No. 133, 'Accounting for Derivative Instruments and Hedging Activities,' effective January 1, 2001, with no material impact on its financial position or results of operations.

Frequently Asked Questions

The primary reason for the significant decrease in net income was a substantial decline in realized investment gains. The prior year period (six months ended June 30, 2000) benefited from unusually high gains from the sale of venture capital investments, which were not replicated in the current year. Additionally, underwriting results in the property-liability insurance segment also deteriorated, largely due to adverse prior-year loss development in the Global Health Care segment.

The company is actively restructuring its business. A key strategic move highlighted in this report is the announced agreement to sell its life insurance subsidiary, Fidelity and Guaranty Life Insurance Company (F&G Life), to Old Mutual plc. This divestiture is expected to close in the third quarter of 2001 and is part of a strategy to focus on its core property-liability insurance operations. The company is also implementing price increases and expense reduction initiatives across its segments.

The St. Paul Companies, Inc. is actively repurchasing its common stock. In the first six months of 2001, the company repurchased 8.3 million shares for a total cost of $389 million. This indicates a strategy to return capital to shareholders and manage its share count, funded through internally generated funds and commercial paper borrowings.

The property-liability insurance segment shows mixed performance. While premiums written experienced significant growth (28% year-to-date) due to price increases and strong retention, underwriting results were impacted by adverse development in the Global Health Care segment. However, segments like Commercial Lines Group and Other Specialty demonstrated strong premium growth and improved profitability. The company expects continued price increases and further improvement in loss experience in the second half of 2001.