10-QPeriod: Q3 FY2006

TRAVELERS COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2006

Filed November 3, 2006For Securities:TRV

Summary

The St. Paul Travelers Companies, Inc. reported strong financial performance for the third quarter and first nine months of 2006, with income from continuing operations reaching $1.04 billion and $3.02 billion, respectively. This represents a significant improvement compared to the same periods in 2005, largely due to a substantial reduction in catastrophe losses. Net written premiums saw growth across all segments, signaling a healthy expansion of the business. The company also made progress on its strategic initiatives, including a share repurchase program and debt management. Despite investments in information systems and personnel to support growth, general and administrative expenses saw an increase. The company is also navigating ongoing investigations by governmental agencies, for which it has entered into settlements and is cooperating with authorities.

Key Highlights

  • 1Income from continuing operations in Q3 2006 was $1.04 billion, or $1.47 per diluted share, a significant increase from $0.11 per diluted share in Q3 2005.
  • 2Nine-month income from continuing operations was $3.02 billion, or $4.23 per diluted share, up from $1.88 billion, or $2.69 per diluted share in the prior year.
  • 3Catastrophe losses were significantly lower in Q3 2006 ($15 million pretax) compared to Q3 2005 ($1.52 billion), contributing to improved profitability.
  • 4Net written premiums for Q3 2006 were $5.28 billion, a 4% increase year-over-year, with growth across all business segments.
  • 5The company repurchased approximately $121 million of its common stock under its $2 billion share repurchase program during Q3 2006.
  • 6Net investment income increased by 6% in Q3 2006 to $858 million, driven by portfolio growth and higher yields.
  • 7The GAAP combined ratio improved to 87.2% in Q3 2006 from 116.2% in Q3 2005, reflecting lower catastrophe losses and improved loss trends.

Frequently Asked Questions

The substantial increase in net income was primarily driven by a significant reduction in catastrophe losses, particularly those related to Hurricanes Katrina and Rita, which heavily impacted the third quarter of 2005.

Net investment income increased by 6% in the third quarter of 2006 to $858 million, and by 11% year-to-date to $2.61 billion. This growth was attributed to an expanding fixed maturity portfolio and higher yields on short-term securities and taxable fixed maturities.

The company's Board of Directors authorized a $2 billion share repurchase program on May 2, 2006. In the third quarter of 2006, the company repurchased approximately 2.7 million shares for $121 million under this program, and year-to-date, it has repurchased 8.4 million shares for $371 million.

The company is involved in ongoing investigations by various governmental agencies concerning its business practices, including broker relationships and non-traditional insurance products. The company has entered into settlement agreements with some authorities and is cooperating with ongoing inquiries. The company also faces significant asbestos and environmental-related litigation.