10-QPeriod: Q2 FY2010

TRAVELERS COMPANIES, INC. Quarterly Report for Q2 Ended Jun 30, 2010

Filed July 22, 2010For Securities:TRV

Summary

The Travelers Companies, Inc. (TRV) reported its financial results for the quarterly period ended June 30, 2010. For the second quarter of 2010, the company posted net income of $670 million, or $1.35 per diluted share, which represents an increase compared to the prior year period primarily due to common share repurchases. However, overall net income saw a decrease from the second quarter of 2009, largely attributed to higher catastrophe losses and net realized investment losses, partially offset by an increase in net investment income and favorable prior year reserve development. Total revenues for the quarter remained stable at $6.18 billion. Earned premiums were also relatively flat at $5.34 billion. The company's investment portfolio remains robust, with total investments at $73.13 billion, predominantly in fixed maturities and short-term securities. Travelers also demonstrated a commitment to returning capital to shareholders, repurchasing approximately $1.40 billion of its common stock during the quarter, contributing to an 18% increase in book value per common share year-over-year.

Financial Highlights

30 data points
Beta

Revenue

$6.18B

Net Income

$670.00M

10.8% Net Margin

EPS (Diluted)

$1.35

Total Assets

$107.02B

Cash & Equivalents

$266.00M

Free Cash Flow

$520.00M

Financial Statements
Beta
Revenue$6.18B
Operating Income$690.00M
Interest Expense$97.00M
Net Income$670.00M
EPS (Basic)$1.37
EPS (Diluted)$1.35
Shares Outstanding (Basic)484.50M
Shares Outstanding (Diluted)490.80M

Key Highlights

  • 1Net income for Q2 2010 was $670 million, or $1.35 per diluted share, up from $1.27 per diluted share in Q2 2009, driven by share buybacks.
  • 2Total revenues were stable at $6.18 billion for Q2 2010, with earned premiums at $5.34 billion, a slight decrease from Q2 2009.
  • 3Catastrophe losses increased significantly to $439 million pretax in Q2 2010, compared to $200 million in Q2 2009.
  • 4Net favorable prior year reserve development was $384 million pretax in Q2 2010, up from $261 million in Q2 2009.
  • 5The company repurchased $1.40 billion of its common stock in Q2 2010 under its share repurchase program.
  • 6Total investments stood at $73.13 billion as of June 30, 2010.
  • 7The GAAP combined ratio for Q2 2010 was 95.2%, an increase from 93.2% in Q2 2009, largely due to higher catastrophe losses.

Frequently Asked Questions

The increase in diluted earnings per share (EPS) from $1.27 in Q2 2009 to $1.35 in Q2 2010 was primarily driven by the company's common share repurchase program. Buying back shares reduces the weighted average number of diluted shares outstanding, thereby increasing EPS even if net income slightly declines.

Catastrophe losses significantly increased in the second quarter of 2010, totaling $439 million pretax, compared to $200 million in the same period of 2009. This increase in catastrophic events adversely affected the company's combined ratio and net income.

Travelers expects its investment strategy to continue focusing on a high-quality, liquid portfolio with a relatively low average effective duration. While fixed maturity portfolio returns are expected to be consistent with recent periods, returns for short-term and non-fixed maturity portfolios are expected to remain challenged due to low short-term interest rates. The company anticipates that net investment income will be a material contributor to results, but warns of potential reductions and realized losses if economic or investment market conditions deteriorate.

Travelers continues to manage its exposure to asbestos and environmental claims through a multi-faceted approach. This includes rigorous defense strategies, settlement initiatives, and ongoing reviews of claim patterns, judicial rulings, and legislative actions. The company maintains significant reserves for these liabilities, acknowledging the inherent uncertainties and potential for future adjustments, while actively seeking to resolve disputes and mitigate long-term exposure.