10-QPeriod: Q3 FY2010

TRAVELERS COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2010

Filed October 21, 2010For Securities:TRV

Summary

The Travelers Companies, Inc. reported solid results for the third quarter and first nine months of 2010. Net income for the third quarter was $1.01 billion, or $2.11 per diluted share, marking a significant increase from the prior year's quarter, driven by higher net realized investment gains and lower catastrophe losses. For the first nine months, net income was $2.32 billion, relatively stable year-over-year, with a slight decrease in net income offset by the positive impact of share repurchases on earnings per share. The company's financial condition remains strong, with total investments of $74.72 billion and total assets of $108.15 billion. Debt levels are manageable, with a debt-to-total capital ratio of 18.6%. Travelers continued its commitment to shareholder value by repurchasing $600 million of common stock in the third quarter. The company also highlighted a robust capital position and sufficient liquidity, with $2.82 billion in cash and short-term investments at the holding company level.

Financial Highlights

30 data points
Beta

Revenue

$6.48B

Net Income

$1.00B

15.5% Net Margin

EPS (Diluted)

$2.11

Total Assets

$108.15B

Cash & Equivalents

$298.00M

Free Cash Flow

$1.34B

Financial Statements
Beta
Revenue$6.48B
Operating Income$858.00M
Interest Expense$95.00M
Net Income$1.00B
EPS (Basic)$2.14
EPS (Diluted)$2.11
Shares Outstanding (Basic)465.90M
Shares Outstanding (Diluted)472.00M

Key Highlights

  • 1Net income for Q3 2010 was $1.01 billion, a 7% increase year-over-year, leading to diluted EPS of $2.11, up 28%.
  • 2Total investments stood at $74.72 billion, with fixed maturities and short-term securities comprising 94% of the portfolio.
  • 3The company repurchased $600 million of common stock in Q3 2010, demonstrating a commitment to returning capital to shareholders.
  • 4Net favorable prior year reserve development was $222 million in Q3 2010, contributing to underwriting profitability, though lower than the $309 million in Q3 2009.
  • 5Catastrophe losses were $117 million pretax in Q3 2010, down from $158 million in the prior year's quarter.
  • 6Book value per common share increased by 15% year-over-year to $59.11.
  • 7The company entered into a new $1.0 billion revolving credit agreement, replacing its previous agreement, indicating ongoing access to liquidity.

Frequently Asked Questions

In Q3 2010, Travelers reported total revenues of $6.48 billion, an increase from $6.33 billion in Q3 2009. Net income rose to $1.01 billion from $935 million in the prior year's quarter. Diluted earnings per share increased to $2.11 from $1.65.

Net realized investment gains were $226 million in Q3 2010, a significant increase from $29 million in Q3 2009. This contributed positively to the company's net income. However, net investment income slightly decreased to $735 million from $763 million, primarily due to lower reinvestment yields on fixed maturity investments.

The Business Insurance segment saw operating income decrease by 19% due to lower prior year reserve development, partially offset by reduced catastrophe losses. The Financial, Professional & International Insurance segment's operating income increased by 27%, driven by higher prior year reserve development. The Personal Insurance segment's operating income improved by 13%, benefiting from increased business volume and favorable rate changes.

Travelers expects continued strong retention levels and stable renewal premium changes across most segments. However, they anticipate modestly reduced underwriting profitability in the remainder of 2010 and into 2011 due to competitive market conditions and expected modest increases in loss costs. The direct-to-consumer initiative in Personal Insurance is expected to remain unprofitable for several years as it grows.