10-QPeriod: Q1 FY2011

TRAVELERS COMPANIES, INC. Quarterly Report for Q1 Ended Mar 31, 2011

Filed April 21, 2011For Securities:TRV

Summary

The Travelers Companies, Inc. reported solid financial results for the first quarter of 2011, demonstrating resilience and profitable growth. Net income reached $839 million, translating to a diluted earnings per share of $1.92, a significant increase of 54% compared to the prior year's quarter. This growth was driven by a substantial reduction in catastrophe losses, a modest increase in net investment income, and a favorable resolution of prior year tax matters contributing $104 million. Earned premiums rose by 3% to $5.37 billion, indicating continued demand across key business segments, particularly Business Insurance and Personal Insurance. The company maintained a strong financial position with total investments of $72.39 billion and total assets of $105.25 billion. Shareholder equity stood at $25.24 billion, and the company actively returned capital to shareholders by repurchasing $1.10 billion in common stock during the quarter under its existing authorization. The GAAP combined ratio improved to 94.7% from 96.4% in the prior year, reflecting improved underwriting performance.

Financial Highlights

30 data points
Beta

Revenue

$6.28B

Net Income

$839.00M

13.4% Net Margin

EPS (Diluted)

$1.92

Total Assets

$105.25B

Cash & Equivalents

$239.00M

Free Cash Flow

$633.00M

Financial Statements
Beta
Revenue$6.28B
Operating Income$826.00M
Interest Expense$96.00M
Net Income$839.00M
EPS (Basic)$1.94
EPS (Diluted)$1.92
Shares Outstanding (Basic)428.20M
Shares Outstanding (Diluted)434.40M

Key Highlights

  • 1Net income increased by 30% year-over-year to $839 million, with diluted EPS up 54% to $1.92, driven by lower catastrophe losses and improved investment income.
  • 2Earned premiums grew by 3% to $5.37 billion, with notable strength in the Business Insurance and Personal Insurance segments.
  • 3The company repurchased $1.10 billion of its common stock during the quarter, demonstrating a commitment to returning capital to shareholders.
  • 4The GAAP combined ratio improved by 1.7 percentage points to 94.7%, indicating enhanced underwriting profitability.
  • 5Catastrophe losses significantly decreased to $186 million ($122 million after-tax) compared to $471 million ($330 million after-tax) in the prior year's quarter.
  • 6Net investment income increased by 3% to $779 million, supported by improved performance in non-fixed maturity investments, despite lower average investment balances.
  • 7Shareholders' equity remained robust at $25.24 billion, with book value per common share increasing 12% year-over-year.

Frequently Asked Questions

The primary drivers for the increase in net income and earnings per share were a significant reduction in catastrophe losses compared to the prior year quarter and a modest increase in net investment income. Additionally, a favorable resolution of various prior year tax matters provided a $104 million benefit to net income.

The Travelers Companies actively managed its capital by repurchasing approximately $1.10 billion of its common stock under its share repurchase authorization. This demonstrates a commitment to returning value to shareholders. The company also announced an increase in its regular quarterly dividend from $0.36 to $0.41 per share.

The company expects retention levels to remain strong. In Business Insurance, a slightly improving trend in renewal premium changes is anticipated. Financial, Professional & International Insurance is expected to see stable renewal premium changes, while Personal Insurance expects positive renewal premium changes, particularly in Automobile and Homeowners lines. The direct-to-consumer initiative in Personal Insurance is expected to contribute to modest premium growth.

While the company continues to manage significant asbestos and environmental liabilities, net asbestos paid losses decreased to $46 million in the first quarter of 2011 from $74 million in the prior year. Net environmental paid losses were $15 million, consistent with the prior year. The company believes its reserves for these claims are appropriately established based on known facts and judgment, but acknowledges the inherent uncertainties and potential for future revisions which could materially impact results.