10-QPeriod: Q3 FY2012

TRAVELERS COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2012

Filed October 18, 2012For Securities:TRV

Summary

Travelers Companies, Inc. reported strong financial results for the third quarter and first nine months of 2012, demonstrating significant year-over-year improvements in net income and earnings per share. Net income for the third quarter reached $864 million, or $2.21 per diluted share, a substantial increase from $333 million, or $0.79 per diluted share, in the prior year's quarter. This robust performance was primarily driven by a considerable reduction in catastrophe losses and a notable increase in net favorable prior year reserve development. The company also benefited from improved underlying underwriting margins across its segments. Total revenues grew slightly to $6.51 billion for the quarter. Investments remain a strong component of the company's financial health, totaling $74.49 billion, predominantly in fixed maturities and short-term securities. The company continued its commitment to returning capital to shareholders through share repurchases, buying back $350 million worth of common stock in the third quarter, while maintaining a solid debt-to-capital ratio of 19.7%. Travelers' financial position appears stable, with ample liquidity and a strong capital base supporting its operations.

Financial Highlights

29 data points
Beta

Revenue

$6.51B

Net Income

$864.00M

13.3% Net Margin

EPS (Diluted)

$2.21

Total Assets

$105.44B

Cash & Equivalents

$220.00M

Free Cash Flow

$1.50B

Financial Statements
Beta
Revenue$6.51B
Operating Income$867.00M
Interest Expense$93.00M
Net Income$864.00M
EPS (Basic)$2.23
EPS (Diluted)$2.21
Shares Outstanding (Basic)384.00M
Shares Outstanding (Diluted)387.90M

Key Highlights

  • 1Net income significantly increased to $864 million ($2.21/diluted share) in Q3 2012, up from $333 million ($0.79/diluted share) in Q3 2011.
  • 2Catastrophe losses decreased substantially to $91 million in Q3 2012 from $606 million in Q3 2011.
  • 3Net favorable prior year reserve development was strong at $193 million in Q3 2012, up from $184 million in Q3 2011.
  • 4Consolidated GAAP combined ratio improved to 90.3% in Q3 2012 from 104.5% in Q3 2011.
  • 5Total investments stood at $74.49 billion as of September 30, 2012, with 93% in fixed maturities and short-term securities.
  • 6The company repurchased $350 million of common stock in Q3 2012.
  • 7Debt-to-total capital ratio remained healthy at 19.7% at the end of Q3 2012.

Frequently Asked Questions

The primary driver behind the significant improvement in net income was a substantial reduction in catastrophe losses compared to the prior year's third quarter. Additionally, higher net favorable prior year reserve development and improved underlying underwriting margins contributed to the strong performance.

The company's investment portfolio totaled $74.49 billion, with a strong emphasis on high-quality, liquid fixed maturities and short-term securities, which comprised 93% of the portfolio. Net investment income was $722 million for the quarter, a 5% increase year-over-year, though income from fixed maturities slightly declined due to lower reinvestment yields.

Travelers continued its practice of returning capital to shareholders by repurchasing approximately 5.4 million common shares for $350 million during the third quarter. The company also declared a regular quarterly dividend of $0.46 per share.

All three segments — Business Insurance, Financial, Professional & International Insurance, and Personal Insurance — showed improved operating income compared to the prior year. The Business Insurance segment saw significant growth, while the Personal Insurance segment experienced a strong turnaround from a loss to profitability.