10-QPeriod: Q2 FY2013

TRAVELERS COMPANIES, INC. Quarterly Report for Q2 Ended Jun 30, 2013

Filed July 23, 2013For Securities:TRV

Summary

Travelers Companies, Inc. reported a strong second quarter for 2013, with diluted net income per share increasing by 91% year-over-year to $2.41. This significant improvement was driven by a combination of factors, including a substantial decrease in catastrophe losses, higher underlying underwriting margins across all segments, and favorable net realized investment gains. The company's Business Insurance segment showed particular strength, with operating income up 60%. Despite a slight decrease in net investment income due to lower reinvestment yields, the company maintained a conservative investment philosophy with a high-quality portfolio. Financially, Travelers demonstrated a robust capital position with total shareholders' equity of $24.89 billion and a debt-to-total capital ratio (excluding net unrealized investment gains) of 20.1%, which is within the company's target range. The company continued its capital return program, repurchasing $300 million of common stock in the quarter, and maintained strong liquidity. Looking ahead, Travelers anticipates continued positive renewal premium changes that are expected to exceed loss cost trends, aiming to further improve underwriting margins.

Financial Highlights

29 data points
Beta

Revenue

$6.67B

Net Income

$925.00M

13.9% Net Margin

EPS (Diluted)

$2.41

Total Assets

$101.90B

Cash & Equivalents

$308.00M

Free Cash Flow

$722.00M

Financial Statements
Beta
Revenue$6.67B
Operating Income$816.00M
Interest Expense$86.00M
Net Income$925.00M
EPS (Basic)$2.44
EPS (Diluted)$2.41
Shares Outstanding (Basic)375.90M
Shares Outstanding (Diluted)379.90M

Key Highlights

  • 1Diluted net income per share increased by 91% to $2.41 in Q2 2013 compared to Q2 2012.
  • 2Total revenues increased to $6.67 billion in Q2 2013 from $6.36 billion in Q2 2012.
  • 3Catastrophe losses decreased significantly to $340 million in Q2 2013 from $549 million in Q2 2012.
  • 4The Business Insurance segment saw a substantial 60% increase in operating income, reaching $579 million.
  • 5The GAAP combined ratio improved to 94.3% in Q2 2013 from 100.5% in Q2 2012.
  • 6The company repurchased $300 million of common stock in the second quarter of 2013.
  • 7Total investments remained strong at $71.27 billion, with a focus on high-quality fixed maturities.

Frequently Asked Questions

The primary driver of Travelers' improved net income in the second quarter of 2013 was a combination of significantly lower catastrophe losses, higher underlying underwriting margins across its business segments, and favorable net realized investment gains. These factors, along with a gain from a legal settlement, contributed to an 85% increase in net income year-over-year.

Travelers' investment portfolio totaled $71.27 billion at June 30, 2013. Net investment income decreased by 7% year-over-year, primarily due to lower reinvestment yields available in the market and reduced results from private equity investments. Despite this, the company maintained a conservative investment philosophy, with a diversified portfolio primarily composed of high-quality fixed maturities.

The company expects continued strong retention levels and positive renewal premium changes that are likely to exceed loss cost trends in its key segments. Efforts are underway to improve underwriting margins through rate increases and expense reductions, particularly in the Business Insurance and Personal Insurance segments. While recognizing the inherent unpredictability of catastrophe losses and the impact of economic conditions, Travelers anticipates improved underlying underwriting margins for the remainder of 2013 and into 2014.

Travelers maintained a strong capital position with total shareholders' equity of $24.89 billion and a debt-to-total capital ratio (excluding net unrealized investment gains) of 20.1% at June 30, 2013. The company continues to return capital to shareholders through dividends and share repurchases, repurchasing $300 million of common stock in the second quarter. The company expects these capital return initiatives to generally align with operating income over time.