10-QPeriod: Q2 FY2015

TRAVELERS COMPANIES, INC. Quarterly Report for Q2 Ended Jun 30, 2015

Filed July 21, 2015For Securities:TRV

Summary

Travelers Companies, Inc. (TRV) reported its financial results for the second quarter and first six months ended June 30, 2015. The company demonstrated resilience with a net income of $812 million ($2.53 diluted EPS) for the quarter, an increase from $683 million ($1.95 diluted EPS) in the prior year. For the first six months, net income was $1.645 billion ($5.08 diluted EPS), a slight decrease from $1.735 billion ($4.91 diluted EPS) in the same period of 2014. This decrease in net income for the six-month period was primarily attributed to lower net investment income and underwriting margins, partially offset by lower catastrophe losses and a favorable resolution of prior year tax matters. The company maintained strong premium growth across its segments, with total earned premiums rising slightly. While net investment income saw a decrease compared to the prior year due to lower reinvestment rates and the impact of a large asbestos litigation settlement payment, the company's underwriting performance remained robust, highlighted by a combined ratio of 90.8% for the quarter. Travelers continued its commitment to shareholder returns through significant share repurchases and dividend payments, indicating confidence in its financial position and future prospects.

Financial Statements
Beta
Revenue$6.71B
SG&A Expenses$1.03B
Operating Income$806.00M
Interest Expense$92.00M
Net Income$812.00M
EPS (Basic)$2.56
EPS (Diluted)$2.53
Shares Outstanding (Basic)314.80M
Shares Outstanding (Diluted)318.00M

Key Highlights

  • 1Net income for Q2 2015 increased to $812 million, or $2.53 per diluted share, up from $683 million, or $1.95 per diluted share, in Q2 2014.
  • 2For the first six months of 2015, net income was $1.645 billion, or $5.08 per diluted share, down slightly from $1.735 billion, or $4.91 per diluted share, in the comparable 2014 period.
  • 3Total revenues for Q2 2015 were $6.706 billion, a slight decrease from $6.785 billion in Q2 2014.
  • 4Earned premiums showed modest growth, with Q2 2015 at $5.931 billion, up slightly from $5.928 billion in Q2 2014.
  • 5The combined ratio improved to 90.8% in Q2 2015 from 95.1% in Q2 2014, driven by lower catastrophe losses and favorable prior year reserve development.
  • 6Net investment income decreased in both the quarter and year-to-date periods due to lower reinvestment rates and the impact of a significant asbestos litigation settlement payment.
  • 7Travelers returned substantial capital to shareholders, repurchasing approximately $1.40 billion of common stock and paying $369 million in dividends during the first six months of 2015.

Frequently Asked Questions

The decrease in net income for the first six months of 2015 was primarily due to lower net investment income, lower underlying underwriting margins, and lower net favorable prior year reserve development. These were partially offset by lower catastrophe losses and a favorable resolution of prior year tax matters.

The company's underwriting performance improved in the second quarter of 2015, as indicated by a lower combined ratio of 90.8% compared to 95.1% in the second quarter of 2014. This improvement was driven by reduced catastrophe losses and increased favorable prior year reserve development.

Travelers is actively returning capital to shareholders through significant share repurchases and dividend payments. In the first six months of 2015, the company repurchased approximately $1.40 billion of its common stock and paid $369 million in dividends. The company has a substantial remaining authorization for future share repurchases.

Asbestos and environmental claims, particularly the settlement of the Asbestos Direct Action Litigation, have had a material impact. The company made a $579 million payment in Q1 2015 related to this settlement. The company has established reserves for these claims, but there remains uncertainty regarding the ultimate cost, which could lead to future charges.