10-QPeriod: Q1 FY2017

TRAVELERS COMPANIES, INC. Quarterly Report for Q1 Ended Mar 31, 2017

Filed April 20, 2017For Securities:TRV

Summary

The Travelers Companies, Inc. reported a net income of $617 million for the first quarter of 2017, a decrease of 11% compared to the same period in 2016. This decline was primarily attributed to lower net favorable prior year reserve development, increased catastrophe losses, and reduced underwriting margins, partially offset by higher net investment income. Diluted earnings per share were $2.17, down from $2.30 in the prior year, though the decrease was less pronounced due to share repurchases. The company's total revenues increased by 4% to $6.94 billion, driven by a 3% rise in earned premiums across its segments, particularly in Personal Insurance. Net investment income saw a significant 12% increase, largely due to strong returns from private equity investments, which helped to cushion the impact of rising claims and claim adjustment expenses. The combined ratio worsened to 96.0% from 92.3% in the prior year, mainly due to higher catastrophe losses and a reduction in prior year reserve development benefits.

Financial Highlights

32 data points
Beta

Revenue

$6.94B

Net Income

$617.00M

8.9% Net Margin

EPS (Diluted)

$2.17

Total Assets

$101.25B

Cash & Equivalents

$249.00M

Free Cash Flow

$848.00M

Financial Statements
Beta
Revenue$6.94B
SG&A Expenses$996.00M
Interest Expense$89.00M
Net Income$617.00M
EPS (Basic)$2.19
EPS (Diluted)$2.17
Shares Outstanding (Basic)279.70M
Shares Outstanding (Diluted)282.40M

Key Highlights

  • 1Net income decreased by 11% to $617 million, or $2.17 per diluted share, compared to $691 million, or $2.30 per diluted share, in Q1 2016.
  • 2Total revenues increased by 4% to $6.94 billion, driven by a 3% increase in earned premiums to $6.18 billion.
  • 3Net investment income rose 12% to $610 million, benefiting from strong performance in private equity limited partnerships.
  • 4The combined ratio deteriorated to 96.0% from 92.3% in the prior year, primarily due to increased catastrophe losses ($347 million vs. $318 million) and lower net favorable prior year reserve development ($81 million vs. $180 million).
  • 5The Personal Insurance segment experienced a significant 43% decline in segment income, impacted by higher catastrophe losses and lower prior year reserve development.
  • 6The company announced an agreement to acquire Simply Business for approximately $490 million, expected to close in Q3 2017.
  • 7Shareholders' equity increased to $23.61 billion, and the company announced an increase in its quarterly dividend to $0.72 per share and a $5.0 billion share repurchase authorization.

Frequently Asked Questions

The decrease in net income was primarily driven by lower net favorable prior year reserve development, higher catastrophe losses, reduced underwriting margins, and lower other revenues. These factors were partially offset by an increase in net investment income.

The company's investment portfolio performed well, with net investment income increasing by 12% to $610 million. This growth was largely due to higher returns from private equity limited partnerships, which helped to mitigate some of the impacts of declining investment income from fixed maturity investments due to lower reinvestment rates.

The company expects retention levels to remain strong. In Business and International Insurance, positive renewal premium changes are anticipated. Bond & Specialty Insurance expects positive renewal premium changes for management liability business, and increased net written premium volume for surety business. Personal Insurance anticipates positive renewal premium changes for Agency Automobile and Agency Homeowners and Other. New business is expected to remain competitive across segments.

The company plans to return capital through dividends and share repurchases. They announced an increase in their quarterly dividend to $0.72 per share and an expanded share repurchase authorization of $5.0 billion. The company expects that, over time, the combination of dividends and repurchases will likely not exceed net income.