10-QPeriod: Q3 FY2018

TRAVELERS COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 18, 2018For Securities:TRV

Summary

The Travelers Companies, Inc. (TRV) reported a strong third quarter and first nine months of 2018, demonstrating significant profit growth compared to the prior year. Net income for the third quarter surged by 142% to $709 million ($2.62 diluted EPS) from $293 million ($1.05 diluted EPS) in Q3 2017. For the nine-month period, net income increased by 26% to $1.90 billion ($6.97 diluted EPS) from $1.51 billion ($5.34 diluted EPS). This performance was driven by a combination of factors, including significantly lower catastrophe losses, higher net investment income, and improved underwriting margins across its segments. The company also benefited from lower income tax rates due to the Tax Cuts and Jobs Act of 2017. Premiums continued to grow across all segments, reflecting a healthy insurance market. Travelers also actively managed its capital, repurchasing shares and paying dividends, while maintaining a strong capital position and liquidity.

Financial Highlights

35 data points
Beta

Revenue

$7.72B

Net Income

$709.00M

9.2% Net Margin

EPS (Diluted)

$2.62

Total Assets

$104.39B

Cash & Equivalents

$359.00M

Free Cash Flow

$1.73B

Financial Statements
Beta
Revenue$7.72B
SG&A Expenses$1.06B
Interest Expense$86.00M
Net Income$709.00M
EPS (Basic)$2.65
EPS (Diluted)$2.62
Shares Outstanding (Basic)266.10M
Shares Outstanding (Diluted)268.40M

Key Highlights

  • 1Net income increased significantly year-over-year, with Q3 2018 at $709 million ($2.62/share) and YTD at $1.90 billion ($6.97/share), up 142% and 26% respectively.
  • 2Total revenues grew to $7.72 billion for the quarter and $22.49 billion for the nine months, up 5% and 5% respectively.
  • 3Catastrophe losses were substantially lower in 2018 compared to 2017, decreasing from $700 million to $264 million in Q3 and from $1.45 billion to $1.11 billion year-to-date, positively impacting profitability.
  • 4Net investment income showed a healthy increase, rising 10% to $646 million in Q3 and 3% to $1.84 billion year-to-date, driven by higher investment levels and reinvestment rates.
  • 5The combined ratio improved to 96.6% in Q3 2018 from 103.2% in Q3 2017, indicating enhanced underwriting profitability.
  • 6The company returned capital to shareholders through $400 million in share repurchases and $207 million in dividends in Q3 2018, with $3.46 billion remaining under its repurchase authorization.
  • 7Earned premiums demonstrated consistent growth, increasing 6% year-over-year for both the quarter ($6.88 billion) and the nine months ($20.11 billion).

Frequently Asked Questions

Travelers experienced a substantial increase in profitability. Net income for the third quarter of 2018 rose by 142% to $709 million ($2.62 diluted EPS) compared to $293 million ($1.05 diluted EPS) in the same period of 2017. For the first nine months of 2018, net income increased by 26% to $1.90 billion ($6.97 diluted EPS) from $1.51 billion ($5.34 diluted EPS) in the comparable period of 2017.

The improved financial results were primarily driven by significantly lower catastrophe losses ($264 million in Q3 2018 vs. $700 million in Q3 2017), higher net investment income (up 10% to $646 million in Q3 2018), and better underwriting margins. Additionally, the company benefited from lower income tax expenses due to the Tax Cuts and Jobs Act of 2017 and a combined ratio improvement to 96.6% in Q3 2018.

Travelers actively returned capital to shareholders. In the third quarter of 2018, the company repurchased approximately 3.1 million shares for $400 million and paid $207 million in dividends. At the end of the quarter, $3.46 billion remained available under its share repurchase authorization, indicating a continued commitment to shareholder returns.

The company expects continued premium growth. Earned premiums increased by 6% year-over-year for both the third quarter and the first nine months of 2018. Travelers anticipates strong retention levels and positive renewal premium changes across its business segments in the near future, despite a competitive market environment.