10-QPeriod: Q2 FY2019

TRAVELERS COMPANIES, INC. Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 23, 2019For Securities:TRV

Summary

The Travelers Companies, Inc. (TRV) reported solid financial results for the second quarter and first six months of 2019, demonstrating resilience and continued growth. Net income increased by 6% and 13% respectively for the periods, while diluted earnings per share saw a more substantial increase of 9% and 17%, reflecting the positive impact of ongoing share repurchase programs. Total revenues grew, driven by higher earned premiums across all segments: Business Insurance, Bond & Specialty Insurance, and Personal Insurance. The company also benefited from increased net investment income, attributed to higher long-term reinvestment rates and a larger average investment portfolio. Despite an increase in claims and claim adjustment expenses, largely due to higher business volumes, loss cost trends, and some higher loss estimates, the company managed these pressures. Catastrophe losses were lower year-over-year for both periods, and net favorable prior year reserve development provided a significant benefit. The company maintained a strong capital position with a debt-to-total capital ratio within its target range. Travelers continued to return capital to shareholders through dividends and substantial share repurchases, underscoring a commitment to shareholder value.

Financial Highlights

35 data points
Beta

Revenue

$7.83B

Net Income

$557.00M

7.1% Net Margin

EPS (Diluted)

$2.10

Total Assets

$108.57B

Cash & Equivalents

$416.00M

Free Cash Flow

$1.15B

Financial Statements
Beta
Revenue$7.83B
SG&A Expenses$1.13B
Interest Expense$89.00M
Net Income$557.00M
EPS (Basic)$2.11
EPS (Diluted)$2.10
Shares Outstanding (Basic)261.30M
Shares Outstanding (Diluted)263.70M

Key Highlights

  • 1Net income increased by 6% to $557 million for Q2 2019 and by 13% to $1.35 billion for the first six months of 2019 compared to the prior year.
  • 2Diluted earnings per share increased by 9% to $2.10 for Q2 2019 and by 17% to $5.08 for the first six months of 2019, boosted by share repurchases.
  • 3Total revenues grew to $7.83 billion in Q2 2019 and $15.51 billion in the first six months of 2019, driven by a 4% increase in earned premiums across all segments.
  • 4Net investment income increased by 9% to $648 million in Q2 2019 and by 3% to $1.23 billion in the first six months of 2019, supported by higher reinvestment rates and portfolio growth.
  • 5Catastrophe losses decreased year-over-year, contributing positively to underwriting results. Q2 2019 catastrophe losses were $367 million compared to $488 million in Q2 2018.
  • 6Net favorable prior year reserve development remained a significant positive factor, totaling $123 million in Q2 2019 and $174 million in the first six months of 2019.
  • 7The company repurchased $750 million of common stock in the first six months of 2019 and maintained a healthy debt-to-total capital ratio of 20.6% (excluding unrealized investment gains).

Frequently Asked Questions

Travelers reported a 6% increase in net income to $557 million for the second quarter of 2019 and a 13% increase to $1.35 billion for the first six months of 2019, compared to the same periods in 2018. Diluted earnings per share saw more significant growth, rising 9% to $2.10 for the second quarter and 17% to $5.08 for the first six months, largely benefiting from share repurchase programs.

Total revenues increased to $7.83 billion for the second quarter and $15.51 billion for the first six months of 2019. This growth was primarily driven by a 4% increase in earned premiums across all business segments (Business Insurance, Bond & Specialty Insurance, and Personal Insurance) and higher net investment income, which rose 9% and 3% respectively for the periods, due to higher reinvestment rates and a larger investment portfolio.

Catastrophe losses were lower year-over-year in both periods, contributing positively to the results. In the second quarter, catastrophe losses were $367 million in 2019 versus $488 million in 2018. Net favorable prior year reserve development remained a strong contributor, with $123 million recorded in the second quarter of 2019 and $174 million in the first six months of 2019.

Travelers maintained a strong capital position, with a debt-to-total capital ratio of 20.6% (or 21.9% excluding net unrealized investment gains) as of June 30, 2019, which is within the company's target range. The company continued to return capital to shareholders through dividends and a robust share repurchase program, buying back $750 million of stock in the first six months of 2019 and still having $2.54 billion of repurchase capacity remaining.