10-QPeriod: Q3 FY2019

TRAVELERS COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 22, 2019For Securities:TRV

Summary

The Travelers Companies, Inc. (TRV) reported its third-quarter and year-to-date results for 2019, showing a decrease in net income compared to the prior year. For the three months ended September 30, 2019, net income was $396 million, or $1.50 per diluted share, down from $709 million, or $2.62 per diluted share, in the same period of 2018. This decline was attributed to higher catastrophe losses, unfavorable prior year reserve development, and lower net investment income, partially offset by lower overall catastrophe losses. For the nine months ended September 30, 2019, net income was $1.75 billion, or $6.59 per diluted share, a decrease from $1.90 billion, or $6.97 per diluted share, in the comparable period of 2018. The company's earned premiums showed growth across all segments (Business Insurance, Bond & Specialty Insurance, and Personal Insurance), indicating continued business activity. Despite the decline in net income, Travelers maintained a strong balance sheet with total assets of $110.24 billion and shareholders' equity of $25.61 billion.

Financial Highlights

36 data points
Beta

Revenue

$8.01B

Net Income

$396.00M

4.9% Net Margin

EPS (Diluted)

$1.50

Total Assets

$110.24B

Cash & Equivalents

$508.00M

Free Cash Flow

$2.00B

Financial Statements
Beta
Revenue$8.01B
SG&A Expenses$1.10B
Interest Expense$84.00M
Net Income$396.00M
EPS (Basic)$1.52
EPS (Diluted)$1.50
Shares Outstanding (Basic)259.20M
Shares Outstanding (Diluted)261.80M

Key Highlights

  • 1Net income for the third quarter of 2019 decreased by 44% to $396 million ($1.50 per diluted share) compared to $709 million ($2.62 per diluted share) in the third quarter of 2018.
  • 2For the first nine months of 2019, net income decreased by 8% to $1.75 billion ($6.59 per diluted share) from $1.90 billion ($6.97 per diluted share) in the same period of 2018.
  • 3Earned premiums increased by 4% to $7.18 billion in Q3 2019 and by 5% to $21.02 billion for the nine months ended September 30, 2019, compared to the respective periods in 2018, driven by growth across all business segments.
  • 4Catastrophe losses were $241 million in Q3 2019, lower than the $264 million in Q3 2018, but prior year reserve development turned unfavorable, with $294 million in net unfavorable development in Q3 2019 versus net favorable development in Q3 2018.
  • 5The combined ratio worsened to 101.5% in Q3 2019 from 96.6% in Q3 2018, primarily due to increased claims and claim adjustment expenses.
  • 6The company repurchased 2.5 million shares for $375 million in Q3 2019 and paid $214 million in dividends, reflecting ongoing capital return to shareholders.
  • 7Total investments stood at $77.42 billion, with a conservative investment strategy focused on high-quality fixed maturities and short-term securities, which comprised 94% of total investments.

Frequently Asked Questions

The primary drivers for the decrease in net income in the third quarter of 2019 compared to the prior year were net unfavorable prior year reserve development, lower underwriting margins (excluding catastrophe losses), and reduced net investment income. Higher catastrophe losses also contributed, though they were partially offset by lower overall catastrophe losses.

The company demonstrated positive growth in earned premiums across all its segments. For the third quarter of 2019, earned premiums increased by 4% to $7.18 billion. For the first nine months of 2019, earned premiums grew by 5% to $21.02 billion, indicating continued business activity and expansion.

Travelers continues to return capital to shareholders through share repurchases and dividends. In the third quarter of 2019, the company repurchased 2.5 million shares for $375 million and paid $214 million in dividends. The company expects that, over time, dividends and share repurchases will not exceed net income.

The company maintains a conservative investment strategy focused on high-quality, liquid assets. At the end of the third quarter of 2019, total investments were $77.42 billion, with 94% in fixed maturities and short-term securities. While net investment income decreased slightly in the third quarter, the company expects it to remain broadly consistent year-over-year for the fourth quarter, with a slight decrease anticipated for early 2020 due to lower reinvestment yields.