10-QPeriod: Q2 FY2021

TRAVELERS COMPANIES, INC. Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 20, 2021For Securities:TRV

Summary

Travelers Companies, Inc. (TRV) reported a strong second quarter for 2021, with net income of $934 million, or $3.66 per diluted share. This marks a significant improvement compared to a net loss of $40 million in the same period of 2020. The positive results were driven by higher net earned premiums across all segments, particularly in Personal Insurance and Bond & Specialty Insurance. The company also benefited from higher net investment income, lower catastrophe losses, and favorable prior year reserve development, leading to a combined ratio of 95.3%. The balance sheet remains robust with total assets of $119.76 billion and shareholders' equity of $29.16 billion. The company continued its commitment to returning capital to shareholders, repurchasing $401 million of stock and paying $224 million in dividends during the quarter. Travelers also maintained a strong liquidity position with $2.43 billion in holding company liquidity, exceeding its target.

Financial Highlights

34 data points
Beta

Revenue

$8.69B

Net Income

$934.00M

10.8% Net Margin

EPS (Diluted)

$3.66

Total Assets

$119.76B

Cash & Equivalents

$689.00M

Free Cash Flow

$1.85B

Financial Statements
Beta
Revenue$8.69B
SG&A Expenses$1.17B
Interest Expense$83.00M
Net Income$934.00M
EPS (Basic)$3.70
EPS (Diluted)$3.66
Shares Outstanding (Basic)250.70M
Shares Outstanding (Diluted)253.10M

Key Highlights

  • 1Net income surged to $934 million ($3.66 per diluted share) in Q2 2021, a substantial turnaround from a net loss of $40 million in Q2 2020.
  • 2Total revenues increased to $8.69 billion in Q2 2021, up from $7.40 billion in Q2 2020, driven by strong premium growth.
  • 3Earned premiums rose 10% year-over-year to $7.62 billion in Q2 2021, reflecting growth across Business Insurance, Bond & Specialty Insurance, and Personal Insurance segments.
  • 4The combined ratio improved significantly to 95.3% in Q2 2021 from 103.7% in Q2 2020, indicating improved underwriting profitability.
  • 5Net investment income more than tripled to $818 million in Q2 2021 from $268 million in Q2 2020, contributing significantly to the bottom line.
  • 6The company returned $625 million in capital to shareholders through share repurchases ($401 million) and dividends ($224 million) in Q2 2021.
  • 7Total investments stood at $86.55 billion, with a strong emphasis on high-quality fixed maturities and short-term securities.

Frequently Asked Questions

The primary driver was a combination of factors including higher net earned premiums across all segments, a substantial increase in net investment income, a decrease in catastrophe losses compared to the prior year quarter, and favorable prior year reserve development. These factors collectively led to improved profitability.

All three segments, Business Insurance, Bond & Specialty Insurance, and Personal Insurance, showed improved profitability. Business Insurance rebounded from a loss to a significant profit due to lower catastrophe losses and improved underwriting margins. Bond & Specialty Insurance also saw strong growth in segment income. Personal Insurance experienced higher segment income driven by lower catastrophe losses and favorable reserve development, despite some increased underlying loss activity.

Travelers remains committed to returning capital to shareholders. In the second quarter of 2021, they repurchased $401 million of common stock and paid $224 million in dividends. The company expects that, generally over time, the combination of dividends and share repurchases will likely not exceed net income, and this will be balanced against capital needs for premium growth and financial strength ratings.

Catastrophe losses were lower in the second quarter of 2021 ($475 million) compared to the second quarter of 2020 ($854 million). These losses are a significant factor influencing the combined ratio, and the reduction in Q2 2021 contributed positively to the improved combined ratio of 95.3%.