Fourth Quarter 2021 Record Net Income per
Diluted Share of $5.37 and Return on Equity of 18.6%
Fourth Quarter 2021 Record Core Income per
Diluted Share of $5.20 and Core Return on Equity of 19.8%
Full Year Net Income of $3.662 billion, up
36%, and Return on Equity of 12.7%
Full Year Core Income of $3.522 billion, up
31%, and Core Return on Equity of 13.7%
- Record fourth quarter net income of $1.333 billion and record
core income of $1.289 billion.
- Consolidated combined ratio of 88.0% and underlying combined
ratio of 88.7%.
- Net written premiums of $7.995 billion, up 10% compared to the
prior year quarter; record full year net written premiums of
$31.959 billion, up 7% compared to the prior year.
- Net written premium growth in all three segments compared to
the prior year quarter; Business Insurance up 9%, Bond &
Specialty Insurance up 13% and Personal Insurance up 10%.
- Total capital returned to shareholders of $1.017 billion,
including $801 million of share repurchases; full year total
capital returned to shareholders of $3.076 billion, including
$2.200 billion of share repurchases.
- Book value per share of $119.77, up 4% from year-end 2020;
adjusted book value per share of $109.76, up 10% from year-end
2020.
- Board of Directors declares regular quarterly cash dividend of
$0.88 per share.
The Travelers Companies, Inc. today reported net income of
$1.333 billion, or $5.37 per diluted share, for the quarter ended
December 31, 2021, compared to $1.310 billion, or $5.10 per diluted
share, in the prior year quarter. Core income in the current
quarter was $1.289 billion, or $5.20 per diluted share, compared to
$1.262 billion, or $4.91 per diluted share, in the prior year
quarter. Core income increased primarily due to higher net
investment income and a higher underlying underwriting gain (i.e.,
excluding net prior year reserve development and catastrophe
losses), partially offset by lower net favorable prior year reserve
development. Net realized investment gains in the current quarter
were $58 million pre-tax ($44 million after-tax), compared to $50
million pre-tax ($48 million after-tax) in the prior year quarter.
Per diluted share amounts benefited from the impact of share
repurchases.
Consolidated Highlights
($ in millions, except for per share
amounts, and after-tax, except for premiums and revenues)
Three Months Ended December
31,
Twelve Months Ended December
31,
2021
2020
Change
2021
2020
Change
Net written premiums
$
7,995
$
7,269
10
%
$
31,959
$
29,732
7
%
Total revenues
$
9,011
$
8,397
7
$
34,816
$
31,981
9
Net income
$
1,333
$
1,310
2
$
3,662
$
2,697
36
per diluted share
$
5.37
$
5.10
5
$
14.49
$
10.52
38
Core income
$
1,289
$
1,262
2
$
3,522
$
2,686
31
per diluted share
$
5.20
$
4.91
6
$
13.94
$
10.48
33
Diluted weighted average shares
outstanding
246.4
254.8
(3
)
250.8
254.6
(1
)
Combined ratio
88.0
%
86.7
%
1.3
pts
94.5
%
95.0
%
(0.5
)
pts
Underlying combined ratio
88.7
%
88.7
%
—
pts
90.3
%
90.7
%
(0.4
)
pts
Return on equity
18.6
%
18.4
%
0.2
pts
12.7
%
10.0
%
2.7
pts
Core return on equity
19.8
%
20.5
%
(0.7
)
pts
13.7
%
11.3
%
2.4
pts
As of
December 31, 2021
December 31, 2020
Change
Book value per share
$
119.77
$
115.68
4
%
Adjusted book value per share
109.76
99.54
10
%
See Glossary of Financial
Measures for definitions and the statistical supplement for
additional financial data.
“We are very pleased to report outstanding results for the
fourth quarter and full year, including meaningful top line growth,
strong margins and excellent returns from our investment
portfolio,” said Alan Schnitzer, Chairman and Chief Executive
Officer. “Another year of exceptional performance is a testament to
our franchise value, underwriting excellence and investment
expertise.
“Core income for the quarter was $1.3 billion, or $5.20 per
diluted share, generating core return on equity of 19.8%. These
results were driven by strong underlying underwriting income and
returns from our investment portfolio. Our higher underlying
underwriting income was driven by record net earned premiums of $8
billion and an excellent underlying combined ratio of 88.7%. For
the full year, record underlying underwriting income of $2.3
billion after-tax contributed meaningfully to the 31% increase in
core income to $3.5 billion, or $13.94 per diluted share. Our
high-quality investment portfolio generated after-tax net
investment income of $2.5 billion for the year. Our impressive
operating results, together with our strong balance sheet, enabled
us to grow adjusted book value per share by more than 10% during
the year, after returning $3.1 billion of excess capital to
shareholders, including $2.2 billion of share repurchases, and
making important investments in our business.
“Our best-in-class marketplace execution enabled us to grow net
written premiums by 10% this quarter to $8 billion, with each of
our three segments contributing. In Business Insurance, net written
premiums grew by 9%, with renewal premium change of 9.2% near an
all-time high, while retention was higher than in the prior year
quarter. In addition, new business was up 16% year over year. In
Bond & Specialty Insurance, net written premiums increased by
13%, driven by renewal premium change of 10.9% and continued strong
retention in our management liability business. In Personal
Insurance, net written premiums increased by 10%. Policies in force
in both Auto and Homeowners increased to record levels, driven by
continued strong retention and new business. Renewal premium change
improved in Auto to 1.2% and remained strong in Homeowners at
8.7%.
“Our Perform and Transform call to action once again served us
well in 2021. In addition to delivering excellent financial results
today, we continue to leverage our scale and resources to execute
on our ambitious innovation agenda for tomorrow. We’re enriching
160 years of insurance expertise by investing in digital tools and
virtual capabilities, deploying robotics and proprietary AI models,
and hiring and developing top data scientists, engineers,
roboticists and meteorologists, among others, to build the
insurance company of the future. Looking forward, with the best
talent in the industry, we remain well positioned to capitalize on
opportunities and deliver industry leading returns.”
Consolidated Results
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
2021
2020
Change
Underwriting gain:
$
926
$
955
$
(29
)
$
1,542
$
1,302
$
240
Underwriting gain
includes:
Net favorable prior year reserve
development
95
180
(85
)
538
351
187
Catastrophes, net of reinsurance
(36
)
(29
)
(7
)
(1,847
)
(1,613
)
(234
)
Net investment income
743
677
66
3,033
2,227
806
Other income (expense), including
interest expense
(77
)
(66
)
(11
)
(288
)
(294
)
6
Core income before income taxes
1,592
1,566
26
4,287
3,235
1,052
Income tax expense
303
304
(1
)
765
549
216
Core income
1,289
1,262
27
3,522
2,686
836
Net realized investment gains after
income taxes
44
48
(4
)
132
11
121
Impact of changes in tax laws and/or
tax rates (1)
—
—
—
8
—
8
Net income
$
1,333
$
1,310
$
23
$
3,662
$
2,697
$
965
Combined ratio
88.0
%
86.7
%
1.3
pts
94.5
%
95.0
%
(0.5
)
pts
Impact on combined
ratio
Net favorable prior year reserve
development
(1.2
)
pts
(2.4
)
pts
1.2
pts
(1.8
)
pts
(1.2
)
pts
(0.6
)
pts
Catastrophes, net of reinsurance
0.5
pts
0.4
pts
0.1
pts
6.0
pts
5.5
pts
0.5
pts
Underlying combined ratio
88.7
%
88.7
%
—
pts
90.3
%
90.7
%
(0.4
)
pts
Net written premiums
Business Insurance
$
3,966
$
3,631
9
%
$
16,092
$
15,431
4
%
Bond & Specialty Insurance
905
800
13
3,376
2,951
14
Personal Insurance
3,124
2,838
10
12,491
11,350
10
Total
$
7,995
$
7,269
10
%
$
31,959
$
29,732
7
%
(1) Impact is recognized in the
accounting period in which the change is enacted
Fourth Quarter 2021 Results
(All comparisons vs. fourth quarter 2020, unless noted
otherwise)
Net income of $1.333 billion increased $23 million, primarily
due to higher core income. Core income of $1.289 billion increased
$27 million, primarily due to higher net investment income and a
higher underlying underwriting gain, partially offset by lower net
favorable prior year reserve development. The underlying
underwriting gain benefited from higher business volumes. Net
realized investment gains were $58 million pre-tax ($44 million
after-tax), compared to $50 million pre-tax ($48 million after-tax)
in the prior year quarter.
Combined ratio:
- The combined ratio of 88.0% increased 1.3 points due to lower
net favorable prior year reserve development (1.2 points) and
higher catastrophe losses (0.1 points).
- The underlying combined ratio of 88.7% was comparable to the
prior year quarter. See below for further details by segment.
- Net favorable prior year reserve development in Business
Insurance and Bond & Specialty Insurance was partially offset
by net unfavorable prior year reserve development in Personal
Insurance. See below for further details by segment.
- Catastrophe losses primarily resulted from tornado activity in
Kentucky, windstorms in multiple states and a wildfire in Colorado.
Catastrophe and non-catastrophe weather-related losses in the
fourth quarter of 2021 were reduced by $255 million of recoveries
available under the Company’s 2021 Underlying Property Aggregate
Catastrophe Excess-of-Loss Reinsurance Treaty. There were no
recoveries under the Company’s 2020 Underlying Property Aggregate
Catastrophe Excess-of-Loss Reinsurance Treaty in the fourth quarter
of 2020, as the treaty was fully utilized in the third quarter of
2020.
Net investment income of $743 million pre-tax ($624 million
after-tax) increased 10%. Income from the non-fixed income
investment portfolio increased over the prior year quarter,
primarily due to higher private equity and real estate partnership
returns. Non-fixed income returns are generally reported on a
one-quarter lagged basis and directionally follow the broader
equity markets. Income from the fixed income investment portfolio
increased slightly over the prior year quarter, primarily due to
growth in fixed maturity investments, partially offset by lower
interest rates.
Net written premiums of $7.995 billion increased 10%. See below
for further details by segment.
Full Year 2021 Results (All
comparisons vs. full year 2020, unless noted otherwise)
Net income of $3.662 billion increased $965 million, primarily
due to higher core income and higher net realized investment gains.
Core income of $3.522 billion increased by $836 million, primarily
due to higher net investment income, a higher underlying
underwriting gain and higher net favorable prior year reserve
development, partially offset by higher catastrophe losses. The
underlying underwriting gain benefited from higher business
volumes. Net realized investment gains were $171 million pre-tax
($132 million after-tax), compared to $2 million pre-tax ($11
million after-tax) in the prior year.
Combined ratio:
- The combined ratio of 94.5% improved 0.5 points due to higher
net favorable prior year reserve development (0.6 points) and a
lower underlying combined ratio (0.4 points), partially offset
higher catastrophe losses (0.5 points).
- The underlying combined ratio of 90.3% improved 0.4 points. See
below for further details by segment.
- Net favorable prior year reserve development occurred in all
segments. See below for further details by segment.
- Catastrophe losses included the fourth quarter events described
above, as well as Hurricane Ida, winter storms and severe wind and
hail storms in several regions of the United States in the first
nine months of 2021. Catastrophe and non-catastrophe
weather-related losses in 2021 were reduced by $350 million of
recoveries available under the Company’s 2021 Underlying Property
Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty.
Catastrophe and non-catastrophe weather-related losses in 2020 were
reduced by $280 million of recoveries available under the Company’s
2020 Underlying Property Aggregate Catastrophe Excess-of-Loss
Reinsurance Treaty.
Net investment income of $3.033 billion pre-tax ($2.541 billion
after-tax) increased 36%. Income from the non-fixed income
investment portfolio increased from the prior year, primarily due
to higher private equity partnership returns. Income from the fixed
income investment portfolio decreased from the prior year,
primarily due to lower interest rates, partially offset by growth
in fixed maturity investments.
Net written premiums of $31.959 billion increased 7%. See below
for further details by segment.
Shareholders’ Equity
Shareholders’ equity of $28.887 billion decreased 1% from
year-end 2020, primarily due to lower net unrealized investment
gains resulting from higher interest rates, common share
repurchases and dividends to shareholders, partially offset by net
income of $3.662 billion. Net unrealized investment gains included
in shareholders’ equity were $3.060 billion pre-tax ($2.415 billion
after-tax) compared to $5.175 billion pre-tax ($4.074 billion
after-tax) at year-end 2020. Book value per share of $119.77
increased 4% over year-end 2020. Adjusted book value per share of
$109.76, which excludes net unrealized investment gains, increased
10% over year-end 2020.
The Company repurchased 5.1 million shares during the fourth
quarter at an average price of $156.26 per share for a total of
$801 million. At December 31, 2021, the Company had $4.005 billion
of capacity remaining under its share repurchase authorization
approved by the Board of Directors. At the end of the quarter,
statutory capital and surplus was $23.906 billion, and the ratio of
debt-to-capital was 20.2%. The ratio of debt-to-capital excluding
after-tax net unrealized investment gains included in shareholders’
equity was 21.6%, within the Company’s target range of 15% to
25%.
The Board of Directors declared a regular quarterly dividend of
$0.88 per share. The dividend is payable on March 31, 2022 to
shareholders of record at the close of business on March 10,
2022.
Business
Insurance Segment Financial Results
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
2021
2020
Change
Underwriting gain (loss):
$
523
$
382
$
141
$
640
$
(90
)
$
730
Underwriting gain
(loss) includes:
Net favorable (unfavorable) prior year
reserve development
74
124
(50
)
173
(91
)
264
Catastrophes, net of reinsurance
43
24
19
(793
)
(645
)
(148
)
Net investment income
552
502
50
2,265
1,633
632
Other income (expense)
(7
)
(5
)
(2
)
(21
)
(21
)
—
Segment income before income
taxes
1,068
879
189
2,884
1,522
1,362
Income tax expense
201
166
35
499
213
286
Segment income
$
867
$
713
$
154
$
2,385
$
1,309
$
1,076
Combined ratio
87.0
%
89.8
%
(2.8
)
pts
95.7
%
100.3
%
(4.6
)
pts
Impact on combined
ratio
Net (favorable) unfavorable prior year
reserve development
(1.8
)
pts
(3.2
)
pts
1.4
pts
(1.1
)
pts
0.6
pts
(1.7
)
pts
Catastrophes, net of reinsurance
(1.0
)
pts
(0.6
)
pts
(0.4
)
pts
5.1
pts
4.2
pts
0.9
pts
Underlying combined ratio
89.8
%
93.6
%
(3.8
)
pts
91.7
%
95.5
%
(3.8
)
pts
Net written premiums by market
Domestic
Select Accounts
$
693
$
630
10
%
$
2,833
$
2,821
—
%
Middle Market
2,210
2,012
10
8,933
8,511
5
National Accounts
256
241
6
987
996
(1
)
National Property and Other
535
471
14
2,265
2,086
9
Total Domestic
3,694
3,354
10
15,018
14,414
4
International
272
277
(2
)
1,074
1,017
6
Total
$
3,966
$
3,631
9
%
$
16,092
$
15,431
4
%
Fourth Quarter 2021 Results
(All comparisons vs. fourth quarter 2020, unless noted
otherwise)
Segment income for Business Insurance was $867 million
after-tax, an increase of $154 million. Segment income increased
primarily due to a higher underlying underwriting gain and higher
net investment income, partially offset by lower net favorable
prior year reserve development. The underlying underwriting gain
benefited from higher business volumes.
Combined ratio:
- The combined ratio of 87.0% improved 2.8 points due to a lower
underlying combined ratio (3.8 points) and a higher benefit related
to catastrophe losses (0.4 points), partially offset by lower net
favorable prior year reserve development (1.4 points).
- The underlying combined ratio of 89.8% improved 3.8 points,
primarily reflecting earned pricing that exceeded loss cost trends,
a favorable impact associated with the pandemic, a lower level of
property losses and a lower expense ratio.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in domestic
operations in the workers’ compensation product line for multiple
accident years.
Net written premiums of $3.966 billion increased 9%, reflecting
strong renewal premium change and retention, as well as higher new
business levels.
Full Year 2021 Results (All
comparisons vs. full year 2020, unless noted otherwise)
Segment income for Business Insurance was $2.385 billion
after-tax, an increase of $1.076 billion. Segment income increased
primarily due to higher net investment income, a higher underlying
underwriting gain and net favorable prior year reserve development
(compared to net unfavorable prior year reserve development in the
prior year), partially offset by higher catastrophe losses. The
underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 95.7% improved 4.6 points due to a lower
underlying combined ratio (3.8 points) and net favorable prior year
reserve development compared to net unfavorable prior year reserve
development in the prior year (1.7 points), partially offset by
higher catastrophe losses (0.9 points).
- The underlying combined ratio of 91.7% improved 3.8 points,
primarily reflecting earned pricing that exceeded loss cost trends
and a favorable impact associated with the pandemic.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in domestic
operations in the workers’ compensation product line for multiple
accident years and in the commercial property and commercial
automobile product lines for recent accident years, as well as
better than expected loss experience in the segment’s international
operations for recent accident years, partially offset by an
increase in asbestos reserves of $225 million, an increase in other
reserves related to run-off operations and an increase to
environmental reserves. Net unfavorable prior year reserve
development in the prior year included an increase in asbestos
reserves of $295 million.
Net written premiums of $16.092 billion increased 4%, and
benefited from strong renewal premium change and retention.
Bond
& Specialty Insurance Segment Financial Results
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
2021
2020
Change
Underwriting gain:
$
147
$
138
$
9
$
569
$
346
$
223
Underwriting gain
includes:
Net favorable (unfavorable) prior year
reserve development
24
32
(8
)
105
(1
)
106
Catastrophes, net of reinsurance
(10
)
(1
)
(9
)
(40
)
(11
)
(29
)
Net investment income
61
58
3
247
213
34
Other income
4
8
(4
)
17
21
(4
)
Segment income before income
taxes
212
204
8
833
580
253
Income tax expense
42
40
2
165
107
58
Segment income
$
170
$
164
$
6
$
668
$
473
$
195
Combined ratio
81.5
%
80.9
%
0.6
pts
81.5
%
87.4
%
(5.9
)
pts
Impact on combined
ratio
Net (favorable) unfavorable prior year
reserve development
(3.0
)
pts
(4.2
)
pts
1.2
pts
(3.3
)
pts
—
pts
(3.3
)
pts
Catastrophes, net of reinsurance
1.2
pts
0.1
pts
1.1
pts
1.3
pts
0.4
pts
0.9
pts
Underlying combined ratio
83.3
%
85.0
%
(1.7
)
pts
83.5
%
87.0
%
(3.5
)
pts
Net written premiums
Domestic
Management Liability
$
510
$
463
10
%
$
1,983
$
1,769
12
%
Surety
215
202
6
888
845
5
Total Domestic
725
665
9
2,871
2,614
10
International
180
135
33
505
337
50
Total
$
905
$
800
13
%
$
3,376
$
2,951
14
%
Fourth Quarter 2021 Results
(All comparisons vs. fourth quarter 2020, unless noted
otherwise)
Segment income for Bond & Specialty Insurance was $170
million after-tax, an increase of $6 million. Segment income
increased primarily due to a higher underlying underwriting gain,
partially offset by higher catastrophe losses and lower net
favorable prior year reserve development. The underlying
underwriting gain benefited from higher business volumes.
Combined ratio:
- The combined ratio of 81.5% increased 0.6 points due to lower
net favorable prior year reserve development (1.2 points) and
higher catastrophe losses (1.1 points), partially offset by a lower
underlying combined ratio (1.7 points).
- The underlying combined ratio of 83.3% improved 1.7 points,
primarily reflecting earned pricing that exceeded loss cost trends
and a lower expense ratio.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the segment’s
domestic operations in the fidelity and surety product lines for
recent accident years.
Net written premiums of $905 million increased 13%, reflecting
strong retention and renewal premium change in management liability
and strong production in surety.
Full Year 2021 Results (All
comparisons vs. full year 2020, unless noted otherwise)
Segment income for Bond & Specialty Insurance was $668
million after-tax, an increase of $195 million. Segment income
increased primarily due to a higher underlying underwriting gain,
net favorable prior year reserve development in the current year
(compared to an insignificant amount of net unfavorable prior year
reserve development in the prior year) and higher net investment
income, partially offset by higher catastrophe losses. The
underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 81.5% improved 5.9 points due to a lower
underlying combined ratio (3.5 points) and net favorable prior year
reserve development in the current year (3.3 points), partially
offset by higher catastrophe losses (0.9 points).
- The underlying combined ratio of 83.5% improved 3.5 points,
primarily reflecting earned pricing that exceeded loss cost trends,
a lower level of losses associated with the pandemic and a lower
expense ratio.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the segment’s
domestic operations in the fidelity and surety product lines for
multiple accident years, partially offset by higher than expected
loss experience in the general liability product line for
management liability coverages for multiple accident years.
Net written premiums of $3.376 billion increased 14%, driven by
the same factors described above for the fourth quarter of
2021.
Personal
Insurance Segment Financial Results
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions and pre-tax, unless
noted otherwise)
2021
2020
Change
2021
2020
Change
Underwriting gain:
$
256
$
435
$
(179
)
$
333
$
1,046
$
(713
)
Underwriting gain
includes:
Net favorable (unfavorable) prior year
reserve development
(3
)
24
(27
)
260
443
(183
)
Catastrophes, net of reinsurance
(69
)
(52
)
(17
)
(1,014
)
(957
)
(57
)
Net investment income
130
117
13
521
381
140
Other income
21
23
(2
)
85
76
9
Segment income before income
taxes
407
575
(168
)
939
1,503
(564
)
Income tax expense
80
118
(38
)
179
308
(129
)
Segment income
$
327
$
457
$
(130
)
$
760
$
1,195
$
(435
)
Combined ratio
91.1
%
84.1
%
7.0
pts
96.5
%
89.7
%
6.8
pts
Impact on combined
ratio
Net (favorable) unfavorable prior year
reserve development
0.1
pts
(0.8
)
pts
0.9
pts
(2.2
)
pts
(4.1
)
pts
1.9
pts
Catastrophes, net of reinsurance
2.3
pts
1.8
pts
0.5
pts
8.5
pts
8.8
pts
(0.3
)
pts
Underlying combined ratio
88.7
%
83.1
%
5.6
pts
90.2
%
85.0
%
5.2
pts
Net written premiums
Domestic
Automobile
$
1,456
$
1,348
8
%
$
5,827
$
5,369
9
%
Homeowners and Other
1,504
1,330
13
5,980
5,329
12
Total Domestic
2,960
2,678
11
11,807
10,698
10
International
164
160
3
684
652
5
Total
$
3,124
$
2,838
10
%
$
12,491
$
11,350
10
%
Fourth Quarter 2021 Results
(All comparisons vs. fourth quarter 2020, unless noted
otherwise)
Segment income for Personal Insurance was $327 million
after-tax, a decrease of $130 million. Segment income decreased
primarily due to a lower underlying underwriting gain, net
unfavorable prior year reserve development (compared to net
favorable prior year reserve development in the prior year quarter)
and higher catastrophe losses, partially offset by higher net
investment income. The underlying underwriting gain benefited from
higher business volumes.
Combined ratio:
- The combined ratio of 91.1% increased 7.0 points due to a
higher underlying combined ratio (5.6 points), net unfavorable
prior year reserve development compared to favorable prior year
reserve development in the prior year quarter (0.9 points) and
higher catastrophe losses (0.5 points).
- The underlying combined ratio of 88.7% increased 5.6 points,
primarily driven by higher losses in the automobile product line
due to a comparison to a low level of loss activity in the prior
year quarter as a result of the pandemic and, to a lesser extent,
elevated severity in the current quarter, partially offset by lower
losses in the homeowners and other product line.
- Net unfavorable prior year reserve development was not
significant in the quarter.
Net written premiums of $3.124 billion increased 10%. Domestic
Automobile net written premiums increased 8%, driven by strong
retention and new business. Domestic Homeowners and Other net
written premiums increased 13%, driven by strong retention and
renewal premium change of 8.7%.
Full Year 2021 Results (All
comparisons vs. full year 2020, unless noted otherwise)
Segment income for Personal Insurance was $760 million
after-tax, a decrease of $435 million. Segment income decreased
primarily due to a lower underlying underwriting gain, lower net
favorable prior year reserve development and higher catastrophe
losses, partially offset by higher net investment income. The
underlying underwriting gain benefited from higher business
volumes.
Combined ratio:
- The combined ratio of 96.5% increased 6.8 points due to a
higher underlying combined ratio (5.2 points) and lower net
favorable prior year reserve development (1.9 points), partially
offset by a smaller impact from catastrophe losses (0.3
points).
- The underlying combined ratio of 90.2% increased 5.2 points,
primarily driven by higher losses in the automobile product line
due to a comparison to a low level of loss activity (net of premium
refunds) in the prior year as a result of the pandemic and, to a
lesser extent, elevated severity in the current year and higher
losses in the homeowners and other product line.
- Net favorable prior year reserve development was primarily
driven by better than expected loss experience in the segment’s
domestic operations in both the homeowners and other and automobile
product lines for recent accident years.
Net written premiums of $12.491 billion increased 10%. Excluding
premium refunds provided to personal automobile customers primarily
in 2020, net written premiums increased 8%. Domestic Automobile net
written premiums increased 9%. Excluding the impact of premium
refunds, Domestic Automobile net written premiums increased 4%,
driven by strong retention and higher levels of new business.
Domestic Homeowners and Other net written premiums increased 12%,
driven by strong retention, renewal premium change of 8.3% and
higher levels of new business.
Financial Supplement and Conference Call
The information in this press release should be read in
conjunction with the financial supplement that is available on our
website at www.travelers.com. Travelers management will discuss the
contents of this release and other relevant topics via webcast at 9
a.m. Eastern (8 a.m. Central) on Thursday, January 20, 2022.
Investors can access the call via webcast at
http://investor.travelers.com or by dialing 1.844.895.1976 within
the United States and 1.647.689.5389 outside the United States.
Prior to the webcast, a slide presentation pertaining to the
quarterly earnings will be available on the Company’s website.
Following the live event, replays will be available via webcast
for one year at http://investor.travelers.com and by telephone for
30 days by dialing 1.800.585.8367 within the United States or
1.416.621.4642 outside the United States. All callers should use
conference ID 4999622.
About Travelers
The Travelers Companies, Inc. (NYSE: TRV) is a leading provider
of property casualty insurance for auto, home and business. A
component of the Dow Jones Industrial Average, Travelers has
approximately 30,000 employees and generated revenues of
approximately $35 billion in 2021. For more information, visit
www.travelers.com.
Travelers may use its website and/or social media outlets, such
as Facebook and Twitter, as distribution channels of material
Company information. Financial and other important information
regarding the Company is routinely accessible through and posted on
our website at http://investor.travelers.com, our Facebook page at
https://www.facebook.com/travelers and our Twitter account
(@Travelers) at https://twitter.com/travelers. In addition, you may
automatically receive email alerts and other information about
Travelers when you enroll your email address by visiting the Email
Notifications section at http://investor.travelers.com.
Travelers is organized into the following reportable business
segments:
Business Insurance - Business Insurance offers a broad
array of property and casualty insurance products and services to
its customers, primarily in the United States, as well as in
Canada, the United Kingdom, the Republic of Ireland and throughout
other parts of the world as a corporate member of Lloyd’s.
Bond & Specialty Insurance - Bond & Specialty
Insurance offers surety, fidelity, management liability,
professional liability, and other property and casualty coverages
and related risk management services to its customers, primarily in
the United States, and certain surety and specialty insurance
products in Canada, the United Kingdom and the Republic of Ireland,
as well as Brazil through a joint venture, in each case utilizing
various degrees of financially-based underwriting approaches.
Personal Insurance - Personal Insurance offers a broad
range of property and casualty insurance products and services
covering individuals’ personal risks, primarily in the United
States, as well as in Canada. The primary products of automobile
and homeowners insurance are complemented by a broad suite of
related coverages.
* * * * *
Forward-Looking Statements
This press release contains, and management may make, certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other
than statements of historical facts, may be forward-looking
statements. Words such as “may,” “will,” “should,” “likely,”
“anticipates,” “expects,” “intends,” “plans,” “projects,”
“believes,” “views,” “estimates” and similar expressions are used
to identify these forward-looking statements. These statements
include, among other things, the Company’s statements about:
- the Company’s outlook, the impact of trends on its business and
its future results of operations and financial condition;
- the impact of COVID-19 and related economic conditions;
- the impact of legislative or regulatory actions or court
decisions taken in response to COVID-19 or otherwise;
- share repurchase plans;
- the sufficiency of the Company’s asbestos and other
reserves;
- the impact of emerging claims issues as well as other insurance
and non-insurance litigation;
- catastrophe losses;
- the impact of investment, economic and underwriting market
conditions, including inflation;
- strategic and operational initiatives to improve profitability
and competitiveness;
- the Company’s competitive advantages and innovation
agenda;
- new product offerings; and
- the impact of developments in the tort environment.
The Company cautions investors that such statements are subject
to risks and uncertainties, many of which are difficult to predict
and generally beyond the Company’s control, that could cause actual
results to differ materially from those expressed in, or implied or
projected by, the forward-looking information and statements.
Some of the factors that could cause actual results to differ
include, but are not limited to, the following:
Insurance-Related Risks
- high levels of catastrophe losses;
- actual claims may exceed the Company’s claims and claim
adjustment expense reserves, or the estimated level of claims and
claim adjustment expense reserves may increase, including as a
result of, among other things, changes in the legal/tort,
regulatory and economic environments;
- the Company’s potential exposure to asbestos and environmental
claims and related litigation;
- the Company is exposed to, and may face adverse developments
involving, mass tort claims; and
- the effects of emerging claim and coverage issues on the
Company’s business are uncertain, and court decisions or
legislative changes that take place after the Company issues its
policies can result in an unexpected increase in the number of
claims.
Financial, Economic and Credit
Risks
- a period of financial market disruption or an economic
downturn;
- the Company’s investment portfolio is subject to credit and
interest rate risk, and may suffer reduced or low returns or
material realized or unrealized losses;
- the Company is exposed to credit risk related to reinsurance
and structured settlements, and reinsurance coverage may not be
available to the Company;
- the Company is exposed to credit risk in certain of its
insurance operations and with respect to certain guarantee or
indemnification arrangements that it has with third parties;
- a downgrade in the Company’s claims-paying and financial
strength ratings; and
- the Company’s insurance subsidiaries may be unable to pay
dividends to the Company’s holding company in sufficient
amounts.
Business and Operational
Risks
- the impact of COVID-19 and related risks, including with
respect to revenues, claims and claim adjustment expenses, general
and administrative expenses, investments, inflation, adverse
legislative and/or regulatory action, operational disruptions and
heightened cyber security risks and foreign currency exchange rate
changes;
- the intense competition that the Company faces, and the impact
of innovation, technological change and changing customer
preferences on the insurance industry and the markets in which it
operates;
- disruptions to the Company’s relationships with its independent
agents and brokers or the Company’s inability to manage effectively
a changing distribution landscape;
- the Company’s efforts to develop new products, expand in
targeted markets, improve business processes and workflows or make
acquisitions may not be successful and may create enhanced
risks;
- the Company’s pricing and capital models may provide materially
different indications than actual results;
- loss of or significant restrictions on the use of particular
types of underwriting criteria, such as credit scoring, or other
data or methodologies, in the pricing and underwriting of the
Company’s products; and
- the Company is subject to additional risks associated with its
business outside the United States.
Technology and Intellectual Property
Risks
- as a result of cyber attacks or otherwise, the Company may
experience difficulties with technology, data and network security
or outsourcing relationships;
- the Company’s dependence on effective information technology
systems and on continuing to develop and implement improvements in
technology; and
- the Company may be unable to protect and enforce its own
intellectual property or may be subject to claims for infringing
the intellectual property of others.
Regulatory and Compliance
Risks
- changes in regulation, including higher tax rates; and
- the Company’s compliance controls may not be effective.
In addition, the Company’s share repurchase plans depend on a
variety of factors, including the Company’s financial position,
earnings, share price, catastrophe losses, maintaining capital
levels commensurate with the Company’s desired ratings from
independent rating agencies, changes in levels of written premiums,
funding of the Company’s qualified pension plan, capital
requirements of the Company’s operating subsidiaries, legal
requirements, regulatory constraints, other investment
opportunities (including mergers and acquisitions and related
financings), market conditions, changes in tax laws and other
factors, including the ongoing level of uncertainty related to
COVID-19.
Our forward-looking statements speak only as of the date of this
press release or as of the date they are made, and we undertake no
obligation to update forward-looking statements. For a more
detailed discussion of these factors, see the information under the
captions “Risk Factors,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and “Forward Looking
Statements” in the quarterly report on Form 10-Q filed with the
Securities and Exchange Commission (SEC) on October 19, 2021, and
in our most recent annual report on Form 10-K filed with the SEC on
February 11, 2021, in each case as updated by our periodic filings
with the SEC.
GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF GAAP
MEASURES TO NON-GAAP MEASURES
The following measures are used by the Company’s management to
evaluate financial performance against historical results, to
establish performance targets on a consolidated basis and for other
reasons as discussed below. In some cases, these measures are
considered non-GAAP financial measures under applicable SEC rules
because they are not displayed as separate line items in the
consolidated financial statements or are not required to be
disclosed in the notes to financial statements or, in some cases,
include or exclude certain items not ordinarily included or
excluded in the most comparable GAAP financial measure.
Reconciliations of these measures to the most comparable GAAP
measures also follow.
In the opinion of the Company’s management, a discussion of
these measures provides investors, financial analysts, rating
agencies and other financial statement users with a better
understanding of the significant factors that comprise the
Company’s periodic results of operations and how management
evaluates the Company’s financial performance.
Some of these measures exclude net realized investment gains
(losses), net of tax, and/or net unrealized investment gains
(losses), net of tax, included in shareholders’ equity, which can
be significantly impacted by both discretionary and other economic
factors and are not necessarily indicative of operating trends.
Other companies may calculate these measures differently, and,
therefore, their measures may not be comparable to those used by
the Company’s management.
RECONCILIATION OF NET INCOME TO CORE INCOME AND CERTAIN OTHER
NON-GAAP MEASURES
Core income (loss) is consolidated net income (loss)
excluding the after-tax impact of net realized investment gains
(losses), discontinued operations, the effect of a change in tax
laws and tax rates at enactment, and cumulative effect of changes
in accounting principles when applicable. Segment income
(loss) is determined in the same manner as core income (loss)
on a segment basis. Management uses segment income (loss) to
analyze each segment’s performance and as a tool in making business
decisions. Financial statement users also consider core income
(loss) when analyzing the results and trends of insurance
companies. Core income (loss) per share is core income
(loss) on a per common share basis.
Reconciliation of Net Income to Core
Income less Preferred Dividends
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions, after-tax)
2021
2020
2021
2020
Net income
$
1,333
$
1,310
$
3,662
$
2,697
Adjustments:
Net realized investment gains
(44
)
(48
)
(132
)
(11
)
Impact of changes in tax laws and/or tax
rates (1)
—
—
(8
)
—
Core income
$
1,289
$
1,262
$
3,522
$
2,686
(1) Impact is recognized in the
accounting period in which the change is enacted
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions, pre-tax)
2021
2020
2021
2020
Net income
$
1,650
$
1,616
$
4,458
$
3,237
Adjustments:
Net realized investment gains
(58
)
(50
)
(171
)
(2
)
Core income
$
1,592
$
1,566
$
4,287
$
3,235
Twelve Months Ended December
31,
($ in millions, after-tax)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Net income
$2,697
$2,622
$2,523
$2,056
$3,014
$3,439
$3,692
$3,673
$2,473
$1,426
$3,216
$3,622
$2,924
$4,601
$4,208
$1,622
Less: Loss from discontinued
operations
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(439)
Income from continuing
operations
2,697
2,622
2,523
2,056
3,014
3,439
3,692
3,673
2,473
1,426
3,216
3,622
2,924
4,601
4,208
2,061
Adjustments:
Net realized investment (gains) losses
(11)
(85)
(93)
(142)
(47)
(2)
(51)
(106)
(32)
(36)
(173)
(22)
271
(101)
(8)
(35)
Impact of changes in tax laws and/or tax
rates (1) (2)
—
—
—
129
—
—
—
—
—
—
—
—
—
—
—
—
Core income
2,686
2,537
2,430
2,043
2,967
3,437
3,641
3,567
2,441
1,390
3,043
3,600
3,195
4,500
4,200
2,026
Less: Preferred dividends
—
—
—
—
—
—
—
—
—
1
3
3
4
4
5
6
Core income, less preferred
dividends
$2,686
$2,537
$2,430
$2,043
$2,967
$3,437
$3,641
$3,567
$2,441
$1,389
$3,040
$3,597
$3,191
$4,496
$4,195
$2,020
(1) Impact is recognized in the
accounting period in which the change is enacted
(2) 2017 reflects impact of Tax
Cuts and Jobs Act of 2017 (TCJA)
Reconciliation of Net Income
per Share to Core Income per Share on a Basic and Diluted
Basis
Three Months Ended December
31,
Twelve Months Ended December
31,
2021
2020
2021
2020
Basic income per
share
Net income
$
5.43
$
5.13
$
14.63
$
10.56
Adjustments:
Net realized investment gains,
after-tax
(0.18
)
(0.19
)
(0.53
)
(0.04
)
Impact of changes in tax laws and/or tax
rates (1)
—
—
(0.03
)
—
Core income
$
5.25
$
4.94
$
14.07
$
10.52
Diluted income
per share
Net income
$
5.37
$
5.10
$
14.49
$
10.52
Adjustments:
Net realized investment gains,
after-tax
(0.17
)
(0.19
)
(0.52
)
(0.04
)
Impact of changes in tax laws and/or tax
rates (1)
—
—
(0.03
)
—
Core income
$
5.20
$
4.91
$
13.94
$
10.48
(1) Impact is recognized in the
accounting period in which the change is enacted
Reconciliation of Segment
Income to Total Core Income
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions, after-tax)
2021
2020
2021
2020
Business Insurance
$
867
$
713
$
2,385
$
1,309
Bond & Specialty Insurance
170
164
668
473
Personal Insurance
327
457
760
1,195
Total segment income
1,364
1,334
3,813
2,977
Interest Expense and Other
(75
)
(72
)
(291
)
(291
)
Total core income
$
1,289
$
1,262
$
3,522
$
2,686
RECONCILIATION OF SHAREHOLDERS’ EQUITY TO ADJUSTED
SHAREHOLDERS’ EQUITY AND CALCULATION OF RETURN ON EQUITY AND CORE
RETURN ON EQUITY
Adjusted shareholders’ equity is shareholders’ equity
excluding net unrealized investment gains (losses), net of tax,
included in shareholders’ equity, net realized investment gains
(losses), net of tax, for the period presented, the effect of a
change in tax laws and tax rates at enactment (excluding the
portion related to net unrealized investment gains (losses)),
preferred stock and discontinued operations.
Reconciliation of
Shareholders’ Equity to Adjusted Shareholders’ Equity
As of December 31,
($ in millions)
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Shareholders’ equity
$28,887
$29,201
$25,943
$22,894
$23,731
$23,221
$23,598
$24,836
$24,796
$25,405
$24,477
$25,475
$27,415
$25,319
$26,616
$25,135
$22,303
Adjustments:
Net unrealized investment (gains) losses,
net of tax, included in shareholders’ equity
(2,415)
(4,074)
(2,246)
113
(1,112)
(730)
(1,289)
(1,966)
(1,322)
(3,103)
(2,871)
(1,859)
(1,856)
146
(620)
(453)
(327)
Net realized investment (gains) losses,
net of tax
(132)
(11)
(85)
(93)
(142)
(47)
(2)
(51)
(106)
(32)
(36)
(173)
(22)
271
(101)
(8)
(35)
Impact of changes in tax laws and/or tax
rates (1) (2)
(8)
—
—
—
287
—
—
—
—
—
—
—
—
—
—
—
—
Preferred stock
—
—
—
—
—
—
—
—
—
—
—
(68)
(79)
(89)
(112)
(129)
(153)
Loss from discontinued operations
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
439
Adjusted shareholders’ equity
$26,332
$25,116
$23,612
$22,914
$22,764
$22,444
$22,307
$22,819
$23,368
$22,270
$21,570
$23,375
$25,458
$25,647
$25,783
$24,545
$22,227
(1) Impact is recognized in the accounting
period in which the change is enacted
(2) 2017 reflects impact of Tax Cuts and
Jobs Act of 2017 (TCJA)
Return on equity is the ratio of annualized net income
(loss) less preferred dividends to average shareholders’ equity for
the periods presented. Core return on equity is the ratio of
annualized core income (loss) less preferred dividends to adjusted
average shareholders’ equity for the periods presented. In the
opinion of the Company’s management, these are important indicators
of how well management creates value for its shareholders through
its operating activities and its capital management.
Average shareholders’ equity is (a) the sum of total
shareholders’ equity excluding preferred stock at the beginning and
end of each of the quarters for the period presented divided by (b)
the number of quarters in the period presented times two.
Adjusted average shareholders’ equity is (a) the sum of
total adjusted shareholders’ equity at the beginning and end of
each of the quarters for the period presented divided by (b) the
number of quarters in the period presented times two.
Calculation of Return on Equity and
Core Return on Equity
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions, after-tax)
2021
2020
2021
2020
Annualized net income
$
5,333
$
5,236
$
3,662
$
2,697
Average shareholders’ equity
28,680
28,525
28,735
26,892
Return on equity
18.6
%
18.4
%
12.7
%
10.0
%
Annualized core income
$
5,159
$
5,044
$
3,522
$
2,686
Adjusted average shareholders’ equity
26,101
24,558
25,718
23,790
Core return on equity
19.8
%
20.5
%
13.7
%
11.3
%
Twelve Months Ended December
31,
($ in millions)
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Core income, less preferred dividends
$2,686
$2,537
$2,430
$2,043
$2,967
$3,437
$3,641
$3,567
$2,441
$1,389
$3,040
$3,597
$3,191
$4,496
$4,195
$2,020
Adjusted average shareholders’ equity
23,790
23,335
22,814
22,743
22,386
22,681
23,447
23,004
22,158
22,806
24,285
25,777
25,668
25,350
23,381
21,118
Core return on equity
11.3%
10.9%
10.7%
9.0%
13.3%
15.2%
15.5%
15.5%
11.0%
6.1%
12.5%
14.0%
12.4%
17.7%
17.9%
9.6%
RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN
ITEMS TO NET INCOME
Underwriting gain (loss) is net earned premiums and fee
income less claims and claim adjustment expenses and
insurance-related expenses. In the opinion of the Company’s
management, it is important to measure the profitability of each
segment excluding the results of investing activities, which are
managed separately from the insurance business. This measure is
used to assess each segment’s business performance and as a tool in
making business decisions. Pre-tax underwriting gain,
excluding the impact of catastrophes and net favorable
(unfavorable) prior year loss reserve development, is the
underwriting gain adjusted to exclude claims and claim adjustment
expenses, reinstatement premiums and assessments related to
catastrophes and loss reserve development related to time periods
prior to the current year. In the opinion of the Company’s
management, this measure is meaningful to users of the financial
statements to understand the Company’s periodic earnings and the
variability of earnings caused by the unpredictable nature (i.e.,
the timing and amount) of catastrophes and loss reserve
development. This measure is also referred to as underlying
underwriting margin or underlying underwriting gain.
A catastrophe is a severe loss designated a catastrophe
by internationally recognized organizations that track and report
on insured losses resulting from catastrophic events, such as
Property Claim Services (PCS) for events in the United States and
Canada. Catastrophes can be caused by various natural events,
including, among others, hurricanes, tornadoes and other
windstorms, earthquakes, hail, wildfires, severe winter weather,
floods, tsunamis, volcanic eruptions and other naturally-occurring
events, such as solar flares. Catastrophes can also be man-made,
such as terrorist attacks and other intentionally destructive acts
including those involving nuclear, biological, chemical and
radiological events, cyber events, explosions and destruction of
infrastructure. Each catastrophe has unique characteristics and
catastrophes are not predictable as to timing or amount. Their
effects are included in net and core income and claims and claim
adjustment expense reserves upon occurrence. A catastrophe may
result in the payment of reinsurance reinstatement premiums and
assessments from various pools.
The Company’s threshold for disclosing catastrophes is primarily
determined at the reportable segment level. If a threshold for one
segment or a combination thereof is exceeded and the other segments
have losses from the same event, losses from the event are
identified as catastrophe losses in the segment results and for the
consolidated results of the Company. Additionally, an aggregate
threshold is applied for international business across all
reportable segments. The threshold for 2021 ranges from $20 million
to $30 million of losses before reinsurance and taxes.
Net favorable (unfavorable) prior year loss reserve
development is the increase or decrease in incurred claims and
claim adjustment expenses as a result of the re-estimation of
claims and claim adjustment expense reserves at successive
valuation dates for a given group of claims, which may be related
to one or more prior years. In the opinion of the Company’s
management, a discussion of loss reserve development is meaningful
to users of the financial statements as it allows them to assess
the impact between prior and current year development on incurred
claims and claim adjustment expenses, net and core income (loss),
and changes in claims and claim adjustment expense reserve levels
from period to period.
Components of Net Income
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions, after-tax except as
noted)
2021
2020
2021
2020
Pre-tax underwriting gain excluding the
impact of catastrophes and net prior year loss reserve
development
$
867
$
804
$
2,851
$
2,564
Pre-tax impact of catastrophes
(36
)
(29
)
(1,847
)
(1,613
)
Pre-tax impact of net favorable prior year
loss reserve development
95
180
538
351
Pre-tax underwriting gain
926
955
1,542
1,302
Income tax expense on underwriting
results
197
214
326
292
Underwriting gain
729
741
1,216
1,010
Net investment income
624
572
2,541
1,908
Other income (expense), including interest
expense
(64
)
(51
)
(235
)
(232
)
Core income
1,289
1,262
3,522
2,686
Net realized investment gains
44
48
132
11
Impact of changes in tax laws and/or tax
rates (1)
—
—
8
—
Net income
$
1,333
$
1,310
$
3,662
$
2,697
(1) Impact is recognized in the
accounting period in which the change is enacted
Reconciliation of after-tax
underlying underwriting income (also known as underlying
underwriting gain) to net income
Twelve Months Ended December
31,
($ in millions, after-tax)
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
Underlying underwriting income
$
2,251
$
2,008
$
1,400
$
1,522
$
1,239
$
1,265
$
1,446
$
1,430
$
1,277
$
888
$
451
Impact of catastrophes
(1,459
)
(1,274
)
(699
)
(1,355
)
(1,267
)
(576
)
(338
)
(462
)
(387
)
(1,214
)
(1,669
)
Impact of net favorable (unfavorable)
prior year reserve development
424
276
(47
)
409
378
510
617
616
552
622
473
Underwriting income (loss)
1,216
1,010
654
576
350
1,199
1,725
1,584
1,442
296
(745
)
Net investment income
2,541
1,908
2,097
2,102
1,872
1,846
1,905
2,216
2,186
2,316
2,330
Other income (expense), including interest
expense
(235
)
(232
)
(214
)
(248
)
(179
)
(78
)
(193
)
(159
)
(61
)
(171
)
(195
)
Core income
3,522
2,686
2,537
2,430
2,043
2,967
3,437
3,641
3,567
2,441
1,390
Net realized investment gains
132
11
85
93
142
47
2
51
106
32
36
Impact of changes in tax laws and/or tax
rates (1) (2)
8
—
—
—
(129
)
—
—
—
—
—
—
Net income
$
3,662
$
2,697
$
2,622
$
2,523
$
2,056
$
3,014
$
3,439
$
3,692
$
3,673
$
2,473
$
1,426
(1) Impact is recognized in the
accounting period in which the change is enacted
(2) 2017 reflects impact of Tax
Cuts and Jobs Act of 2017 (TCJA)
COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED
RATIO
Combined ratio: For Statutory Accounting Practices (SAP),
the combined ratio is the sum of the SAP loss and LAE ratio and the
SAP underwriting expense ratio as defined in the statutory
financial statements required by insurance regulators. The combined
ratio, as used in this earnings release, is the equivalent of, and
is calculated in the same manner as, the SAP combined ratio except
that the SAP underwriting expense ratio is based on net written
premiums and the underwriting expense ratio as used in this
earnings release is based on net earned premiums.
For SAP, the loss and LAE ratio is the ratio of incurred losses
and loss adjustment expenses less certain administrative services
fee income to net earned premiums as defined in the statutory
financial statements required by insurance regulators. The loss and
LAE ratio as used in this earnings release is calculated in the
same manner as the SAP ratio.
For SAP, the underwriting expense ratio is the ratio of
underwriting expenses incurred (including commissions paid), less
certain administrative services fee income and billing and policy
fees and other, to net written premiums as defined in the statutory
financial statements required by insurance regulators. The
underwriting expense ratio as used in this earnings release, is the
ratio of underwriting expenses (including the amortization of
deferred acquisition costs), less certain administrative services
fee income, billing and policy fees and other, to net earned
premiums.
The combined ratio, loss and LAE ratio, and underwriting expense
ratio are used as indicators of the Company’s underwriting
discipline, efficiency in acquiring and servicing its business and
overall underwriting profitability. A combined ratio under 100%
generally indicates an underwriting profit. A combined ratio over
100% generally indicates an underwriting loss.
Underlying combined ratio represents the combined ratio
excluding the impact of net prior year reserve development and
catastrophes. The underlying combined ratio is an indicator of the
Company’s underwriting discipline and underwriting profitability
for the current accident year.
Other companies’ method of computing similarly titled measures
may not be comparable to the Company’s method of computing these
ratios.
Calculation of the Combined
Ratio
Three Months Ended December
31,
Twelve Months Ended December
31,
($ in millions, pre-tax)
2021
2020
2021
2020
Loss and loss
adjustment expense ratio
Claims and claim adjustment expenses
$
4,819
$
4,341
$
20,298
$
19,123
Less:
Policyholder dividends
10
10
41
41
Allocated fee income
37
41
150
161
Loss ratio numerator
$
4,772
$
4,290
$
20,107
$
18,921
Underwriting
expense ratio
Amortization of deferred acquisition
costs
$
1,301
$
1,215
$
5,043
$
4,773
General and administrative expenses
(G&A)
1,153
1,142
4,677
4,509
Less:
Non-insurance G&A
75
67
303
234
Allocated fee income
63
65
252
268
Billing and policy fees and other
26
28
107
97
Expense ratio numerator
$
2,290
$
2,197
$
9,058
$
8,683
Earned premium
$
8,024
$
7,480
$
30,855
$
29,044
Combined ratio (1)
Loss and loss adjustment expense ratio
59.5
%
57.3
%
65.1
%
65.1
%
Underwriting expense ratio
28.5
%
29.4
%
29.4
%
29.9
%
Combined ratio
88.0
%
86.7
%
94.5
%
95.0
%
(1)
For purposes of computing ratios,
billing and policy fees and other (which are a component of other
revenues) are allocated as a reduction of underwriting expenses. In
addition, fee income is allocated as a reduction of losses and loss
adjustment expenses and underwriting expenses. These allocations
are to conform the calculation of the combined ratio with statutory
accounting. Additionally, general and administrative expenses
include non-insurance expenses that are excluded from underwriting
expenses, and accordingly are excluded in calculating the combined
ratio.
RECONCILIATION OF BOOK VALUE PER SHARE AND SHAREHOLDERS’
EQUITY TO CERTAIN NON-GAAP MEASURES
Book value per share is total common shareholders’ equity
divided by the number of common shares outstanding. Adjusted
book value per share is total common shareholders’ equity
excluding net unrealized investment gains and losses, net of tax,
included in shareholders’ equity, divided by the number of common
shares outstanding. In the opinion of the Company’s management,
adjusted book value per share is useful in an analysis of a
property casualty company’s book value per share as it removes the
effect of changing prices on invested assets (i.e., net unrealized
investment gains (losses), net of tax), which do not have an
equivalent impact on unpaid claims and claim adjustment expense
reserves. Tangible book value per share is adjusted book
value per share excluding the after-tax value of goodwill and other
intangible assets divided by the number of common shares
outstanding. In the opinion of the Company’s management, tangible
book value per share is useful in an analysis of a property
casualty company’s book value on a nominal basis as it removes
certain effects of purchase accounting (i.e., goodwill and other
intangible assets), in addition to the effect of changing prices on
invested assets.
Reconciliation of
Shareholders’ Equity to Tangible Shareholders’ Equity, Excluding
Net Unrealized Investment Gains, Net of Tax
As of
($ in millions, except per share
amounts)
December 31, 2021
December 31, 2020
Shareholders’ equity
$
28,887
$
29,201
Less: Net unrealized investment gains, net
of tax, included in shareholders’ equity
2,415
4,074
Shareholders’ equity, excluding net
unrealized investment gains, net of tax, included in shareholders’
equity
26,472
25,127
Less:
Goodwill
4,008
3,976
Other intangible assets
306
317
Impact of deferred tax on other intangible
assets
(66
)
(59
)
Tangible shareholders’ equity
$
22,224
$
20,893
Common shares outstanding
241.2
252.4
Book value per share
$
119.77
$
115.68
Adjusted book value per share
109.76
99.54
Tangible book value per share
92.15
82.77
RECONCILIATION OF TOTAL CAPITALIZATION TO TOTAL
CAPITALIZATION EXCLUDING NET UNREALIZED INVESTMENT GAINS, NET OF
TAX
Total capitalization is the sum of total shareholders’
equity and debt. Debt-to-capital ratio excluding net unrealized
gain on investments, net of tax, included in shareholders’
equity, is the ratio of debt to total capitalization excluding
the after-tax impact of net unrealized investment gains and losses
included in shareholders’ equity. In the opinion of the Company’s
management, the debt-to-capital ratio is useful in an analysis of
the Company’s financial leverage.
As of
($ in millions)
December 31, 2021
December 31, 2020
Debt
$
7,290
$
6,550
Shareholders’ equity
28,887
29,201
Total capitalization
36,177
35,751
Less: Net unrealized investment gains, net
of tax, included in shareholders’ equity
2,415
4,074
Total capitalization excluding net
unrealized gain on investments, net of tax, included in
shareholders’ equity
$
33,762
$
31,677
Debt-to-capital ratio
20.2
%
18.3
%
Debt-to-capital ratio excluding net
unrealized investment gains, net of tax, included in shareholders’
equity
21.6
%
20.7
%
RECONCILIATION OF INVESTED ASSETS TO INVESTED ASSETS
EXCLUDING NET UNREALIZED INVESTMENT GAINS (LOSSES)
Twelve Months Ended December
31,
($ in millions, after-tax)
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
Invested assets
$
87,375
$
84,423
$
77,884
$
72,278
$
72,502
$
70,488
$
70,470
$
73,261
$
73,160
$
73,838
$
72,701
Less: Net unrealized investment gains
(losses), pre-tax
3,060
5,175
2,853
(137
)
1,414
1,112
1,974
3,008
2,030
4,761
4,399
Invested assets excluding net
unrealized investment gains (losses)
$
84,315
$
79,248
$
75,031
$
72,415
$
71,088
$
69,376
$
68,496
$
70,253
$
71,130
$
69,077
$
68,302
OTHER DEFINITIONS
Gross written premiums reflect the direct and assumed
contractually determined amounts charged to policyholders for the
effective period of the contract based on the terms and conditions
of the insurance contract. Net written premiums reflect
gross written premiums less premiums ceded to reinsurers.
For Business Insurance and Bond & Specialty Insurance,
retention is the amount of premium available for renewal
that was retained, excluding rate and exposure changes. For
Personal Insurance, retention is the ratio of the expected
number of renewal policies that will be retained throughout the
annual policy period to the number of available renewal base
policies. For all of the segments, renewal rate change
represents the estimated change in average premium on policies that
renew, excluding exposure changes. Exposure is the measure
of risk used in the pricing of an insurance product. The change in
exposure is the amount of change in premium on policies that renew
attributable to the change in portfolio risk. Renewal premium
change represents the estimated change in average premium on
policies that renew, including rate and exposure changes. New
business is the amount of written premium related to new
policyholders and additional products sold to existing
policyholders. These are operating statistics, which are in part
dependent on the use of estimates and are therefore subject to
change. For Business Insurance, retention, renewal premium change
and new business exclude National Accounts. For Bond &
Specialty Insurance, retention, renewal premium change and new
business exclude surety and other products that are generally sold
on a non-recurring, project specific basis. For each of the
segments, production statistics referred to herein are domestic
only unless otherwise indicated.
Statutory capital and surplus represents the excess of an
insurance company’s admitted assets over its liabilities, including
loss reserves, as determined in accordance with statutory
accounting practices.
Holding company liquidity is the total funds available at
the holding company level to fund general corporate purposes,
primarily the payment of shareholder dividends and debt service.
These funds consist of total cash, short-term invested assets and
other readily marketable securities held by the holding
company.
For a glossary of other financial terms used in this press
release, we refer you to the Company’s most recent annual report on
Form 10-K filed with the SEC on February 11, 2021, and subsequent
periodic filings with the SEC.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220118006168/en/
Media: Patrick Linehan
917.778.6267
Institutional Investors: Abbe
Goldstein 917.778.6825
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