Travelers Reports Excellent Fourth Quarter 2023 Results

Record Quarterly Net Income per Diluted Share of $6.99 and Return on Equity of 29.0%

Record Quarterly Core Income per Diluted Share of $7.01 and Core Return on Equity of 24.0%

Full Year Net Income of $2.991 billion and Return on Equity of 13.6%

Full Year Core Income of $3.072 billion and Core Return on Equity of 11.5%

• Record quarterly net income of $1.626 billion and core income of $1.633 billion, driven by both underwriting and investment results.
• Exceptional consolidated combined ratio of 85.8%, an 8.7 point improvement, and underlying combined ratio of 85.9%, a 5.5 point improvement.
• Net written premiums of $9.994 billion for the quarter, up 13%, and full year net written premiums of $40.201 billion, up 14%; both periods reflect growth in all three segments.
• Net investment income increased 24% pre-tax over the prior year quarter, primarily due to strong fixed income returns and growth in fixed maturity investments.
• Total capital of $298 million returned to shareholders in the quarter; full year total capital returned to shareholders of $1.944 billion.
• Book value per share of $109.19, up 18% over year-end 2022, driven by lower interest rates; adjusted book value per share of $122.90, up 8% over year-end 2022.
• Board of Directors declares regular cash dividend of $1.00 per share.

NEW YORK–(BUSINESS WIRE)–The Travelers Companies, Inc. today reported net income of $1.626 billion, or $6.99 per diluted share, for the quarter ended December 31, 2023, compared to $819 million, or $3.44 per diluted share, in the prior year quarter. Core income in the current quarter was $1.633 billion, or $7.01 per diluted share, compared to $810 million, or $3.40 per diluted share, in the prior year quarter. Core income increased primarily due to a higher underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses), lower catastrophe losses and higher net investment income. Net realized investment losses in the current quarter were $11 million pre-tax ($7 million after-tax), compared to net realized investment gains of $7 million pre-tax ($9 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.

“We are very pleased to report exceptional top- and bottom-line results for the fourth quarter,” said Alan Schnitzer, Chairman and Chief Executive Officer.

“Core income, earnings per share and return on equity were all record highs for the quarter, driven by both underwriting and investment results. Record underlying underwriting income resulted from net earned premiums of $10 billion, up more than 13% over the prior year quarter, and an underlying combined ratio which improved 5.5 points to a record 85.9%. Each of our business segments contributed to the improvement.

“We are also pleased to have delivered full year core income of $3.1 billion, generating core ROE of 11.5%, notwithstanding elevated industry-wide catastrophe losses and an operating environment for our Personal Insurance business that, while improving, was difficult during the year. Our high-quality investment portfolio generated after-tax net investment income of $2.4 billion for the year, driven by strong and reliable returns from our growing fixed income portfolio.

“Our operating results, together with our strong balance sheet, enabled us to grow adjusted book value per share by 8% during the year to $122.90, after returning nearly $2 billion of excess capital to shareholders through dividends and share repurchases and making important investments in our business.

“Through excellent marketplace execution across all three segments, we grew net written premiums in the quarter by $1.2 billion, or 13%, to $10 billion. In Business Insurance, we grew net written premiums by 14% to more than $5 billion. Renewal premium change in the segment was very strong at 11.8%, while retention remained historically high at 87% and new business increased significantly. In Bond & Specialty Insurance, we grew net written premiums by 7% to $989 million, achieved 90% retention of our high-quality management liability business and grew net written premiums by 9% in our industry-leading surety business. Given the attractive returns, we are very pleased with the strong production results in both of our commercial business segments. In Personal Insurance, 13% top-line growth was driven by higher pricing. Renewal premium change was 21.2% in our Homeowners and Other business and was 16.7% in our Auto business.

“Looking ahead, the fundamentals across our business are in excellent shape. In Business Insurance, we are growing while achieving very strong margins. Our Bond & Specialty business continues to produce excellent returns, and we added to our expert cyber capabilities with the strategic acquisition of Corvus. Our Personal Insurance business is showing significantly improved profitability, and the outlook is for continued improvement. Record cash flows have enabled us to make important strategic investments in our business, return excess capital to shareholders and grow our investment portfolio to nearly $93 billion. Combined with higher fixed income yields, this sets us up for higher levels of net investment income moving forward. With another year of very strong results in the books, continued strategic investment in pursuit of our focused innovation agenda and the best talent in the industry, we could not feel more confident about how we are positioned for 2024 and beyond.”

Fourth Quarter 2023 Results

(All comparisons vs. fourth quarter 2022, unless noted otherwise)

Net income of $1.626 billion increased $807 million, due to higher core income, partially offset by net realized investment losses compared to net realized investment gains in the same period of 2022. Core income of $1.633 billion increased $823 million, primarily due to a higher underlying underwriting gain, lower catastrophe losses and higher net investment income. The underlying underwriting gain benefited from higher business volumes. Net realized investment losses were $11 million pre-tax ($7 million after-tax), compared to net realized investment gains of $7 million pre-tax ($9 million after-tax) in the prior year quarter.

Combined ratio:

• The combined ratio of 85.8% improved 8.7 points due to an improvement in the underlying combined ratio (5.5 points) and lower catastrophe losses (4.0 points), partially offset by lower net favorable prior year reserve development (0.8 points).

• The underlying combined ratio of 85.9% improved 5.5 points. See below for further details by segment.

• Net favorable prior year reserve development occurred in all three segments. See below for further details by segment.

• Catastrophe losses primarily resulted from wind and hail storms in multiple states, as well as a winter storm.

Net investment income of $778 million pre-tax ($645 million after-tax) increased 24%. Income from the fixed income investment portfolio increased over the prior year quarter due to a higher average yield and growth in fixed maturity investments. Income from the non-fixed income investment portfolio increased slightly over the prior year quarter, primarily due to higher private equity partnership returns, partially offset by lower real estate partnership returns. Non-fixed income returns are generally reported on a one-quarter lagged basis and directionally follow the broader equity markets.

Net written premiums of $9.994 billion increased 13%. See below for further details by segment.

Full Year 2023 Results

(All comparisons vs. full year 2022, unless noted otherwise)

Net income of $2.991 billion increased $149 million, due to higher core income and lower net realized investment losses. Core income of $3.072 billion increased $74 million, primarily due to a higher underlying underwriting gain and higher net investment income, partially offset by higher catastrophe losses and lower net favorable prior year reserve development. The underlying underwriting gain benefited from higher business volumes. The underlying underwriting gain in the current year also included a one-time tax benefit of $211 million due to the expiration of the statute of limitations with respect to a tax item, while the prior year included a $47 million reduction in income tax expense as a result of the resolution of prior year tax matters. These tax benefits are included in the income tax line in the Consolidated Statement of Income and, accordingly, do not impact the combined ratio or the underlying combined ratio. Net realized investment losses were $105 million pre-tax ($81 million after-tax), compared to $204 million pre-tax ($156 million after-tax) in the prior year.

Combined ratio:

• The combined ratio of 97.0% increased 1.4 points due to higher catastrophe losses (2.4 points) and lower net favorable prior year reserve development (1.5 points), partially offset by an improvement in the underlying combined ratio (2.5 points).

• The underlying combined ratio of 89.5% improved 2.5 points. See below for further details by segment.

• Net favorable prior year reserve development in Bond & Specialty Insurance and Personal Insurance was partially offset by net unfavorable prior year reserve development in Business Insurance. See below for further details by segment.

• Catastrophe losses included the fourth quarter events described above, as well as numerous severe wind and hail storms in multiple states in the first nine months of 2023.

Net investment income of $2.922 billion pre-tax ($2.436 billion after-tax) increased 14%. Income from the fixed income investment portfolio increased over the prior year due to a higher average yield and growth in fixed maturity investments. Income from the non-fixed income investment portfolio was solid but decreased from a strong level in the prior year, primarily due to lower real estate and private equity partnership returns.

Net written premiums of $40.201 billion increased 14%. See below for further details by segment.

Shareholders’ Equity

Shareholders’ equity of $24.921 billion increased 16% over year-end 2022, primarily due to net income of $2.991 billion and lower net unrealized investment losses, partially offset by common share repurchases and dividends to shareholders. Net unrealized investment losses included in shareholders’ equity were $3.970 billion pre-tax ($3.129 billion after-tax), compared to $6.220 billion pre-tax ($4.898 billion after-tax) at year-end 2022. The decrease in net unrealized investment losses was driven by lower interest rates. Book value per share of $109.19 increased 18% over year-end 2022. Adjusted book value per share of $122.90, which excludes net unrealized investment gains (losses), increased 8% over year-end 2022.

The Company repurchased 0.4 million shares during the fourth quarter at an average price of $184.78 per share for a total cost of $66 million. At December 31, 2023, the Company had $6.040 billion of capacity remaining under its share repurchase authorizations approved by the Board of Directors. At the end of the quarter, statutory capital and surplus was $25.114 billion, and the ratio of debt-to-capital was 24.4%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains (losses) included in shareholders’ equity was 22.3%, within the Company’s target range of 15% to 25%.

The Board of Directors declared a regular quarterly dividend of $1.00 per share. The dividend is payable March 29, 2024, to shareholders of record at the close of business on March 8, 2024.

Fourth Quarter 2023 Results

(All comparisons vs. fourth quarter 2022, unless noted otherwise)

Segment income for Business Insurance was $957 million after-tax, an increase of $232 million. Segment income increased primarily due to a higher underlying underwriting gain, higher net investment income and lower catastrophe losses, 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 86.5% improved 3.0 points due to an improvement in the underlying combined ratio (2.7 points) and lower catastrophe losses (2.0 points), partially offset by lower net favorable prior year reserve development (1.7 points).

• The underlying combined ratio improved 2.7 points to a very strong 86.8%.

• Net favorable prior year reserve development was primarily driven by better than expected loss experience in the domestic operations’ workers’ compensation product line for multiple accident years, partially offset by higher than expected loss experience in the general liability product line for multiple accident years.

Net written premiums of $5.018 billion increased 14%, reflecting strong renewal premium change and retention, as well as higher levels of new business. The increase in net written premiums also included the impact of the Company’s quota share reinsurance agreement with subsidiaries of Fidelis Insurance Holdings Limited effective January 1, 2023, which is included in the segment’s International results.

Full Year 2023 Results

(All comparisons vs. full year 2022, unless noted otherwise)

Segment income for Business Insurance was $2.583 billion after-tax, an increase of $52 million. Segment income increased primarily due to a higher underlying underwriting gain and higher net investment income, partially offset by net unfavorable prior year reserve development, compared to net favorable prior year reserve development in 2022, and higher catastrophe losses. The underlying underwriting gain benefited from higher business volumes. The underlying underwriting gain in the current year also included a one-time tax benefit of $171 million due to the expiration of the statute of limitations with respect to a tax item, while the prior year included a $3 million reduction in income tax expense as a result of the resolution of prior year tax matters.

Combined ratio:

• The combined ratio of 94.7% increased 2.2 points due to net unfavorable prior year reserve development compared to net favorable prior year reserve development in 2022 (3.7 points) and higher catastrophe losses (0.5 points), partially offset by an improvement in the underlying combined ratio (2.0 points).

• The underlying combined ratio improved 2.0 points to a very strong 88.9%.

• Net unfavorable prior year reserve development was primarily driven by (i) net unfavorable prior year reserve development in the run-off operations within the general liability product line, including additions to reserves for asbestos, childhood sexual molestation and environmental claims, partially offset by (ii) net favorable prior year reserve development in the ongoing operations, including better than expected loss experience in the domestic operations’ workers’ compensation product line for multiple accident years, partially offset by higher than expected loss experience in the general liability product line for multiple accident years and the commercial automobile product line for recent accident years.

Net written premiums of $20.430 billion increased 16%, reflecting the same factors described above for the fourth quarter of 2023.

Fourth Quarter 2023 Results

(All comparisons vs. fourth quarter 2022, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $240 million after-tax, an increase of $19 million. Segment income increased 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.

Combined ratio:

• The combined ratio of 77.3% increased 0.4 points due to lower net favorable prior year reserve development (1.9 points), partially offset by an improvement in the underlying combined ratio (1.1 points) and lower catastrophe losses (0.4 points).

• The underlying combined ratio of 80.6% improved 1.1 points.

• Net favorable prior year reserve development was primarily driven by better than expected loss experience in the domestic operations’ fidelity and surety product lines and in the general liability product line for management liability coverages for recent accident years.

Net written premiums of $989 million increased 7%, reflecting strong production in both surety and management liability.

Full Year 2023 Results

(All comparisons vs. full year 2022, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $942 million after-tax, an increase of $34 million. Segment income increased primarily due to higher net investment income and higher net favorable prior year reserve development, partially offset by a lower underlying underwriting gain. The underlying underwriting gain benefited from higher business volumes. The underlying underwriting gain in the current year included a one-time tax benefit of $9 million due to the expiration of the statute of limitations with respect to a tax item, while the prior year included a $24 million reduction in income tax expense as a result of the resolution of prior year tax matters.

Combined ratio:

• The combined ratio of 76.9% increased 1.6 points due to a higher underlying combined ratio (2.

Contacts

Media:

Patrick Linehan

917.778.6267

Institutional Investors:

Abbe Goldstein

917.778.6825

Read full story here