Travelers Reports Third Quarter 2023 Net Income of $404 million and Core Income of $454 million

Third Quarter 2023 Net Income per Diluted Share of $1.74 and Return on Equity of 7.7%

Third Quarter 2023 Core Income per Diluted Share of $1.95 and Core Return on Equity of 6.9%

• Excellent underlying underwriting income of $868 million pre-tax, up 43%.
• Consolidated combined ratio of 101.0%; and underlying combined ratio of 90.6%, a 1.9 point improvement.
• Catastrophe losses of $850 million pre-tax compared to $512 million pre-tax in the prior year quarter.
• Net unfavorable prior year reserve development of $154 million pre-tax primarily due to an addition to asbestos reserves of $284 million pre-tax.
• Record net written premiums of $10.493 billion, up 14% over the prior year quarter, including growth in all three segments.
• Strong renewal premium change in all three segments, including record levels in Business Insurance and Personal Automobile.
• Net investment income increased 30% pre-tax over the prior year quarter primarily due to strong fixed income returns.

NEW YORK–(BUSINESS WIRE)–The Travelers Companies, Inc. today reported net income of $404 million, or $1.74 per diluted share, for the quarter ended September 30, 2023, compared to $454 million, or $1.89 per diluted share, in the prior year quarter. Core income in the current quarter was $454 million, or $1.95 per diluted share, compared to $526 million, or $2.20 per diluted share, in the prior year quarter. Core income decreased primarily due to higher catastrophe losses and net unfavorable prior year reserve development (driven by the Company’s run-off businesses) compared to net favorable prior year reserve development in the prior year quarter, partially offset by a higher underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses) and higher net investment income. Net realized investment losses in the current quarter were $65 million pre-tax ($50 million after-tax), compared to $93 million pre-tax ($72 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.

“Core income of $454 million for the quarter benefited from very strong underlying underwriting returns and net investment income but was also impacted by elevated catastrophe losses,” said Alan Schnitzer, Chairman and Chief Executive Officer. “We are very pleased with the underlying fundamentals of our business. Underlying underwriting income of $868 million pre-tax was up 43% over the prior year quarter, driven by record net earned premiums of $9.7 billion and a consolidated underlying combined ratio which improved 1.9 points to an excellent 90.6%. The underlying combined ratio in our commercial segments remained excellent, and the underlying combined ratio in Personal Insurance improved by more than 5 points to 94.2%. Our high-quality investment portfolio continued to perform extremely well, generating after-tax net investment income of $640 million.

“Through excellent marketplace execution across all three segments, we delivered growth of $1.3 billion, or 14%, in net written premiums to a record $10.5 billion. In Business Insurance, we grew net written premiums by 16%. Renewal premium change in the segment was very strong at 12.9%. Renewal rate change accelerated sequentially to 7.9%, while retention remained historically high at 87%. New business was strong and higher broadly across the segment. In Bond & Specialty Insurance, we grew net written premiums to a milestone $1 billion, achieved 91% retention of our high-quality management liability business and grew net written premiums in our industry-leading surety business by 13%. Given the attractive returns, we are very pleased with the strong production results in both of our commercial business segments. In Personal Insurance, 14% top-line growth was driven by higher pricing. Renewal premium change was 19.4% in our Homeowners and Other business and increased to a record high 18.2% in our Auto business.

“The fundamentals in our commercial businesses are terrific, the underlying results in our personal insurance business are improving and heading in the right direction and we are achieving steadily rising returns in our growing fixed income portfolio. Alongside that momentum, we are making excellent progress in the execution of our focused innovation agenda. For those reasons and more, we are very confident in the outlook across our diversified business.”

Third Quarter 2023 Results

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

Net income of $404 million decreased $50 million, due to lower core income, partially offset by lower net realized investment losses. Core income of $454 million decreased $72 million, primarily due to higher catastrophe losses and net unfavorable prior year reserve development (driven by the Company’s run-off businesses) compared to net favorable prior year reserve development in the prior year quarter, partially offset by a higher underlying underwriting gain and higher net investment income. The underlying underwriting gain benefited from higher business volumes. Net realized investment losses were $65 million pre-tax ($50 million after-tax), compared to $93 million pre-tax ($72 million after-tax) in the prior year quarter.

Combined ratio:

• The combined ratio of 101.0% increased 2.8 points due to higher catastrophe losses (2.9 points) and net unfavorable prior year reserve development compared to net favorable prior year reserve development in the prior year quarter (1.8 points), partially offset by a lower underlying combined ratio (1.9 points).

• The underlying combined ratio of 90.6% improved 1.9 points. See below for further details by segment.

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

• Catastrophe losses primarily resulted from numerous severe wind and hail storms in multiple states.

Net investment income of $769 million pre-tax ($640 million after-tax) increased 30%. 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 over the prior year quarter due to higher private equity 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 $10.493 billion increased 14%. See below for further details by segment.

Year-to-Date 2023 Results

(All comparisons vs. year-to-date 2022, unless noted otherwise)

Net income of $1.365 billion decreased $658 million, due to lower core income, partially offset by lower net realized investment losses. Core income of $1.439 billion decreased $749 million, primarily due to higher catastrophe losses and lower net favorable prior year reserve development, partially offset by a higher underlying underwriting gain and higher net investment income. The underlying underwriting gain benefited from higher business volumes. The underlying underwriting gain in the current year period 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 period 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 $94 million pre-tax ($74 million after-tax), compared to $211 million pre-tax ($165 million after-tax) in the prior year period.

Combined ratio:

• The combined ratio of 101.0% increased 5.0 points due to higher catastrophe losses (4.6 points) and lower net favorable prior year reserve development (1.8 points), partially offset by a lower underlying combined ratio (1.4 points).

• The underlying combined ratio of 90.8% improved 1.4 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 third quarter events described above, as well as numerous severe wind and hail storms in multiple states in the first six months of 2023.

Net investment income of $2.144 billion pre-tax ($1.791 billion after-tax) increased 11%. Income from the fixed income investment portfolio increased over the prior year period 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 period, primarily due to lower private equity and real estate partnership returns.

Net written premiums of $30.207 billion increased 14%. See below for further details by segment.

Shareholders’ Equity

Shareholders’ equity of $19.978 billion decreased 7% from year-end 2022, primarily due to higher net unrealized investment losses, common share repurchases and dividends to shareholders, partially offset by net income of $1.365 billion. Net unrealized investment losses included in shareholders’ equity were $8.206 billion pre-tax ($6.466 billion after-tax), compared to $6.220 billion pre-tax ($4.898 billion after-tax) at year-end 2022. The increase in net unrealized investment losses was driven by higher interest rates. Book value per share of $87.47 increased 3% over September 30, 2022, and decreased 6% from year-end 2022. Adjusted book value per share of $115.78, which excludes net unrealized investment gains (losses), increased 3% over September 30, 2022, and increased 2% over year-end 2022.

The Company repurchased 0.6 million shares during the third quarter at an average price of $164.50 per share for a total cost of $101 million. At September 30, 2023, the Company had $6.105 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 $23.267 billion, and the ratio of debt-to-capital was 28.7%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains (losses) included in shareholders’ equity was 23.3%, 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 December 29, 2023, to shareholders of record at the close of business on December 8, 2023.

Third Quarter 2023 Results

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

Segment income for Business Insurance was $468 million after-tax, a decrease of $3 million. Segment income decreased primarily due to higher net unfavorable prior year reserve development, partially offset by higher net investment income, a higher underlying underwriting gain and lower catastrophe losses. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

• The combined ratio of 99.1% increased 2.8 points due to higher net unfavorable prior year reserve development (3.9 points), partially offset by lower catastrophe losses (0.8 points) and a lower underlying combined ratio (0.3 points).

• The underlying combined ratio improved 0.3 points to a very strong 89.7%.

• 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 an addition to asbestos reserves of $284 million and additions to reserves attributable to childhood sexual molestation claims 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 commercial automobile product line for recent accident years. Net unfavorable prior year reserve development in the prior year quarter included an addition to asbestos reserves of $212 million. The Company completes its annual in-depth asbestos claim review in the third quarter of each year.

Net written premiums of $5.080 billion increased 16%, 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.

Year-to-Date 2023 Results

(All comparisons vs. year-to-date 2022, unless noted otherwise)

Segment income for Business Insurance was $1.626 billion after-tax, a decrease of $180 million. Segment income decreased primarily due to net unfavorable prior year reserve development compared to net favorable prior year reserve development in the same period of 2022 and higher catastrophe losses, partially offset by a higher underlying underwriting gain and higher net investment income. The underlying underwriting gain benefited from higher business volumes. The underlying underwriting gain in the current year period 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 period 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 97.7% increased 4.2 points due to net unfavorable prior year reserve development compared to net favorable prior year reserve development in the same period of 2022 (4.4 points) and higher catastrophe losses (1.6 points), partially offset by a lower underlying combined ratio (1.8 points).

• The underlying combined ratio improved 1.8 points to a very strong 89.6%.

• 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 an addition to asbestos reserves and additions to reserves attributable to childhood sexual molestation claims 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 commercial automobile product line for recent accident years.

Net written premiums of $15.412 billion increased 16%, reflecting the same factors described above for the third quarter of 2023.

Third Quarter 2023 Results

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

Segment income for Bond & Specialty Insurance was $265 million after-tax, an increase of $23 million. Segment income increased primarily due to higher net investment income, higher net favorable prior year reserve development and lower catastrophe losses, partially offset by a lower underlying underwriting gain. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

• The combined ratio of 73.6% increased 1.1 points due to a higher underlying combined ratio (2.3 points), partially offset by lower catastrophe losses (0.7 points) and higher net favorable prior year reserve development (0.5 points).

• The underlying combined ratio of 80.7% increased 2.3 points, primarily driven by a higher expense ratio.

• 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 $1.003 billion increased 4%, reflecting strong production in surety, as well as strong retention and new business and positive renewal premium change in management liability.

Year-to-Date 2023 Results

(All comparisons vs. year-to-date 2022, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $702 million after-tax, an increase of $15 million. Segment income increased primarily due to higher net favorable prior year reserve development and higher net investment income, partially offset by a lower underlying underwriting gain and higher catastrophe losses. The underlying underwriting gain benefited from higher business volumes. The underlying underwriting gain in the current year period 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 period included a $24 million reduction in income tax expense as a result of the resolution of prior year tax matters.

Contacts

Media:

Patrick Linehan

917.778.6267

Institutional Investors:

Abbe Goldstein

917.778.6825

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