0000086312-19-000005.txt : 20190122 0000086312-19-000005.hdr.sgml : 20190122 20190122070128 ACCESSION NUMBER: 0000086312-19-000005 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20190122 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190122 DATE AS OF CHANGE: 20190122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRAVELERS COMPANIES, INC. CENTRAL INDEX KEY: 0000086312 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 410518860 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10898 FILM NUMBER: 19534256 BUSINESS ADDRESS: STREET 1: 385 WASHINGTON ST CITY: SAINT PAUL STATE: MN ZIP: 55102 BUSINESS PHONE: 6513107911 MAIL ADDRESS: STREET 1: 485 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017-2630 FORMER COMPANY: FORMER CONFORMED NAME: ST PAUL TRAVELERS COMPANIES INC DATE OF NAME CHANGE: 20040401 FORMER COMPANY: FORMER CONFORMED NAME: ST PAUL FIRE & MARINE INSURANCE CO/MD DATE OF NAME CHANGE: 19990219 FORMER COMPANY: FORMER CONFORMED NAME: ST PAUL COMPANIES INC/MN/ DATE OF NAME CHANGE: 19990219 8-K 1 a123118form8k.htm 8-K Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _______________________________________
 FORM 8-K
 _______________________________________

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  January 22, 2019
 _______________________________________________
The Travelers Companies, Inc.
(Exact name of registrant as specified in its charter)
 _______________________________________________
 
Minnesota
 
001-10898
 
41-0518860
(State or other jurisdiction of
incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification No.)
 
485 Lexington Avenue
New York, New York
 
10017
(Address of principal executive offices)
 
(Zip Code)
 
(917) 778-6000
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former name or former address, if changed since last report)
 _________________________________________________

 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o





Item 2.02.  Results of Operations and Financial Condition.
 
On January 22, 2019, The Travelers Companies, Inc. (the “Company”) issued a press release announcing the results of the Company’s operations for the quarter ended December 31, 2018, and the availability of the Company’s fourth quarter financial supplement on the Company’s web site.  The press release and the financial supplement are furnished as Exhibits 99.1 and 99.2 to this Report and are hereby incorporated by reference in this Item 2.02.
 
As provided in General Instruction B.2 of Form 8-K, the information and exhibits contained in this Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
 
Item 9.01.  Financial Statements and Exhibits.
 
(d)                                 Exhibits.
 





SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, The Travelers Companies, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
THE TRAVELERS COMPANIES, INC.
 
 
 
 
 
 
 
 
Date:
January 22, 2019
By
/s/   CHRISTINE K. KALLA
 
 
 
Name: Christine K. Kalla
 
 
 
Executive Vice President and General Counsel


 EX-99.1 2 a991pressrelease123118.htm EXHIBIT 99.1 Exhibit


g34651mo25i001b12.gifExhibit 99.1
The Travelers Companies, Inc.
485 Lexington Avenue
New York, NY 10017-2630
www.travelers.com
NYSE: TRV

Travelers Reports Fourth Quarter 2018 Net Income per Diluted Share of $2.32, up 17%,
and Return on Equity of 10.9%

Fourth Quarter 2018 Core Income per Diluted Share of $2.13 and Core Return on Equity of 10.0%

Full Year Net Income of $2.523 billion and Return on Equity of 11.0%

Full Year Core Income of $2.430 billion and Core Return on Equity of 10.7%

•
Fourth quarter net income of $621 million and core income of $571 million.
•
Catastrophe losses of $610 million pre-tax increased from $499 million pre-tax in the prior year quarter.
•
Fourth quarter consolidated combined ratio of 97.5%; underlying combined ratio of 91.1%.
•
Fourth quarter net written premiums of $6.691 billion, up 4%; record full year net written premiums of $27.708 billion, up 6%; both periods reflect growth in all segments.
•
Total capital returned to shareholders of $375 million in the quarter, including $170 million of share repurchases.
•
Year-to-date total capital returned to shareholders of $2.139 billion, including $1.321 billion of share repurchases.
•
Book value per share of $86.84, down 1% from year-end 2017, due to the impact of higher interest rates on net unrealized investment gains (losses). Adjusted book value per share of $87.27, up 5% from year-end 2017.
•
Board of Directors declared quarterly dividend per share of $0.77.

New York, January 22, 2019 — The Travelers Companies, Inc. today reported net income of $621 million, or $2.32 per diluted share, for the quarter ended December 31, 2018, compared to $551 million, or $1.98 per diluted share, in the prior year quarter. Core income in the current quarter was $571 million, or $2.13 per diluted share, compared to $633 million, or $2.28 per diluted share, in the prior year quarter. Core income before income taxes decreased primarily due to a decrease in net favorable prior year reserve development of $126 million and an increase in catastrophe losses of $111 million, partially offset by an increase in underlying underwriting gain (i.e., excluding net favorable prior year reserve development and catastrophe losses) of $106 million and an increase in net investment income of $29 million. Core income benefited from a lower U.S. corporate income tax rate. Net income in the prior year quarter included a charge of $129 million related to the passage of the Tax Cuts and Jobs Act of 2017 (TCJA). 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,
 
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
 
Net written premiums
 
$
6,691

 
$
6,424

 
4
 %
 
$
27,708

 
$
26,219

 
6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
7,796

 
$
7,451

 
5

 
$
30,282

 
$
28,902

 
5

 
Net income
 
$
621

 
$
551

 
13

 
$
2,523

 
$
2,056

 
23

 
per diluted share
 
$
2.32

 
$
1.98

 
17

 
$
9.28

 
$
7.33

 
27

 
Core income
 
$
571

 
$
633

 
(10
)
 
$
2,430

 
$
2,043

 
19

 
per diluted share
 
$
2.13

 
$
2.28

 
(7
)
 
$
8.94

 
$
7.28

 
23

 
Diluted weighted average shares outstanding
 
266.0

 
275.7

 
(4
)
 
269.8

 
278.6

 
(3
)
 
Combined ratio
 
97.5
%
 
95.5
%
 
2.0

pts
96.9
%
 
97.9
%
 
(1.0
)
pts
Underlying combined ratio
 
91.1
%
 
92.4
%
 
(1.3
)
pts
92.5
%
 
92.6
%
 
(0.1
)
pts
Return on equity
 
10.9
%
 
9.3
%
 
1.6

pts
11.0
%
 
8.7
%
 
2.3

pts
Core return on equity
 
10.0
%
 
11.1
%
 
(1.1
)
pts
10.7
%
 
9.0
%
 
1.7

pts
 
 
As of
 
 
 
 
December 31,
2018
 
December 31,
2017
 
Change
Book value per share
 
$
86.84

 
$
87.46

 
(1
)%
Adjusted book value per share
 
87.27

 
83.36

 
5
 %
See Glossary of Financial Measures for definitions and the statistical supplement for additional financial data.

1


“Fourth quarter core income of $571 million and core return on equity of 10.0% were both impacted by a high level of catastrophe losses arising from the California wildfires and Hurricane Michael,” said Alan Schnitzer, Chairman and Chief Executive Officer. “Our consolidated underlying results remained strong, benefiting from the continued successful execution of our strategy to create top-line opportunities and improve productivity and efficiency. This resulted in a 5% increase in net earned premiums to a record $6.9 billion and a reduction in the expense ratio to 29.5%. The underlying combined ratio improved to 91.1%, the lowest level since the first quarter of 2016. We were pleased with strong underlying performance across our diversified product portfolio, particularly in the Workers' Compensation, Surety, Management Liability and Personal Auto product lines, while our results in Commercial Auto were impacted by higher loss estimates for the full year. Net investment income of $630 million pre-tax was strong, up 5% over the prior year quarter due to higher returns in our fixed income portfolio. These results, together with our strong balance sheet, enabled us to return $375 million of excess capital to shareholders this quarter, including $170 million of share repurchases. For the full year, we returned over $2.1 billion of excess capital to shareholders, including $1.3 billion in share repurchases.
“We remain very pleased with our performance in the market, as net written premiums increased by 4% to $6.7 billion, with each of our business segments contributing. Net written premiums in Business Insurance increased by 3%, benefiting from renewal premium change of nearly 5% and continued historically high levels of retention. In our Middle Market business, renewal premium change increased over the prior year and was stable sequentially with retention at a fourth quarter record of 88%. In Bond & Specialty Insurance, net written premiums increased by 8%, with strong production in both our Management Liability and Surety businesses. In Personal Insurance, net written premiums increased by 5%. In Agency Auto, net written premiums increased by 5%, with strong retention and renewal premium change that continued to moderate, consistent with our objective of balancing growth and profitability. In our leading Agency Homeowners business, net written premiums increased by 6%, with strong retention and pricing up nearly a point over the prior year quarter.
“For the full year, we were pleased to have achieved record net written premiums of $27.7 billion and core income of $2.4 billion that generated core ROE of 10.7% despite an elevated level of $1.4 billion of after-tax catastrophe losses. These results demonstrate the strength of our franchise. We continue to pursue our ambitious innovation agenda and identify opportunities to leverage our long-standing competitive advantages in a rapidly changing world. For example, we recently announced an agreement to become the exclusive provider of U.S. auto insurance claim management for Lyft. Our significant competitive advantages, including a strong balance sheet, superior talent and leading position with agents and brokers, together with our capital management strategy and the strategic initiatives we have underway, position us well to continue to deliver shareholder value over time.”
 






2


Consolidated Results
 
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
($ in millions and pre-tax, unless noted otherwise)
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
 
Underwriting gain:
 
$
135

 
$
266

 
$
(131
)
 
$
681

 
$
404

 
$
277

 
Underwriting gain includes:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net favorable prior year reserve development
 
167

 
293

 
(126
)
 
517

 
592

 
(75
)
 
Catastrophes, net of reinsurance
 
(610
)
 
(499
)
 
(111
)
 
(1,716
)
 
(1,949
)
 
233

 
Net investment income
 
630

 
601

 
29

 
2,474

 
2,397

 
77

 
Other income (expense), including interest expense
 
(79
)
 
(77
)
 
(2
)
 
(308
)
 
(287
)
 
(21
)
 
Core income before income taxes
 
686

 
790

 
(104
)
 
2,847

 
2,514

 
333

 
Income tax expense
 
115

 
157

 
(42
)
 
417

 
471

 
(54
)
 
Core income
 
571

 
633

 
(62
)
 
2,430

 
2,043

 
387

 
Net realized investment gains after income taxes
 
50

 
47

 
3

 
93

 
142

 
(49
)
 
Impact of TCJA at enactment
 
—

 
(129
)
 
129

 
—

 
(129
)
 
129

 
Net income
 
$
621

 
$
551

 
$
70

 
$
2,523

 
$
2,056

 
$
467

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
 
97.5
 %
 
95.5
 %
 
2.0

pts
96.9
 %
 
97.9
 %
 
(1.0
)
pts
Impact on combined ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
Net favorable prior year reserve development
 
(2.4
)
pts
(4.4
)
pts
2.0

pts
(1.9
)
pts
(2.3
)
pts
0.4

pts
Catastrophes, net of reinsurance
 
8.8

pts
7.5

pts
1.3

pts
6.3

pts
7.6

pts
(1.3
)
pts
Underlying combined ratio
 
91.1
 %
 
92.4
 %
 
(1.3
)
pts
92.5
 %
 
92.6
 %
 
(0.1
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net written premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Insurance
 
$
3,533

 
$
3,437

 
3
 %
 
$
14,956

 
$
14,270

 
5
 %
 
Bond & Specialty Insurance
 
657

 
606

 
8

 
2,528

 
2,359

 
7

 
Personal Insurance
 
2,501

 
2,381

 
5

 
10,224

 
9,590

 
7

 
Total
 
$
6,691

 
$
6,424

 
4
 %
 
$
27,708

 
$
26,219

 
6
 %
 
 
Fourth Quarter 2018 Results
(All comparisons vs. fourth quarter 2017, unless noted otherwise)
 
Net income of $621 million increased $70 million due to a $129 million charge in the prior year quarter related to the passage of the TCJA, partially offset by lower core income. Core income of $571 million decreased $62 million. Core income before income taxes decreased primarily due to a decrease in net favorable prior year reserve development of $126 million and an increase in catastrophe losses of $111 million, partially offset by an increase in underlying underwriting gain of $106 million and an increase in net investment income of $29 million. Core income benefited from a lower U.S. corporate income tax rate.

Underwriting results: 

•
The combined ratio of 97.5% increased 2.0 points due to lower net favorable prior year reserve development (2.0 points) and higher catastrophe losses (1.3 points), partially offset by a lower underlying combined ratio (1.3 points).

•
The underlying combined ratio of 91.1% decreased 1.3 points. See below for details by segment.

•
Net favorable prior year reserve development occurred in all segments. Catastrophe losses included $453 million pre-tax ($358 million after-tax) from the wildfires in California and $158 million pre-tax ($125 million after-tax) from Hurricane Michael.

Net investment income of $630 million pre-tax ($535 million after-tax) increased 5%. Income from the fixed income investment portfolio increased due to higher long-term and short-term interest rates as well as a higher average level of fixed maturity investments. Private equity returns were lower than in the prior year quarter.

3


Net written premiums of $6.691 billion increased 4%, reflecting growth in all segments. Retention remained high and new business increased across all segments.

Full Year 2018 Results
(All comparisons vs. full year 2017, unless noted otherwise)
 
Net income of $2.523 billion increased $467 million due to higher core income and the $129 million charge in the prior year related to the passage of the TCJA, partially offset by lower net realized investment gains. Core income of $2.430 billion increased $387 million. Core income before income taxes increased due to a decrease in catastrophe losses of $233 million, an increase in underlying underwriting gain of $119 million and an increase in net investment income of $77 million, partially offset by a decrease in net favorable prior year reserve development of $75 million. Core income benefited from a lower U.S. corporate income tax rate. Net realized investment gains of $114 million pre-tax ($93 million after-tax) were lower by $102 million pre-tax ($49 million after-tax).

Underwriting results:
 
•
The combined ratio of 96.9% improved 1.0 points due to lower catastrophe losses (1.3 points) and a slightly lower underlying combined ratio (0.1 points), partially offset by lower net favorable prior year reserve development (0.4 points).

•
The underlying combined ratio of 92.5% decreased 0.1 points. See below for details by segment.

•
Net favorable prior year reserve development occurred in all segments. Catastrophe losses included the fourth quarter events described above, as well as winter storms in the eastern U.S., Hurricane Florence, wind and hail storms in several regions of the U.S. and mudslides in California in the first three quarters of 2018.
 
Net investment income of $2.474 billion pre-tax ($2.102 billion after-tax) increased 3%. Income from the fixed income investment portfolio increased due to a higher average level of fixed maturity investments and higher long-term and short-term interest rates. Private equity returns were lower than in the prior year.

Record net written premiums of $27.708 billion increased 6%, reflecting growth in all segments. Retention remained high and new business increased across all segments.

Shareholders’ Equity
 
Shareholders’ equity of $22.894 billion decreased 4% from year-end 2017 due to the impact of higher interest rates on net unrealized investment gains (losses). Net unrealized investment losses included in shareholders’ equity were $137 million pre-tax ($113 million after-tax), compared to net unrealized investment gains of $1.414 billion pre-tax ($1.112 billion after-tax) at year-end 2017. Book value per share of $86.84 decreased 1% from year-end 2017, also due to the impact of higher interest rates on net unrealized investment gains (losses). Adjusted book value per share of $87.27 increased 5% from year-end 2017.

The Company repurchased 1.4 million shares during the fourth quarter at an average price of $125.07 per share for a total cost of $170 million. Capacity remaining under the existing share repurchase authorization was $3.286 billion at the end of the quarter. At the end of fourth quarter 2018, statutory capital and surplus was $20.774 billion, and the ratio of debt-to-capital was 22.3%. The ratio of debt-to-capital excluding after-tax net unrealized investment losses included in shareholders’ equity was 22.2%, within the Company’s target range of 15% to 25%.

The Board of Directors declared a quarterly dividend of $0.77 per share. The dividend is payable on March 29, 2019, to shareholders of record at the close of business on March 11, 2019.


4


Business Insurance Segment Financial Results
 
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
($ in millions and pre-tax, unless noted otherwise)
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
 
Underwriting gain:
 
$
7

 
$
399

 
$
(392
)
 
$
76

 
$
251

 
$
(175
)
 
Underwriting gain includes:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net favorable prior year reserve development
 
48

 
244

 
(196
)
 
142

 
439

 
(297
)
 
Catastrophes, net of reinsurance
 
(197
)
 
(53
)
 
(144
)
 
(639
)
 
(858
)
 
219

 
Net investment income
 
465

 
449

 
16

 
1,833

 
1,786

 
47

 
Other income (expense)
 
(9
)
 
2

 
(11
)
 
(12
)
 
24

 
(36
)
 
Segment income before income taxes
 
463

 
850

 
(387
)
 
1,897

 
2,061

 
(164
)
 
Income tax expense
 
72

 
213

 
(141
)
 
259

 
448

 
(189
)
 
Segment income
 
$
391

 
$
637

 
$
(246
)
 
$
1,638

 
$
1,613

 
$
25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
 
99.4
 %
 
88.6
 %
 
10.8

pts
99.1
 %
 
97.8
 %
 
1.3

pts
Impact on combined ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
Net favorable prior year reserve development
 
(1.2
)
pts
(6.7
)
pts
5.5

pts
(1.0
)
pts
(3.1
)
pts
2.1

pts
Catastrophes, net of reinsurance
 
5.2

pts
1.4

pts
3.8

pts
4.4

pts
6.0

pts
(1.6
)
pts
Underlying combined ratio
 
95.4
 %
 
93.9
 %
 
1.5

pts
95.7
 %
 
94.9
 %
 
0.8

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net written premiums by market
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
 
 
 
 
 
 
 
 
 
 
 
Select Accounts
 
$
660

 
$
661

 
—
 %
 
$
2,828

 
$
2,800

 
1
 %
 
Middle Market
 
1,935

 
1,863

 
4

 
8,214

 
7,756

 
6

 
National Accounts
 
247

 
259

 
(5
)
 
1,025

 
1,010

 
1

 
National Property and Other
 
422

 
381

 
11

 
1,805

 
1,691

 
7

 
Total Domestic
 
3,264

 
3,164

 
3

 
13,872

 
13,257

 
5

 
International
 
269

 
273

 
(1
)
 
1,084

 
1,013

 
7

 
Total
 
$
3,533

 
$
3,437

 
3
 %
 
$
14,956

 
$
14,270

 
5
 %
 
 
Fourth Quarter 2018 Results
(All comparisons vs. fourth quarter 2017, unless noted otherwise)
 
Segment income for Business Insurance was $391 million after-tax, a decrease of $246 million. Segment income before income taxes decreased due to lower net favorable prior year reserve development, higher catastrophe losses and a lower underlying underwriting gain, partially offset by higher net investment income. The lower underlying underwriting gain was primarily driven by higher loss estimates in the domestic commercial automobile line for bodily injury liability coverages. Segment income in the current quarter benefited from a lower U.S. corporate income tax rate.
 
Underwriting results:

•
The combined ratio of 99.4% increased 10.8 points due to lower net favorable prior year reserve development (5.5 points), higher catastrophe losses (3.8 points) and a higher underlying combined ratio (1.5 points).

•
The underlying combined ratio of 95.4% increased 1.5 points, driven by the full year impact of higher loss estimates in the domestic commercial automobile line for bodily injury liability coverages, partially offset by a lower expense ratio.

•
Net favorable prior year reserve development was primarily driven by better than expected loss experience in domestic workers' compensation for multiple accident years, partially offset by higher than expected loss experience in domestic commercial automobile for recent accident years and domestic general liability for multiple accident years.


5


Net written premiums of $3.533 billion increased 3%, benefiting from continued strong retention, higher renewal premium change and higher levels of new business.

Full Year 2018 Results
(All comparisons vs. full year 2017, unless noted otherwise)
 
Segment income for Business Insurance was $1.638 billion after-tax, an increase of $25 million. Segment income before income taxes decreased due to lower net favorable prior year reserve development and a lower underlying underwriting gain, partially offset by lower catastrophe losses and higher net investment income. The lower underlying underwriting gain was primarily driven by higher loss estimates in the domestic commercial automobile line for bodily injury liability coverages. Segment income in the current year benefited from a lower U.S. corporate income tax rate.
 
Underwriting results:

•
The combined ratio of 99.1% increased 1.3 points due to lower net favorable prior year reserve development (2.1 points) and a higher underlying combined ratio (0.8 points), partially offset by lower catastrophe losses (1.6 points).

•
The underlying combined ratio of 95.7% increased 0.8 points, primarily driven by higher loss estimates in the domestic commercial automobile line for bodily injury liability coverages.

•
Net favorable prior year reserve development was primarily driven by better than expected loss experience in domestic workers’ compensation for multiple accident years and commercial property for recent accident years, partially offset by higher than expected loss experience in domestic general liability for multiple accident years (including a $225 million increase to asbestos reserves and a $55 million increase to environmental reserves) and domestic commercial automobile for recent accident years.

Net written premiums of $14.956 billion increased 5% and benefited from the same factors as discussed above for the fourth quarter of 2018.


6


Bond & Specialty Insurance Segment Financial Results
 
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
($ in millions and pre-tax, unless noted otherwise)
2018
 
2017
 
Change
 
2018
 
2017
 
Change
 
Underwriting gain:
$
214

 
$
94

 
$
120

 
$
740

 
$
512

 
$
228

 
Underwriting gain includes:
 
 
 
 
 
 
 
 
 
 
 
 
Net favorable prior year reserve development
89

 
42

 
47

 
266

 
140

 
126

 
Catastrophes, net of reinsurance
(7
)
 
2

 
(9
)
 
(16
)
 
(6
)
 
(10
)
 
Net investment income
61

 
54

 
7

 
233

 
228

 
5

 
Other income
5

 
8

 
(3
)
 
18

 
24

 
(6
)
 
Segment income before income taxes
280

 
156

 
124

 
991

 
764

 
227

 
Income tax expense
60

 
44

 
16

 
198

 
208

 
(10
)
 
Segment income
$
220

 
$
112

 
$
108

 
$
793

 
$
556

 
$
237

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
64.8
 %
 
83.7
 %
 
(18.9
)
pts
69.0
 %
 
77.4
 %
 
(8.4
)
pts
Impact on combined ratio
 
 
 
 
 
 
 
 
 
 
 
 
Net favorable prior year reserve development
(14.4
)
pts
(7.2
)
pts
(7.2
)
pts
(11.0
)
pts
(6.1
)
pts
(4.9
)
pts
Catastrophes, net of reinsurance
1.1

pts
(0.2
)
pts
1.3

pts
0.6

pts
0.3

pts
0.3

pts
Underlying combined ratio
78.1
 %
 
91.1
 %
 
(13.0
)
pts
79.4
 %
 
83.2
 %
 
(3.8
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
Net written premiums
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
 
 
 
 
 
 
 
 
 
 
Management Liability
$
366

 
$
337

 
9
 %
 
$
1,455

 
$
1,367

 
6
 %
 
Surety
198

 
196

 
1

 
835

 
793

 
5

 
Total Domestic
564

 
533

 
6

 
2,290

 
2,160

 
6

 
International
93

 
73

 
27

 
238

 
199

 
20

 
Total
$
657

 
$
606

 
8
 %
 
$
2,528

 
$
2,359

 
7
 %
 

Fourth Quarter 2018 Results
(All comparisons vs. fourth quarter 2017, unless noted otherwise)
 
Segment income for Bond & Specialty Insurance was $220 million after-tax, an increase of $108 million. Segment income before income taxes benefited from a higher underlying underwriting gain and higher net favorable prior year reserve development. The higher underlying underwriting gain primarily resulted from a charge for a single international surety loss in the fourth quarter of 2017 and higher business volumes. Segment income in the current quarter benefited from a lower U.S. corporate income tax rate.
 
Underwriting results:

•
The combined ratio of 64.8% improved 18.9 points due to a lower underlying combined ratio (13.0 points) and higher net favorable prior year reserve development (7.2 points), partially offset by higher catastrophe losses (1.3 points).

•
The underlying combined ratio of 78.1% improved 13.0 points, primarily driven by a charge for a single international surety loss in the fourth quarter of 2017.

•
Net favorable prior year reserve development resulted from better than expected loss experience in domestic general liability for management liability coverages for multiple accident years.

Net written premiums of $657 million increased 8%, reflecting continued strong retention and higher new business in management liability and an increase in surety premiums.


7


Full Year 2018 Results
(All comparisons vs. full year 2017, unless noted otherwise)
 
Segment income for Bond & Specialty Insurance was $793 million after-tax, an increase of $237 million. Segment income before income taxes benefited from higher net favorable prior year reserve development and a higher underlying underwriting gain. The higher underlying underwriting gain primarily resulted from a charge for a single international surety loss in 2017 and higher business volumes. Segment income in the current year benefited from a lower U.S. corporate income tax rate.

Underwriting results:

•
The combined ratio of 69.0% improved 8.4 points due to higher net favorable prior year reserve development (4.9 points) and a lower underlying combined ratio (3.8 points), partially offset by higher catastrophe losses (0.3 points).

•
The underlying combined ratio of 79.4% improved 3.8 points, primarily driven by a charge for a single international surety loss in 2017.

•
Net favorable prior year reserve development resulted from better than expected loss experience in domestic general liability for management liability coverages for multiple accident years.

Net written premiums of $2.528 billion increased 7% and benefited from the same factors as discussed above for the fourth quarter of 2018.

Personal Insurance Segment Financial Results
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
($ in millions and pre-tax, unless noted otherwise)
2018
 
2017
 
Change
 
2018
 
2017
 
Change
 
Underwriting gain (loss):
$
(86
)
 
$
(227
)
 
$
141

 
$
(135
)
 
$
(359
)
 
$
224

 
Underwriting gain (loss) includes:
 
 
 
 
 
 
 
 
 
 
 
 
Net favorable prior year reserve development
30

 
7

 
23

 
109

 
13

 
96

 
Catastrophes, net of reinsurance
(406
)
 
(448
)
 
42

 
(1,061
)
 
(1,085
)
 
24

 
Net investment income
104

 
98

 
6

 
408

 
383

 
25

 
Other income
18

 
15

 
3

 
66

 
60

 
6

 
Segment income (loss) before income taxes
36

 
(114
)
 
150

 
339

 
84

 
255

 
Income tax expense (benefit)
4

 
(64
)
 
68

 
42

 
(44
)
 
86

 
Segment income (loss)
$
32

 
$
(50
)
 
$
82

 
$
297

 
$
128

 
$
169

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
102.6
 %
 
108.7
 %
 
(6.1
)
pts
100.6
 %
 
103.1
 %
 
(2.5
)
pts
Impact on combined ratio
 
 
 
 
 
 
 
 
 
 
 
 
Net favorable prior year reserve development
(1.1
)
pts
(0.3
)
pts
(0.8
)
pts
(1.1
)
pts
(0.1
)
pts
(1.0
)
pts
Catastrophes, net of reinsurance
15.9

pts
18.6

pts
(2.7
)
pts
10.7

pts
11.7

pts
(1.0
)
pts
Underlying combined ratio
87.8
 %
 
90.4
 %
 
(2.6
)
pts
91.0
 %
 
91.5
 %
 
(0.5
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
Net written premiums
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
 
 
 
 
 
 
 
 
 
 
Agency (1)
 
 
 
 
 
 
 
 
 
 
 
 
Automobile
$
1,226

 
$
1,172

 
5
 %
 
$
4,972

 
$
4,646

 
7
 %
 
Homeowners & Other
1,011

 
955

 
6

 
4,148

 
3,933

 
5

 
Total Agency
2,237

 
2,127

 
5

 
9,120

 
8,579

 
6

 
Direct to Consumer
97

 
90

 
8

 
396

 
361

 
10

 
Total Domestic
2,334

 
2,217

 
5

 
9,516

 
8,940

 
6

 
International
167

 
164

 
2

 
708

 
650

 
9

 
Total
$
2,501

 
$
2,381

 
5
 %
 
$
10,224

 
$
9,590

 
7
 %
 
(1) Represents business sold through agents, brokers and other intermediaries, and excludes direct to consumer.
 

8


Fourth Quarter 2018 Results
(All comparisons vs. fourth quarter 2017, unless noted otherwise)
 
Segment income for Personal Insurance was $32 million after-tax, compared to a loss of $50 million in the prior year quarter. Segment income before income taxes benefited from a higher underlying underwriting gain, lower catastrophe losses, higher net favorable prior year reserve development and higher net investment income. The higher underlying underwriting gain was primarily driven by earned pricing that exceeded loss cost trends in Agency Automobile, partially offset by higher non-weather related losses in Agency Homeowners & Other.

Underwriting results:

•
The combined ratio of 102.6% improved 6.1 points due to lower catastrophe losses (2.7 points), a lower underlying combined ratio (2.6 points) and higher net favorable prior year reserve development (0.8 points).

•
The underlying combined ratio of 87.8% improved 2.6 points, primarily driven by earned pricing that exceeded loss cost trends in Agency Automobile and a lower expense ratio, partially offset by higher non-weather related losses in Agency Homeowners & Other.

•
Net favorable prior year reserve development primarily resulted from better than expected loss experience in Agency Automobile for recent accident years.

Net written premiums of $2.501 billion increased 5%. Agency Automobile net written premiums increased 5%, driven by renewal premium change of 6%. Agency Homeowners & Other net written premiums increased 6%, benefiting from year-over-year policies in force growth of 6%.

Full Year 2018 Results
(All comparisons vs. full year 2017, unless noted otherwise)
 
Segment income for Personal Insurance was $297 million after-tax, an increase of $169 million. Segment income before income taxes benefited from a higher underlying underwriting gain, higher net favorable prior year reserve development, higher net investment income and lower catastrophe losses. The higher underlying underwriting gain was primarily driven by earned pricing that exceeded loss cost trends in Agency Automobile, partially offset by higher non-catastrophe weather-related losses and non-weather related losses in Agency Homeowners & Other. Segment income in the current year benefited from a lower U.S. corporate income tax rate.
 
Underwriting results:

•
The combined ratio of 100.6% improved 2.5 points due to higher net favorable prior year reserve development (1.0 points), lower catastrophe losses (1.0 points) and a lower underlying combined ratio (0.5 points).

•
The underlying combined ratio of 91.0% improved 0.5 points, primarily driven by earned pricing that exceeded loss cost trends in Agency Automobile, partially offset by higher non-catastrophe weather-related losses and non-weather related losses in Agency Homeowners & Other.

•
Net favorable prior year reserve development resulted from better than expected loss experience in Agency Automobile for recent accident years.

Net written premiums of $10.224 billion increased 7%. Agency Automobile net written premiums increased 7%, and Agency Homeowners & Other net written premiums increased 5%, in each case benefiting from the same factors as discussed above for the fourth quarter of 2018.
 

9


Financial Supplement and Conference Call
 
The information in this press release should be read in conjunction with a 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 Tuesday, January 22, 2019. 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, an audio playback of the webcast and the slide presentation will be available on the same website.

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 $30 billion in 2018. 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 and insurance related services to its customers, primarily in the United States, as well as in Canada, the United Kingdom, the Republic of Ireland, Brazil and throughout other parts of the world as a corporate member of Lloyd’s.

Bond & Specialty Insurance - Bond & Specialty Insurance provides surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to its customers in the United States and certain specialty insurance products in Canada, the United Kingdom, the Republic of Ireland and Brazil, utilizing various degrees of financially-based underwriting approaches.

Personal Insurance - Personal Insurance writes a broad range of property and casualty insurance 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,” “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 and its future results of operations and financial condition (including, among other things, anticipated premium volume, premium rates, renewal premium changes, margins, net and core income, investment income and performance, loss costs, return on equity, core return on equity and expected current returns and combined ratios and underlying combined ratios);
•
share repurchase plans;
•
future pension plan contributions;
•
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;
•
the cost and availability of reinsurance coverage;
•
catastrophe losses;

10


•
the impact of investment (including changes in interest rates), economic (including inflation, recent changes in tax law, rapid changes in commodity prices and fluctuations in foreign currency exchange rates) and underwriting market conditions;
•
strategic and operational initiatives to improve profitability and competitiveness;
•
the Company’s competitive advantages;
•
new product offerings;
•
the impact of new or potential regulations imposed or to be imposed by the United States or other nations, including tariffs or other barriers to international trade; and
•
the impact of the government shutdown.

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:

•
catastrophe losses could materially and adversely affect the Company’s results of operations, its financial position and/or liquidity, and could adversely impact the Company’s ratings, the Company’s ability to raise capital and the availability and cost of reinsurance;
•
if actual claims exceed the Company’s claims and claim adjustment expense reserves, or if changes in the estimated level of claims and claim adjustment expense reserves are necessary, including as a result of, among other things, changes in the legal, regulatory and economic environments in which the Company operates, the Company’s financial results could be materially and adversely affected;
•
during or following a period of financial market disruption or an economic downturn, the Company’s business could be materially and adversely affected;
•
the Company’s investment portfolio is subject to credit risk and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses;
•
the Company’s business could be harmed because of its potential exposure to asbestos and environmental claims and related litigation;
•
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, could harm its ability to maintain or increase its business volumes and its profitability;
•
disruptions to the Company’s relationships with its independent agents and brokers or the Company's inability to manage effectively a changing distribution landscape could adversely affect the Company;
•
the Company is exposed to, and may face adverse developments involving, mass tort claims such as those relating to exposure to potentially harmful products or substances;
•
the effects of emerging claim and coverage issues on the Company’s business are uncertain;
•
the Company may not be able to collect all amounts due to it from reinsurers, reinsurance coverage may not be available to the Company in the future at commercially reasonable rates or at all and we are exposed to credit risk related to our structured settlements;
•
the Company is also exposed to credit risk in certain of its insurance operations and with respect to certain guarantee or indemnification arrangements that we have with third parties;
•
within the United States, the Company’s businesses are heavily regulated by the states in which it conducts business, including licensing, market conduct and financial supervision, and changes in regulation may reduce the Company’s profitability and limit its growth;
•
a downgrade in the Company’s claims-paying and financial strength ratings could adversely impact the Company’s business volumes, adversely impact the Company’s ability to access the capital markets and increase the Company’s borrowing costs;
•
the inability of the Company’s insurance subsidiaries to pay dividends to the Company’s holding company in sufficient amounts would harm the Company’s ability to meet its obligations, pay future shareholder dividends and/or make future share repurchases;
•
the Company’s efforts to develop new products, expand in targeted markets or improve business processes and workflows may not be successful and may create enhanced risks;
•
the Company may be adversely affected if its pricing and capital models provide materially different indications than actual results;
•
the Company’s business success and profitability depend, in part, on effective information technology systems and on continuing to develop and implement improvements in technology, particularly as its business processes become more digital;

11


•
if the Company experiences difficulties with technology, data and network security (including as a result of cyber attacks), outsourcing relationships or cloud-based technology, the Company’s ability to conduct its business could be negatively impacted;
•
the Company is also subject to a number of additional risks associated with its business outside the United States, such as foreign currency exchange fluctuations (including with respect to the valuation of the Company’s foreign investments and interests in joint ventures) and restrictive regulations as well as the risks and uncertainties associated with the United Kingdom’s withdrawal from the European Union;
•
regulatory changes outside of the United States, including in Canada, the United Kingdom, the Republic of Ireland and the European Union, could adversely impact the Company’s results of operations and limit its growth;
•
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 could reduce the Company’s future profitability;
•
acquisitions and integration of acquired businesses may result in operating difficulties and other unintended consequences;
•
the Company could be adversely affected if its controls designed to ensure compliance with guidelines, policies and legal and regulatory standards are not effective;
•
the Company’s businesses may be adversely affected if it is unable to hire and retain qualified employees;
•
intellectual property is important to the Company’s business, and the Company may be unable to protect and enforce its own intellectual property or the Company may be subject to claims for infringing the intellectual property of others;
•
changes in federal regulation could impose significant burdens on the Company and otherwise adversely impact the Company’s results;
•
changes in U.S. tax laws or in the tax laws of other jurisdictions in which the Company operates could adversely impact the Company; and
•
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, 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 and other factors.

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” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 15, 2018, 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.


12


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)
 
2018
 
2017
 
2018
 
2017
Net income
 
$
621

 
$
551

 
$
2,523

 
$
2,056

Less: Net realized investment gains
 
(50
)
 
(47
)
 
(93
)
 
(142
)
Impact of TCJA at enactment
 
—

 
129

 
—

 
129

Core income
 
$
571

 
$
633

 
$
2,430

 
$
2,043

 
 
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
($ in millions, pre-tax)
 
2018
 
2017
 
2018
 
2017
Net income
 
$
746

 
$
860

 
$
2,961

 
$
2,730

Less: Net realized investment gains
 
(60
)
 
(70
)
 
(114
)
 
(216
)
Core income
 
$
686

 
$
790

 
$
2,847

 
$
2,514

 
 
 
Twelve Months Ended December 31,
($ in millions, after-tax)
 
2018
 
2017
 
2016
 
2015
 
2014
 
2013
 
2012
 
2011
 
2010
 
2009
 
2008
 
2007
 
2006
 
2005
Net income
 
$
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
 
2,523

 
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
 
(93
)
 
(142
)
 
(47
)
 
(2
)
 
(51
)
 
(106
)
 
(32
)
 
(36
)
 
(173
)
 
(22
)
 
271

 
(101
)
 
(8
)
 
(35
)
Impact of TCJA at enactment
 
—

 
129

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Core income
 
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
 
$
2,430

 
$
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

 


13


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,
 
 
2018
 
2017
 
2018
 
2017
Basic income per share
 
 

 
 

 
 

 
 

Net income
 
$
2.33

 
$
2.00

 
$
9.37

 
$
7.39

Adjustments:
 
 

 
 

 
 

 
 

Net realized investment gains, after-tax
 
(0.18
)
 
(0.17
)
 
(0.35
)
 
(0.51
)
Impact of TCJA at enactment
 
—

 
0.47

 
—

 
0.47

Core income
 
$
2.15

 
$
2.30

 
$
9.02

 
$
7.35

Diluted income per share
 
 

 
 

 
 

 
 

Net income
 
$
2.32

 
$
1.98

 
$
9.28

 
$
7.33

Adjustments:
 
 

 
 

 
 

 
 

Net realized investment gains, after-tax
 
(0.19
)
 
(0.17
)
 
(0.34
)
 
(0.51
)
Impact of TCJA at enactment
 
—

 
0.47

 
—

 
0.46

Core income
 
$
2.13

 
$
2.28

 
$
8.94

 
$
7.28


Reconciliation of Segment Income to Total Core Income
 
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
($ in millions, after-tax)
 
2018
 
2017
 
2018
 
2017
Business Insurance
 
$
391

 
$
637

 
$
1,638

 
$
1,613

Bond & Specialty Insurance
 
220

 
112

 
793

 
556

Personal Insurance
 
32

 
(50
)
 
297

 
128

Total segment income
 
643

 
699

 
2,728

 
2,297

Interest Expense and Other
 
(72
)
 
(66
)
 
(298
)
 
(254
)
Total core income
 
$
571

 
$
633

 
$
2,430

 
$
2,043

 
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)
 
2018
 
2017
 
2016
 
2015
 
2014
 
2013
 
2012
 
2011
 
2010
 
2009
 
2008
 
2007
 
2006
 
2005
Shareholders’ equity
 
$
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
 
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
 
(93
)
 
(142
)
 
(47
)
 
(2
)
 
(51
)
 
(106
)
 
(32
)
 
(36
)
 
(173
)
 
(22
)
 
271

 
(101
)
 
(8
)
 
(35
)
Impact of TCJA at enactment
 
—

 
287

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Preferred stock
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(68
)
 
(79
)
 
(89
)
 
(112
)
 
(129
)
 
(153
)
Loss from discontinued operations
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
439

Adjusted shareholders’ equity
 
$
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

  
Return on equity is the ratio of annualized net income less preferred dividends to average shareholders’ equity for the periods presented. Core return on equity is the ratio of annualized core income 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.

14



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 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)
 
2018
 
2017
 
2018
 
2017
Annualized net income
 
$
2,483

 
$
2,202

 
$
2,523

 
$
2,056

Average shareholders’ equity
 
22,677

 
23,735

 
22,843

 
23,671

Return on equity
 
10.9
%
 
9.3
%
 
11.0
%
 
8.7
%
Annualized core income
 
$
2,286

 
$
2,530

 
$
2,430

 
$
2,043

Adjusted average shareholders’ equity
 
22,932

 
22,795

 
22,814

 
22,743

Core return on equity
 
10.0
%
 
11.1
%
 
10.7
%
 
9.0
%
 
Average annual core return on equity over a period is the ratio of:
a) the sum of core income less preferred dividends for the periods presented to b) the sum of: 1) the sum of the adjusted average shareholders’ equity for all full years in the period presented, and 2) for partial years in the period presented, the number of quarters in that partial year divided by four, multiplied by the adjusted average shareholders’ equity of the partial year.
 
Calculation of Average Annual Core Return on Equity from January 1, 2005 through December 31, 2018
 
 
Twelve Months Ended December 31,
($ in millions)
 
2018
 
2017
 
2016
 
2015
 
2014
 
2013
 
2012
 
2011
 
2010
 
2009
 
2008
 
2007
 
2006
 
2005
Core income, less preferred dividends
 
$
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
 
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
 
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
%
Average annual core return on equity for the period Jan. 1, 2005 through Dec. 31, 2018
 
13.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 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 or

15


radiological events, cyber attacks, explosions and infrastructure failures. 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 2018 ranges from approximately $18 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)
 
2018
 
2017
 
2018
 
2017
Pre-tax underwriting gain excluding the impact of catastrophes and net favorable prior year loss reserve development
 
$
578

 
$
472

 
$
1,880

 
$
1,761

Pre-tax impact of catastrophes
 
(610
)
 
(499
)
 
(1,716
)
 
(1,949
)
Pre-tax impact of net favorable prior year loss reserve development
 
167

 
293

 
517

 
592

Pre-tax underwriting gain
 
135

 
266

 
681

 
404

Income tax expense on underwriting results
 
36

 
50

 
105

 
54

Underwriting gain
 
99

 
216

 
576

 
350

Net investment income
 
535

 
467

 
2,102

 
1,872

Other income (expense), including interest expense
 
(63
)
 
(50
)
 
(248
)
 
(179
)
Core income
 
571

 
633

 
2,430

 
2,043

Net realized investment gains
 
50

 
47

 
93

 
142

Impact of TCJA at enactment
 
—

 
(129
)
 
—

 
(129
)
Net income
 
$
621

 
$
551

 
$
2,523

 
$
2,056

 
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.


16


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)
 
2018
 
2017
 
2018
 
2017
Loss and loss adjustment expense ratio
 
 
 
 
 
 
 
 
Claims and claim adjustment expenses
 
$
4,778

 
$
4,342

 
$
18,291

 
$
17,467

Less:
 
 
 
 
 
 
 
 
Policyholder dividends
 
15

 
13

 
52

 
51

Allocated fee income
 
39

 
36

 
154

 
162

Loss ratio numerator
 
$
4,724

 
$
4,293

 
$
18,085

 
$
17,254

Underwriting expense ratio
 
 
 
 
 
 
 
 
Amortization of deferred acquisition costs
 
$
1,122

 
$
1,072

 
$
4,381

 
$
4,166

General and administrative expenses (G&A)
 
1,063

 
1,084

 
4,297

 
4,170

Less:
 
 
 
 
 
 
 
 
Non-insurance G&A
 
45

 
33

 
159

 
77

Allocated fee income
 
69

 
69

 
278

 
285

Billing and policy fees and other
 
24

 
21

 
93

 
88

Expense ratio numerator
 
$
2,047

 
$
2,033

 
$
8,148

 
$
7,886

Earned premium
 
$
6,945

 
$
6,626

 
$
27,059

 
$
25,683

Combined ratio (1)
 
 
 
 
 
 
 
 
Loss and loss adjustment expense ratio
 
68.0
%
 
64.8
%
 
66.8
%
 
67.2
%
Underwriting expense ratio
 
29.5
%
 
30.7
%
 
30.1
%
 
30.7
%
Combined ratio
 
97.5
%
 
95.5
%
 
96.9
%
 
97.9
%
 
(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. In addition, G&A 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.


17


Reconciliation of Shareholders’ Equity to Tangible Shareholders’ Equity, Excluding Net Unrealized Investment Gains (Losses), Net of Tax 
 
 
As of
($ in millions, except per share amounts)
 
December 31,
2018
 
December 31,
2017
Shareholders’ equity
 
$
22,894

 
$
23,731

Less: Net unrealized investment gains (losses), net of tax, included in shareholders’ equity
 
(113
)
 
1,112

Shareholders’ equity, excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity
 
23,007

 
22,619

Less:
 
 
 
 
Goodwill
 
3,937

 
3,951

Other intangible assets
 
345

 
342

Impact of deferred tax on other intangible assets
 
(44
)
 
(44
)
Tangible shareholders’ equity
 
$
18,769

 
$
18,370

Common shares outstanding
 
263.6

 
271.4

Book value per share
 
$
86.84

 
$
87.46

Adjusted book value per share
 
87.27

 
83.36

Tangible book value per share
 
71.20

 
67.70


RECONCILIATION OF TOTAL CAPITALIZATION TO TOTAL CAPITALIZATION EXCLUDING NET UNREALIZED INVESTMENT GAINS (LOSSES), NET OF TAX
 
Total capitalization is the sum of total shareholders’ equity and debt. Debt-to-capital ratio excluding net unrealized gain (loss) 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,
2018
 
December 31,
2017
Debt    
 
$
6,564

 
$
6,571

Shareholders’ equity  
 
22,894

 
23,731

Total capitalization  
 
29,458

 
30,302

Less: Net unrealized investment gains (losses), net of tax, included in shareholders’ equity
 
(113
)
 
1,112

Total capitalization excluding net unrealized gain (loss) on investments, net of tax, included in shareholders’ equity
 
$
29,571

 
$
29,190

Debt-to-capital ratio  
 
22.3
%
 
21.7
%
Debt-to-capital ratio excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity
 
22.2
%
 
22.5
%
 
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

18


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.

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 15, 2018, and subsequent periodic filings with the SEC.
 
###
 
Contacts
Media:
Institutional Investors:
Patrick Linehan
Abbe Goldstein
917.778.6267
917.778.6825
 
 
 
 



19
 EX-99.2 3 a992financialsupplement123.htm EXHIBIT 99.2 Exhibit
The Travelers Companies, Inc.                                                g34651mo25i001b12.gif
Financial Supplement - Fourth Quarter 2018                                                


 
Page Number
Consolidated Results
 
Financial Highlights
1
Reconciliation to Net Income and Earnings Per Share
2
Statement of Income
3
Net Income by Major Component and Combined Ratio
4
Core Income
5
Selected Statistics - Property and Casualty Operations
6
Written and Earned Premiums - Property and Casualty Operations
7
 
 
Business Insurance
 
Segment Income
8
Segment Income by Major Component and Combined Ratio
9
Selected Statistics
10
Net Written Premiums
11
 
 
Bond & Specialty Insurance
 
Segment Income
12
Segment Income by Major Component and Combined Ratio
13
Selected Statistics
14
Net Written Premiums
15
 
 
Personal Insurance
 
Segment Income (Loss)
16
Segment Income (Loss) by Major Component and Combined Ratio
17
Selected Statistics
18
Net Written Premiums
19
Selected Statistics - Domestic Agency Automobile
20
Selected Statistics - Domestic Agency Homeowners and Other
21
 
 
Supplemental Detail
 
Interest Expense and Other
22
Consolidated Balance Sheet
23
Investment Portfolio
24
Investment Portfolio - Fixed Maturities Data
25
Investment Income
26
Net Realized and Unrealized Investment Gains (Losses) included in Shareholders’ Equity
27
Reinsurance Recoverables
28
Net Reserves for Losses and Loss Adjustment Expense
29
Asbestos and Environmental Reserves
30
Capitalization
31
Statutory Capital and Surplus to GAAP Shareholders’ Equity Reconciliation
32
Statement of Cash Flows
33
Statement of Cash Flows (continued)
34
Glossary of Financial Measures and Description of Reportable Business Segments
35-36
 

The information included in the Financial Supplement is unaudited.  This document should be read in conjunction with the Company’s Form 10-K which will be filed with the Securities and Exchange Commission.

Index
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Financial Highlights

($ and shares in millions, except for per share data)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Net income
 
$
617

 
$
595

 
$
293

 
$
551

 
$
669

 
$
524

 
$
709

 
$
621

 
$
2,056

 
$
2,523

Net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
2.19

 
$
2.13

 
$
1.06

 
$
2.00

 
$
2.45

 
$
1.93

 
$
2.65

 
$
2.33

 
$
7.39

 
$
9.37

Diluted
 
$
2.17

 
$
2.11

 
$
1.05

 
$
1.98

 
$
2.42

 
$
1.92

 
$
2.62

 
$
2.32

 
$
7.33

 
$
9.28

Core income
 
$
614

 
$
543

 
$
253

 
$
633

 
$
678

 
$
494

 
$
687

 
$
571

 
$
2,043

 
$
2,430

Core income per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
2.18

 
$
1.94

 
$
0.92

 
$
2.30

 
$
2.48

 
$
1.83

 
$
2.56

 
$
2.15

 
$
7.35

 
$
9.02

Diluted
 
$
2.16

 
$
1.92

 
$
0.91

 
$
2.28

 
$
2.46

 
$
1.81

 
$
2.54

 
$
2.13

 
$
7.28

 
$
8.94

Return on equity
 
10.5
%
 
10.0
%
 
4.9
%
 
9.3
%
 
11.5
%
 
9.2
%
 
12.6
%
 
10.9
%
 
8.7
%
 
11.0
%
Core return on equity
 
10.8
%
 
9.5
%
 
4.5
%
 
11.1
%
 
11.9
%
 
8.7
%
 
12.0
%
 
10.0
%
 
9.0
%
 
10.7
%
Total assets, at period end
 
$
101,246

 
$
102,669

 
$
104,311

 
$
103,483

 
$
103,676

 
$
103,523

 
$
104,390

 
$
104,233

 
$
103,483

 
$
104,233

Total equity, at period end
 
$
23,612

 
$
23,858

 
$
23,738

 
$
23,731

 
$
22,979

 
$
22,623

 
$
22,460

 
$
22,894

 
$
23,731

 
$
22,894

Book value per share, at period end
 
$
84.51

 
$
86.46

 
$
86.73

 
$
87.46

 
$
85.03

 
$
84.51

 
$
84.82

 
$
86.84

 
$
87.46

 
$
86.84

Less: Net unrealized investment gains (losses), net of tax
 
2.95

 
3.75

 
3.67

 
4.10

 
0.49

 
(0.42
)
 
(1.69
)
 
(0.43
)
 
4.10

 
(0.43
)
Adjusted book value per share, at period end
 
$
81.56

 
$
82.71

 
$
83.06

 
$
83.36

 
$
84.54

 
$
84.93

 
$
86.51

 
$
87.27

 
$
83.36

 
$
87.27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding (basic)
 
279.7

 
277.5

 
274.1

 
272.8

 
271.0

 
268.7

 
266.1

 
263.9

 
276.0

 
267.4

Weighted average number of common shares outstanding and common stock equivalents (diluted)
 
282.4

 
280.0

 
276.6

 
275.7

 
273.9

 
271.1

 
268.4

 
266.0

 
278.6

 
269.8

Common shares outstanding at period end
 
279.4

 
275.9

 
273.7

 
271.4

 
270.2

 
267.7

 
264.8

 
263.6

 
271.4

 
263.6

Common stock dividends declared
 
$
190

 
$
201

 
$
200

 
$
198

 
$
197

 
$
209

 
$
207

 
$
205

 
$
789

 
$
818

Common stock repurchased:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Under Board of Directors authorization
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
 
1.9

 
3.8

 
2.6

 
2.6

 
2.5

 
2.7

 
3.0

 
1.4

 
10.9

 
9.6

Cost
 
$
225

 
$
475

 
$
328

 
$
350

 
$
350

 
$
350

 
$
400

 
$
170

 
$
1,378

 
$
1,270

Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
 
0.5

 
—

 
—

 
—

 
0.3

 
—

 
0.1

 
—

 
0.5

 
0.4

Cost
 
$
61

 
$
—

 
$
—

 
$
1

 
$
51

 
$
—

 
$
—

 
$
—

 
$
62

 
$
51

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

1
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Reconciliation to Net Income and Earnings per Share


($ and shares in millions, except earnings per share)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
617

 
$
595

 
$
293

 
$
551

 
$
669

 
$
524

 
$
709

 
$
621

 
$
2,056

 
$
2,523

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized investment (gains) losses, after-tax
 
(3
)
 
(52
)
 
(40
)
 
(47
)
 
9

 
(30
)
 
(22
)
 
(50
)
 
(142
)
 
(93
)
Impact of TCJA at enactment (1)
 
—

 
—

 
—

 
129

 
—

 
—

 
—

 
—

 
129

 
—

Core income
 
$
614

 
$
543

 
$
253

 
$
633

 
$
678

 
$
494

 
$
687

 
$
571

 
$
2,043

 
$
2,430

Basic earnings per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
2.19

 
$
2.13

 
$
1.06

 
$
2.00

 
$
2.45

 
$
1.93

 
$
2.65

 
$
2.33

 
$
7.39

 
$
9.37

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized investment (gains) losses, after-tax
 
(0.01
)
 
(0.19
)
 
(0.14
)
 
(0.17
)
 
0.03

 
(0.10
)
 
(0.09
)
 
(0.18
)
 
(0.51
)
 
(0.35
)
Impact of TCJA at enactment (1)
 
—

 
—

 
—

 
0.47

 
—

 
—

 
—

 
—

 
0.47

 
—

Core income
 
$
2.18

 
$
1.94

 
$
0.92

 
$
2.30

 
$
2.48

 
$
1.83

 
$
2.56

 
$
2.15

 
$
7.35

 
$
9.02

Diluted earnings per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
2.17

 
$
2.11

 
$
1.05

 
$
1.98

 
$
2.42

 
$
1.92

 
$
2.62

 
$
2.32

 
$
7.33

 
$
9.28

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized investment (gains) losses, after-tax
 
(0.01
)
 
(0.19
)
 
(0.14
)
 
(0.17
)
 
0.04

 
(0.11
)
 
(0.08
)
 
(0.19
)
 
(0.51
)
 
(0.34
)
Impact of TCJA at enactment (1)
 
—

 
—

 
—

 
0.47

 
—

 
—

 
—

 
—

 
0.46

 
—

Core income
 
$
2.16

 
$
1.92

 
$
0.91

 
$
2.28

 
$
2.46

 
$
1.81

 
$
2.54

 
$
2.13

 
$
7.28

 
$
8.94

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to net income and weighted average shares for net income EPS calculations: (2)
Basic and Diluted
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Net income, as reported
 
$
617

 
$
595

 
$
293

 
$
551

 
$
669

 
$
524

 
$
709

 
$
621

 
$
2,056

 
$
2,523

Participating share-based awards - allocated income
 
(4
)
 
(5
)
 
(2
)
 
(4
)
 
(5
)
 
(4
)
 
(5
)
 
(5
)
 
(15
)
 
(19
)
Net income available to common shareholders - basic and diluted
 
$
613

 
$
590

 
$
291

 
$
547

 
$
664

 
$
520

 
$
704

 
$
616

 
$
2,041

 
$
2,504

Common Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
279.7

 
277.5

 
274.1

 
272.8

 
271.0

 
268.7

 
266.1

 
263.9

 
276.0

 
267.4

Diluted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
279.7

 
277.5

 
274.1

 
272.8

 
271.0

 
268.7

 
266.1

 
263.9

 
276.0

 
267.4

Weighted average effects of dilutive securities - stock options and performance shares
 
2.7

 
2.5

 
2.5

 
2.9

 
2.9

 
2.4

 
2.3

 
2.1

 
2.6

 
2.4

Diluted weighted average shares outstanding
 
282.4

 
280.0

 
276.6

 
275.7

 
273.9

 
271.1

 
268.4

 
266.0

 
278.6

 
269.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  Reflects the impact of changes in tax laws and tax rates enacted in the U.S. on December 22, 2017 as part of the Tax Cuts and Jobs Act of 2017 (TCJA), resulting primarily from revaluing the Company’s deferred tax assets and liabilities and the tax associated with accumulated foreign earnings.
(2)  Adjustments to net income and weighted average shares for net income EPS calculations can generally be used for the core income EPS calculations.
See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

2
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Statement of Income - Consolidated


($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
6,183

 
$
6,351

 
$
6,523

 
$
6,626

 
$
6,537

 
$
6,695

 
$
6,882

 
$
6,945

 
$
25,683

 
$
27,059

Net investment income
 
610

 
598

 
588

 
601

 
603

 
595

 
646

 
630

 
2,397

 
2,474

Fee income
 
113

 
116

 
113

 
105

 
103

 
112

 
109

 
108

 
447

 
432

Net realized investment gains (losses)
 
5

 
80

 
61

 
70

 
(11
)
 
36

 
29

 
60

 
216

 
114

Other revenues
 
31

 
39

 
40

 
49

 
54

 
39

 
57

 
53

 
159

 
203

Total revenues
 
6,942

 
7,184

 
7,325

 
7,451

 
7,286

 
7,477

 
7,723

 
7,796

 
28,902

 
30,282

Claims and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claims and claim adjustment expenses
 
4,094

 
4,225

 
4,806

 
4,342

 
4,296

 
4,562

 
4,655

 
4,778

 
17,467

 
18,291

Amortization of deferred acquisition costs
 
1,003

 
1,032

 
1,059

 
1,072

 
1,061

 
1,081

 
1,117

 
1,122

 
4,166

 
4,381

General and administrative expenses
 
996

 
1,045

 
1,045

 
1,084

 
1,062

 
1,113

 
1,059

 
1,063

 
4,170

 
4,297

Interest expense
 
89

 
92

 
95

 
93

 
89

 
90

 
86

 
87

 
369

 
352

Total claims and expenses
 
6,182

 
6,394

 
7,005

 
6,591

 
6,508

 
6,846

 
6,917

 
7,050

 
26,172

 
27,321

Income before income taxes
 
760

 
790

 
320

 
860

 
778

 
631

 
806

 
746

 
2,730

 
2,961

Income tax expense
 
143

 
195

 
27

 
309

 
109

 
107

 
97

 
125

 
674

 
438

Net income
 
$
617

 
$
595

 
$
293

 
$
551

 
$
669

 
$
524

 
$
709

 
$
621

 
$
2,056

 
$
2,523

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other-than-temporary impairments (OTTI)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total OTTI gains (losses)
 
$
(1
)
 
$
(5
)
 
$
(5
)
 
$
(2
)
 
$
—

 
$
(1
)
 
$
—

 
$
—

 
$
(13
)
 
$
(1
)
OTTI losses recognized in net realized investment gains (losses)
 
$
(2
)
 
$
(5
)
 
$
(5
)
 
$
(2
)
 
$
—

 
$
(1
)
 
$
—

 
$
—

 
$
(14
)
 
$
(1
)
OTTI gains (losses) recognized in other comprehensive income (loss)
 
$
1

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate on net investment income
 
21.3
%
 
21.9
%
 
22.1
%
 
22.4
%
 
14.9
%
 
14.8
%
 
15.4
%
 
15.0
%
 
21.9
%
 
15.0
%
Net investment income (after-tax)
 
$
480

 
$
468

 
$
457

 
$
467

 
$
513

 
$
507

 
$
547

 
$
535

 
$
1,872

 
$
2,102

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Catastrophes, net of reinsurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
347

 
$
403

 
$
700

 
$
499

 
$
354

 
$
488

 
$
264

 
$
610

 
$
1,949

 
$
1,716

After-tax
 
$
226

 
$
262

 
$
455

 
$
324

 
$
280

 
$
384

 
$
209

 
$
482

 
$
1,267

 
$
1,355

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior year reserve development - favorable:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
81

 
$
203

 
$
15

 
$
293

 
$
150

 
$
186

 
$
14

 
$
167

 
$
592

 
$
517

After-tax
 
$
44

 
$
132

 
$
10

 
$
192

 
$
119

 
$
148

 
$
10

 
$
132

 
$
378

 
$
409

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


3
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Net Income by Major Component and Combined Ratio - Consolidated


($ in millions, net of tax)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Underwriting gain (loss)
 
$
175

 
$
112

 
$
(153
)
 
$
216

 
$
222

 
$
61

 
$
194

 
$
99

 
$
350

 
$
576

Net investment income
 
480

 
468

 
457

 
467

 
513

 
507

 
547

 
535

 
1,872

 
2,102

Other income (expense), including interest expense
 
(41
)
 
(37
)
 
(51
)
 
(50
)
 
(57
)
 
(74
)
 
(54
)
 
(63
)
 
(179
)
 
(248
)
Core income
 
614

 
543

 
253

 
633

 
678

 
494

 
687

 
571

 
2,043

 
2,430

Net realized investment gains (losses)
 
3

 
52

 
40

 
47

 
(9
)
 
30

 
22

 
50

 
142

 
93

Impact of TCJA at enactment (1)
 
—

 
—

 
—

 
(129
)
 
—

 
—

 
—

 
—

 
(129
)
 
—

Net income
 
$
617

 
$
595

 
$
293

 
$
551

 
$
669

 
$
524

 
$
709

 
$
621

 
$
2,056

 
$
2,523

Combined ratio (2) (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expense ratio
 
65.3
 %
 
65.6
 %
 
72.8
 %
 
64.8
 %
 
64.9
 %
 
67.4
 %
 
66.9
 %
 
68.0
 %
 
67.2
 %
 
66.8
 %
Underwriting expense ratio
 
30.7
 %
 
31.1
 %
 
30.4
 %
 
30.7
 %
 
30.6
 %
 
30.7
 %
 
29.7
 %
 
29.5
 %
 
30.7
 %
 
30.1
 %
Combined ratio
 
96.0
 %
 
96.7
 %
 
103.2
 %
 
95.5
 %
 
95.5
 %
 
98.1
 %
 
96.6
 %
 
97.5
 %
 
97.9
 %
 
96.9
 %
Impact on combined ratio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net favorable prior year reserve development
 
(1.3
)%
 
(3.2
)%
 
(0.3
)%
 
(4.4
)%
 
(2.3
)%
 
(2.8
)%
 
(0.2
)%
 
(2.4
)%
 
(2.3
)%
 
(1.9
)%
Catastrophes, net of reinsurance
 
5.6
 %
 
6.4
 %
 
10.7
 %
 
7.5
 %
 
5.4
 %
 
7.3
 %
 
3.8
 %
 
8.8
 %
 
7.6
 %
 
6.3
 %
Underlying combined ratio
 
91.7
 %
 
93.5
 %
 
92.8
 %
 
92.4
 %
 
92.4
 %
 
93.6
 %
 
93.0
 %
 
91.1
 %
 
92.6
 %
 
92.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  Reflects the impact of changes in tax laws and tax rates enacted in the U.S. on December 22, 2017 as part of the TCJA, resulting primarily from revaluing the Company’s deferred tax assets and liabilities and the tax associated with accumulated foreign earnings.
(2)  Before policyholder dividends.
(3)  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.  In addition, general and administrative expenses include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio.  See following: 
($ in millions, net of tax)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Billing and policy fees and other
 
$
23

 
$
22

 
$
22

 
$
21

 
$
23

 
$
22

 
$
24

 
$
24

 
$
88

 
$
93

Fee income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expenses
 
$
42

 
$
42

 
$
42

 
$
36

 
$
37

 
$
40

 
$
38

 
$
39

 
$
162

 
$
154

Underwriting expenses
 
71

 
74

 
71

 
69

 
66

 
72

 
71

 
69

 
285

 
278

Total fee income
 
$
113

 
$
116

 
$
113

 
$
105

 
$
103

 
$
112

 
$
109

 
$
108

 
$
447

 
$
432

Non-insurance general and administrative expenses
 
$
8

 
$
8

 
$
28

 
$
33

 
$
37

 
$
39

 
$
38

 
$
45

 
$
77

 
$
159

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

4
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Core Income - Consolidated


($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
6,183

 
$
6,351

 
$
6,523

 
$
6,626

 
$
6,537

 
$
6,695

 
$
6,882

 
$
6,945

 
$
25,683

 
$
27,059

Net investment income
 
610

 
598

 
588

 
601

 
603

 
595

 
646

 
630

 
2,397

 
2,474

Fee income
 
113

 
116

 
113

 
105

 
103

 
112

 
109

 
108

 
447

 
432

Other revenues
 
31

 
39

 
40

 
49

 
54

 
39

 
57

 
53

 
159

 
203

Total revenues
 
6,937

 
7,104

 
7,264

 
7,381

 
7,297

 
7,441

 
7,694

 
7,736

 
28,686

 
30,168

Claims and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claims and claim adjustment expenses
 
4,094

 
4,225

 
4,806

 
4,342

 
4,296

 
4,562

 
4,655

 
4,778

 
17,467

 
18,291

Amortization of deferred acquisition costs
 
1,003

 
1,032

 
1,059

 
1,072

 
1,061

 
1,081

 
1,117

 
1,122

 
4,166

 
4,381

General and administrative expenses
 
996

 
1,045

 
1,045

 
1,084

 
1,062

 
1,113

 
1,059

 
1,063

 
4,170

 
4,297

Interest expense
 
89

 
92

 
95

 
93

 
89

 
90

 
86

 
87

 
369

 
352

Total claims and expenses
 
6,182

 
6,394

 
7,005

 
6,591

 
6,508

 
6,846

 
6,917

 
7,050

 
26,172

 
27,321

Core income before income taxes
 
755

 
710

 
259

 
790

 
789

 
595

 
777

 
686

 
2,514

 
2,847

Income tax expense
 
141

 
167

 
6

 
157

 
111

 
101

 
90

 
115

 
471

 
417

Core income
 
$
614

 
$
543

 
$
253

 
$
633

 
$
678

 
$
494

 
$
687

 
$
571

 
$
2,043

 
$
2,430

Other statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate on net investment income
 
21.3
%
 
21.9
%
 
22.1
%
 
22.4
%
 
14.9
%
 
14.8
%
 
15.4
%
 
15.0
%
 
21.9
%
 
15.0
%
Net investment income (after-tax)
 
$
480

 
$
468

 
$
457

 
$
467

 
$
513

 
$
507

 
$
547

 
$
535

 
$
1,872

 
$
2,102

Catastrophes, net of reinsurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
347

 
$
403

 
$
700

 
$
499

 
$
354

 
$
488

 
$
264

 
$
610

 
$
1,949

 
$
1,716

After-tax
 
$
226

 
$
262

 
$
455

 
$
324

 
$
280

 
$
384

 
$
209

 
$
482

 
$
1,267

 
$
1,355

Prior year reserve development - favorable:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
81

 
$
203

 
$
15

 
$
293

 
$
150

 
$
186

 
$
14

 
$
167

 
$
592

 
$
517

After-tax
 
$
44

 
$
132

 
$
10

 
$
192

 
$
119

 
$
148

 
$
10

 
$
132

 
$
378

 
$
409

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 











See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


5
The Travelers Companies, Inc.                                      g34651mo25i001b12.gif    
Selected Statistics - Property and Casualty Operations


($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Statutory underwriting
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross written premiums
 
$
7,018

 
$
6,927

 
$
7,063

 
$
6,640

 
$
7,418

 
$
7,429

 
$
7,462

 
$
6,943

 
$
27,648

 
$
29,252

Net written premiums
 
$
6,495

 
$
6,640

 
$
6,660

 
$
6,424

 
$
6,824

 
$
7,131

 
$
7,062

 
$
6,691

 
$
26,219

 
$
27,708

Net earned premiums
 
$
6,183

 
$
6,351

 
$
6,523

 
$
6,626

 
$
6,537

 
$
6,695

 
$
6,882

 
$
6,945

 
$
25,683

 
$
27,059

Losses and loss adjustment expenses
 
4,043

 
4,169

 
4,751

 
4,291

 
4,245

 
4,506

 
4,606

 
4,719

 
17,254

 
18,076

Underwriting expenses
 
1,975

 
2,049

 
2,018

 
1,992

 
2,072

 
2,147

 
2,082

 
1,999

 
8,034

 
8,300

Statutory underwriting gain (loss)
 
165

 
133

 
(246
)
 
343

 
220

 
42

 
194

 
227

 
395

 
683

Policyholder dividends
 
11

 
15

 
12

 
13

 
13

 
12

 
12

 
15

 
51

 
52

Statutory underwriting gain (loss) after policyholder dividends
 
$
154

 
$
118

 
$
(258
)
 
$
330

 
$
207

 
$
30

 
$
182

 
$
212

 
$
344

 
$
631

Other statutory statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reserves for losses and loss adjustment expenses
 
$
40,313

 
$
40,630

 
$
41,545

 
$
41,454

 
$
41,669

 
$
41,861

 
$
42,293

 
$
42,409

 
$
41,454

 
$
42,409

Increase (decrease) in reserves
 
$
409

 
$
317

 
$
915

 
$
(91
)
 
$
215

 
$
192

 
$
432

 
$
116

 
$
1,550

 
$
955

Statutory capital and surplus
 
$
20,617

 
$
20,607

 
$
20,740

 
$
20,448

 
$
20,533

 
$
20,371

 
$
20,462

 
$
20,774

 
$
20,448

 
$
20,774

Net written premiums/surplus (1)
 
1.23:1

 
1.24:1

 
1.25:1

 
1.28:1

 
1.29:1

 
1.33:1

 
1.34:1

 
1.33:1

 
1.28:1

 
1.33:1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)  Based on 12 months of rolling net written premiums.
 


















See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.



6
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gifWritten and Earned Premiums - Property and Casualty Operations

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Written premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
$
7,018

 
$
6,927

 
$
7,063

 
$
6,640

 
$
7,418

 
$
7,429

 
$
7,462

 
$
6,943

 
$
27,648

 
$
29,252

Ceded
 
(523
)
 
(287
)
 
(403
)
 
(216
)
 
(594
)
 
(298
)
 
(400
)
 
(252
)
 
(1,429
)
 
(1,544
)
Net
 
$
6,495

 
$
6,640

 
$
6,660

 
$
6,424

 
$
6,824

 
$
7,131

 
$
7,062

 
$
6,691

 
$
26,219

 
$
27,708

Earned premiums
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
$
6,550

 
$
6,720

 
$
6,906

 
$
6,978

 
$
6,903

 
$
7,060

 
$
7,266

 
$
7,331

 
$
27,154

 
$
28,560

Ceded
 
(367
)
 
(369
)
 
(383
)
 
(352
)
 
(366
)
 
(365
)
 
(384
)
 
(386
)
 
(1,471
)
 
(1,501
)
Net
 
$
6,183

 
$
6,351

 
$
6,523

 
$
6,626

 
$
6,537

 
$
6,695

 
$
6,882

 
$
6,945

 
$
25,683

 
$
27,059

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
































See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


7
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Segment Income - Business Insurance


($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
3,429

 
$
3,504

 
$
3,576

 
$
3,637

 
$
3,568

 
$
3,641

 
$
3,743

 
$
3,770

 
$
14,146

 
$
14,722

Net investment income
 
453

 
447

 
437

 
449

 
446

 
440

 
482

 
465

 
1,786

 
1,833

Fee income
 
109

 
112

 
108

 
101

 
99

 
107

 
103

 
103

 
430

 
412

Other revenues
 
9

 
15

 
19

 
26

 
31

 
20

 
33

 
28

 
69

 
112

Total revenues
 
4,000

 
4,078

 
4,140

 
4,213

 
4,144

 
4,208

 
4,361

 
4,366

 
16,431

 
17,079

Claims and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claims and claim adjustment expenses
 
2,265

 
2,306

 
2,847

 
2,103

 
2,392

 
2,484

 
2,653

 
2,642

 
9,521

 
10,171

Amortization of deferred acquisition costs
 
554

 
567

 
579

 
586

 
580

 
588

 
610

 
610

 
2,286

 
2,388

General and administrative expenses
 
610

 
636

 
643

 
674

 
650

 
674

 
648

 
651

 
2,563

 
2,623

Total claims and expenses
 
3,429

 
3,509

 
4,069

 
3,363

 
3,622

 
3,746

 
3,911

 
3,903

 
14,370

 
15,182

Segment income before income taxes
 
571

 
569

 
71

 
850

 
522

 
462

 
450

 
463

 
2,061

 
1,897

Income tax expense (benefit)
 
129

 
140

 
(34
)
 
213

 
70

 
77

 
40

 
72

 
448

 
259

Segment income
 
$
442

 
$
429

 
$
105

 
$
637

 
$
452

 
$
385

 
$
410

 
$
391

 
$
1,613

 
$
1,638

Other statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate on net investment income
 
22.0
%
 
22.2
%
 
22.4
%
 
22.7
%
 
14.7
%
 
14.7
%
 
15.3
%
 
14.9
%
 
22.3
%
 
14.9
%
Net investment income (after-tax)
 
$
353

 
$
348

 
$
338

 
$
348

 
$
380

 
$
376

 
$
408

 
$
395

 
$
1,387

 
$
1,559

Catastrophes, net of reinsurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
132

 
$
184

 
$
489

 
$
53

 
$
138

 
$
168

 
$
136

 
$
197

 
$
858

 
$
639

After-tax
 
$
86

 
$
120

 
$
318

 
$
34

 
$
110

 
$
132

 
$
107

 
$
156

 
$
558

 
$
505

Prior year reserve development - favorable (unfavorable):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax (1)
 
$
61

 
$
125

 
$
9

 
$
244

 
$
66

 
$
84

 
$
(56
)
 
$
48

 
$
439

 
$
142

After-tax (1)
 
$
30

 
$
81

 
$
6

 
$
159

 
$
52

 
$
68

 
$
(45
)
 
$
38

 
$
276

 
$
113

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)  The first quarter of 2017 includes the unfavorable impact of $62 million pre-tax ($51 million after-tax) in the Company’s international operations in Europe due to the UK Ministry of Justice’s “Ogden” discount rate adjustment applied to lump sum bodily injury payouts.









See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

8
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Segment Income by Major Component and Combined Ratio - Business Insurance



($ in millions, net of tax)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Underwriting gain (loss)
 
$
83

 
$
69

 
$
(233
)
 
$
288

 
$
70

 
$
19

 
$
2

 
$
3

 
$
207

 
$
94

Net investment income
 
353

 
348

 
338

 
348

 
380

 
376

 
408

 
395

 
1,387

 
1,559

Other income (expense)
 
6

 
12

 
—

 
1

 
2

 
(10
)
 
—

 
(7
)
 
19

 
(15
)
Segment income
 
$
442

 
$
429

 
$
105

 
$
637

 
$
452

 
$
385

 
$
410

 
$
391

 
$
1,613

 
$
1,638

Combined ratio (1) (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expense ratio
 
64.5
 %
 
64.3
 %
 
78.1
 %
 
56.5
 %
 
65.7
 %
 
66.9
 %
 
69.6
%
 
68.7
 %
 
65.9
 %
 
67.8
 %
Underwriting expense ratio
 
31.9
 %
 
32.2
 %
 
31.7
 %
 
32.1
 %
 
31.8
 %
 
31.9
 %
 
31.0
%
 
30.7
 %
 
31.9
 %
 
31.3
 %
Combined ratio
 
96.4
 %
 
96.5
 %
 
109.8
 %
 
88.6
 %
 
97.5
 %
 
98.8
 %
 
100.6
%
 
99.4
 %
 
97.8
 %
 
99.1
 %
Impact on combined ratio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (favorable) unfavorable prior year reserve development
 
(1.8
)%
 
(3.6
)%
 
(0.3
)%
 
(6.7
)%
 
(1.9
)%
 
(2.3
)%
 
1.5
%
 
(1.2
)%
 
(3.1
)%
 
(1.0
)%
Catastrophes, net of reinsurance
 
3.8
 %
 
5.3
 %
 
13.7
 %
 
1.4
 %
 
3.9
 %
 
4.6
 %
 
3.7
%
 
5.2
 %
 
6.0
 %
 
4.4
 %
Underlying combined ratio
 
94.4
 %
 
94.8
 %
 
96.4
 %
 
93.9
 %
 
95.5
 %
 
96.5
 %
 
95.4
%
 
95.4
 %
 
94.9
 %
 
95.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  Before policyholder dividends.
(2)  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.  In addition, general and administrative expenses include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio.  See following:
 
($ in millions, net of tax)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Billing and policy fees and other
 
$
4

 
$
4

 
$
4

 
$
4

 
$
4

 
$
4

 
$
3

 
$
4

 
$
16

 
$
15

Fee income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expenses
 
$
42

 
$
42

 
$
42

 
$
36

 
$
37

 
$
40

 
$
38

 
$
39

 
$
162

 
$
154

Underwriting expenses
 
67

 
70

 
66

 
65

 
62

 
67

 
65

 
64

 
268

 
258

Total fee income
 
$
109

 
$
112

 
$
108

 
$
101

 
$
99

 
$
107

 
$
103

 
$
103

 
$
430

 
$
412

Non-insurance general and administrative expenses
 
$
—

 
$
—

 
$
21

 
$
24

 
$
28

 
$
30

 
$
29

 
$
37

 
$
45

 
$
124

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


9
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Selected Statistics - Business Insurance

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Statutory underwriting
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross written premiums
 
$
4,271

 
$
3,794

 
$
3,787

 
$
3,621

 
$
4,471

 
$
4,038

 
$
3,992

 
$
3,754

 
$
15,473

 
$
16,255

Net written premiums
 
$
3,855

 
$
3,544

 
$
3,434

 
$
3,437

 
$
3,994

 
$
3,781

 
$
3,648

 
$
3,533

 
$
14,270

 
$
14,956

Net earned premiums
 
$
3,429

 
$
3,504

 
$
3,576

 
$
3,637

 
$
3,568

 
$
3,641

 
$
3,743

 
$
3,770

 
$
14,146

 
$
14,722

Losses and loss adjustment expenses
 
2,215

 
2,254

 
2,795

 
2,053

 
2,344

 
2,429

 
2,606

 
2,586

 
9,317

 
9,965

Underwriting expenses
 
1,169

 
1,153

 
1,106

 
1,126

 
1,213

 
1,196

 
1,144

 
1,107

 
4,554

 
4,660

Statutory underwriting gain (loss)
 
45

 
97

 
(325
)
 
458

 
11

 
16

 
(7
)
 
77

 
275

 
97

Policyholder dividends
 
9

 
12

 
10

 
11

 
11

 
9

 
11

 
12

 
42

 
43

Statutory underwriting gain (loss) after policyholder dividends
 
$
36

 
$
85

 
$
(335
)
 
$
447

 
$
—

 
$
7

 
$
(18
)
 
$
65

 
$
233

 
$
54

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 






























See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


10
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Net Written Premiums - Business Insurance


($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Net written premiums by market
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Domestic
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Select Accounts
 
$
755

 
$
720

 
$
664

 
$
661

 
$
773

 
$
729

 
$
666

 
$
660

 
$
2,800

 
$
2,828

Middle Market
 
2,177

 
1,820

 
1,896

 
1,863

 
2,262

 
1,985

 
2,032

 
1,935

 
7,756

 
8,214

National Accounts
 
288

 
219

 
244

 
259

 
309

 
231

 
238

 
247

 
1,010

 
1,025

National Property and Other
 
386

 
496

 
428

 
381

 
380

 
518

 
485

 
422

 
1,691

 
1,805

Total Domestic
 
3,606

 
3,255

 
3,232

 
3,164

 
3,724

 
3,463

 
3,421

 
3,264

 
13,257

 
13,872

International
 
249

 
289

 
202

 
273

 
270

 
318

 
227

 
269

 
1,013

 
1,084

Total
 
$
3,855

 
$
3,544

 
$
3,434

 
$
3,437

 
$
3,994

 
$
3,781

 
$
3,648

 
$
3,533

 
$
14,270

 
$
14,956

Net written premiums by product line
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Domestic
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Workers’ compensation
 
$
1,207

 
$
925

 
$
918

 
$
876

 
$
1,190

 
$
935

 
$
887

 
$
828

 
$
3,926

 
$
3,840

Commercial automobile
 
581

 
543

 
549

 
546

 
651

 
629

 
625

 
613

 
2,219

 
2,518

Commercial property
 
402

 
506

 
441

 
423

 
391

 
536

 
492

 
448

 
1,772

 
1,867

General liability
 
558

 
491

 
519

 
518

 
591

 
531

 
559

 
546

 
2,086

 
2,227

Commercial multi-peril
 
855

 
788

 
787

 
798

 
896

 
831

 
840

 
823

 
3,228

 
3,390

Other
 
3

 
2

 
18

 
3

 
5

 
1

 
18

 
6

 
26

 
30

Total Domestic
 
3,606

 
3,255

 
3,232

 
3,164

 
3,724

 
3,463

 
3,421

 
3,264

 
13,257

 
13,872

International
 
249

 
289

 
202

 
273

 
270

 
318

 
227

 
269

 
1,013

 
1,084

Total
 
$
3,855

 
$
3,544

 
$
3,434

 
$
3,437

 
$
3,994

 
$
3,781

 
$
3,648

 
$
3,533

 
$
14,270

 
$
14,956

National Accounts
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Additions to claim volume under administration (1)
 
$
734

 
$
529

 
$
521

 
$
581

 
$
771

 
$
522

 
$
540

 
$
574

 
$
2,365

 
$
2,407

Written fees
 
$
104

 
$
85

 
$
83

 
$
75

 
$
103

 
$
83

 
$
81

 
$
76

 
$
347

 
$
343

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 (1)  Includes new and renewal business.
 










See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


11
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Segment Income - Bond & Specialty Insurance


($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
555

 
$
575

 
$
591

 
$
586

 
$
582

 
$
601

 
$
617

 
$
620

 
$
2,307

 
$
2,420

Net investment income
 
61

 
56

 
57

 
54

 
58

 
57

 
57

 
61

 
228

 
233

Other revenues
 
5

 
6

 
5

 
8

 
6

 
5

 
5

 
7

 
24

 
23

Total revenues
 
621

 
637

 
653

 
648

 
646

 
663

 
679

 
688

 
2,559

 
2,676

Claims and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claims and claim adjustment expenses
 
227

 
174

 
236

 
262

 
216

 
175

 
205

 
176

 
899

 
772

Amortization of deferred acquisition costs
 
103

 
108

 
111

 
110

 
107

 
113

 
117

 
117

 
432

 
454

General and administrative expenses
 
113

 
116

 
115

 
120

 
115

 
116

 
113

 
115

 
464

 
459

Total claims and expenses
 
443

 
398

 
462

 
492

 
438

 
404

 
435

 
408

 
1,795

 
1,685

Segment income before income taxes
 
178

 
239

 
191

 
156

 
208

 
259

 
244

 
280

 
764

 
991

Income tax expense
 
33

 
76

 
55

 
44

 
35

 
55

 
48

 
60

 
208

 
198

Segment income
 
$
145

 
$
163

 
$
136

 
$
112

 
$
173

 
$
204

 
$
196

 
$
220

 
$
556

 
$
793

Other statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate on net investment income
 
14.6
%
 
17.6
%
 
18.9
%
 
19.6
%
 
14.5
%
 
14.3
%
 
14.6
%
 
14.8
%
 
17.6
%
 
14.6
%
Net investment income (after-tax)
 
$
52

 
$
46

 
$
47

 
$
43

 
$
50

 
$
48

 
$
49

 
$
52

 
$
188

 
$
199

Catastrophes, net of reinsurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
1

 
$
1

 
$
6

 
$
(2
)
 
$
—

 
$
5

 
$
4

 
$
7

 
$
6

 
$
16

After-tax
 
$
—

 
$
1

 
$
4

 
$
(1
)
 
$
—

 
$
4

 
$
3

 
$
6

 
$
4

 
$
13

Prior year reserve development - favorable:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
14

 
$
78

 
$
6

 
$
42

 
$
35

 
$
89

 
$
53

 
$
89

 
$
140

 
$
266

After-tax
 
$
10

 
$
51

 
$
4

 
$
27

 
$
28

 
$
70

 
$
42

 
$
70

 
$
92

 
$
210

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 














See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


12
The Travelers Companies, Inc.                                                g34651mo25i001b12.gif
Segment Income by Major Component and Combined Ratio - Bond & Specialty Insurance

($ in millions, net of tax)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Underwriting gain
 
$
89

 
$
114

 
$
85

 
$
64

 
$
119

 
$
153

 
$
143

 
$
165

 
$
352

 
$
580

Net investment income
 
52

 
46

 
47

 
43

 
50

 
48

 
49

 
52

 
188

 
199

Other income
 
4

 
3

 
4

 
5

 
4

 
3

 
4

 
3

 
16

 
14

Segment income
 
$
145

 
$
163

 
$
136

 
$
112

 
$
173

 
$
204

 
$
196

 
$
220

 
$
556

 
$
793

Combined ratio (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expense ratio
 
40.6
 %
 
29.7
 %
 
39.5
 %
 
44.6
 %
 
36.6
 %
 
28.8
 %
 
33.1
 %
 
27.9
 %
 
38.6
 %
 
31.5
 %
Underwriting expense ratio
 
38.8
 %
 
39.0
 %
 
38.2
 %
 
39.1
 %
 
38.1
 %
 
37.7
 %
 
37.1
 %
 
36.9
 %
 
38.8
 %
 
37.5
 %
Combined ratio
 
79.4
 %
 
68.7
 %
 
77.7
 %
 
83.7
 %
 
74.7
 %
 
66.5
 %
 
70.2
 %
 
64.8
 %
 
77.4
 %
 
69.0
 %
Impact on combined ratio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net favorable prior year reserve development
 
(2.6
)%
 
(13.5
)%
 
(0.9
)%
 
(7.2
)%
 
(6.0
)%
 
(14.8
)%
 
(8.7
)%
 
(14.4
)%
 
(6.1
)%
 
(11.0
)%
Catastrophes, net of reinsurance
 
0.1
 %
 
0.2
 %
 
0.9
 %
 
(0.2
)%
 
—
 %
 
0.8
 %
 
0.6
 %
 
1.1
 %
 
0.3
 %
 
0.6
 %
Underlying combined ratio
 
81.9
 %
 
82.0
 %
 
77.7
 %
 
91.1
 %
 
80.7
 %
 
80.5
 %
 
78.3
 %
 
78.1
 %
 
83.2
 %
 
79.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1) General and administrative expenses include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio. See following:



($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Non-insurance general and administrative expenses
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
2

 
$
1

 
$
2

 
$
—

 
$
5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 















See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


13
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Selected Statistics - Bond & Specialty Insurance


($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Statutory underwriting
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Gross written premiums
 
$
601

 
$
620

 
$
632

 
$
627

 
$
638

 
$
674

 
$
673

 
$
680

 
$
2,480

 
$
2,665

Net written premiums
 
$
544

 
$
598

 
$
611

 
$
606

 
$
574

 
$
653

 
$
644

 
$
657

 
$
2,359

 
$
2,528

Net earned premiums
 
$
555

 
$
575

 
$
591

 
$
586

 
$
582

 
$
601

 
$
617

 
$
620

 
$
2,307

 
$
2,420

Losses and loss adjustment expenses
 
226

 
170

 
233

 
261

 
213

 
173

 
204

 
173

 
890

 
763

Underwriting expenses
 
219

 
228

 
231

 
226

 
232

 
234

 
232

 
231

 
904

 
929

Statutory underwriting gain
 
110

 
177

 
127

 
99

 
137

 
194

 
181

 
216

 
513

 
728

Policyholder dividends
 
2

 
3

 
2

 
2

 
2

 
3

 
1

 
3

 
9

 
9

Statutory underwriting gain after policyholder dividends
 
$
108

 
$
174

 
$
125

 
$
97

 
$
135

 
$
191

 
$
180

 
$
213

 
$
504

 
$
719

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



























See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.



14
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Net Written Premiums - Bond & Specialty Insurance

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Net written premiums by market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management Liability
 
$
330

 
$
341

 
$
359

 
$
337

 
$
348

 
$
362

 
$
379

 
$
366

 
$
1,367

 
$
1,455

Surety
 
174

 
211

 
212

 
196

 
185

 
235

 
217

 
198

 
793

 
835

Total Domestic
 
504

 
552

 
571

 
533

 
533

 
597

 
596

 
564

 
2,160

 
2,290

International
 
40

 
46

 
40

 
73

 
41

 
56

 
48

 
93

 
199

 
238

Total
 
$
544

 
$
598

 
$
611

 
$
606

 
$
574

 
$
653

 
$
644

 
$
657

 
$
2,359

 
$
2,528

Net written premiums by product line
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fidelity & surety
 
$
225

 
$
260

 
$
264

 
$
244

 
$
241

 
$
285

 
$
273

 
$
250

 
$
993

 
$
1,049

General liability
 
234

 
249

 
247

 
247

 
244

 
264

 
261

 
268

 
977

 
1,037

Other
 
45

 
43

 
60

 
42

 
48

 
48

 
62

 
46

 
190

 
204

Total Domestic
 
504

 
552

 
571

 
533

 
533

 
597

 
596

 
564

 
2,160

 
2,290

International
 
40

 
46

 
40

 
73

 
41

 
56

 
48

 
93

 
199

 
238

Total
 
$
544

 
$
598

 
$
611

 
$
606

 
$
574

 
$
653

 
$
644

 
$
657

 
$
2,359

 
$
2,528

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




















See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


15
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Segment Income (Loss) - Personal Insurance


($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
2,199

 
$
2,272

 
$
2,356

 
$
2,403

 
$
2,387

 
$
2,453

 
$
2,522

 
$
2,555

 
$
9,230

 
$
9,917

Net investment income
 
96

 
95

 
94

 
98

 
99

 
98

 
107

 
104

 
383

 
408

Fee income
 
4

 
4

 
5

 
4

 
4

 
5

 
6

 
5

 
17

 
20

Other revenues
 
16

 
15

 
14

 
15

 
17

 
14

 
17

 
18

 
60

 
66

Total revenues
 
2,315

 
2,386

 
2,469

 
2,520

 
2,507

 
2,570

 
2,652

 
2,682

 
9,690

 
10,411

Claims and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claims and claim adjustment expenses
 
1,602

 
1,745

 
1,723

 
1,977

 
1,688

 
1,903

 
1,797

 
1,960

 
7,047

 
7,348

Amortization of deferred acquisition costs
 
346

 
357

 
369

 
376

 
374

 
380

 
390

 
395

 
1,448

 
1,539

General and administrative expenses
 
265

 
285

 
280

 
281

 
288

 
316

 
290

 
291

 
1,111

 
1,185

Total claims and expenses
 
2,213

 
2,387

 
2,372

 
2,634

 
2,350

 
2,599

 
2,477

 
2,646

 
9,606

 
10,072

Segment income (loss) before income taxes
 
102

 
(1
)
 
97

 
(114
)
 
157

 
(29
)
 
175

 
36

 
84

 
339

Income tax expense (benefit)
 
13

 
(13
)
 
20

 
(64
)
 
28

 
(12
)
 
22

 
4

 
(44
)
 
42

Segment income (loss)
 
$
89

 
$
12

 
$
77

 
$
(50
)
 
$
129

 
$
(17
)
 
$
153

 
$
32

 
$
128

 
$
297

Other statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate on net investment income
 
22.3
%
 
22.5
%
 
22.7
%
 
22.9
%
 
15.6
%
 
15.6
%
 
16.1
%
 
15.7
%
 
22.6
%
 
15.8
%
Net investment income (after-tax)
 
$
75

 
$
74

 
$
72

 
$
76

 
$
83

 
$
83

 
$
90

 
$
88

 
$
297

 
$
344

Catastrophes, net of reinsurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
214

 
$
218

 
$
205

 
$
448

 
$
216

 
$
315

 
$
124

 
$
406

 
$
1,085

 
$
1,061

After-tax
 
$
140

 
$
141

 
$
133

 
$
291

 
$
170

 
$
248

 
$
99

 
$
320

 
$
705

 
$
837

Prior year reserve development - favorable (unfavorable):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
6

 
$
—

 
$
—

 
$
7

 
$
49

 
$
13

 
$
17

 
$
30

 
$
13

 
$
109

After-tax
 
$
4

 
$
—

 
$
—

 
$
6

 
$
39

 
$
10

 
$
13

 
$
24

 
$
10

 
$
86

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 












See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


16
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Segment Income (Loss) by Major Component and Combined Ratio - Personal Insurance


($ in millions, net of tax)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Underwriting gain (loss)
 
$
3

 
$
(71
)
 
$
(5
)
 
$
(136
)
 
$
33

 
$
(111
)
 
$
49

 
$
(69
)
 
$
(209
)
 
$
(98
)
Net investment income
 
75

 
74

 
72

 
76

 
83

 
83

 
90

 
88

 
297

 
344

Other income
 
11

 
9

 
10

 
10

 
13

 
11

 
14

 
13

 
40

 
51

Segment income (loss)
 
$
89

 
$
12

 
$
77

 
$
(50
)
 
$
129

 
$
(17
)
 
$
153

 
$
32

 
$
128

 
$
297

Combined ratio (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expense ratio
 
72.9
 %
 
76.8
%
 
73.1
%
 
82.2
 %
 
70.7
 %
 
77.6
 %
 
71.2
 %
 
76.8
 %
 
76.3
 %
 
74.1
 %
Underwriting expense ratio
 
26.7
 %
 
27.3
%
 
26.6
%
 
26.5
 %
 
26.8
 %
 
27.3
 %
 
26.0
 %
 
25.8
 %
 
26.8
 %
 
26.5
 %
Combined ratio
 
99.6
 %
 
104.1
%
 
99.7
%
 
108.7
 %
 
97.5
 %
 
104.9
 %
 
97.2
 %
 
102.6
 %
 
103.1
 %
 
100.6
 %
Domestic Agency combined ratio
 
99.0
 %
 
103.5
%
 
98.7
%
 
108.7
 %
 
96.5
 %
 
103.6
 %
 
95.4
 %
 
101.9
 %
 
102.6
 %
 
99.4
 %
Impact on combined ratio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (favorable) unfavorable prior year reserve development
 
(0.3
)%
 
—
%
 
—
%
 
(0.3
)%
 
(2.0
)%
 
(0.5
)%
 
(0.6
)%
 
(1.1
)%
 
(0.1
)%
 
(1.1
)%
Catastrophes, net of reinsurance
 
9.8
 %
 
9.6
%
 
8.7
%
 
18.6
 %
 
9.0
 %
 
12.8
 %
 
4.9
 %
 
15.9
 %
 
11.7
 %
 
10.7
 %
Underlying combined ratio
 
90.1
 %
 
94.5
%
 
91.0
%
 
90.4
 %
 
90.5
 %
 
92.6
 %
 
92.9
 %
 
87.8
 %
 
91.5
 %
 
91.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)  Billing and policy fees and other, which are a component of other revenues, and fee income are allocated as a reduction of underwriting expenses.
 
($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Billing and policy fees and other
 
$
19

 
$
18

 
$
18

 
$
17

 
$
19

 
$
18

 
$
21

 
$
20

 
$
72

 
$
78

Fee income
 
$
4

 
$
4

 
$
5

 
$
4

 
$
4

 
$
5

 
$
6

 
$
5

 
$
17

 
$
20

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 















See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


17
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Selected Statistics - Personal Insurance


($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Statutory underwriting
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross written premiums
 
$
2,146

 
$
2,513

 
$
2,644

 
$
2,392

 
$
2,309

 
$
2,717

 
$
2,797

 
$
2,509

 
$
9,695

 
$
10,332

Net written premiums
 
$
2,096

 
$
2,498

 
$
2,615

 
$
2,381

 
$
2,256

 
$
2,697

 
$
2,770

 
$
2,501

 
$
9,590

 
$
10,224

Net earned premiums
 
$
2,199

 
$
2,272

 
$
2,356

 
$
2,403

 
$
2,387

 
$
2,453

 
$
2,522

 
$
2,555

 
$
9,230

 
$
9,917

Losses and loss adjustment expenses
 
1,602

 
1,745

 
1,723

 
1,977

 
1,688

 
1,904

 
1,796

 
1,960

 
7,047

 
7,348

Underwriting expenses
 
587

 
668

 
681

 
640

 
627

 
717

 
706

 
661

 
2,576

 
2,711

Statutory underwriting gain (loss)
 
$
10

 
$
(141
)
 
$
(48
)
 
$
(214
)
 
$
72

 
$
(168
)
 
$
20

 
$
(66
)
 
$
(393
)
 
$
(142
)
Policies in force (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Automobile
 
2,929

 
2,962

 
2,979

 
2,983

 
2,976

 
2,981

 
2,986

 
2,983

 
2,983

 
2,983

Homeowners and Other
 
4,639

 
4,702

 
4,773

 
4,826

 
4,879

 
4,961

 
5,037

 
5,087

 
4,826

 
5,087

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





























See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


18
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Net Written Premiums - Personal Insurance

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Net written premiums by market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Automobile
 
$
1,087

 
$
1,159

 
$
1,228

 
$
1,172

 
$
1,183

 
$
1,258

 
$
1,305

 
$
1,226

 
$
4,646

 
$
4,972

Homeowners and Other
 
794

 
1,077

 
1,107

 
955

 
832

 
1,137

 
1,168

 
1,011

 
3,933

 
4,148

Total Agency
 
1,881

 
2,236

 
2,335

 
2,127

 
2,015

 
2,395

 
2,473

 
2,237

 
8,579

 
9,120

Direct-to-Consumer
 
83

 
88

 
100

 
90

 
92

 
99

 
108

 
97

 
361

 
396

Total Domestic
 
1,964

 
2,324

 
2,435

 
2,217

 
2,107

 
2,494

 
2,581

 
2,334

 
8,940

 
9,516

International
 
132

 
174

 
180

 
164

 
149

 
203

 
189

 
167

 
650

 
708

Total
 
$
2,096

 
$
2,498

 
$
2,615

 
$
2,381

 
$
2,256

 
$
2,697

 
$
2,770

 
$
2,501

 
$
9,590

 
$
10,224

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





























See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

19
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Selected Statistics - Personal Insurance - Domestic Agency Automobile (1)

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Statutory underwriting
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross written premiums
 
$
1,094

 
$
1,164

 
$
1,234

 
$
1,179

 
$
1,192

 
$
1,265

 
$
1,310

 
$
1,231

 
$
4,671

 
$
4,998

Net written premiums
 
$
1,087

 
$
1,159

 
$
1,228

 
$
1,172

 
$
1,183

 
$
1,258

 
$
1,305

 
$
1,226

 
$
4,646

 
$
4,972

Net earned premiums
 
$
1,035

 
$
1,083

 
$
1,128

 
$
1,158

 
$
1,158

 
$
1,192

 
$
1,227

 
$
1,242

 
$
4,404

 
$
4,819

Losses and loss adjustment expenses
 
800

 
890

 
936

 
920

 
823

 
851

 
840

 
900

 
3,546

 
3,414

Underwriting expenses
 
260

 
278

 
279

 
281

 
285

 
299

 
297

 
288

 
1,098

 
1,169

Statutory underwriting gain (loss)
 
$
(25
)
 
$
(85
)
 
$
(87
)
 
$
(43
)
 
$
50

 
$
42

 
$
90

 
$
54

 
$
(240
)
 
$
236

Other statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio (2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expense ratio
 
77.3
%
 
82.2
%
 
83.0
%
 
79.4
 %
 
71.1
 %
 
71.4
 %
 
68.5
 %
 
72.5
 %
 
80.6
%
 
70.8
 %
Underwriting expense ratio
 
23.8
%
 
24.2
%
 
23.0
%
 
23.6
 %
 
23.7
 %
 
24.0
 %
 
22.8
 %
 
22.8
 %
 
23.6
%
 
23.4
 %
Combined ratio
 
101.1
%
 
106.4
%
 
106.0
%
 
103.0
 %
 
94.8
 %
 
95.4
 %
 
91.3
 %
 
95.3
 %
 
104.2
%
 
94.2
 %
Impact on combined ratio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (favorable) unfavorable prior year reserve development
 
—
%
 
—
%
 
—
%
 
—
 %
 
(2.3
)%
 
(2.8
)%
 
(1.8
)%
 
(1.9
)%
 
—
%
 
(2.2
)%
Catastrophes, net of reinsurance
 
2.5
%
 
4.0
%
 
7.2
%
 
(1.1
)%
 
0.8
 %
 
2.7
 %
 
0.5
 %
 
0.3
 %
 
3.2
%
 
1.1
 %
Underlying combined ratio
 
98.6
%
 
102.4
%
 
98.8
%
 
104.1
 %
 
96.3
 %
 
95.5
 %
 
92.6
 %
 
96.9
 %
 
101.0
%
 
95.3
 %
Catastrophe losses, net of reinsurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
26

 
$
43

 
$
80

 
$
(12
)
 
$
10

 
$
32

 
$
6

 
$
4

 
$
137

 
$
52

After-tax
 
$
17

 
$
28

 
$
52

 
$
(8
)
 
$
8

 
$
25

 
$
5

 
$
3

 
$
89

 
$
41

Prior year reserve development - favorable (unfavorable):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
—

 
$
—

 
$
—

 
$
—

 
$
27

 
$
34

 
$
22

 
$
24

 
$
—

 
$
107

After-tax
 
$
—

 
$
—

 
$
—

 
$
—

 
$
21

 
$
27

 
$
18

 
$
19

 
$
—

 
$
85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policies in force (in thousands)
 
2,482

 
2,514

 
2,528

 
2,529

 
2,519

 
2,517

 
2,518

 
2,518

 
 
 
 
Change from prior year quarter
 
12.2
%
 
10.5
%
 
7.6
%
 
4.2
 %
 
1.5
 %
 
0.1
 %
 
(0.4
)%
 
(0.4
)%
 
 
 
 
Change from prior quarter
 
2.2
%
 
1.3
%
 
0.6
%
 
—
 %
 
(0.4
)%
 
(0.1
)%
 
—
 %
 
—
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)  Represents Automobile policies sold through agents, brokers and other intermediaries, and excludes direct to consumer.
(2)  Billing and policy fees and other, which are a component of other revenues, and fee income are allocated as a reduction of underwriting expenses.
($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Billing and policy fees and other
 
$
10

 
$
10

 
$
10

 
$
9

 
$
10

 
$
10

 
$
11

 
$
11

 
$
39

 
$
42

Fee income
 
$
2

 
$
3

 
$
2

 
$
3

 
$
3

 
$
3

 
$
3

 
$
3

 
$
10

 
$
12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

20
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Selected Statistics - Personal Insurance - Domestic Agency Homeowners and Other (1)

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Statutory underwriting
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross written premiums
 
$
835

 
$
1,085

 
$
1,123

 
$
957

 
$
873

 
$
1,148

 
$
1,180

 
$
1,012

 
$
4,000

 
$
4,213

Net written premiums
 
$
794

 
$
1,077

 
$
1,107

 
$
955

 
$
832

 
$
1,137

 
$
1,168

 
$
1,011

 
$
3,933

 
$
4,148

Net earned premiums
 
$
934

 
$
955

 
$
976

 
$
987

 
$
972

 
$
996

 
$
1,025

 
$
1,038

 
$
3,852

 
$
4,031

Losses and loss adjustment expenses
 
646

 
686

 
605

 
865

 
687

 
841

 
746

 
857

 
2,802

 
3,131

Underwriting expenses
 
243

 
299

 
305

 
270

 
255

 
320

 
313

 
281

 
1,117

 
1,169

Statutory underwriting gain (loss)
 
$
45

 
$
(30
)
 
$
66

 
$
(148
)
 
$
30

 
$
(165
)
 
$
(34
)
 
$
(100
)
 
$
(67
)
 
$
(269
)
Other statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio (2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expense ratio
 
69.1
%
 
71.9
%
 
62.1
%
 
87.6
%
 
70.7
 %
 
84.4
%
 
72.8
%
 
82.6
 %
 
72.7
%
 
77.7
%
Underwriting expense ratio
 
27.6
%
 
28.4
%
 
28.2
%
 
27.7
%
 
27.8
 %
 
29.2
%
 
27.5
%
 
27.2
 %
 
28.0
%
 
27.9
%
Combined ratio
 
96.7
%
 
100.3
%
 
90.3
%
 
115.3
%
 
98.5
 %
 
113.6
%
 
100.3
%
 
109.8
 %
 
100.7
%
 
105.6
%
Impact on combined ratio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (favorable) unfavorable prior year reserve development
 
—
%
 
—
%
 
—
%
 
—
%
 
(2.4
)%
 
2.2
%
 
0.7
%
 
(0.6
)%
 
—
%
 
—
%
Catastrophes, net of reinsurance
 
19.1
%
 
17.5
%
 
12.2
%
 
45.1
%
 
20.7
 %
 
26.2
%
 
11.1
%
 
37.9
 %
 
23.6
%
 
24.0
%
Underlying combined ratio
 
77.6
%
 
82.8
%
 
78.1
%
 
70.2
%
 
80.2
 %
 
85.2
%
 
88.5
%
 
72.5
 %
 
77.1
%
 
81.6
%
Catastrophe losses, net of reinsurance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
178

 
$
168

 
$
119

 
$
444

 
$
201

 
$
262

 
$
114

 
$
394

 
$
909

 
$
971

After-tax
 
$
116

 
$
109

 
$
77

 
$
289

 
$
159

 
$
207

 
$
90

 
$
311

 
$
591

 
$
767

Prior year reserve development - favorable (unfavorable):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
$
—

 
$
—

 
$
—

 
$
—

 
$
24

 
$
(22
)
 
$
(7
)
 
$
6

 
$
—

 
$
1

After-tax
 
$
—

 
$
—

 
$
—

 
$
—

 
$
19

 
$
(17
)
 
$
(6
)
 
$
5

 
$
—

 
$
1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policies in force (in thousands)
 
4,222

 
4,283

 
4,352

 
4,402

 
4,453

 
4,530

 
4,601

 
4,652

 
 
 
 
Change from prior year quarter
 
3.8
%
 
4.0
%
 
5.0
%
 
5.5
%
 
5.5
 %
 
5.8
%
 
5.7
%
 
5.7
 %
 
 
 
 
Change from prior quarter
 
1.1
%
 
1.4
%
 
1.6
%
 
1.1
%
 
1.2
 %
 
1.7
%
 
1.6
%
 
1.1%

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)  Represents Homeowners and Other Lines sold through agents, brokers and other intermediaries, and excludes direct to consumer.
(2)  Billing and policy fees and other, which are a component of other revenues, and fee income are allocated as a reduction of underwriting expenses.
($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Billing and policy fees and other
 
$
7

 
$
6

 
$
6

 
$
6

 
$
6

 
$
7

 
$
7

 
$
7

 
$
25

 
$
27

Fee income
 
$
2

 
$
2

 
$
2

 
$
1

 
$
2

 
$
2

 
$
2

 
$
2

 
$
7

 
$
8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

21
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Interest Expense and Other

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other revenues
 
$
1

 
$
3

 
$
2

 
$
—

 
$
—

 
$
—

 
$
2

 
$
—

 
$
6

 
$
2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claims and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
89

 
92

 
95

 
93

 
89

 
90

 
86

 
87

 
369

 
352

General and administrative expenses
 
8

 
8

 
7

 
9

 
9

 
7

 
8

 
6

 
32

 
30

Total claims and expenses
 
97

 
100

 
102

 
102

 
98

 
97

 
94

 
93

 
401

 
382

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss before income tax benefit
 
(96
)
 
(97
)
 
(100
)
 
(102
)
 
(98
)
 
(97
)
 
(92
)
 
(93
)
 
(395
)
 
(380
)
Income tax benefit
 
(34
)
 
(36
)
 
(35
)
 
(36
)
 
(22
)
 
(19
)
 
(20
)
 
(21
)
 
(141
)
 
(82
)
Loss
 
$
(62
)
 
$
(61
)
 
$
(65
)
 
$
(66
)
 
$
(76
)
 
$
(78
)
 
$
(72
)
 
$
(72
)
 
$
(254
)
 
$
(298
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




























See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.


22
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Consolidated Balance Sheet

($ in millions)
 
December 31,
2018 (1)
 
December 31,
2017
Assets
 
 
 
 
Fixed maturities, available for sale, at fair value (amortized cost $63,601 and $61,316)
 
$
63,464

 
$
62,694

Equity securities, at fair value (cost $382 and $440)
 
368

 
453

Real estate investments
 
904

 
932

Short-term securities
 
3,985

 
4,895

Other investments
 
3,557

 
3,528

Total investments
 
72,278

 
72,502

Cash
 
373

 
344

Investment income accrued
 
624

 
606

Premiums receivable
 
7,506

 
7,144

Reinsurance recoverables
 
8,370

 
8,309

Ceded unearned premiums
 
578

 
551

Deferred acquisition costs
 
2,120

 
2,025

Deferred taxes
 
445

 
70

Contractholder receivables
 
4,785

 
4,775

Goodwill
 
3,937

 
3,951

Other intangible assets
 
345

 
342

Other assets
 
2,872

 
2,864

Total assets
 
$
104,233

 
$
103,483

 
 
 
 
 
Liabilities
 
 
 
 
Claims and claim adjustment expense reserves
 
$
50,668

 
$
49,650

Unearned premium reserves
 
13,555

 
12,915

Contractholder payables
 
4,785

 
4,775

Payables for reinsurance premiums
 
289

 
274

Debt
 
6,564

 
6,571

Other liabilities
 
5,478

 
5,567

Total liabilities
 
81,339

 
79,752

Shareholders’ equity
 
 
 
 
Common stock (1,750.0 shares authorized; 263.7 and 271.5 shares issued, 263.6 and 271.4 shares outstanding)
 
23,144

 
22,886

Retained earnings
 
35,204

 
33,462

Accumulated other comprehensive loss
 
(1,859
)
 
(343
)
Treasury stock, at cost (510.9 and 500.9 shares)
 
(33,595
)
 
(32,274
)
Total shareholders’ equity
 
22,894

 
23,731

Total liabilities and shareholders’ equity
 
$
104,233

 
$
103,483

 
 
 
 
 

(1) Preliminary.


23
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Investment Portfolio

(at carrying value, $ in millions)
 
December 31,
2018
 
Pre-tax Book
Yield (1)
 
December 31,
2017
 
Pre-tax Book
Yield (1)
Investment portfolio
 
 
 
 
 
 
 
 
Taxable fixed maturities (including redeemable preferred stock)
 
$
35,150

 
3.23
%
 
$
32,089

 
3.09
%
Tax-exempt fixed maturities
 
28,314

 
3.18
%
 
30,605

 
3.12
%
Total fixed maturities
 
63,464

 
3.21
%
 
62,694

 
3.10
%
Non-redeemable preferred stocks
 
52

 
4.86
%
 
114

 
5.34
%
Public common stocks
 
316

 
 
 
339

 
 
Total equity securities
 
368

 
 
 
453

 
 
Real estate investments
 
904

 
 
 
932

 
 
Short-term securities
 
3,985

 
2.54
%
 
4,895

 
1.39
%
Private equities
 
2,293

 
 
 
2,145

 
 
Hedge funds
 
222

 
 
 
303

 
 
Real estate partnerships
 
675

 
 
 
661

 
 
Other investments
 
367

 
 
 
419

 
 
Total other investments
 
3,557

 
 
 
3,528

 
 
Total investments
 
$
72,278

 
 
 
$
72,502

 
 
 
 
 
 
 
 
 
 
 
Net unrealized investment gains (losses), net of tax, included in accumulated other comprehensive loss
 
$
(113
)
 
 
 
$
954

 
 
Tax effect of TCJA (2)
 
—

 
 
 
158

 
 
Net unrealized investment gains (losses), net of tax, included in shareholders’ equity
 
$
(113
)
 
 
 
$
1,112

 
 
 
 
 
 
 
 
 
 
 

(1)  Yields are provided for those investments with an embedded book yield.

(2) At December 31, 2017, shareholders’ equity included a $158 million tax benefit related to net unrealized investment gains (losses) that was recorded in net income as part of the $129 million charge related to enactment of TCJA. In accordance with new accounting guidance adopted on January 1, 2018, the Company reclassified the stranded tax effects of TCJA from accumulated other comprehensive income to retained earnings.



24
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Investment Portfolio - Fixed Maturities Data

(at carrying value, $ in millions)
 
December 31,
2018
 
December 31,
2017
 
Fixed maturities
 
 
 
 
 
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
 
$
2,064

 
$
2,076

 
Obligations of states and political subdivisions:
 
 
 
 
 
Pre-refunded
 
2,852

 
3,899

 
All other
 
25,759

 
27,016

 
Total
 
28,611

 
30,915

 
Debt securities issued by foreign governments
 
1,257

 
1,509

 
Mortgage-backed securities - principally obligations of U.S. Government agencies
 
2,573

 
2,410

 
Corporates (including redeemable preferreds)
 
28,959

 
25,784

 
Total fixed maturities
 
$
63,464

 
$
62,694

 
 
 
 
 
 
 
 
Fixed Maturities
Quality Characteristics (1)
 
 
 
December 31, 2018
 
December 31, 2017
 
 
Amount
 
% of Total
 
Amount
 
% of Total
Quality Ratings
 
 
 
 
 
 
 
 
Aaa
 
$
26,089

 
41.1
%
 
$
26,682

 
42.6
%
Aa
 
16,027

 
25.3

 
16,828

 
26.8

A
 
10,539

 
16.6

 
9,786

 
15.6

Baa
 
9,334

 
14.7

 
7,731

 
12.3

Total investment grade
 
61,989

 
97.7

 
61,027

 
97.3

Ba
 
912

 
1.4

 
990

 
1.6

B
 
466

 
0.7

 
477

 
0.8

Caa and lower
 
97

 
0.2

 
200

 
0.3

Total below investment grade
 
1,475

 
2.3

 
1,667

 
2.7

Total fixed maturities
 
$
63,464

 
100.0
%
 
$
62,694

 
100.0
%
Average weighted quality
 
 Aa2, AA

 
 
 
 Aa2, AA

 
 
Weighted average duration of fixed maturities and short-term securities, net of securities lending activities and net receivables and payables on investment sales and purchases
 
4.5

 
 
 
4.0

 
 
 
 
 
 
 
 
 
 
 

(1)  Rated using external rating agencies or by Travelers when a public rating does not exist.  Below investment grade assets refer to securities rated “Ba” or below.

25
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Investment Income

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Gross investment income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
$
477

 
$
471

 
$
469

 
$
478

 
$
481

 
$
489

 
$
498

 
$
512

 
$
1,895

 
$
1,980

Short-term securities
 
11

 
13

 
19

 
19

 
19

 
21

 
25

 
27

 
62

 
92

Other
 
131

 
124

 
108

 
115

 
113

 
94

 
134

 
100

 
478

 
441

 
 
619

 
608

 
596

 
612

 
613

 
604

 
657

 
639

 
2,435

 
2,513

Investment expenses
 
9

 
10

 
8

 
11

 
10

 
9

 
11

 
9

 
38

 
39

Net investment income, pre-tax
 
610

 
598

 
588

 
601

 
603

 
595

 
646

 
630

 
2,397

 
2,474

Income taxes
 
130

 
130

 
131

 
134

 
90

 
88

 
99

 
95

 
525

 
372

Net investment income, after-tax
 
$
480

 
$
468

 
$
457

 
$
467

 
$
513

 
$
507

 
$
547

 
$
535

 
$
1,872

 
$
2,102

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate
 
21.3
%
 
21.9
%
 
22.1
%
 
22.4
%
 
14.9
%
 
14.8
%
 
15.4%

 
15.0%

 
21.9
%
 
15.0%

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average invested assets (1)
 
$70,865
 
$71,385
 
$72,363
 
$72,781
 
$72,524
 
$72,618
 
$73,059
 
$73,758
 
$71,867
 
$73,031
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average yield pre-tax (1)
 
3.4
%
 
3.4
%
 
3.2
%
 
3.3
%
 
3.3
%
 
3.3
%
 
3.5
%
 
3.4
%
 
3.3
%
 
3.4
%
Average yield after-tax
 
2.7
%
 
2.6
%
 
2.5
%
 
2.6
%
 
2.8
%
 
2.8
%
 
3.0
%
 
2.9
%
 
2.6
%
 
2.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)  Excludes net unrealized investment gains, and is adjusted for cash, receivables for investment sales, payables on investment purchases and accrued investment income.


26
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Net Realized and Unrealized Investment Gains (Losses) included in Shareholders' Equity

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Net realized investment gains (losses)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
$
4

 
$
5

 
$
9

 
$
(18
)
 
$
—

 
$
12

 
$
18

 
$
2

 
$
—

 
$
32

Equity securities (1)
 
5

 
79

 
54

 
89

 
(14
)
 
12

 
6

 
(37
)
 
227

 
(33
)
Other (2)
 
(4
)
 
(4
)
 
(2
)
 
(1
)
 
3

 
12

 
5

 
95

 
(11
)
 
115

Realized investment gains (losses) before tax
 
5

 
80

 
61

 
70

 
(11
)
 
36

 
29

 
60

 
216

 
114

Related taxes
 
2

 
28

 
21

 
23

 
(2
)
 
6

 
7

 
10

 
74

 
21

Net realized investment gains (losses)
 
$
3

 
$
52

 
$
40

 
$
47

 
$
(9
)
 
$
30

 
$
22

 
$
50

 
$
142

 
$
93

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross investment gains (2)
 
$
47

 
$
122

 
$
101

 
$
131

 
$
26

 
$
63

 
$
41

 
$
105

 
$
401

 
$
235

Gross investment losses before impairments (2)
 
(40
)
 
(37
)
 
(35
)
 
(59
)
 
(37
)
 
(26
)
 
(12
)
 
(45
)
 
(171
)
 
(120
)
Net investment gains (losses) before impairments
 
7

 
85

 
66

 
72

 
(11
)
 
37

 
29

 
60

 
230

 
115

Other-than-temporary impairment losses
 
(2
)
 
(5
)
 
(5
)
 
(2
)
 
—

 
(1
)
 
—

 
—

 
(14
)
 
(1
)
Net realized investment gains (losses) before tax
 
5

 
80

 
61

 
70

 
(11
)
 
36

 
29

 
60

 
216

 
114

Related taxes
 
2

 
28

 
21

 
23

 
(2
)
 
6

 
7

 
10

 
74

 
21

Net realized investment gains (losses)
 
$
3

 
$
52

 
$
40

 
$
47

 
$
(9
)
 
$
30

 
$
22

 
$
50

 
$
142

 
$
93

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($ in millions)
 
March 31,
2017
 
June 30,
2017
 
September 30,
2017
 
December 31,
2017
 
March 31,
2018
 
June 30,
2018
 
September 30,
2018
 
December 31,
2018
 
 
 
 
Net unrealized investment gains (losses), net of tax, included in shareholders’ equity, by asset type
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
$
999

 
$
1,425

 
$
1,430

 
$
1,378

 
$
173

 
$
(138
)
 
$
(561
)
 
$
(137
)
 
 
 
 
Equity securities & other
 
256

 
160

 
115

 
36

 
2

 
3

 
1

 
—

 
 
 
 
Unrealized investment gains (losses) before tax
 
1,255

 
1,585

 
1,545

 
1,414

 
175

 
(135
)
 
(560
)
 
(137
)
 
 
 
 
Related taxes (3)
 
432

 
550

 
539

 
302

 
42

 
(23
)
 
(113
)
 
(24
)
 
 
 
 
Balance, end of period
 
$
823

 
$
1,035

 
$
1,006

 
$
1,112

 
$
133

 
$
(112
)
 
$
(447
)
 
$
(113
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) In accordance with new accounting guidance effective for the quarter ending March 31, 2018, changes in fair value of equity investments, except those accounted for under the equity method of accounting, are recognized in net income.
(2)  Includes the following gross investment gains and gross investment losses related to U.S. Treasury futures, which are settled daily:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross investment Treasury future gains
 
$
31

 
$
26

 
$
30

 
$
25

 
$
25

 
$
11

 
$
7

 
$
—

 
$
112

 
$
43

Gross investment Treasury future losses
 
$
34

 
$
31

 
$
30

 
$
21

 
$
14

 
$
8

 
$
5

 
$
—

 
$
116

 
$
27

The Company entered into these arrangements as part of its strategy to manage the duration of its fixed maturity portfolio.  In a changing interest rate environment, the change in the value of the futures contracts can be expected to partially offset changes in the value of the fixed maturity portfolio.
 
(3) At December 31, 2017, shareholders’ equity included $460 million of taxes on unrealized investment gains (losses) recorded in accumulated other comprehensive income, partially offset by a $158 million tax benefit related to net unrealized investment gains (losses) recorded in retained earnings as part of the effect of enactment of TCJA. In accordance with new accounting guidance adopted on January 1, 2018, the Company reclassified the stranded tax effects of TCJA from accumulated other comprehensive income to retained earnings.

27
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Reinsurance Recoverables

($ in millions)
 
December 31, 2018
 
December 31, 2017
Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses
 
$
3,485

 
$
3,303

Allowance for uncollectible reinsurance
 
(110
)
 
(111
)
Net reinsurance recoverables (i)
 
3,375

 
3,192

Mandatory pools and associations (ii) 
 
2,005

 
2,011

Structured settlements (iii)
 
2,990

 
3,106

Total reinsurance recoverables
 
$
8,370

 
$
8,309

 
 
 
 
 
(i)  The Company’s top five reinsurer groups, including retroactive reinsurance, included in net reinsurance recoverables is as follows:
Reinsurer
 
A.M. Best Rating of Group's Predominant Reinsurer
 
December 31, 2018
Swiss Re Group
 
 A+ second highest of 16 ratings
 
$
473

Munich Re Group
 
A+ second highest of 16 ratings
 
305

Berkshire Hathaway
 
A++ highest of 16 ratings
 
278

Axa Group (1)
 
A+ second highest of 16 ratings
 
188

Sompo Japan Nipponkoa Group
 
 A+ second highest of 16 ratings
 
129

 
 
 
 
 

The gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses represent the current and estimated future amounts due from reinsurers on known and incurred but not reported claims.  The ceded reserves are estimated in a manner consistent with the underlying direct and assumed reserves.  Although this total comprises recoverables due from nearly one thousand different reinsurance entities, about half is attributable to 10 reinsurer groups.
 
The net reinsurance recoverables reflect an allowance for uncollectible reinsurance that is based upon the Company’s ongoing review of amounts outstanding, reinsurer solvency, the Company’s experience, current economic conditions, and other relevant factors.  Of the total net recoverables due from reinsurers at December 31, 2018, after deducting mandatory pools and associations and structured settlement balances, $2.8 billion, or 82%, were rated by A.M. Best Company.  Of the total rated by A.M. Best Company, 99% were rated A- or better.  The remaining 18% of net recoverables from reinsurers were comprised of the following:  3% related to the Company’s participation in voluntary pools, 11% related to recoverables from captive insurance companies and 4% were balances from other companies not rated by A.M. Best Company.  In addition, $0.9 billion of the net recoverables were collateralized by letters of credit, funds held or trust agreements at December 31, 2018.
 
(ii)  The mandatory pools and associations represent various involuntary assigned risk pools that the Company is required to participate in.  These pools principally involve workers’ compensation and automobile insurance, which provide various insurance coverages to insureds that otherwise are unable to purchase coverage in the open market.  The costs of these mandatory pools in most states are usually charged back to the participating members in proportion to voluntary writings of related business in that state.  In the event that a member of the pool becomes insolvent, the remaining members assume an additional pro rata share of the pool’s liabilities. 

(iii)  Included in reinsurance recoverables are certain amounts related to structured settlements, which comprise annuities purchased from various life insurance companies to settle certain personal physical injury claims, of which workers’ compensation claims comprise a significant portion.  In cases where the Company did not receive a release from the claimant, the amount due from the life insurance company related to the structured settlement is included in the Company’s consolidated balance sheet as a liability and as a reinsurance recoverable, as the Company retains the contingent liability to pay the claimant in the event that the life insurance company fails to make the required annuity payments.  The Company would be required to make such payments, to the extent the purchased annuities are not covered by state guaranty associations.
 
The Company’s top five groups by structured settlement is as follows:
Group
 
A.M. Best Rating of Group's Predominant Insurer
 
December 31, 2018
Fidelity & Guaranty Life Group (2)
 
 A- fourth highest of 16 ratings
 
$
809

Genworth Financial Group (3)
 
 B+ sixth highest of 16 ratings
 
356

John Hancock Group
 
 A+ second highest of 16 ratings
 
273

Brighthouse Financial, Inc.
 
 A third highest of 16 ratings
 
266

Symetra Financial Corporation
 
 A third highest of 16 ratings
 
251

 
 
 
 
 
(1)  On September 12, 2018, Axa SA completed its acquisition of XL Group Ltd. On December 6, 2018, A.M. Best upgraded the financial strength rating for XL Reinsurance America Inc to A+ (Superior) from A (Excellent).

(2) On November 20, 2018, A.M. Best upgraded the financial strength rating for Fidelity & Guaranty Life Insurance Company to A- (Excellent) from B++ (Good).

(3)  On October 23, 2016, Genworth Financial (Genworth) announced that they have entered into a definitive agreement under which China Oceanwide Holdings Group Co., Ltd. (China Oceanwide) agreed to acquire all of the outstanding shares of Genworth. China Oceanwide is a privately held, family-owned international financial holding group headquartered in Beijing, China. On March 7, 2017, Genworth stockholders adopted the merger agreement, and the acquisition is pending the receipt of required regulatory approvals. On November 30, 2018, the parties agreed to extend the closing deadline for the transaction until January 31, 2019.

28
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Net Reserves for Losses and Loss Adjustment Expense

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Statutory Reserves for Losses and Loss Adjustment Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of period
 
$
32,407

 
$
32,621

 
$
32,789

 
$
33,501

 
$
33,107

 
$
33,292

 
$
33,369

 
$
33,773

 
$
32,407

 
$
33,107

Incurred
 
2,215

 
2,254

 
2,795

 
2,053

 
2,344

 
2,429

 
2,606

 
2,586

 
9,317

 
9,965

Paid
 
(2,019
)
 
(2,132
)
 
(2,132
)
 
(2,451
)
 
(2,163
)
 
(2,298
)
 
(2,207
)
 
(2,454
)
 
(8,734
)
 
(9,122
)
Foreign exchange and other
 
18

 
46

 
49

 
4

 
4

 
(54
)
 
5

 
(48
)
 
117

 
(93
)
End of period
 
$
32,621

 
$
32,789

 
$
33,501

 
$
33,107

 
$
33,292

 
$
33,369

 
$
33,773

 
$
33,857

 
$
33,107

 
$
33,857

Bond & Specialty Insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of period
 
$
3,150

 
$
3,132

 
$
3,122

 
$
3,144

 
$
3,187

 
$
3,207

 
$
3,111

 
$
3,057

 
$
3,150

 
$
3,187

Incurred
 
226

 
170

 
233

 
261

 
213

 
173

 
204

 
173

 
890

 
763

Paid
 
(249
)
 
(193
)
 
(224
)
 
(221
)
 
(201
)
 
(248
)
 
(258
)
 
(230
)
 
(887
)
 
(937
)
Foreign exchange and other
 
5

 
13

 
13

 
3

 
8

 
(21
)
 
—

 
(13
)
 
34

 
(26
)
End of period
 
$
3,132

 
$
3,122

 
$
3,144

 
$
3,187

 
$
3,207

 
$
3,111

 
$
3,057

 
$
2,987

 
$
3,187

 
$
2,987

Personal Insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of period
 
$
4,347

 
$
4,560

 
$
4,719

 
$
4,900

 
$
5,160

 
$
5,170

 
$
5,381

 
$
5,463

 
$
4,347

 
$
5,160

Incurred
 
1,602

 
1,745

 
1,723

 
1,977

 
1,688

 
1,904

 
1,796

 
1,960

 
7,047

 
7,348

Paid
 
(1,400
)
 
(1,609
)
 
(1,578
)
 
(1,711
)
 
(1,655
)
 
(1,676
)
 
(1,728
)
 
(1,815
)
 
(6,298
)
 
(6,874
)
Foreign exchange and other
 
11

 
23

 
36

 
(6
)
 
(23
)
 
(17
)
 
14

 
(43
)
 
64

 
(69
)
End of period
 
$
4,560

 
$
4,719

 
$
4,900

 
$
5,160

 
$
5,170

 
$
5,381

 
$
5,463

 
$
5,565

 
$
5,160

 
$
5,565

Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of period
 
$
39,904

 
$
40,313

 
$
40,630

 
$
41,545

 
$
41,454

 
$
41,669

 
$
41,861

 
$
42,293

 
$
39,904

 
$
41,454

Incurred
 
4,043

 
4,169

 
4,751

 
4,291

 
4,245

 
4,506

 
4,606

 
4,719

 
17,254

 
18,076

Paid
 
(3,668
)
 
(3,934
)
 
(3,934
)
 
(4,383
)
 
(4,019
)
 
(4,222
)
 
(4,193
)
 
(4,499
)
 
(15,919
)
 
(16,933
)
Foreign exchange and other
 
34

 
82

 
98

 
1

 
(11
)
 
(92
)
 
19

 
(104
)
 
215

 
(188
)
End of period
 
$
40,313

 
$
40,630

 
$
41,545

 
$
41,454

 
$
41,669

 
$
41,861

 
$
42,293

 
$
42,409

 
$
41,454

 
$
42,409

Prior Year Reserve Development: Unfavorable (Favorable)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asbestos
 
$
—

 
$
—

 
$
225

 
$
—

 
$
—

 
$
—

 
$
225

 
$
—

 
$
225

 
$
225

Environmental
 
—

 
65

 
—

 
—

 
—

 
55

 
—

 
—

 
65

 
55

All other
 
(61
)
 
(190
)
 
(234
)
 
(244
)
 
(66
)
 
(139
)
 
(169
)
 
(48
)
 
(729
)
 
(422
)
Total Business Insurance (1)
 
(61
)
 
(125
)
 
(9
)
 
(244
)
 
(66
)
 
(84
)
 
56

 
(48
)
 
(439
)
 
(142
)
Bond & Specialty Insurance
 
(14
)
 
(78
)
 
(6
)
 
(42
)
 
(35
)
 
(89
)
 
(53
)
 
(89
)
 
(140
)
 
(266
)
Personal Insurance
 
(6
)
 
—

 
—

 
(7
)
 
(49
)
 
(13
)
 
(17
)
 
(30
)
 
(13
)
 
(109
)
Total
 
$
(81
)
 
$
(203
)
 
$
(15
)
 
$
(293
)
 
$
(150
)
 
$
(186
)
 
$
(14
)
 
$
(167
)
 
$
(592
)
 
$
(517
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  Excludes accretion of discount.
 
See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

29
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Asbestos and Environmental Reserves

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Asbestos reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
$
1,512

 
$
1,436

 
$
1,347

 
$
1,621

 
$
1,538

 
$
1,483

 
$
1,408

 
$
1,681

 
$
1,512

 
$
1,538

Ceded
 
(186
)
 
(168
)
 
(159
)
 
(262
)
 
(257
)
 
(234
)
 
(225
)
 
(336
)
 
(186
)
 
(257
)
Net
 
1,326

 
1,268

 
1,188

 
1,359

 
1,281

 
1,249

 
1,183

 
1,345

 
1,326

 
1,281

Incurred losses and loss expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
—

 
—

 
340

 
—

 
—

 
—

 
343

 
—

 
340

 
343

Ceded
 
—

 
—

 
(115
)
 
—

 
—

 
—

 
(118
)
 
—

 
(115
)
 
(118
)
Paid loss and loss expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
76

 
90

 
66

 
83

 
56

 
74

 
70

 
73

 
315

 
273

Ceded
 
(18
)
 
(9
)
 
(12
)
 
(5
)
 
(23
)
 
(9
)
 
(7
)
 
(9
)
 
(44
)
 
(48
)
Foreign exchange and other:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
—

 
1

 
—

 
—

 
1

 
(1
)
 
—

 
—

 
1

 
—

Ceded
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Ending reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
1,436

 
1,347

 
1,621

 
1,538

 
1,483

 
1,408

 
1,681

 
1,608

 
1,538

 
1,608

Ceded
 
(168
)
 
(159
)
 
(262
)
 
(257
)
 
(234
)
 
(225
)
 
(336
)
 
(327
)
 
(257
)
 
(327
)
Net
 
$
1,268

 
$
1,188

 
$
1,359

 
$
1,281

 
$
1,249

 
$
1,183

 
$
1,345

 
$
1,281

 
$
1,281

 
$
1,281

Environmental reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
$
395

 
$
379

 
$
431

 
$
408

 
$
373

 
$
356

 
$
413

 
$
397

 
$
395

 
$
373

Ceded
 
(13
)
 
(13
)
 
(20
)
 
(20
)
 
(13
)
 
(9
)
 
(25
)
 
(25
)
 
(13
)
 
(13
)
Net
 
382

 
366

 
411

 
388

 
360

 
347

 
388

 
372

 
382

 
360

Incurred losses and loss expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
—

 
74

 
—

 
—

 
—

 
71

 
—

 
—

 
74

 
71

Ceded
 
—

 
(9
)
 
—

 
—

 
—

 
(16
)
 
—

 
—

 
(9
)
 
(16
)
Paid loss and loss expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
16

 
23

 
23

 
35

 
17

 
13

 
17

 
39

 
97

 
86

Ceded
 
—

 
(2
)
 
—

 
(7
)
 
(4
)
 
—

 
—

 
(2
)
 
(9
)
 
(6
)
Foreign exchange and other:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
—

 
1

 
—

 
—

 
—

 
(1
)
 
1

 
—

 
1

 
—

Ceded
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Ending reserves:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
 
379

 
431

 
408

 
373

 
356

 
413

 
397

 
358

 
373

 
358

Ceded
 
(13
)
 
(20
)
 
(20
)
 
(13
)
 
(9
)
 
(25
)
 
(25
)
 
(24
)
 
(13
)
 
(24
)
Net
 
$
366

 
$
411

 
$
388

 
$
360

 
$
347

 
$
388

 
$
372

 
$
334

 
$
360

 
$
334

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

30
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Capitalization

($ in millions)
 
December 31,
2018
 
December 31,
2017
Debt
 
 
 
 
 
 
 
 
 
Short-term debt
 
 
 
 
Commercial paper
 
$
100

 
$
100

5.80% Senior notes due May 15, 2018
 
—

 
500

5.90% Senior notes due June 2, 2019 (1)
 
500

 
—

Total short-term debt
 
600

 
600

Long-term debt
 
 
 
 
5.90% Senior notes due June 2, 2019 (1)
 
—

 
500

3.90% Senior notes due November 1, 2020 (1)
 
500

 
500

7.75% Senior notes due April 15, 2026
 
200

 
200

7.625% Junior subordinated debentures due December 15, 2027
 
125

 
125

6.375% Senior notes due March 15, 2033 (1)
 
500

 
500

6.75% Senior notes due June 20, 2036 (1)
 
400

 
400

6.25% Senior notes due June 15, 2037 (1)
 
800

 
800

5.35% Senior notes due November 1, 2040 (1)
 
750

 
750

4.60% Senior notes due August 1, 2043 (1)
 
500

 
500

4.30% Senior notes due August 25, 2045 (1)
 
400

 
400

8.50% Junior subordinated debentures due December 15, 2045
 
56

 
56

3.75% Senior notes due May 15, 2046 (1)
 
500

 
500

8.312% Junior subordinated debentures due July 1, 2046
 
73

 
73

4.00% Senior notes due May 30, 2047 (1)
 
700

 
700

4.05% Senior notes due March 7, 2048 (1)
 
500

 
—

Total long-term debt
 
6,004

 
6,004

Unamortized fair value adjustment
 
44

 
46

Unamortized debt issuance costs
 
(84
)
 
(79
)
 
 
5,964

 
5,971

Total debt
 
6,564

 
6,571

Common equity (excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity)
 
23,007

 
22,619

Total capital (excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity)
 
$
29,571

 
$
29,190

Total debt to capital (excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity)
 
22.2
%
 
22.5
%
 
 
 
 
 
(1)  Redeemable anytime with “make-whole” premium. 


See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

31
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Statutory Capital and Surplus to GAAP Shareholders' Equity Reconciliation

($ in millions)
 
December 31,
2018 (1)
 
December 31,
2017
Statutory capital and surplus
 
$
20,774

 
$
20,448

GAAP adjustments
 
 

 
 

Goodwill and intangible assets
 
3,600

 
3,692

Investments
 
252

 
1,783

Noninsurance companies
 
(4,234
)
 
(4,283
)
Deferred acquisition costs
 
2,120

 
2,025

Deferred federal income tax
 
(561
)
 
(934
)
Current federal income tax
 
(22
)
 
(12
)
Reinsurance recoverables
 
56

 
55

Furniture, equipment & software
 
654

 
682

Agents balances
 
202

 
186

Other
 
53

 
89

Total GAAP adjustments
 
2,120

 
3,283

GAAP shareholders’ equity
 
$
22,894

 
$
23,731

 
 
 
 
 

(1) Estimated and Preliminary
 






















See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

32
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Statement of Cash Flows - Preliminary


($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
617

 
$
595

 
$
293

 
$
551

 
$
669

 
$
524

 
$
709

 
$
621

 
$
2,056

 
$
2,523

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net realized investment (gains) losses
 
(5
)
 
(80
)
 
(61
)
 
(70
)
 
11

 
(36
)
 
(29
)
 
(60
)
 
(216
)
 
(114
)
Depreciation and amortization
 
211

 
198

 
202

 
202

 
212

 
199

 
198

 
194

 
813

 
803

Deferred federal income tax expense (benefit)
 
151

 
(45
)
 
(18
)
 
249

 
(56
)
 
(14
)
 
27

 
30

 
337

 
(13
)
Amortization of deferred acquisition costs
 
1,003

 
1,032

 
1,059

 
1,072

 
1,061

 
1,081

 
1,117

 
1,122

 
4,166

 
4,381

Equity in income from other investments
 
(109
)
 
(101
)
 
(90
)
 
(97
)
 
(95
)
 
(74
)
 
(115
)
 
(81
)
 
(397
)
 
(365
)
Premiums receivable
 
(286
)
 
(323
)
 
92

 
123

 
(397
)
 
(263
)
 
152

 
115

 
(394
)
 
(393
)
Reinsurance recoverables
 
94

 
63

 
(176
)
 
35

 
5

 
24

 
(50
)
 
(79
)
 
16

 
(100
)
Deferred acquisition costs
 
(1,065
)
 
(1,092
)
 
(1,080
)
 
(1,020
)
 
(1,124
)
 
(1,160
)
 
(1,141
)
 
(1,063
)
 
(4,257
)
 
(4,488
)
Claims and claim adjustment expense reserves
 
334

 
164

 
1,063

 
(101
)
 
180

 
255

 
445

 
366

 
1,460

 
1,246

Unearned premium reserves
 
475

 
214

 
163

 
(331
)
 
518

 
361

 
216

 
(385
)
 
521

 
710

Other (1)
 
(572
)
 
281

 
284

 
50

 
(430
)
 
247

 
205

 
168

 
43

 
190

Net cash provided by operating activities (1)
 
848

 
906

 
1,731

 
663

 
554

 
1,144

 
1,734

 
948

 
4,148

 
4,380

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from maturities of fixed maturities
 
2,218

 
2,082

 
2,281

 
2,169

 
1,950

 
1,707

 
1,998

 
1,431

 
8,750

 
7,086

Proceeds from sales of investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
188

 
375

 
297

 
994

 
1,085

 
1,522

 
578

 
361

 
1,854

 
3,546

Equity securities
 
21

 
179

 
140

 
425

 
26

 
66

 
35

 
51

 
765

 
178

Real estate investments
 
11

 
9

 
3

 
—

 
—

 
—

 
8

 
66

 
23

 
74

Other investments (1)
 
122

 
111

 
108

 
127

 
114

 
75

 
81

 
241

 
468

 
511

Purchases of investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities
 
(3,056
)
 
(2,617
)
 
(2,730
)
 
(3,847
)
 
(3,920
)
 
(4,032
)
 
(2,910
)
 
(2,664
)
 
(12,250
)
 
(13,526
)
Equity securities
 
(22
)
 
(144
)
 
(27
)
 
(266
)
 
(20
)
 
(40
)
 
(26
)
 
(31
)
 
(459
)
 
(117
)
Real estate investments
 
(16
)
 
(10
)
 
(14
)
 
(19
)
 
(33
)
 
(11
)
 
(13
)
 
(17
)
 
(59
)
 
(74
)
Other investments
 
(124
)
 
(135
)
 
(133
)
 
(149
)
 
(142
)
 
(133
)
 
(117
)
 
(145
)
 
(541
)
 
(537
)
Net sales (purchases) of short-term securities
 
49

 
(473
)
 
(566
)
 
964

 
410

 
792

 
(746
)
 
452

 
(26
)
 
908

Securities transactions in course of settlement
 
157

 
13

 
(48
)
 
(169
)
 
202

 
77

 
(106
)
 
(229
)
 
(47
)
 
(56
)
Acquisitions, net of cash acquired
 
—

 
—

 
(439
)
 
—

 
—

 
—

 
(4
)
 
—

 
(439
)
 
(4
)
Other
 
(63
)
 
(65
)
 
(58
)
 
(55
)
 
(53
)
 
(99
)
 
(80
)
 
(86
)
 
(241
)
 
(318
)
Net cash provided by (used in) investing activities (1)
 
(515
)
 
(675
)
 
(1,186
)
 
174

 
(381
)
 
(76
)
 
(1,302
)
 
(570
)
 
(2,202
)
 
(2,329
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) In accordance with new accounting guidance, certain distributions received on equity method investments previously included in net cash flows from investing activities are now included in net cash flows from operating activities. Prior periods have been restated to conform to the new presentation.

33
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Statement of Cash Flows - Preliminary (Continued)

($ in millions)
 
1Q2017
 
2Q2017
 
3Q2017
 
4Q2017
 
1Q2018
 
2Q2018
 
3Q2018
 
4Q2018
 
YTD 4Q2017
 
YTD 4Q2018
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Treasury stock acquired - share repurchase authorization
 
(225
)
 
(475
)
 
(328
)
 
(350
)
 
(350
)
 
(350
)
 
(400
)
 
(170
)
 
(1,378
)
 
(1,270
)
Treasury stock acquired - net employee share-based compensation
 
(61
)
 
—

 
—

 
(1
)
 
(51
)
 
—

 
—

 
—

 
(62
)
 
(51
)
Dividends paid to shareholders
 
(190
)
 
(199
)
 
(200
)
 
(196
)
 
(197
)
 
(207
)
 
(207
)
 
(203
)
 
(785
)
 
(814
)
Payment of debt
 
—

 
(207
)
 
—

 
(450
)
 
(100
)
 
(500
)
 
—

 
—

 
(657
)
 
(600
)
Issuance of debt
 
—

 
689

 
—

 
100

 
491

 
—

 
100

 
—

 
789

 
591

Issuance of common stock - employee share options
 
83

 
35

 
30

 
25

 
85

 
13

 
19

 
15

 
173

 
132

Net cash used in financing activities
 
(393
)
 
(157
)
 
(498
)
 
(872
)
 
(122
)
 
(1,044
)
 
(488
)
 
(358
)
 
(1,920
)
 
(2,012
)
Effect of exchange rate changes on cash
 
2

 
5

 
4

 
—

 
2

 
(6
)
 
—

 
(6
)
 
11

 
(10
)
Net increase (decrease) in cash
 
(58
)
 
79

 
51

 
(35
)
 
53

 
18

 
(56
)
 
14

 
37

 
29

Cash at beginning of period
 
307

 
249

 
328

 
379

 
344

 
397

 
415

 
359

 
307

 
344

Cash at end of period
 
$
249

 
$
328

 
$
379

 
$
344

 
$
397

 
$
415

 
$
359

 
$
373

 
$
344

 
$
373

Income taxes paid
 
$
2

 
$
321

 
$
144

 
$
47

 
$
56

 
$
182

 
$
6

 
$
164

 
$
514

 
$
408

Interest paid
 
$
43

 
$
135

 
$
39

 
$
150

 
$
39

 
$
136

 
$
50

 
$
122

 
$
367

 
$
347

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


34
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Glossary of Financial Measures and Description of Reportable Business Segments

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.
 
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.
 
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.
 
Average shareholders’ equity is (a) the sum of total 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.  Adjusted shareholders’ equity is shareholders’equity excluding net realized investment gains (losses), net of tax, net unrealized investment gains (losses), net of tax, included in shareholders’equity for the periods presented and the effect of a change in tax laws and tax rates at enactment (excluding the portion related to net unrealized investment gains (losses)).  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.
 
Return on equity is the ratio of annualized net income (loss) to average shareholders’ equity for the periods presented.  Core return on equity is the ratio of annualized core income (loss) 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.
 
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.
 
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 or radiological events, cyber-attacks, explosions and infrastructure failures.  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 2018 ranges from approximately $18 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.
 
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 financial supplement, 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 financial supplement 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 financial supplement 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 financial supplement, is the ratio of underwriting expenses (including the amortization of deferred acquisition costs), less certain administrative services fee income and billing and policy fees, to net earned premiums.   Underlying combined ratio is the combined ratio adjusted to exclude the impact of prior year reserve development and catastrophes, net of reinsurance.
 
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.

35
The Travelers Companies, Inc.                                                 g34651mo25i001b12.gif
Glossary of Financial Measures and Description of Reportable Business Segments

 
Other companies’ method of computing similarly titled measures may not be comparable to the Company’s method of computing these ratios.
 
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.
 
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.
 
Total capital is the sum of total shareholders’ equity and debt.  Debt-to-capital ratio excluding net unrealized gain (loss) on investments, net of tax, included in shareholders’ equity is the ratio of debt to total capital excluding net unrealized investment gains and losses, net of tax, 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.
 
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.
 
Travelers has organized its businesses into the following reportable business segments:
 
Business Insurance - Business Insurance offers a broad array of property and casualty insurance and insurance related services to its customers, primarily in the United States, as well as in Canada, the United Kingdom, the Republic of Ireland, Brazil and throughout other parts of the world as a corporate member of Lloyd’s.  Business Insurance is organized as follows:  Select Accounts; Middle Market including Commercial Accounts, Construction, Technology, Public Sector Services, Oil & Gas, Excess Casualty, Inland Marine, Ocean Marine, and Boiler & Machinery; National Accounts; National Property and Other including National Property, Northland Transportation, Northfield, National Programs, and Agribusiness; and International including Global Services.  Business Insurance also includes Simply Business, a leading provider of small business insurance policies primarily in the United Kingdom that was acquired in August 2017, as well as Business Insurance Other, which comprises the Special Liability Group (which manages the Company’s asbestos and environmental liabilities within the Company's Strategic Resolution Group), and the assumed reinsurance and certain other runoff operations.
 
Bond & Specialty Insurance - Bond & Specialty Insurance provides surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to its customers in the United States, and certain specialty insurance products in Canada, the United Kingdom, the Republic of Ireland and Brazil, utilizing various degrees of financially-based underwriting approaches.  The range of coverages includes performance, payment and commercial surety and fidelity bonds for construction and general commercial enterprises; management liability coverages including directors’ and officers’ liability, employee dishonesty, employment practices liability, fiduciary liability and cyber risk for public corporations, private companies, not-for-profit organizations and financial institutions; professional liability coverage for a variety of professionals including, among others, lawyers and design professionals; and in the United States only, property, workers’ compensation, auto and general liability for financial institutions.
 
Bond & Specialty Insurance surety business in Brazil and Colombia is conducted through Junto Holding Brasil S.A. (Junto) and Junto Holding Latam S.A. in Brazil. The Company owns 49.5% of both Junto, a market leader in surety coverages in Brazil, and Junto Holding Latam S.A., which in September 2015 acquired a majority interest in JMalucelli Travelers Seguros S.A., a Colombian start-up surety provider. These joint venture investments are accounted for using the equity method and are included in “other investments” on the consolidated balance sheet.
 
Personal Insurance - Personal Insurance writes a broad range of property and casualty insurance 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.


36
 GRAPHIC 4 g34651mo25i001b12.gif begin 644 g34651mo25i001b12.gif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�)<[#9AQE0A(, M.\]FN92-5K1UW0#IOYE.M+0J#XU!8L*"SB$-A "TJP!N,XU#PZL4#]W<2'/8V2NB.8* MW*,';5@ F0DPZ#0/Z+P8H>PU?RW$;U*@9O/%XS_<8,YJFM"&?'WHA$.]W(TZ MX!ZGTW;?XG781UJ8(+S X[L;$NPP@L+>]KZW!X4Y7.$R4N!VG .^)-!3MW$[ M(3+>M$>N^[8P&P2V%?>'D'/K-HM;%[R;JU:UQM;90R$M/) MRGK):240/[?](!K';$;KIJ 9KWTW6J!U\09[K1$Q#=UKW,$IT@6'VX;PI"_V<0!+PTOE>;54[ M +RJ;J^!5W@ZY6]EJ3PQ$.*<(?< ;AMDGY#*I@'3[ IEF-OK-JY-4"&,[K@0 M144J36/[(BK//'Q7[C4;BUV=!"2 _P/Z(?Z=Y1#J=%]"\ #]H4Q%T-"-P1< M#E!?*\B"X&-E_@0!,YB#"P,*K$9"[$) &#@'&= #,N@N2B0!I?1[J9(/:S @ M2\&$5!&!'W%#I?-F63>"K]9=OW9#.60]\6=8!+12<$4+@!,*G[1[<,-CV9,] MXN=D U!9XE= :M@SMM-"T5= X_VZ#@;7V/42U0%2C2*7T7-Y6%>M7$ M Q#T;L<"7A$@/Q( 0O]D$$?G;Q-TBL3H-:2H.@&8>+##6 SS8ZJS7-858&/5 M9XXC2N>D8Z#C #P@B@01'7*1%4^R5D9SB))F;EDC-J[F86DC-LH$ #WP0TZ# M$/50 1$@-CL$;VZW06W'+B-SB ;Y0P#IA_SRC_L#D0ZY #W />X#D#]TCQ I MA@#@!BM# 9I5$/6P-_J3@@8S 3V@B(!#,QDP 75&X2")XQ1$N);@C&#IUT5 M