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Travelers Reports Excellent Fourth Quarter and Full Year Results, Including Strong Earnings and Premium Growth

Fourth Quarter 2021 Record Net Income per Diluted Share of $5.37 and Return on Equity of 18.6%

Fourth Quarter 2021 Record Core Income per Diluted Share of $5.20 and Core Return on Equity of 19.8%

Full Year Net Income of $3.662 billion, up 36%, and Return on Equity of 12.7%

Full Year Core Income of $3.522 billion, up 31%, and Core Return on Equity of 13.7%

  • Record fourth quarter net income of $1.333 billion and record core income of $1.289 billion.

  • Consolidated combined ratio of 88.0% and underlying combined ratio of 88.7%.

  • Net written premiums of $7.995 billion, up 10% compared to the prior year quarter; record full year net written premiums of $31.959 billion, up 7% compared to the prior year.

  • Net written premium growth in all three segments compared to the prior year quarter; Business Insurance up 9%, Bond & Specialty Insurance up 13% and Personal Insurance up 10%.

  • Total capital returned to shareholders of $1.017 billion, including $801 million of share repurchases; full year total capital returned to shareholders of $3.076 billion, including $2.200 billion of share repurchases.

  • Book value per share of $119.77, up 4% from year-end 2020; adjusted book value per share of $109.76, up 10% from year-end 2020.

  • Board of Directors declares regular quarterly cash dividend of $0.88 per share.

NEW YORK, January 20, 2022--(BUSINESS WIRE)--The Travelers Companies, Inc. today reported net income of $1.333 billion, or $5.37 per diluted share, for the quarter ended December 31, 2021, compared to $1.310 billion, or $5.10 per diluted share, in the prior year quarter. Core income in the current quarter was $1.289 billion, or $5.20 per diluted share, compared to $1.262 billion, or $4.91 per diluted share, in the prior year quarter. Core income increased primarily due to higher net investment income and a higher underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses), partially offset by lower net favorable prior year reserve development. Net realized investment gains in the current quarter were $58 million pre-tax ($44 million after-tax), compared to $50 million pre-tax ($48 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.

Consolidated Highlights

($ in millions, except for per share amounts, and after-tax, except for premiums and revenues)

Three Months Ended December 31,

Twelve Months Ended December 31,

2021

2020

Change

2021

2020

Change

Net written premiums

$

7,995

$

7,269

10

%

$

31,959

$

29,732

7

%

Total revenues

$

9,011

$

8,397

7

$

34,816

$

31,981

9

Net income

$

1,333

$

1,310

2

$

3,662

$

2,697

36

per diluted share

$

5.37

$

5.10

5

$

14.49

$

10.52

38

Core income

$

1,289

$

1,262

2

$

3,522

$

2,686

31

per diluted share

$

5.20

$

4.91

6

$

13.94

$

10.48

33

Diluted weighted average shares outstanding

246.4

254.8

(3

)

250.8

254.6

(1

)

Combined ratio

88.0

%

86.7

%

1.3

pts

94.5

%

95.0

%

(0.5

)

pts

Underlying combined ratio

88.7

%

88.7

%

pts

90.3

%

90.7

%

(0.4

)

pts

Return on equity

18.6

%

18.4

%

0.2

pts

12.7

%

10.0

%

2.7

pts

Core return on equity

19.8

%

20.5

%

(0.7

)

pts

13.7

%

11.3

%

2.4

pts

As of

December 31,
2021

December 31,
2020

Change

Book value per share

$

119.77

$

115.68

4

%

Adjusted book value per share

109.76

99.54

10

%

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

"We are very pleased to report outstanding results for the fourth quarter and full year, including meaningful top line growth, strong margins and excellent returns from our investment portfolio," said Alan Schnitzer, Chairman and Chief Executive Officer. "Another year of exceptional performance is a testament to our franchise value, underwriting excellence and investment expertise.

"Core income for the quarter was $1.3 billion, or $5.20 per diluted share, generating core return on equity of 19.8%. These results were driven by strong underlying underwriting income and returns from our investment portfolio. Our higher underlying underwriting income was driven by record net earned premiums of $8 billion and an excellent underlying combined ratio of 88.7%. For the full year, record underlying underwriting income of $2.3 billion after-tax contributed meaningfully to the 31% increase in core income to $3.5 billion, or $13.94 per diluted share. Our high-quality investment portfolio generated after-tax net investment income of $2.5 billion for the year. Our impressive operating results, together with our strong balance sheet, enabled us to grow adjusted book value per share by more than 10% during the year, after returning $3.1 billion of excess capital to shareholders, including $2.2 billion of share repurchases, and making important investments in our business.

"Our best-in-class marketplace execution enabled us to grow net written premiums by 10% this quarter to $8 billion, with each of our three segments contributing. In Business Insurance, net written premiums grew by 9%, with renewal premium change of 9.2% near an all-time high, while retention was higher than in the prior year quarter. In addition, new business was up 16% year over year. In Bond & Specialty Insurance, net written premiums increased by 13%, driven by renewal premium change of 10.9% and continued strong retention in our management liability business. In Personal Insurance, net written premiums increased by 10%. Policies in force in both Auto and Homeowners increased to record levels, driven by continued strong retention and new business. Renewal premium change improved in Auto to 1.2% and remained strong in Homeowners at 8.7%.

"Our Perform and Transform call to action once again served us well in 2021. In addition to delivering excellent financial results today, we continue to leverage our scale and resources to execute on our ambitious innovation agenda for tomorrow. We’re enriching 160 years of insurance expertise by investing in digital tools and virtual capabilities, deploying robotics and proprietary AI models, and hiring and developing top data scientists, engineers, roboticists and meteorologists, among others, to build the insurance company of the future. Looking forward, with the best talent in the industry, we remain well positioned to capitalize on opportunities and deliver industry leading returns."

Consolidated Results

Three Months Ended December 31,

Twelve Months Ended December 31,

($ in millions and pre-tax, unless noted otherwise)

2021

2020

Change

2021

2020

Change

Underwriting gain:

$

926

$

955

$

(29

)

$

1,542

$

1,302

$

240

Underwriting gain includes:

Net favorable prior year reserve development

95

180

(85

)

538

351

187

Catastrophes, net of reinsurance

(36

)

(29

)

(7

)

(1,847

)

(1,613

)

(234

)

Net investment income

743

677

66

3,033

2,227

806

Other income (expense), including interest expense

(77

)

(66

)

(11

)

(288

)

(294

)

6

Core income before income taxes

1,592

1,566

26

4,287

3,235

1,052

Income tax expense

303

304

(1

)

765

549

216

Core income

1,289

1,262

27

3,522

2,686

836

Net realized investment gains after income taxes

44

48

(4

)

132

11

121

Impact of changes in tax laws and/or tax rates (1)

8

8

Net income

$

1,333

$

1,310

$

23

$

3,662

$

2,697

$

965

Combined ratio

88.0

%

86.7

%

1.3

pts

94.5

%

95.0

%

(0.5

)

pts

Impact on combined ratio

Net favorable prior year reserve development

(1.2

)

pts

(2.4

)

pts

1.2

pts

(1.8

)

pts

(1.2

)

pts

(0.6

)

pts

Catastrophes, net of reinsurance

0.5

pts

0.4

pts

0.1

pts

6.0

pts

5.5

pts

0.5

pts

Underlying combined ratio

88.7

%

88.7

%

pts

90.3

%

90.7

%

(0.4

)

pts

Net written premiums

Business Insurance

$

3,966

$

3,631

9

%

$

16,092

$

15,431

4

%

Bond & Specialty Insurance

905

800

13

3,376

2,951

14

Personal Insurance

3,124

2,838

10

12,491

11,350

10

Total

$

7,995

$

7,269

10

%

$

31,959

$

29,732

7

%

(1) Impact is recognized in the accounting period in which the change is enacted

Fourth Quarter 2021 Results
(All comparisons vs. fourth quarter 2020, unless noted otherwise)

Net income of $1.333 billion increased $23 million, primarily due to higher core income. Core income of $1.289 billion increased $27 million, primarily due to higher net investment income and a higher underlying underwriting gain, partially offset by lower net favorable prior year reserve development. The underlying underwriting gain benefited from higher business volumes. Net realized investment gains were $58 million pre-tax ($44 million after-tax), compared to $50 million pre-tax ($48 million after-tax) in the prior year quarter.

Combined ratio:

  • The combined ratio of 88.0% increased 1.3 points due to lower net favorable prior year reserve development (1.2 points) and higher catastrophe losses (0.1 points).

  • The underlying combined ratio of 88.7% was comparable to the prior year quarter. See below for further details by segment.

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

  • Catastrophe losses primarily resulted from tornado activity in Kentucky, windstorms in multiple states and a wildfire in Colorado. Catastrophe and non-catastrophe weather-related losses in the fourth quarter of 2021 were reduced by $255 million of recoveries available under the Company’s 2021 Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty. There were no recoveries under the Company’s 2020 Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty in the fourth quarter of 2020, as the treaty was fully utilized in the third quarter of 2020.

Net investment income of $743 million pre-tax ($624 million after-tax) increased 10%. Income from the non-fixed income investment portfolio increased over the prior year quarter, primarily due to higher private equity and real estate partnership returns. Non-fixed income returns are generally reported on a one-quarter lagged basis and directionally follow the broader equity markets. Income from the fixed income investment portfolio increased slightly over the prior year quarter, primarily due to growth in fixed maturity investments, partially offset by lower interest rates.

Net written premiums of $7.995 billion increased 10%. See below for further details by segment.

Full Year 2021 Results
(All comparisons vs. full year 2020, unless noted otherwise)

Net income of $3.662 billion increased $965 million, primarily due to higher core income and higher net realized investment gains. Core income of $3.522 billion increased by $836 million, primarily due to higher net investment income, a higher underlying underwriting gain and higher net favorable prior year reserve development, partially offset by higher catastrophe losses. The underlying underwriting gain benefited from higher business volumes. Net realized investment gains were $171 million pre-tax ($132 million after-tax), compared to $2 million pre-tax ($11 million after-tax) in the prior year.

Combined ratio:

  • The combined ratio of 94.5% improved 0.5 points due to higher net favorable prior year reserve development (0.6 points) and a lower underlying combined ratio (0.4 points), partially offset higher catastrophe losses (0.5 points).

  • The underlying combined ratio of 90.3% improved 0.4 points. See below for further details by segment.

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

  • Catastrophe losses included the fourth quarter events described above, as well as Hurricane Ida, winter storms and severe wind and hail storms in several regions of the United States in the first nine months of 2021. Catastrophe and non-catastrophe weather-related losses in 2021 were reduced by $350 million of recoveries available under the Company’s 2021 Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty. Catastrophe and non-catastrophe weather-related losses in 2020 were reduced by $280 million of recoveries available under the Company’s 2020 Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty.

Net investment income of $3.033 billion pre-tax ($2.541 billion after-tax) increased 36%. Income from the non-fixed income investment portfolio increased from the prior year, primarily due to higher private equity partnership returns. Income from the fixed income investment portfolio decreased from the prior year, primarily due to lower interest rates, partially offset by growth in fixed maturity investments.

Net written premiums of $31.959 billion increased 7%. See below for further details by segment.

Shareholders’ Equity

Shareholders’ equity of $28.887 billion decreased 1% from year-end 2020, primarily due to lower net unrealized investment gains resulting from higher interest rates, common share repurchases and dividends to shareholders, partially offset by net income of $3.662 billion. Net unrealized investment gains included in shareholders’ equity were $3.060 billion pre-tax ($2.415 billion after-tax) compared to $5.175 billion pre-tax ($4.074 billion after-tax) at year-end 2020. Book value per share of $119.77 increased 4% over year-end 2020. Adjusted book value per share of $109.76, which excludes net unrealized investment gains, increased 10% over year-end 2020.

The Company repurchased 5.1 million shares during the fourth quarter at an average price of $156.26 per share for a total of $801 million. At December 31, 2021, the Company had $4.005 billion of capacity remaining under its share repurchase authorization approved by the Board of Directors. At the end of the quarter, statutory capital and surplus was $23.906 billion, and the ratio of debt-to-capital was 20.2%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains included in shareholders’ equity was 21.6%, within the Company’s target range of 15% to 25%.

The Board of Directors declared a regular quarterly dividend of $0.88 per share. The dividend is payable on March 31, 2022 to shareholders of record at the close of business on March 10, 2022.

Business Insurance Segment Financial Results

Three Months Ended December 31,

Twelve Months Ended December 31,

($ in millions and pre-tax, unless noted otherwise)

2021

2020

Change

2021

2020

Change

Underwriting gain (loss):

$

523

$

382

$

141

$

640

$

(90

)

$

730

Underwriting gain (loss) includes:

Net favorable (unfavorable) prior year reserve development

74

124

(50

)

173

(91

)

264

Catastrophes, net of reinsurance

43

24

19

(793

)

(645

)

(148

)

Net investment income

552

502

50

2,265

1,633

632

Other income (expense)

(7

)

(5

)

(2

)

(21

)

(21

)

Segment income before income taxes

1,068

879

189

2,884

1,522

1,362

Income tax expense

201

166

35

499

213

286

Segment income

$

867

$

713

$

154

$

2,385

$

1,309

$

1,076

Combined ratio

87.0

%

89.8

%

(2.8

)

pts

95.7

%

100.3

%

(4.6

)

pts

Impact on combined ratio

Net (favorable) unfavorable prior year reserve development

(1.8

)

pts

(3.2

)

pts

1.4

pts

(1.1

)

pts

0.6

pts

(1.7

)

pts

Catastrophes, net of reinsurance

(1.0

)

pts

(0.6

)

pts

(0.4

)

pts

5.1

pts

4.2

pts

0.9

pts

Underlying combined ratio

89.8

%

93.6

%

(3.8

)

pts

91.7

%

95.5

%

(3.8

)

pts

Net written premiums by market

Domestic

Select Accounts

$

693

$

630

10

%

$

2,833

$

2,821

%

Middle Market

2,210

2,012

10

8,933

8,511

5

National Accounts

256

241

6

987

996

(1

)

National Property and Other

535

471

14

2,265

2,086

...

Total Domestic

3,694

3,354

10

15,018

14,414

4

International

272

277