The Travelers Companies Inc. (TRV, Financial) filed Quarterly Report for the period ended 2009-06-30.
St. Paul Travelers is a leading provider of commercial property-liability insurance and asset management services. Under the Travelers brand the company is also a leading underwriter of homeowners and auto insurance through independent agents. The Travelers Companies Inc. has a market cap of $24.96 billion; its shares were traded at around $42.63 with a P/E ratio of 8.7 and P/S ratio of 1. The dividend yield of The Travelers Companies Inc. stocks is 2.8%. The Travelers Companies Inc. had an annual average earning growth of 55% over the past 5 years.
Net income in the second quarter of 2009 totaled $740 million, 21% lower than net income of $942 million in the same period of 2008. Net income of $1.40 billion in the first six months of 2009 was 27% lower than the comparable 2008 net income of $1.91 billion. The decrease in net income in the second quarter of 2009 was driven by declines in net favorable prior year reserve development and net investment income, reduced underwriting margins related to pricing and loss cost trends, and an increase in non-catastrophe weather-related losses, partially offset by a decline in catastrophe losses. Net favorable prior year reserve development totaled $261 million in the second quarter of 2009, compared with $526 million in the same period of 2008. Catastrophe losses in the second quarter of 2009 totaled $200 million, compared with $356 million in the same period of 2008. The decline in net income in the first six months of 2009 compared with the same 2008 period was driven by the same factors described above for the second quarter, as well as an increase in net realized investment losses and a decline in fee income. Net favorable prior year reserve development totaled $519 million in the first six months of 2009, compared with $926 million in the same period of 2008. Catastrophe losses in the first six months of 2009 totaled $283 million, compared with $451 million in the same period of 2008. Net income in the second quarter and first six months of 2009 benefited from $26 million and $87 million of reductions, respectively, in the estimate of property windpool assessments related to Hurricane Ike that had been recorded in general and administrative expenses in the third quarter of 2008. Net income in the second quarter and first six months of 2009 also included net benefits of $19 million and $88 million, respectively, due to the favorable resolution of various prior year federal and state tax matters.
Earned premiums in the second quarter of 2009 totaled $5.35 billion, a decrease of $4 million, or less than 1%, from the same 2008 period. Through the first six months of 2009, earned premiums of $10.65 billion were $43 million, or less than 1%, lower than the same 2008 period. In the Business Insurance segment, earned premiums declined slightly from the second quarter and first six months of 2008 despite strong business retention levels, primarily reflecting the impact of competitive market conditions on pricing and new business levels in several business units during the preceding twelve months. In the Financial, Professional & International Insurance segment, earned premiums declined 5% compared with the second quarter and first six months of 2008 due to the unfavorable impact of foreign currency exchange rates. Adjusting for the impact of exchange rates, earned premiums in this segment increased 1% over the second quarter and first six months of 2008. In the Personal Insurance segment, earned premium growth of 3% and 2% over the second quarter and first six months of 2008, respectively, reflected continued strong business retention rates and continued renewal premium increases.
Net investment income of $658 million in the second quarter of 2009 declined $120 million, or 15%, from the same period of 2008. Through the first six months of 2009, net investment income of $1.20 billion was $393 million, or 25%, lower than in the same period of 2008. The declines in both periods of 2009 were due to negative returns from non-fixed maturity investments, compared with positive returns in 2008, as well as a significant decline in short-term interest rates and a lower average level of long-term fixed maturity invested assets. Non-fixed maturity investments produced negative net investment income of $33 million and $208 million in the second quarter and first six months of 2009, respectively, compared with net investment income of $32 and $71 million in the respective periods of 2008. Included in non-fixed maturity investments are private equity partnerships, hedge funds and real estate partnerships that are accounted for under the equity method of accounting and typically report financial statement information on a lag. The decline in net investment income from these investments in 2009 reflected the challenging capital market conditions that have persisted in recent quarters. The amortized cost of the fixed maturity portfolio at June 30, 2009 totaled $61.83 billion, $1.39 billion lower than at the same date in 2008, primarily reflecting the impact of $1.12 billion of common share repurchases during the preceding twelve-month period, the sale of the Companys subsidiary Unionamerica in December 2008 and the Companys $450 million contribution to its pension plan in the second half of 2008. These factors were partially offset by strong operating cash flows during that twelve-month period and the issuance of debt in the second quarter of 2009. The average pretax investment yields of 3.6% and 3.3% in the second quarter and first six months of 2009, respectively, declined from 4.2% and 4.3% in the respective periods of 2008, primarily reflecting the negative investment income from non-fixed maturity investments in 2009 and the decline in short-term interest rates.
Net Other-Than-Temporary Impairment Losses on Investments Impairments of fixed maturity investments included in net income in the second quarter of 2009 totaled $23 million, which included $13 million related to various issuers deteriorated financial position, $7 million of impairments related to structured mortgage securities and $3 million related to securities with respect to which the Company has the intent to sell. Impairments included in net income in the second quarter of 2009 also included $5 million related to equity investments and $2 million related to other investments. The equity impairments were related to issuers in the financial industry. Impairments in the second quarter of 2008 included in net income totaled $28 million and included $15 million of impairments on equity securities, $12 million on fixed maturities and $1 million on other investments.
Through the first six months of 2009, impairments included in net income totaled $214 million. Fixed income impairments in the first six months of 2009 were $130 million and included $60 million related to various issuers deteriorated financial position, $58 million of impairments related to structured mortgage securities and $12 million with respect to securities that the Company has the intent to sell. Equity impairments in the first six months of 2009 were $79 million, the majority of which were related to issuers in the financial industry. Impairments in the first six months of 2009 also included $5 million related to other investments. Impairments in the first six months of 2008 totaled $66 million, which were concentrated in the fixed maturity portfolio and included $25 million of impairments related to securities as to which the Company was unable to assert an intention to hold until recovery in market value. The remaining impairment losses in the fixed maturity portfolio in the first six months of 2008 were primarily related to various issuers deteriorated financial position.
Read the The complete ReportTRV is in the portfolios of Richard Snow of Snow Capital Management, L.P., Andreas Halvorsen of Viking Global Investors LP, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Dodge & Cox, Irving Kahn of Kahn Brothers & Company Inc., Richard Aster Jr of Meridian Fund, Brian Rogers of T Rowe Price Equity Income Fund, David Dreman of Dreman Value Management, NWQ Managers of NWQ Investment Management Co, John Keeley of Keeley Fund Management.
St. Paul Travelers is a leading provider of commercial property-liability insurance and asset management services. Under the Travelers brand the company is also a leading underwriter of homeowners and auto insurance through independent agents. The Travelers Companies Inc. has a market cap of $24.96 billion; its shares were traded at around $42.63 with a P/E ratio of 8.7 and P/S ratio of 1. The dividend yield of The Travelers Companies Inc. stocks is 2.8%. The Travelers Companies Inc. had an annual average earning growth of 55% over the past 5 years.
Highlight of Business Operations:
· Catastrophe losses of $200 million pretax ($130 million after-tax)Net income in the second quarter of 2009 totaled $740 million, 21% lower than net income of $942 million in the same period of 2008. Net income of $1.40 billion in the first six months of 2009 was 27% lower than the comparable 2008 net income of $1.91 billion. The decrease in net income in the second quarter of 2009 was driven by declines in net favorable prior year reserve development and net investment income, reduced underwriting margins related to pricing and loss cost trends, and an increase in non-catastrophe weather-related losses, partially offset by a decline in catastrophe losses. Net favorable prior year reserve development totaled $261 million in the second quarter of 2009, compared with $526 million in the same period of 2008. Catastrophe losses in the second quarter of 2009 totaled $200 million, compared with $356 million in the same period of 2008. The decline in net income in the first six months of 2009 compared with the same 2008 period was driven by the same factors described above for the second quarter, as well as an increase in net realized investment losses and a decline in fee income. Net favorable prior year reserve development totaled $519 million in the first six months of 2009, compared with $926 million in the same period of 2008. Catastrophe losses in the first six months of 2009 totaled $283 million, compared with $451 million in the same period of 2008. Net income in the second quarter and first six months of 2009 benefited from $26 million and $87 million of reductions, respectively, in the estimate of property windpool assessments related to Hurricane Ike that had been recorded in general and administrative expenses in the third quarter of 2008. Net income in the second quarter and first six months of 2009 also included net benefits of $19 million and $88 million, respectively, due to the favorable resolution of various prior year federal and state tax matters.
Earned premiums in the second quarter of 2009 totaled $5.35 billion, a decrease of $4 million, or less than 1%, from the same 2008 period. Through the first six months of 2009, earned premiums of $10.65 billion were $43 million, or less than 1%, lower than the same 2008 period. In the Business Insurance segment, earned premiums declined slightly from the second quarter and first six months of 2008 despite strong business retention levels, primarily reflecting the impact of competitive market conditions on pricing and new business levels in several business units during the preceding twelve months. In the Financial, Professional & International Insurance segment, earned premiums declined 5% compared with the second quarter and first six months of 2008 due to the unfavorable impact of foreign currency exchange rates. Adjusting for the impact of exchange rates, earned premiums in this segment increased 1% over the second quarter and first six months of 2008. In the Personal Insurance segment, earned premium growth of 3% and 2% over the second quarter and first six months of 2008, respectively, reflected continued strong business retention rates and continued renewal premium increases.
Net investment income of $658 million in the second quarter of 2009 declined $120 million, or 15%, from the same period of 2008. Through the first six months of 2009, net investment income of $1.20 billion was $393 million, or 25%, lower than in the same period of 2008. The declines in both periods of 2009 were due to negative returns from non-fixed maturity investments, compared with positive returns in 2008, as well as a significant decline in short-term interest rates and a lower average level of long-term fixed maturity invested assets. Non-fixed maturity investments produced negative net investment income of $33 million and $208 million in the second quarter and first six months of 2009, respectively, compared with net investment income of $32 and $71 million in the respective periods of 2008. Included in non-fixed maturity investments are private equity partnerships, hedge funds and real estate partnerships that are accounted for under the equity method of accounting and typically report financial statement information on a lag. The decline in net investment income from these investments in 2009 reflected the challenging capital market conditions that have persisted in recent quarters. The amortized cost of the fixed maturity portfolio at June 30, 2009 totaled $61.83 billion, $1.39 billion lower than at the same date in 2008, primarily reflecting the impact of $1.12 billion of common share repurchases during the preceding twelve-month period, the sale of the Companys subsidiary Unionamerica in December 2008 and the Companys $450 million contribution to its pension plan in the second half of 2008. These factors were partially offset by strong operating cash flows during that twelve-month period and the issuance of debt in the second quarter of 2009. The average pretax investment yields of 3.6% and 3.3% in the second quarter and first six months of 2009, respectively, declined from 4.2% and 4.3% in the respective periods of 2008, primarily reflecting the negative investment income from non-fixed maturity investments in 2009 and the decline in short-term interest rates.
Net Other-Than-Temporary Impairment Losses on Investments Impairments of fixed maturity investments included in net income in the second quarter of 2009 totaled $23 million, which included $13 million related to various issuers deteriorated financial position, $7 million of impairments related to structured mortgage securities and $3 million related to securities with respect to which the Company has the intent to sell. Impairments included in net income in the second quarter of 2009 also included $5 million related to equity investments and $2 million related to other investments. The equity impairments were related to issuers in the financial industry. Impairments in the second quarter of 2008 included in net income totaled $28 million and included $15 million of impairments on equity securities, $12 million on fixed maturities and $1 million on other investments.
Through the first six months of 2009, impairments included in net income totaled $214 million. Fixed income impairments in the first six months of 2009 were $130 million and included $60 million related to various issuers deteriorated financial position, $58 million of impairments related to structured mortgage securities and $12 million with respect to securities that the Company has the intent to sell. Equity impairments in the first six months of 2009 were $79 million, the majority of which were related to issuers in the financial industry. Impairments in the first six months of 2009 also included $5 million related to other investments. Impairments in the first six months of 2008 totaled $66 million, which were concentrated in the fixed maturity portfolio and included $25 million of impairments related to securities as to which the Company was unable to assert an intention to hold until recovery in market value. The remaining impairment losses in the fixed maturity portfolio in the first six months of 2008 were primarily related to various issuers deteriorated financial position.
Read the The complete ReportTRV is in the portfolios of Richard Snow of Snow Capital Management, L.P., Andreas Halvorsen of Viking Global Investors LP, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Dodge & Cox, Irving Kahn of Kahn Brothers & Company Inc., Richard Aster Jr of Meridian Fund, Brian Rogers of T Rowe Price Equity Income Fund, David Dreman of Dreman Value Management, NWQ Managers of NWQ Investment Management Co, John Keeley of Keeley Fund Management.
