The Travelers Companies, Inc. Delivers Strong Financial Performance

The Travelers Companies, Inc., a leading provider of property and casualty insurance, has reported impressive financial results for the third quarter and first nine months of 2024. The company’s net income and earnings per share saw significant increases compared to the same periods in 2023, driven by higher underwriting margins, favorable prior year reserve development, and strong investment performance.

Consolidated Overview

In the third quarter of 2024, Travelers reported diluted net income per share of $5.42, a 211% increase from $1.74 in the same period of 2023. Net income for the quarter was $1.26 billion, up 212% from $404 million a year earlier.

The increase in income before taxes was primarily due to:

• Higher underwriting margins, excluding catastrophe losses and prior year reserve development
• Net favorable prior year reserve development, compared to net unfavorable development in 2023
• Higher net investment income
• Net realized investment gains, compared to losses in 2023
• Partially offset by higher catastrophe losses

For the first nine months of 2024, diluted net income per share was $12.51, up 115% from $5.83 in the same period of 2023. Net income increased 114% to $2.92 billion.

The higher net income was driven by:

• Improved underlying underwriting margins
• Increased net investment income
• Higher net favorable prior year reserve development
• Net realized investment gains, compared to losses in 2023
• Partially offset by higher catastrophe losses

The company’s international operations, which include Canada, the UK, Ireland, and joint ventures in Brazil and Colombia, did not have a material impact on the reported results.

Revenues

Earned premiums, which reflect the premiums that have been recognized as revenue, increased 10% in the third quarter and 12% in the first nine months of 2024 compared to the same periods in 2023. The increases were seen across all three of the company’s business segments: Business Insurance, Bond & Specialty Insurance, and Personal Insurance.

Net investment income rose 18% in the third quarter and 23% in the first nine months of 2024, primarily due to higher yields on fixed maturity investments and increased income from private equity partnerships.

Fee income, which is mainly generated by the National Accounts business in Business Insurance, increased 7% in the third quarter and 5% in the first nine months of 2024.

The company reported net realized investment gains of $55 million in the third quarter and $25 million in the first nine months of 2024, compared to losses of $65 million and $94 million, respectively, in the same periods of 2023. These gains were driven by favorable changes in the fair value of the company’s equity securities portfolio.

Claims and Expenses

Claims and claim adjustment expenses decreased 2% in the third quarter of 2024 but increased 3% in the first nine months, primarily due to:

• Higher business volumes
• Increased catastrophe losses
• Loss cost trends
• Partially offset by net favorable prior year reserve development and lower non-catastrophe weather-related losses in Personal Insurance

Amortization of deferred acquisition costs and general and administrative expenses increased in line with the growth in earned premiums.

Interest expense was flat in the third quarter and increased slightly in the first nine months of 2024 compared to the same periods in 2023.

The company’s effective tax rate was 19% in the third quarter and first nine months of 2024, compared to 14% and (1)% in the respective 2023 periods. The increase was primarily due to the higher income before taxes and the expiration of a tax benefit in 2023.

Segment Performance

Business Insurance Segment income increased 49% in the third quarter and 30% in the first nine months of 2024, driven by:

• Lower net unfavorable prior year reserve development
• Higher underlying underwriting margins, reflecting the benefit of earned pricing
• Increased net investment income

Earned premiums grew 10% in the third quarter and 12% in the first nine months, reflecting strong retention rates and new business growth.

Bond & Specialty Insurance Segment income decreased 16% in the third quarter and 16% in the first nine months of 2024, primarily due to:

• Lower net favorable prior year reserve development
• Higher catastrophe losses
• Increased general and administrative expenses, including from the Corvus acquisition

Earned premiums increased 8% in both periods, driven by growth in the domestic management liability and surety lines.

Personal Insurance The segment reported income of $384 million in the third quarter, compared to a loss of $193 million a year earlier. For the first nine months, the segment had income of $451 million, versus a loss of $648 million in 2023. The improvements were driven by:

• Higher underlying underwriting margins, reflecting earned pricing, lower non-catastrophe weather losses, and lower physical damage claims
• Higher net favorable prior year reserve development
• Lower catastrophe losses
• Increased net investment income

Earned premiums grew 10% in the third quarter and 12% in the first nine months, driven by strong retention and new business in both the automobile and homeowners lines.

Combined Ratio

The company’s combined ratio, which measures underwriting profitability, improved significantly in 2024 compared to 2023:

• Third quarter 2024: 93.2% vs. 101.0% in 2023
• First nine months 2024: 95.7% vs. 101.0% in 2023

The improvement was primarily due to higher underlying underwriting margins, net favorable prior year reserve development, and lower catastrophe losses, partially offset by a higher underwriting expense ratio.

Outlook

Looking ahead, the company expects:

• Continued strong retention levels in its business segments
• Competitive market conditions for new business, with new business generally having less impact on underwriting profitability than renewal business
• Potential volatility in catastrophe losses and prior year reserve development, which can significantly impact underwriting results
• Continued growth in net investment income, driven by higher reinvestment yields and increased invested assets
• Share repurchases and dividends to shareholders, subject to various factors including capital needs and market conditions

The company believes it has a strong capital position and expects to continue returning excess capital to shareholders over time, while maintaining appropriate capital levels to support its operations and financial strength ratings.

Conclusion

Travelers delivered excellent financial performance in the third quarter and first nine months of 2024, with significant increases in net income, earnings per share, and underwriting profitability. The company’s diverse business segments, disciplined underwriting, and strong investment portfolio have enabled it to navigate the current economic and market environment effectively. Looking ahead, Travelers remains focused on profitable growth, prudent capital management, and providing value to its shareholders.