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TheStreet Open House

Travelers Reports Quarterly Records For Net And Operating Income Per Diluted Share Of $2.70 And $2.68, Respectively, As Compared To $0.78 And $0.72 In The Prior Year Quarter

“We continue to be very pleased with the execution of our business strategies. In Business Insurance, our active pricing strategy improved profitability, as well as delivered meaningful written rate gains and higher retention levels. Within the Financial, Professional & International segment, our Management Liability business continued to improve profitability and achieve written rate gains in excess of loss trend. In International, our acquisition of Dominion closed on November 1, and we are on track with the integration. We are also pleased with the profitability of our Personal Insurance business, particularly the improvement in Automobile. Finally, we launched our new auto product, Quantum 2.0, in October and are encouraged in these early days by the market receptivity.

“Our focus on delivering top-tier operating return on equity by generating appropriate returns on our products and right sizing capital has created significant shareholder value. From the beginning of 2005 through the end of 2013, we have delivered an average annual operating return on equity of 13.1%, returned over $27 billion in capital to our shareholders through dividends and share repurchases, and grown book value per share at a compound annual growth rate of 9%. Total return to shareholders over that period, including dividends reinvested, exceeded 200%. We are encouraged by the strength of our 2013 results, and we remain committed to taking the steps necessary to continue to improve returns consistent with our long-held goal of producing mid-teens operating return on equity over time,” concluded Fishman.

Consolidated Results

                                                                       
($ in millions and pre-tax, unless noted otherwise)                                      
Three Months Ended December 31, Twelve Months Ended December 31,
2013 2012 Change 2013 2012 Change
 
Underwriting gain (loss): $ 689 $ (338 ) $ 1,027 $ 2,167 $ 507 $ 1,660

Underwriting gain (loss) includes:

 

Net favorable prior year reserve development

Catastrophes, net of reinsurance

 

259 222 37 840 940 (100 )
(53 ) (1,054 ) 1,001 (591 ) (1,862 ) 1,271
 
Net investment income 702 689 13 2,716 2,889 (173 )
 
Other, including interest expense (31 ) (79 ) 48 (104 ) (281 ) 177
           
Operating income before income taxes 1,360 272 1,088 4,779 3,115 1,664
Income tax expense (benefit)   379     (6 )   385     1,212     674     538  
Operating income 981 278 703 3,567 2,441 1,126
Net realized investment gains after income taxes   7     26     (19 )   106     32     74  
Net Income $ 988   $ 304   $ 684   $ 3,673   $ 2,473   $ 1,200  
                                                                       
 
GAAP combined ratio 87.7 % 105.4 % (17.7 ) pts 89.8 % 97.1 % (7.3 ) pts
 

Impact on GAAP combined ratio

Net favorable prior year reserve development

Catastrophes, net of reinsurance

(4.4 ) pts (4.0 ) pts (0.4 ) pts (3.7 ) pts (4.2 ) pts 0.5 pts
0.9 pts 18.7 pts (17.8 ) pts 2.6 pts 8.3 pts (5.7 ) pts
 
Underlying GAAP combined ratio 91.2 % 90.7 % 0.5 pts 90.9 % 93.0 % (2.1 ) pts
                                                                       
 
Net written premiums
Business Insurance $ 2,873 $ 2,784 3 % $ 12,233 $ 11,872 3 %
Financial, Professional & International Insurance 1,043 808 29 3,309 2,981 11
Personal Insurance   1,717     1,793   (4 )   7,225     7,594   (5 )
Total $ 5,633   $ 5,385   5 % $ 22,767   $ 22,447   1 %
                                                                                               

Fourth Quarter 2013 Results

(All comparisons vs. fourth quarter 2012, unless noted otherwise)

Net and operating income of $988 million after-tax and $981 million after-tax, respectively, increased $684 million and $703 million, primarily due to lower catastrophe losses.

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