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Travelers Cos. (TRV) Tops Q4 EPS by 53c

January 22, 2015 6:57 AM EST

Travelers Cos. (NYSE: TRV) reported Q4 EPS of $3.07, $0.53 better than the analyst estimate of $2.54. Revenue came in at $6.78 billion, versus the consensus at $5.82 billion.

Fourth quarter net income of $1.038 billion provided a strong finish to an excellent year financially, strategically, and operationally,” commented Jay Fishman, Chairman and Chief Executive Officer. “We achieved record levels of net income per diluted share for both the quarter and the full year of $3.11 and $10.70, respectively, benefitting from strong underwriting and investment results, as well as our ongoing strategy of returning excess capital to shareholders. For the full year, we achieved a return on equity of 14.6% and operating return on equity of 15.5%, bringing our average annual return on equity to 12.5% and average annual operating return on equity to 13.3% for the past decade.

“For the full year, all our business segments performed very well. Business and International Insurance profitability was very strong, with a combined ratio of 93.1% and operating income of over $2.3 billion. We remain very pleased with, and intend to continue, our proactive, account by account, class by class pricing strategy. Bond & Specialty Insurance had exceptional performance in 2014, with record operating income of $727 million. These results are a continuation of the superior, long-term performance this business has achieved while successfully navigating a very challenging and rapidly evolving economic environment. Results in Personal Insurance were strong, and we are especially pleased with the marketplace success of Quantum 2.0. We achieved net written premium growth in Auto in the second half of the year, as well as sequential increases in policies in force beginning in the third quarter. Importantly, loss indications for Quantum 2.0, while still preliminary, look to be in line with our expectations.

“We remain optimistic that we will continue to achieve superior returns over time across our business segments, and that, combined with our active capital management strategy, positions us to continue to deliver meaningful shareholder value.”

Q4 Performance:

Underwriting results

  • The combined ratio improved 2.7 points to 85.0% due to higher net favorable prior year reserve development (1.5 points), an improved underlying combined ratio (1.0 point), and lower catastrophe losses (0.2 points).
  • The underlying combined ratio improved 1.0 point to 90.2% due to the benefits of earned pricing that exceeded loss cost trends.
  • Net favorable prior year reserve development occurred in all segments. Catastrophe losses were primarily due to a wind and hail storm in the Midwest region of the United States, as well as increases in estimated losses related to certain wind and hail storms that occurred in the second quarter.

Net investment income of $637 million pre-tax ($513 million after-tax) decreased due to lower reinvestment rates in the fixed income portfolio and lower returns in the non-fixed income portfolio. Other expense of $65 million pre-tax increased primarily due to the benefit of several items that occurred in the prior year quarter.

Net written premiums of $5.836 billion increased 4% primarily driven by growth in domestic business insurance and the inclusion of Dominion.

For earnings history and earnings-related data on Travelers Cos. (TRV) click here.



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