Provides estimate of PG&E subrogation
recoveries expected to be recognized in third quarter 2020
The Travelers Companies, Inc. (NYSE: TRV) today announced
preliminary results for the second quarter of 2020 and provided an
estimate of PG&E subrogation recoveries expected to be
recognized in the third quarter of 2020.
For the second quarter of 2020, the company expects to report a
net loss per diluted share of $0.16 and a core loss per diluted
share of $0.20, resulting from a high level of catastrophe losses
and, as expected, losses in the company’s non-fixed income
investment portfolio.
The company’s estimate for catastrophe losses is $854 million
pre-tax ($673 million after-tax), net of reinsurance. Catastrophe
losses primarily resulted from severe storms in several regions of
the United States, as well as events related to civil unrest.
The company expects to report net investment income of $268
million pre-tax ($251 million after-tax), which includes investment
income from the fixed income portfolio of $511 million pre-tax
($438 million after-tax) and losses in the non-fixed income
portfolio of $234 million pre-tax ($180 million after-tax). As the
company discussed in its first quarter 2020 earnings disclosure,
its non-fixed income returns are generally reported on a
one-quarter lagged basis and directionally follow the broader
equity markets. Based on its composition, the company’s non-fixed
income investment portfolio declined less than the broader equity
markets during the first quarter.
In terms of the company’s underlying underwriting results,
COVID-19 and related economic conditions had a modest net impact in
the quarter, reflecting the company’s disciplined underwriting in
terms of products and classes of business written, as well as
careful management of terms and conditions. Insurance losses
directly attributed to the pandemic of $114 million pre-tax and a
$63 million pre-tax reduction in the estimate of ultimate audit
premiums receivable were approximately offset by initial estimates
of favorable frequency from the shelter-in-place environment,
primarily in short-tail lines (net of premium refunds), and other
items.
Separately, regarding third quarter 2020 results, the company
provided an estimate of its subrogation recoveries related to
claims against PG&E Corporation and Pacific Gas and Electric
Company (together “PG&E”) resulting from the 2017 and 2018
wildfires in California. In connection with PG&E’s emergence
from bankruptcy, which occurred on July 1, 2020, the company will
recognize favorable prior year reserve development related to these
claims of approximately $400 million, pre-tax and net of expenses
and reinsurance, in its third quarter 2020 results.
Second Quarter 2020 Conference
Call
As previously announced, Travelers will review its second
quarter 2020 results at 9 a.m. ET on Thursday, July 23, following
the release of results earlier that morning. Investors can access
the call via webcast at investor.travelers.com or by dialing
844.895.1976 within the United States and 647.689.5389 outside the
United States. A slide presentation, statistical supplement and
live audio broadcast will be available on the investor section of
the Travelers website. A replay of the webcast will be available on
the same website following the conference call.
Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements, other than statements of historical facts,
may be forward-looking statements. Words such as “may,” “will,”
“should,” “likely,” “anticipates,” “expects,” “intends,” “plans,”
“projects,” “believes,” “estimates” and similar expressions are
used to identify these forward-looking statements. These statements
include, among other things, the company’s statements about:
- the company’s expected results of operations for the second
quarter ended June 30, 2020, including, among other things, net and
core loss per diluted share, net investment income and catastrophe
losses;
- the impact of COVID-19 and related economic conditions on the
company’s expected results of operations for the second quarter
ended June 30, 2020, including the impact on insurance losses
directly attributable to the pandemic, the estimate of ultimate
audit premiums receivable and favorable frequency, primarily in
short-tail lines; and
- the amount of the company’s expected recognition in the third
quarter ending September 30, 2020 of favorable prior year reserve
development related to subrogation claims against PG&E.
The forward-looking statements in this press release provide
preliminary information based on the company’s current estimates
and expectations, and remain subject to change and finalization
based on management’s ongoing review of results of the quarter and
completion of all quarter-end close processes. The company cautions
investors that if the estimates, expectations or assumptions
underlying the forward-looking statements in this press release
prove inaccurate or if other risks or uncertainties arise, actual
results could differ materially from those expressed in, or implied
by, these forward-looking statements. Other factors that could
cause actual results to differ materially from the forward looking
statements in this press release are discussed under the captions
“Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in the company’s
quarterly report on Form 10-Q filed with the Securities and
Exchange Commission (SEC) on April 21, 2020, and in the company’s
most recent annual report on Form 10-K filed with the SEC on
February 13, 2020, in each case as updated by periodic filings with
the SEC. The company’s forward-looking statements speak only as of
the date of this press release, and the company undertakes no
obligation to update forward-looking statements.
About Travelers
The Travelers Companies, Inc. (NYSE: TRV) is a leading provider
of property casualty insurance for auto, home and business. A
component of the Dow Jones Industrial Average, Travelers has
approximately 30,000 employees and generated revenues of
approximately $32 billion in 2019. For more information, visit
www.travelers.com.
Reconciliation of GAAP Measure to Non-GAAP Measure
The following measure is used by the company’s management as one
measure to evaluate financial performance against historical
results, to establish performance targets on a consolidated basis
and for other reasons as discussed below. This measure is
considered a non-GAAP financial measure under applicable SEC rules
because it excludes an item not ordinarily excluded in the most
comparable GAAP financial measure. A reconciliation to the most
comparable GAAP measure also follows.
In the opinion of the company’s management, a discussion of this
measure provides investors, financial analysts, rating agencies and
other financial statement users with a better understanding of the
significant factors that comprise the company’s periodic results of
operations and how management evaluates the company’s financial
performance.
This measure excludes net realized investment gains (losses),
net of tax, which can be significantly impacted by both
discretionary and other economic factors and are not necessarily
indicative of operating trends.
Other companies may calculate this measure differently, and,
therefore, their measure may not be comparable to the measure used
by the company’s management.
Core income (loss) is consolidated net income (loss)
excluding the after-tax impact of net realized investment gains
(losses), discontinued operations, the effect of a change in tax
laws and tax rates at enactment, and cumulative effect of changes
in accounting principles when applicable. Financial statement users
also consider core income (loss) when analyzing the results and
trends of insurance companies. Core income (loss) per share
is core income (loss) on a per common share basis.
Reconciliation of Net Income (Loss) per
Share to Core Income (Loss) per Share on a Basic and Diluted
Basis
Three Months Ended June 30,
2020
Basic and Diluted
income (loss) per share
Net income
$ (0.16)
Adjustments:
Net realized investment (gains) losses,
after-tax
(0.04)
Core income
$ (0.20)
The allocation of undistributed loss to participating
share-based awards and the weighted average effects of stock
options and performance shares were excluded from the calculation
of the net income (loss) per share on a diluted basis since the
impact of these potential shares of common stock and their effects
on income were anti-dilutive for the three months ended June 30,
2020. Accordingly, net income (loss) per share is the same on a
basic and diluted share basis.
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version on businesswire.com: https://www.businesswire.com/news/home/20200714005307/en/
Investors: Abbe Goldstein, 917.778.6825
Media: Patrick Linehan, 917.778.6267
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