Financial Performance
2023 Results
Travelers delivered core income of $3.1 billion, or $13.13 of core income per diluted share, generating a core return on equity of 11.5%, a meaningful spread above both the 10-year Treasury and our cost of equity. We produced these very strong results notwithstanding elevated industrywide catastrophe losses and a personal lines operating environment that, while improving, was difficult during the year.
We delivered record $3.2 billion of after-tax underlying underwriting income, an increase of more than 55% compared to the prior year, and an underlying combined ratio that improved 250 basis points to an excellent 89.5%. This year’s outstanding underlying underwriting results are even more impressive when considered in their historical context. As illustrated by the following chart, over the past four years, we have taken our underlying underwriting income to an entirely new level and sustained it there.
Underlying Underwriting Income1 (in billions, after-tax)
Underlying_Underwriting_Income_Accordion
1 Excludes the impact of net prior year reserve development and catastrophe losses.
Turning to the top line, today’s production generates tomorrow’s earned premiums. In 2023, we delivered record net written premiums of $40.2 billion, up 14% compared to the prior year. This represents the 14th consecutive year of net written premium growth. All three of our business segments contributed to this strong top-line performance, with Business Insurance up 16%, Bond & Specialty Insurance up 3% and Personal Insurance up 13%. We remain very well positioned to continue to profitably grow our business. Importantly, our growth has not come from competing margin away. As demonstrated by our continued strong margins, we have grown by successfully investing in the franchise value – products, services and experiences – that our customers want to purchase and our distribution partners want to sell, and, of course, through excellent execution by our field organization.
Investment Expertise
We strive to be thoughtful underwriters on both sides of our balance sheet, and we have always managed our investment portfolio to support our insurance operations, not the reverse. Accordingly, our investment portfolio is positioned to meet our obligations to policyholders under almost every foreseeable circumstance – anything from a global pandemic to a significant natural disaster to a financial crisis.
With this in mind, we are focused on risk-adjusted returns and credit quality rather than reaching for yield that is not commensurate with the underlying risk. Our well-defined and consistent investment portfolio has been a meaningful and reliable contributor to our results, year in and year out.
This is exactly what we saw in 2023. Net investment income increased by more than 12% to a very strong $2.4 billion after-tax. From a fixed income perspective, we benefited throughout 2023 from very strong cash flow and the trend of higher interest rates, which began in 2022. For 2024, we expect to earn approximately $2.6 billion after-tax on our fixed income portfolio, our highest level ever.
Underwriting Expertise
Underwriting excellence is of course key to our success, and there is nothing more critical to underwriting excellence than a culture that values strong performance over time and understands how to balance the art and science of decision making based on data and analytics. In other words, evaluating risk and reward is at the heart of what we do.
Our culture alone is a significant competitive advantage, and one that we believe is very hard to replicate. A critical component of this culture is our granular approach to underwriting. In our commercial businesses, that means execution on an account-by-account or class-by-class basis. In personal lines, it means a very high degree of segmentation by risk profile, product and geography. With that and our advanced data and analytics, we thoughtfully select the risks we write and price our products deliberately with our target return in mind.
Like every aspect of our business, our focus on performance over time is core to how we manage our catastrophe exposure. Although we are unable to predict what the next event will be or where it will occur, we are taking steps every day to ensure that our portfolio of risk properly contemplates the potential for loss and that we maintain the right balance of risk and reward. While the impact of the risk-based decisions we are making today is not always immediately evident, they will continue to drive our performance over time.
As a result of our thoughtful risk and reward approach to catastrophe management, our share of catastrophe losses over time has been significantly below our market share. This outperformance is the result of our prudent and integrated approach to managing our catastrophe exposures through portfolio, underwriting and pricing actions.
We continue to make significant investments in advanced capabilities to ensure that our underwriters have the tools and insights necessary to develop a comprehensive view of catastrophe risk. As just a few examples, in 2023, we:
- Introduced new, internally developed storm surge underwriting capabilities, providing a granular view of storm surge risk to inform underwriting decisions at the point of sale.
- Invested in new climate research to deepen our understanding of changing climate conditions related to peak catastrophe perils.
- Enhanced our view of the risks related to tornado/hail to align with the latest science and implemented a new tornado/hail catastrophe model that includes new variables to improve risk segmentation and better reflect current weather trends.
While weather and catastrophe losses continue to be a major challenge for the industry, we are confident that we are making the necessary investments to maintain our underwriting excellence and achieve target returns over time.
Combined Ratio2 - Travelers in Comparison to the U.S. Industry
Combined_Ratio_Accordion
2 Statutory Combined Ratio. Copyright © 2024, S&P Global Market Intelligence. Used with permission.
2023 Financial Results in the Context of Our Innovation Strategy
When we first articulated our innovation strategy several years ago, we made clear that it was designed in large part to position us to grow over time at leading returns. The charts below illustrate this strategy at work and its compounding, multiyear benefit. We have more than doubled our rate of growth, sustained strong underlying underwriting margins and meaningfully lowered our expense ratio. That has resulted in record levels of underlying underwriting income, cash flow from operations and invested assets excluding net unrealized investment gains (losses).
We have not grown by underpricing the business or compromising our underwriting discipline. We have grown by investing in the products, services and experiences that our customers want to buy and our distribution partners want to sell. We have also grown through excellent execution and hard work on the part of our outstanding field organization.
Accelerating Net Written Premium Growth
Net_Premium_Growth
3 Represents growth from 2012 through 2016.
4 Represents growth from 2016 through 2023.
Consistently Strong Underlying Profitability5
Underlying_Combined_Ratio
5 Underlying combined ratio, which excludes the impact of catastrophe losses and net prior year reserve development.
Improving Expense Ratio
Improving_Expense_Ratio
Higher Underlying Underwriting Income6 (after-tax)
Underwriting Income
6 Underlying underwriting income, which excludes the impact of net prior year reserve development and catastrophe losses.
Higher Cash Flow from Operations
Higher_Cash_Flow
Growing Invested Assets7
Growing_Invested_Assets
7 Invested assets excludes net unrealized investment gains (losses).
Consistent and Successful Long-Term Financial Strategy Delivers Shareholder Value
It is always important to consider our strategic initiatives and financial results in the context of what we are ultimately trying to achieve. At Travelers, our simple and unwavering mission for creating shareholder value is to:
- Deliver superior returns on equity by leveraging our competitive advantages.
- Generate earnings and capital substantially in excess of our growth needs.
- Thoughtfully rightsize capital and grow book value per share over time.
The results we deliver are due to our deliberate and consistent approach to creating shareholder value. We have been clear for many years that one of our crucial responsibilities is to produce an appropriate return on equity for our shareholders. This has meant developing and executing financial and operational plans consistent with our goal of achieving superior returns, which we defined many years ago as a mid-teens core return on equity over time. We emphasize that this objective is measured over time because we recognize that the macroeconomic environment, loss cost trends, weather, and geopolitical and other factors impact our results from year to year, and that there will be years – or longer periods – and environments in which a mid-teens return is not attainable. In that regard, we established the mid-teens goal at a time when the 10-year Treasury was yielding around 5%, and mid-teens was simply the quantification of what qualified as an industry-leading return in that environment. While the 10-year Treasury rate has moved closer to that level after years of historic lows, the upward trajectory over the past couple years will take time to earn into our fixed income portfolio, with approximately 10% of the fixed income portfolio maturing each year. In any event, we always seek to deliver industry-leading returns over time.
Return on Equity
Return_On_Equity
8 2023 Forecast: ©2024 Conning, Inc., as published in Conning’s Property-Casualty Forecast & Analysis by Line of Insurance, 2023 Q4 edition. Used with permission. Historical data: © 2024 S&P Global Market Intelligence LLC. Used with permission.
Our 2023 return on equity of 13.6% and core return on equity of 11.5% again meaningfully exceeded the average return on equity for the domestic P&C industry of 8.4%, according to estimates from Conning, Inc., a global investment management firm and insurance research provider. As shown in the chart above, our return on equity has significantly outperformed the average return on equity for the industry in each of the past 10 years.
Importantly, these industry-leading returns on an absolute basis are even more impressive on a risk-adjusted basis when you take into account our low level of volatility. The level and consistency of our return on equity over time reflect the value of our competitive advantages and the discipline with which we run our business.
A Balanced Approach to Rightsizing Capital
Our strong and consistent returns over time, together with our fortress balance sheet, have enabled us to grow both book value per share and adjusted book value per share at a compound annual growth rate of 4% and 6%, respectively, over the last 10 years.
Adjusted Book Value Per Share9
Adjusted_Book_Value
9 Excludes net unrealized investment gains (losses), net of tax, included in shareholders' equity.
During this period, we have also returned a significant amount of excess capital to our shareholders through dividends and share repurchases. Over the last 10 years, we increased our dividend each year and grew dividends per share at an average annual rate of approximately 7%.
Dividends Per Share
Dividends_Per_Share
Notably, since we began our share repurchase program in 2006, we have returned approximately $55 billion of excess capital to our shareholders, including through $41 billion of share repurchases – well in excess of the market capitalization of the company at that time.
Our capital management strategy has been an important driver of shareholder value creation over time. Our first objective for the capital we generate is to reinvest it in our business – organically and inorganically – to create shareholder value. For example, as we continue to meaningfully grow our top line, as we have for the past few years, we will retain more capital to support that growth. Also, we continue to invest in everything from talent to technology to further our ambitious innovation agenda, advance our strategic objectives and drive tomorrow's performance.
Having said that, we are disciplined stewards of our shareholders’ capital. To the extent that we generate capital that we cannot reinvest consistent with our objective of generating industry-leading returns over time, we will manage it the same way we have for nearly two decades – by returning it to our shareholders through dividends and share repurchases. By returning excess capital to our investors, we give them the ability to allocate their investment dollars as they see fit, including by investing in companies with different growth profiles or capital needs, thereby efficiently allocating capital across the economy. Over time, that efficient allocation of capital in the marketplace contributes to a stronger economy.
See the Non-GAAP Reconciliations page for a discussion and calculation of non-GAAP financial measures.
Financial Highlights
At and for the year ended December 31. Dollar amounts in millions, except per share amounts.
|
2023 |
2022 |
2021 |
2020 |
2019 | |
|---|---|---|---|---|---|
|
Earned Premiums |
$37,761 |
$33,763 |
$30,855 |
$29,044 |
$28,272 |
|
Total Revenues |
$41,364 |
$36,884 |
$34,816 |
$31,981 |
$31,581 |
|
Core Income |
$3,072 |
$2,998 |
$3,522 |
$2,686 |
$2,537 |
|
Net Income |
$2,991 |
$2,842 |
$3,662 |
$2,697 |
$2,622 |
|
Net Income Per Diluted Share |
$12.79 |
$11.77 |
$14.49 |
$10.52 |
$9.92 |
|
Total Investments |
$88,810 |
$80,454 |
$87,375 |
$84,423 |
$77,884 |
|
Total Assets |
$125,978 |
$115,717 |
$120,466 |
$116,764 |
$110,122 |
|
Shareholders’ Equity |
$24,921 |
$21,560 |
$28,887 |
$29,201 |
$25,943 |
|
Return On Equity |
13.6% |
12.2% |
12.7% |
10.0% |
10.5% |
|
Core Return On Equity |
11.5% |
11.3% |
13.7% |
11.3% |
10.9% |
|
Book Value Per Share |
$109.19 |
$92.90 |
$119.77 |
$115.68 |
$101.55 |
|
Dividends Per Share |
$3.93 |
$3.67 |
$3.49 |
$3.37 |
$3.23 |
See the Non-GAAP Reconciliations page for a discussion and calculation of non-GAAP financial measures.
Deliberate and Disciplined Execution
Disciplined_Execution_Accordion
Delivering Value Over Time
Ultimately, it is the success of our strategy – with all its component parts – that drives our total return to shareholders over time. It is important to remember that we have a well-established track record of managing the company to create value over the long term, through periods of weather volatility; through anticipated and unanticipated developments impacting loss trends; through both foreseeable and unforeseeable economic cycles; and through any number of more extreme economic, geopolitical and other conditions. With that in mind, the graph below compares our returns since the 2008 financial crisis to the returns for the S&P 500, the S&P 500 Financials and the Dow 30.
Total Return to Shareholders1
Transcript_Accordion_Shareholder
1Represents the change in stock price plus the cumulative amount of dividends, assuming dividend reinvestment. For each year on the chart, total return is calculated with January 1, 2008, as the starting point and December 31 of the relevant year as the ending point. ©Bloomberg Finance L.P. Used with permission of Bloomberg.
Our total return reflects the successful execution of our long-term strategy. We provide our shareholders with industry-leading returns, low volatility and high credit quality. The success of this long-term strategy is evident in the strong performance of our stock over time, which has been remarkably consistent relative to many others in the P&C industry. Viewing our performance through this long-term lens, we are as confident as ever that executing on our long-term financial strategy, managing Travelers with an over-time discipline, and continuing to invest in our competitive advantages through our ambitious and focused innovation agenda is the right approach for building on Travelers’ outstanding record.
Non-GAAP Reconciliations
Reconciliation of Net Income Per Share to Core Income Per Share on a Diluted Basis
For the year ended December 31,
| 2023 |
2022 | |
| Net Income | $12.79 | $11.77 |
| Adjustments: | ||
| Net realized investment losses, after-tax | 0.34 | 0.65 |
| Core Income | $13.13 | $12.42 |
Reconciliation of Shareholders' Equity to Adjusted Shareholders' Equity
As of December 31,
| (Dollars in millions) | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 |
|---|---|---|---|---|---|---|
| Shareholders’ equity | $24,921 | $21,560 | $28,887 | $29,201 | $25,943 | $22,894 |
| Adjustments: | ||||||
| Net unrealized investment (gains) losses, net of tax, included in shareholders’ equity | 3,129 | 4,898 | (2,415) | (4,074) | (2,246) | 113 |
| Net realized investment (gains) losses, net of tax | 81 | 156 | (132) | (11) | (85) | (93) |
| Impact of changes in tax laws and/or tax rates1 | — | — | (8) | — | — | — |
| Adjusted shareholders’ equity | $28,131 | $26,614 | $26,332 | $25,116 | $23,612 | $22,914 |
Calculation of Return on Equity and Core Return on Equity
For the year ended December 31,
| (Dollars in millions, after tax) | 2023 | 2022 | 2021 | 2020 | 2019 |
|---|---|---|---|---|---|
| Net income | $2,991 | $2,842 | $3,662 | $2,697 | $2,622 |
| Average shareholders’ equity | $22,031 | $23,384 | $28,735 | $26,892 | $24,922 |
| Return on equity | 13.6% | 12.2% | 12.7% | 10.0% | 10.5% |
| Core income | $3,072 | $2,998 | $3,522 | $2,686 | $2,537 |
| Adjusted average shareholders’ equity | $26,772 | $26,588 | $25,718 | $23,790 | $23,335 |
| Core return on equity | 11.5% | 11.3% | 13.7% | 11.3% | 10.9% |
Calculation of Book Value Per Share and Adjusted Book Value Per Share
As of December 31,
| (Dollars in millions, except per share amounts) | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|---|---|---|---|---|
| Shareholders’ equity | $24,921 | $21,560 | $28,887 | $29,201 | $25,943 | $22,894 | $23,731 | $23,221 | $23,598 | $24,836 |
| Less: Net unrealized investment gains (losses), net of tax, included in shareholders’ equity | (3,129) | (4,898) | 2,415 | 4,074 | 2,246 | (113) | 1,112 | 730 | 1,289 | 1,966 |
| Shareholders’ equity, excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity | $28,050 | $26,458 | $26,472 | $25,127 | $23,697 | $23,007 | $22,619 | $22,491 | $22,309 | $22,870 |
| Common shares outstanding | 228.2 | 232.1 | 241.2 | 252.4 | 255.5 | 263.6 | 271.4 | 279.6 | 295.9 | 322.2 |
| Book value per share | $109.19 | $92.90 | $119.77 | $115.68 | $101.55 | $86.84 | $87.46 | $83.05 | $79.75 | $77.08 |
| Adjusted book value per share | $122.90 | $114.00 | $109.76 | $99.54 | $92.76 | $87.27 | $83.36 | $80.44 | $75.39 | $70.98 |
Reconciliation of Net Income to Core Income, and Core Income to After-Tax Underlying Underwriting Income (Also Known as Underlying Underwriting Gain)
For the year ended December 31,
| (Dollars in millions, after-tax) | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net income | $2,991 | $2,842 | $3,662 | $2,697 | $2,622 | $2,523 | $2,056 | $3,014 | $3,439 | $3,692 | $3,673 | $2,473 |
| Net realized investment (gains) losses | 81 | 156 | (132) | (11) | (85) | (93) | (142) | (47) | (2) | (51) | (106) | (32) |
| Impact of changes in tax laws and/or tax rates1,2 | — | — | (8) | — | — | — | 129 | — | — | — | — | — |
| Core income | 3,072 | 2,998 | 3,522 | 2,686 | 2,537 | 2,430 | 2,043 | 2,967 | 3,437 | 3,641 | 3,567 | 2,441 |
| Net investment income | (2,436) | (2,170) | (2,541) | (1,908) | (2,097) | (2,102) | (1,872) | (1,846) | (1,905) | (2,216) | (2,186) | (2,316) |
| Other (income) expense, including interest expense | 337 | 277 | 235 | 232 | 214 | 248 | 179 | 78 | 193 | 159 | 61 | 171 |
| Underwriting income | 973 | 1,105 | 1,216 | 1,010 | 654 | 576 | 350 | 1,199 | 1,725 | 1,584 | 1,442 | 296 |
| Impact of net (favorable) unfavorable prior year reserve development | (113) | (512) | (424) | (276) | 47 | (409) | (378) | (510) | (617) | (616) | (552) | 622 |
| Impact of catastrophes | 2,361 | 1,480 | 1,459 | 1,274 | 699 | 1,355 | 1,267 | 576 | 338 | 462 | 387 | 1,214 |
| Underlying underwriting income | $3,221 | $2,073 | $2,251 | $2,008 | $1,400 | $1,522 | $1,239 | $1,265 | $1,446 | $1,430 | $1,277 | $888 |
Reconciliation of Invested Assets to Invested Assets Excluding Net Unrealized Investment Gains (Losses)
As of December 31,
| (Dollars in millions) | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Invested assets | $88,810 | $80,454 | $87,375 | $84,423 | $77,884 | $72,278 | $72,502 | $70,488 | $70,470 | $73,261 | $73,160 | $73,838 |
| Less: Net unrealized investment gains (losses), pre-tax | (3,970) | (6,220) | 3,060 | 5,175 | 2,853 | (137) | 1,414 | 1,112 | 1,974 | 3,008 | 2,030 | 4,761 |
| Invested assets excluding net unrealized investment gains (losses) | $92,780 | $86,674 | $84,315 | $79,248 | $75,031 | $72,415 | $71,088 | $69,376 | $68,496 | $70,253 | $71,130 | $69,077 |
1Impact is recognized in the accounting period in which the change is enacted.
22017 reflects impact of Tax Cuts and Jobs Act of 2017 (TCJA).
Underlying underwriting income is net earned premiums and fee income less claims and claim adjustment expenses (excluding catastrophe losses and net prior year reserve development) and insurance-related expenses.
Average shareholders’ equity is (a) the sum of total shareholders’ equity at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.
Adjusted shareholders’ equity is shareholders’ equity excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity, net realized investment gains (losses), net of tax, for the period presented and the effect of a change in tax laws and tax rates at enactment (excluding the portion related to net unrealized investment gains (losses)). Adjusted average shareholders’ equity is (a) the sum of adjusted shareholders’ equity at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.
Return on equity is the ratio of (a) net income for the period presented to (b) average shareholders’ equity for the period presented. Core return on equity is the ratio of (a) core income for the period presented to (b) adjusted average shareholders’ equity for the period presented.
Definitions of certain terms on this site are included in the Glossary of Selected Insurance Terms portion of the Form 10-K.