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)
Bar chart displaying underlying underwriting income from 2014 until 2023. In 2023, the underlying underwriting income was $3.2 billion. In 2014, the underlying underwriting income was $1.4 billion. The average across 2014 to 2019 is $1.4 billion. The average across 2020 to 2023 is $2.1 billion.
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
Line chart displaying Travelers in comparison to the U.S. Industry. According to S&P Global Market Intelligence, Travelers’ Statutory Combined Ratio has compared favorably to the U.S. industry average from 2014 to 2023. Data as of 5/10/24, 99 percent of companies have filed for 2023. Used with permission.
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
Bar chart displaying Accelerating Net Written Premium Growth from 2012 until 2023, showing an increase from $22.4 billion in 2012 to $40.2 billion in 2023. Compound annual growth rate from 2012 to 2016 was 2.7%, and from 2016 to 2023 was 7.0 percent.
3 Represents growth from 2012 through 2016.
4 Represents growth from 2016 through 2023.
Consistently strong underlying profitability5
Bar chart displaying Consistently Strong Underlying Profitability from 2012 until 2023. In 2023, the underlying combined ratio was 89.5 percent. In 2012, the stable underlying combined ratio was 93.0 percent. The average across 2012 to 2023 was 91.4 percent. This data excludes the impact of catastrophe losses and prior year reserve development.
5 Underlying combined ratio, which excludes the impact of catastrophe losses and net prior year reserve development.
Improving expense ratio
Bar chart displaying Improving Expense Ratio from 2012 until 2023. The average between 2012 until 2016 was 31.7 percent. The ratio improved 3.6 points from the average to 28.1% in 2023.
Higher underlying underwriting income6 (after-tax)
Chart displaying Higher Underlying Underwriting Income from 2012 through 2023. The increase from 2012 until 2023 was 146 percent, representing an increase from an average of $1.3 billion in 2012 to 2016, to $3.2 billion in 2023. This data excludes the impact of net prior year reserve development and catastrophe losses.
6 Underlying underwriting income, which excludes the impact of net prior year reserve development and catastrophe losses.
Higher cash flow from operations
Bar chart displaying Higher Cash Flow from Operations from 2012 through 2023. The increase from 2012 through 2023 was 108%, representing an increase from an average of $3.7 billion between 2012 to 2016, to $7.7 billion in 2023.
Growing invested assets7
Bar chart displaying Growing Invested Assets from 2012 until 2023. The increase from 2012 until 2023 was 33 percent, representing an increase from an average of $69.7 billion between 2012 to 2016, to $92.8 billion in 2023. Invested assets excludes net unrealized investment gains (losses).
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
Line graph displaying Return on Equity for Travelers compared with U.S. P&C Insurers. Travelers is at 13.6 percent in 2023, compared to U.S. P&C Insurers at 8.4 percent. Travelers’ return on equity exceeds the average return on equity for the industry in each of the past 10 years. The 2023 Forecast is sourced from Conning, Inc., used with permission. S&P historical data used with permission.
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
Bar chart displaying Adjusted Book Value Per Share steadily increasing from 2014 until 2023. In 2023, the value was $122.90, compared to $114.00 in 2022. This chart excludes net unrealized investment gains (losses), net of tax, included in shareholders’ equity.
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
Bar chart displaying Dividends Per Share steadily increasing each year from 2014 to 2023. In 2023 dividends per share were $3.93, compared to $3.67 in 2022.
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.
More about financial performance
Financial highlights
Review our financial highlights from recent years.
Delivering value over time
The success of our strategy – with all its component parts – drives our total return to shareholders over time.
Non-GAAP reconciliations
Review tables that provide reconciliations of certain GAAP financial measures to non-GAAP financial measures.