•Second quarter net income of $534 million and core income of $585 million.

•Consolidated combined ratio improved 6.3 points from the prior year quarter to 100.2%.

•Catastrophe losses of $1.509 billion pre-tax, compared to $1.481 billion pre-tax in the prior year quarter.

•Underlying combined ratio improved 3.4 points from the prior year quarter to an excellent 87.7%.

•Net favorable prior year reserve development of $230 million pre-tax, with favorable development in all three segments.

•Record net written premiums of $11.115 billion, up 8%, with growth in all three segments.

•Net investment income increased 24% pre-tax over the prior year quarter, primarily due to strong fixed income returns and growth in fixed maturity investments.

•Total capital of $498 million returned to shareholders, including $253 million of share repurchases.

•Book value per share of $109.08, up 14% over June 30, 2023; adjusted book value per share of $126.52, up 10% over June 30, 2023.

•Board of Directors declares regular cash dividend of $1.05 per share.

New York, July 19, 2024 — The Travelers Companies, Inc. today reported net income of $534 million, or $2.29 per diluted share, for the quarter ended June 30, 2024, compared to a net loss of $14 million, or $0.07 per diluted share, in the prior year quarter. Core income in the current quarter was $585 million, or $2.51 per diluted share, compared to $15 million, or $0.06 per diluted share, in the prior year quarter. Core income increased primarily due to a higher underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses), higher net favorable prior year reserve development and higher net investment income, partially offset by higher catastrophe losses. Net realized investment losses in the current quarter were $65 million pre-tax ($51 million after-tax), compared to net realized investment losses of $35 million pre-tax ($29 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.

NM = Not meaningful.

See Glossary of Financial Measures for definitions and the statistical supplement for additional financial data.

“We are pleased to have generated a strong bottom line result in a quarter that included a record level of severe convective storms across the United States,” said Alan Schnitzer, Chairman and Chief Executive Officer. “Core income of $585 million, or $2.51 per diluted share, benefited from excellent underlying results, favorable net prior year reserve development and higher investment income.

“Underlying underwriting income of $1.2 billion pre-tax was up 55% over the prior year quarter, driven by record net earned premiums of $10.2 billion and a consolidated underlying combined ratio that improved 3.4 points to an excellent 87.7%. Net earned premiums were higher in all three of our business segments. The underlying combined ratio in our Business Insurance segment was an excellent 89.2%; the underlying combined ratio in our Bond & Specialty Insurance business improved 1.7 points to a very strong 86.1%; and the underlying combined ratio in Personal Insurance improved by nearly eight points to a terrific 86.3%. Our high-quality investment portfolio continued to perform well, generating after-tax net investment income of $727 million, driven by strong and reliable returns from our growing fixed income portfolio and higher returns from our non-fixed income portfolio. We returned $498 million of excess capital to our shareholders this quarter, including $253 million of share repurchases.

“Through terrific marketplace execution across all three segments, we grew net written premiums in the quarter by 8% to $11.1 billion. In Business Insurance, we grew net written premiums by 7% to $5.5 billion. Renewal premium change in the segment remained very strong at 10.1%, while retention remained high at 85% and new business increased 9% to a record $732 million. In Bond & Specialty Insurance, we grew net written premiums by 8% to more than $1 billion, with excellent retention of 90% in our high-quality management liability business. In our industry-leading surety business, we grew net written premiums by 11%. Given the attractive returns, we are very pleased with the strong production results in both of our commercial business segments. In Personal Insurance, continued strong pricing drove 9% growth in net written premiums, with growth of 10% in Auto and 8% in Home.

“We continue to be very confident in the outlook for our business. Our results for the first half of the year include strong premium growth, excellent underlying underwriting profitability, record operating cash flow and steadily rising investment returns in our growing fixed income portfolio. With a strong and diversified business and balance sheet, we delivered 13.6% core return on equity over the last twelve months, despite elevated industrywide catastrophe losses. We also continue to grow adjusted book value per share, while making important investments in our business and returning substantial excess capital to shareholders. With this momentum and plenty of opportunity ahead of us, we remain well positioned for success this year and beyond.”

Net income of $534 million increased $548 million, due to higher core income, partially offset by higher net realized investment losses. Core income of $585 million increased $570 million, primarily due to a higher underlying underwriting gain, higher net favorable prior year reserve development and higher net investment income, partially offset by higher catastrophe losses. The underlying underwriting gain benefited from higher business volumes. Net realized investment losses were $65 million pre-tax ($51 million after-tax), compared to net realized investment losses of $35 million pre-tax ($29 million after-tax) in the prior year quarter.

•The combined ratio of 100.2% improved 6.3 points due to an improvement in the underlying combined ratio (3.4 points), higher net favorable prior year reserve development (1.5 points) and lower catastrophe losses as a percentage of net earned premiums (1.4 points).

•The underlying combined ratio improved 3.4 points to 87.7%. See below for further details by segment.

•Net favorable prior year reserve development occurred in all segments. See below for further details by segment.

•Catastrophe losses primarily resulted from numerous severe wind and hail storms in multiple states.

Net investment income of $885 million pre-tax ($727 million after-tax) increased 24%. Income from the fixed income investment portfolio increased over the prior year quarter due to a higher average yield and growth in fixed maturity investments. Income from the non-fixed income investment portfolio increased over the prior year quarter primarily due to higher private equity partnership returns.

Non-fixed income returns are generally reported on a one-quarter lagged basis and directionally follow the broader equity markets.

Net written premiums of $11.115 billion increased 8%. See below for further details by segment.

 

Net income of $1.657 billion increased $696 million, due to higher core income. Core income of $1.681 billion increased $696 million, primarily due to a higher underlying underwriting gain, higher net investment income and higher net favorable prior year reserve development, partially offset by higher catastrophe losses. The underlying underwriting gain benefited from higher business volumes. The underlying underwriting gain in the prior year included a one-time tax benefit of $211 million due to the expiration of the statute of limitations with respect to a tax item. Net realized investment losses were $30 million pre-tax ($24 million after-tax), compared to net realized investment losses of $29 million pre-tax ($24 million after-tax) in the prior year.

 

•The combined ratio of 97.1% improved 4.0 points due to an improvement in the underlying combined ratio (3.1 points), higher net favorable prior year reserve development (0.6 points) and lower catastrophe losses as a percentage of net earned premiums (0.3 points).

•The underlying combined ratio of 87.7% improved 3.1 points. See below for further details by segment.

•Net favorable prior year reserve development occurred in all segments. See below for further details by segment.

•Catastrophe losses included the second quarter events described above, as well as severe wind and hail storms in the central and eastern regions of the United States in the first three months of 2024.

Net investment income of $1.731 billion pre-tax ($1.425 billion after-tax) increased 26% driven by the same factors described above for the second quarter of 2024.

Net written premiums of $21.297 billion increased 8%. See below for further details by segment.

Shareholders’ equity of $24.862 billion decreased slightly from year-end 2023, primarily due to higher net unrealized investment losses, common share repurchases and dividends to shareholders, largely offset by net income of $1.657 billion. Net unrealized investment losses included in shareholders’ equity were $5.043 billion pre-tax ($3.976 billion after-tax), compared to $3.970 billion pre-tax ($3.129 billion after-tax) at year-end 2023. The increase in net unrealized investment losses was driven primarily by higher interest rates. Book value per share of $109.08 was comparable with year-end 2023. Adjusted book value per share of $126.52, which excludes net unrealized investment gains (losses), increased 3% from year-end 2023.

The Company repurchased 1.2 million shares during the second quarter at an average price of $211.24 per share for a total cost of $253 million. At June 30, 2024, the Company had $5.540 billion of capacity remaining under its share repurchase authorizations approved by the Board of Directors. At the end of the quarter, statutory capital and surplus was $25.210 billion, and the ratio of debt-to-capital was 24.4%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains (losses) included in shareholders’ equity was 21.8%, within the Company’s target range of 15% to 25%.

The Board of Directors declared a regular quarterly dividend of $1.05 per share. The dividend is payable September 30, 2024, to shareholders of record at the close of business on September 10, 2024.

 

 

Segment income for Business Insurance was $656 million after-tax, an increase of $254 million. Segment income increased primarily due to net favorable prior year reserve development compared to net unfavorable prior year reserve development in the prior year quarter, higher net investment income and a higher underlying underwriting gain. The underlying underwriting gain benefited from higher business volumes.

•The combined ratio of 96.1% improved 4.0 points due to net favorable prior year reserve development compared to net unfavorable prior year reserve development in the prior year quarter (2.8 points), lower catastrophe losses (1.0 points) and an improvement in the underlying combined ratio (0.2 points).

•The underlying combined ratio remained excellent at 89.2%.

•Net favorable prior year reserve development was primarily driven by better than expected loss experience in the domestic operations’ workers’ compensation product line for multiple accident years, partially offset by higher than expected loss experience in the general liability product line for recent accident years, driven by excess coverages, as well as an addition to reserves related to run-off.

Net written premiums of $5.539 billion increased 7%, reflecting strong renewal premium change and retention, as well as higher levels of new business.

 

Segment income for Business Insurance was $1.420 billion after-tax, an increase of $262 million. Segment income increased primarily due to higher net investment income and net favorable prior year reserve development compared to net unfavorable prior year reserve development in the prior year period, partially offset by a lower underlying underwriting gain. The underlying underwriting gain benefited from higher business volumes. The underlying underwriting gain in the prior year period included a one-time tax benefit of $171 million due to the expiration of the statute of limitations with respect to a tax item.

 

•The combined ratio of 94.7% improved 2.2 points due to net favorable prior year reserve development compared to net unfavorable prior year reserve development in the prior year period (1.2 points), lower catastrophe losses as a percentage of net earned premiums (0.7 points) and an improvement in the underlying combined ratio (0.3 points).

•The underlying combined ratio remained excellent at 89.2%.

•Net favorable prior year reserve development was primarily driven by the same factors described above for the second quarter of 2024.

Net written premiums of $11.135 billion increased 8%, reflecting the same factors described above for the second quarter of 2024.

 

Segment income for Bond & Specialty Insurance was $170 million after-tax, a decrease of $60 million. Segment income decreased primarily due to lower net favorable prior year reserve development and higher catastrophe losses, partially offset by a higher underlying underwriting gain and higher net investment income. The underlying underwriting gain benefited from higher business volumes.

•The combined ratio of 87.7% increased 10.6 points due to lower net favorable prior year reserve development (10.5 points) and higher catastrophe losses (1.8 points), partially offset by an improvement in the underlying combined ratio (1.7 points).

•The underlying combined ratio improved 1.7 points to a very strong 86.1%.

•Net favorable prior year reserve development was primarily driven by better than expected loss experience in the domestic operations’ fidelity and surety product lines for recent accident years.

Net written premiums of $1.040 billion increased 8%, reflecting strong production in both surety and management liability.

 

Segment income for Bond & Specialty Insurance was $365 million after-tax, a decrease of $72 million. Segment income decreased primarily due to lower net favorable prior year reserve development and higher catastrophe losses, partially offset by higher net investment income and a higher underlying underwriting gain. The underlying underwriting gain benefited from higher business volumes. The underlying underwriting gain in the prior year period included a one-time tax benefit of $9 million due to the expiration of the statute of limitations with respect to a tax item.

•The combined ratio of 86.1% increased 7.6 points due to lower net favorable prior year reserve development (7.4 points) and higher catastrophe losses (0.8 points), partially offset by an improvement in the underlying combined ratio (0.6 points).

•The underlying combined ratio improved 0.6 points to a very strong 86.3%.

•Net favorable prior year reserve development was primarily driven by the same factors described above for the second quarter of 2024.

Net written premiums of $1.983 billion increased 7%, reflecting the same factors described above for the second quarter of 2024.

Segment loss for Personal Insurance was $153 million after-tax, compared with a segment loss of $538 million in the prior year quarter. The improvement in segment loss was primarily due to a higher underlying underwriting gain, higher net favorable prior year reserve development and higher net investment income, partially offset by higher catastrophe losses. The underlying underwriting gain benefited from higher business volumes.

•The combined ratio of 108.5% improved 13.5 points due to an improvement in the underlying combined ratio (7.8 points), higher net favorable prior year reserve development (3.0 points) and lower catastrophe losses as a percentage of net earned premiums (2.7 points).

•The underlying combined ratio of 86.3% improved 7.8 points, reflecting improvement in both Automobile and Homeowners and Other.

•Net favorable prior year reserve development was primarily driven by better than expected loss experience in the domestic operations in both the homeowners and other and automobile product lines for recent accident years.

Net written premiums of $4.536 billion increased 9%, reflecting strong renewal premium change in both Domestic Automobile and Homeowners and Other.

 

Segment income for Personal Insurance was $67 million after-tax, compared with a segment loss of $455 million in 2023. Segment income increased primarily due to a higher underlying underwriting gain, higher net favorable prior year reserve development and higher net investment income, partially offset by higher catastrophe losses. The underlying underwriting gain benefited from higher business volumes. The underlying underwriting gain in the prior year period included a one-time tax benefit of $31 million due to the expiration of the statute of limitations with respect to a tax item.

•The combined ratio of 102.8% improved 9.2 points due to an improvement in the underlying combined ratio (7.3 points) and higher net favorable prior year reserve development (1.9 points).

•The underlying combined ratio of 86.2% improved 7.3 points, reflecting improvement in both Automobile and Homeowners and Other.

•Net favorable prior year reserve development was primarily driven by the same factors described above for the second quarter of 2024.

Net written premiums of $8.179 billion increased 9%, reflecting the same factor described above for the second quarter of 2024.

The information in this press release should be read in conjunction with the financial supplement that is available on our website at Travelers.com. Travelers management will discuss the contents of this release and other relevant topics via webcast at 9 a.m. Eastern (8 a.m. Central) on Friday, July 19, 2024. Investors can access the call via webcast at investor.travelers.com or by dialing 1.888.440.6281 within the United States or 1.646.960.0218 outside the United States. Prior to the webcast, a slide presentation pertaining to the quarterly earnings will be available on the Company’s website.

Following the live event, replays will be available via webcast for one year at investor.travelers.com and by telephone for 30 days by dialing 1.800.770.2030 within the United States or 1.647.362.9199 outside the United States. All callers should use conference ID 5449478.

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 more than 30,000 employees and generated revenues of more than $41 billion in 2023. For more information, visit Travelers.com.

Travelers may use its website and/or social media outlets, such as Facebook and X, as distribution channels of material Company information. Financial and other important information regarding the Company is routinely accessible through and posted on our website at investor.travelers.com, our Facebook page at facebook.com/travelers and our X account (@Travelers) at twitter.com/travelers. In addition, you may automatically receive email alerts and other information about Travelers when you enroll your email address by visiting the Email Notifications section at investor.travelers.com.

Business Insurance - Business Insurance offers a broad array of property and casualty insurance products and services to its customers, primarily in the United States, as well as in Canada, the United Kingdom, the Republic of Ireland and throughout other parts of the world, including as a corporate member of Lloyd’s.

Bond & Specialty Insurance - Bond & Specialty Insurance offers surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to its customers, primarily in the United States, and certain surety and specialty insurance products in Canada, the United Kingdom and the Republic of Ireland, as well as Brazil through a joint venture, in each case utilizing various degrees of financially-based underwriting approaches.

Personal Insurance - Personal Insurance offers a broad range of property and casualty insurance products and services covering individuals’ personal risks, primarily in the United States, as well as in Canada. Personal Insurance’s primary products of automobile and homeowners insurance are complemented by a broad suite of related coverages.

 * * * * *

This press release contains, and management may make, certain “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,” “probably,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “views,” “ensures,” “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 outlook, the impact of trends on its business and its future results of operations and financial condition;

•the impact of legislative or regulatory actions or court decisions;

•share repurchase plans;

•future pension plan contributions;

•the sufficiency of the Company’s reserves, including asbestos;

•the impact of emerging claims issues as well as other insurance and non-insurance litigation;

•the cost and availability of reinsurance coverage;

•catastrophe losses and modeling;

•the impact of investment, economic and underwriting market conditions, including interest rates and inflation;

•the Company’s approach to managing its investment portfolio;

•the impact of changing climate conditions;

•strategic and operational initiatives to improve profitability and competitiveness;

•the Company’s competitive advantages and innovation agenda, including executing on that agenda with respect to artificial intelligence;

•the Company’s cybersecurity policies and practices;

•new product offerings;

•the impact of developments in the tort environment;

•the impact of developments in the geopolitical environment; and

•the impact of the Company’s acquisition of Corvus Insurance Holdings, Inc.

The Company cautions investors that such statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond the Company’s control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Some of the factors that could cause actual results to differ include, but are not limited to, the following:

•high levels of catastrophe losses;

•actual claims may exceed the Company’s claims and claim adjustment expense reserves, or the estimated level of claims and claim adjustment expense reserves may increase, including as a result of, among other things, changes in the legal/tort, regulatory and economic environments, including increased inflation;

•the Company’s potential exposure to asbestos and environmental claims and related litigation;

•the Company is exposed to, and may face adverse developments involving, mass tort claims; and

•the effects of emerging claim and coverage issues on the Company’s business are uncertain, and court decisions or legislative changes that take place after the Company issues its policies can result in an unexpected increase in the number of claims.

•a period of financial market disruption or an economic downturn;

•the Company’s investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses;

•the Company is exposed to credit risk related to reinsurance and structured settlements, and reinsurance coverage may not be available to the Company;

•the Company is exposed to credit risk in certain of its insurance operations and with respect to certain guarantee or indemnification arrangements that it has with third parties;

•a downgrade in the Company’s claims-paying and financial strength ratings; and

•the Company’s insurance subsidiaries may be unable to pay dividends to the Company’s holding company in sufficient amounts.

•the intense competition that the Company faces, including with respect to attracting and retaining employees, and the impact of innovation, technological change and changing customer preferences on the insurance industry and the markets in which it operates;

•disruptions to the Company’s relationships with its independent agents and brokers or the Company’s inability to manage effectively a changing distribution landscape;

•the Company’s efforts to develop new products or services, expand in targeted markets, improve business processes and workflows or make acquisitions may not be successful and may create enhanced risks;

•the Company's pricing and capital models may provide materially different indications than actual results;

•loss of or significant restrictions on the use of particular types of underwriting criteria, such as credit scoring, or other data or methodologies, in the pricing and underwriting of the Company’s products;

•the Company is subject to additional risks associated with its business outside the United States; and

•future pandemics (including new variants of COVID-19).

•as a result of cyber attacks (the risk of which could be exacerbated by geopolitical tensions) or otherwise, the Company may experience difficulties with technology, data and network security or outsourcing relationships;

•the Company’s dependence on effective information technology systems and on continuing to develop and implement improvements in technology, including with respect to artificial intelligence; and

•the Company may be unable to protect and enforce its own intellectual property or may be subject to claims for infringing the intellectual property of others.

•changes in regulation, including higher tax rates; and

•the Company's compliance controls may not be effective.

In addition, the Company’s share repurchase plans depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, changes in levels of written premiums, funding of the Company’s qualified pension plan, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions, changes in tax laws (including the Inflation Reduction Act of 2022) and other factors.

Our forward-looking statements speak only as of the date of this press release or as of the date they are made, and we undertake no obligation to update forward-looking statements. For a more detailed discussion of these factors, see the information under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Forward Looking Statements” in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 15, 2024, as updated by our periodic filings with the SEC.

The following measures are used by the Company’s management to evaluate financial performance against historical results, to establish performance targets on a consolidated basis and for other reasons as discussed below. In some cases, these measures are considered non-GAAP financial measures under applicable SEC rules because they are not displayed as separate line items in the consolidated financial statements or are not required to be disclosed in the notes to financial statements or, in some cases, include or exclude certain items not ordinarily included or excluded in the most comparable GAAP financial measure. Reconciliations of these measures to the most comparable GAAP measures also follow.

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, the effect of a change in tax laws and tax rates at enactment (excluding the portion related to net unrealized investment gains (losses)), preferred stock and discontinued operations.

Return on equity is the ratio of annualized net income (loss) less preferred dividends to average shareholders’ equity for the periods presented. Core return on equity is the ratio of annualized core income (loss) less preferred dividends to adjusted average shareholders’ equity for the periods presented. In the opinion of the Company’s management, these are important indicators of how well management creates value for its shareholders through its operating activities and its capital management.

Average shareholders’ equity is (a) the sum of total shareholders’ equity excluding preferred stock 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 average shareholders’ equity is (a) the sum of total 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.

Underwriting gain (loss) is net earned premiums and fee income less claims and claim adjustment expenses and insurance-related expenses. In the opinion of the Company’s management, it is important to measure the profitability of each segment excluding the results of investing activities, which are managed separately from the insurance business. This measure is used to assess each segment’s business performance and as a tool in making business decisions. Underwriting gain, excluding the impact of catastrophes and net favorable (unfavorable) prior year loss reserve development, is the underwriting gain adjusted to exclude claims and claim adjustment expenses, reinstatement premiums and assessments related to catastrophes and loss reserve development related to time periods prior to the current year. In the opinion of the Company’s management, this measure is meaningful to users of the financial statements to understand the Company’s periodic earnings and the variability of earnings caused by the unpredictable nature (i.e., the timing and amount) of catastrophes and loss reserve development. This measure is also referred to as underlying underwriting gain, underlying underwriting margin, underlying underwriting income or underlying underwriting result.

A catastrophe is a severe loss designated, or reasonably expected by the Company to be designated, a catastrophe by one or more industry recognized organizations that track and report on insured losses resulting from catastrophic events, such as Property Claim Services (PCS) for events in the United States and Canada. Catastrophes can be caused by various natural events, including, among others, hurricanes, tornadoes and other windstorms, earthquakes, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions and other naturally-occurring events, such as solar flares. Catastrophes can also be man-made, such as terrorist attacks and other intentionally destructive acts including those involving nuclear, biological, chemical and radiological events, cyber events, explosions and destruction of infrastructure. Each catastrophe has unique characteristics and catastrophes are not predictable as to timing or amount. Their effects are included in net and core income (loss) and claims and claim adjustment expense reserves upon occurrence. A catastrophe may result in the payment of reinsurance reinstatement premiums and assessments from various pools.

The Company’s threshold for disclosing catastrophes is primarily determined at the reportable segment level. If a threshold for one segment or a combination thereof is reached and the other segments have losses from the same event, losses from the event are identified as catastrophe losses in the segment results and for the consolidated results of the Company. Additionally, an aggregate threshold is applied for international business across all reportable segments. The threshold for 2024 ranges from $20 million to $30 million of losses before reinsurance and taxes.

 

Combined ratio: For Statutory Accounting Practices (SAP), the combined ratio is the sum of the SAP loss and LAE ratio and the SAP underwriting expense ratio as defined in the statutory financial statements required by insurance regulators. The combined ratio, as used in this earnings release, is the equivalent of, and is calculated in the same manner as, the SAP combined ratio except that the SAP underwriting expense ratio is based on net written premiums and the underwriting expense ratio as used in this earnings release is based on net earned premiums.

For SAP, the loss and LAE ratio is the ratio of incurred losses and loss adjustment expenses less certain administrative services fee income to net earned premiums as defined in the statutory financial statements required by insurance regulators. The loss and LAE ratio as used in this earnings release is calculated in the same manner as the SAP ratio.

For SAP, the underwriting expense ratio is the ratio of underwriting expenses incurred (including commissions paid), less certain administrative services fee income and billing and policy fees and other, to net written premiums as defined in the statutory financial statements required by insurance regulators. The underwriting expense ratio as used in this earnings release, is the ratio of underwriting expenses (including the amortization of deferred acquisition costs), less certain administrative services fee income, billing and policy fees and other, to net earned premiums.

Underlying combined ratio represents the combined ratio excluding the impact of net prior year reserve development and catastrophes. The underlying combined ratio is an indicator of the Company’s underwriting discipline and underwriting profitability for the current accident year.

(1)  For purposes of computing ratios, billing and policy fees and other (which are a component of other revenues) are allocated as a reduction of underwriting expenses.  In addition, fee income is allocated as a reduction of losses and loss adjustment expenses and underwriting expenses. These allocations are to conform the calculation of the combined ratio with statutory accounting. Additionally, general and administrative expenses include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio. 

 

Book value per share is total common shareholders’ equity divided by the number of common shares outstanding. Adjusted book value per share is total common shareholders’ equity excluding net unrealized investment gains and losses, net of tax, included in shareholders’ equity, divided by the number of common shares outstanding. In the opinion of the Company’s management, adjusted book value per share is useful in an analysis of a property casualty company’s book value per share as it removes the effect of changing prices on invested assets (i.e., net unrealized investment gains (losses), net of tax), which do not have an equivalent impact on unpaid claims and claim adjustment expense reserves. Tangible book value per share is adjusted book value per share excluding the after-tax value of goodwill and other intangible assets divided by the number of common shares outstanding. In the opinion of the Company’s management, tangible book value per share is useful in an analysis of a property casualty company’s book value on a nominal basis as it removes certain effects of purchase accounting (i.e., goodwill and other intangible assets), in addition to the effect of changing prices on invested assets.

 

Total capitalization is the sum of total shareholders’ equity and debt. Debt-to-capital ratio excluding net unrealized gains (losses) on investments, net of tax, included in shareholders’ equity, is the ratio of debt to total capitalization excluding the after-tax impact of net unrealized investment gains and losses included in shareholders’ equity. In the opinion of the Company’s management, the debt-to-capital ratio is useful in an analysis of the Company’s financial leverage.

 

For Business Insurance and Bond & Specialty Insurance, retention is the amount of premium available for renewal that was retained, excluding rate and exposure changes. For Personal Insurance, retention is the ratio of the expected number of renewal policies that will be retained throughout the annual policy period to the number of available renewal base policies. For all of the segments, renewal rate change represents the estimated change in average premium on policies that renew, excluding exposure changes. Exposure is the measure of risk used in the pricing of an insurance product. The change in exposure is the amount of change in premium on policies that renew attributable to the change in portfolio risk. Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes. New business is the amount of written premium related to new policyholders and additional products sold to existing policyholders. These are operating statistics, which are in part dependent on the use of estimates and are therefore subject to change. For Business Insurance, retention, renewal premium change and new business exclude National Accounts. For Bond & Specialty Insurance, retention, renewal premium change and new business exclude surety and other products that are generally sold on a non-recurring, project specific basis. For each of the segments, production statistics referred to herein are domestic only unless otherwise indicated.

Holding company liquidity is the total funds available at the holding company level to fund general corporate purposes, primarily the payment of shareholder dividends and debt service. These funds consist of total cash, short-term invested assets and other readily marketable securities held by the holding company.

For a glossary of other financial terms used in this press release, we refer you to the Company’s most recent annual report on Form 10-K filed with the SEC on February 15, 2024, and subsequent periodic filings with the SEC.

 

###