U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 15, 2002
Travelers Property Casualty Corp.
(Exact Name of Registrant as Specified in Its Charter)
Connecticut 001-31266 06-1008174
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
One Tower Square, Hartford, Connecticut 06183
(Address of principal executive offices) (Zip Code)
(860) 277-0111
(Registrant's telephone number, including area code)
Travelers Property Casualty Corp.
Current Report on Form 8-K
ITEM 5. OTHER EVENTS.
On April 15, 2002, in its first quarter as a public company, Travelers Property
Casualty Corp. reported $326.6 million in operating income or $0.41 per share,
fully diluted. Had the additional shares issued in connection with its initial
public offering been outstanding for the entire quarter, fully diluted operating
income per share would have been $0.33.
"We have emerged from a successful initial public offering as a strong,
well-capitalized public company," according to Robert I. Lipp, Chairman and
Chief Executive Officer. "I am pleased with our first quarter operating results
and feel that we are off to a good start."
On March 22, Travelers Property Casualty completed its initial public
offering of 231 million shares of class A common stock in the largest ever IPO
in the U.S. insurance sector and the fifth largest IPO in U.S. history.
Operating income was $326.6 million in the first quarter of 2002, compared
to $314.3 million and $348.8 million in the fourth and first quarters of 2001,
respectively. A major contributor to the year-over-year reduction in operating
income was an expected decline in net investment income of $24.5 million, after
tax, resulting from realized gains taken in 2001, declining interest rates, and
a reduction in investable funds due to dividend and debt payments to Citigroup
in recent years. In addition, the first quarter of 2001 benefited from favorable
prior year reserve development in Commercial Lines.
During the 2002 quarter, the company adopted new accounting standards
relating to goodwill and other intangible assets (FAS 141 and 142), the effect
of which was a cumulative charge of $242.6 million, after-tax, or $0.30 per
share and the elimination of goodwill amortization.
CONSOLIDATED OPERATING RESULTS
($ millions) 1Q 4Q 1Q
2002 2001 2001
--------------------------------------------------------------------------------
Operating income $326.6 $314.3 $348.8
Realized investment gains (losses) 18.9 (10.2) 125.3
Restructuring charge (.8) (.8) --
Cumulative effect of changes in
accounting principles (242.6) -- 4.5
--------------------------------------------------------------------------------
Net income $102.1 $303.3 $478.6
--------------------------------------------------------------------------------
"There are a number of major positive trends underlying our performance in
the quarter," said Mr. Lipp. "Rates are increasing across all major lines,
including average increases in excess of 20% in our core Commercial Lines
mid-size business market and average increases of approximately 9% in our
Personal Lines business. Customer retention levels are strong and, as a result
of these factors, revenues are rising. At the same time, we are seeing loss
trends continuing to rise, which require us to keep our focus on underwriting
discipline and expense management."
COMMERCIAL LINES FUNDAMENTALS STRONG
Operating income for the first quarter of 2002 was $277.6 million compared
to $277.9 million and $300.7 million in the fourth and first quarters of 2001,
respectively. First quarter 2002 results were positively affected by rate
increases in excess of loss cost trends and lower expenses, reflecting the
elimination of goodwill amortization. However, lower net investment income in
2002 and favorable prior year reserve development in the first quarter of 2001
more than offset these earnings improvements.
Net written premiums rose 17% to $1.688 billion over the first quarter of
2001 as a result of rate increases in all lines of business, improvement in new
business volumes and the addition of the Northland and CitiCapital companies in
the fourth quarter of 2001, partly offset by our disciplined approach to
underwriting and risk selection and increased reinsurance costs. Rate increases
were particularly strong in our core mid-size business market, exceeding 20%.
Fees for services provided to self-insured companies and residual markets also
rose during the quarter.
The statutory combined ratio for the quarter was 101.3% compared to 100.7%
and 99.8% in the fourth and first quarters of 2001, respectively. These ratios
reflect the factors described above.
PERSONAL LINES RATES INCREASING
Operating income of $71.2 million compared to $60.1 million and $96.4
million in the fourth and first quarters of 2001, respectively. First quarter
2002 results reflect recent improvements in premium rates and, to a lesser
degree, the accounting change for goodwill. Catastrophe losses, after tax, were
$10.4 million in the first quarter of 2002, which compares to $2.3 million in
the fourth quarter of 2001 and no catastrophe losses in the first quarter of
2001.
Net written premiums increased 10% over the first quarter of 2001 to
$1.037 billion, reflecting average renewal price increases of 9%. These rate
increases and the benefits of other underwriting actions initiated in 2001 are
now exceeding the rise in loss costs. The statutory combined ratio for the first
quarter of 2002 was 101.5%, compared to 102.2% in the fourth quarter of 2001.
The unfavorable impact of rising loss costs in 2001 resulted in an increase in
the statutory combined ratio from a low of 98.0% in the first quarter to 102.3%
for the full year of 2001.
INTEREST EXPENSE AND OTHER DECLINES ON LOWER DEBT
Interest Expense and Other was an after tax charge of $22.2 million in the
first quarter 2002 compared to $23.7 million and $48.3 million in the fourth and
first quarters of 2001, respectively. The primary component of Interest Expense
and Other for each quarter was interest expense, which amounted to $23.3 million
in the first quarter 2002, $26.1 million in the fourth quarter 2001 and $42.7
million in the first quarter 2001, all after tax. The reduction in interest
expense is due to lower average debt levels and lower interest rates. The
decrease in debt levels was primarily due to repayments of debt obligations to
Citigroup.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained herein that are not historical facts
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Company's actual results may differ materially from
those included in the forward-looking statements. Forward-looking statements are
typically identified by words or phrases such as "believe," "expect,"
"anticipate," "intend," "estimate," "target," "may increase," "may fluctuate,"
"may result in," "are projected," and similar expressions. These forward-looking
statements involve risks and uncertainties including, but not limited to, the
following: general economic conditions, including the performance of financial
markets and interest rates.
###
A financial summary follows. Additional financial, statistical and
business-related information, as well as business and segment trends, is
included in the Financial Supplement.
SUMMARY OF FINANCIAL INFORMATION TRAVELERS PROPERTY CASUALTY CORP.
(in millions, except per share
and percentage data)
1Q 4Q 1Q
2002 2001 2001
-------------------------------------------------------------------------------------
OPERATING INCOME $ 326.6 $ 314.3 $ 348.8
Realized investment gains (losses) 18.9 (10.2) 125.3
Restructuring charge (.8) (.8) --
Cumulative effect of changes in accounting
principles (242.6) -- 4.5
-------------------------------------------------------------------------------------
Net income 102.1 303.3 478.6
Goodwill amortization -- 20.6 17.9
-------------------------------------------------------------------------------------
Adjusted net income $ 102.1 $ 323.9 $ 496.5
-------------------------------------------------------------------------------------
BASIC AND DILUTED EARNINGS PER SHARE:
OPERATING INCOME $ 0.41 $ 0.41 $ 0.45
Realized investment gains (losses) 0.02 (0.02) 0.16
Cumulative effect of changes in
accounting principles (0.30) -- 0.01
-------------------------------------------------------------------------------------
Net income 0.13 0.39 0.62
Goodwill amortization -- 0.03 0.03
-------------------------------------------------------------------------------------
Adjusted net income $ 0.13 $ 0.42 $ 0.65
-------------------------------------------------------------------------------------
Dividends declared (1) $ 5,252.5 $ -- $ 50.0
Basic and diluted weighted average number of
common shares outstanding and common stock
equivalents 794.7 769.0 769.0
Common shares outstanding at period end 1,000.0 769.0 769.0
-------------------------------------------------------------------------------------
PRO FORMA EARNINGS PER SHARE (2):
OPERATING INCOME $ 0.33 $ 0.31 $ 0.35
Realized investment gains (losses) 0.01 (0.01) 0.13
Cumulative effect of changes
in accounting principles (0.24) -- --
-------------------------------------------------------------------------------------
Net income 0.10 0.30 0.48
Goodwill amortization -- 0.02 0.02
-------------------------------------------------------------------------------------
Adjusted net income $ 0.10 $ 0.32 $ 0.50
-------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) BY SEGMENT
Commercial Lines $ 277.6 $ 277.9 $ 300.7
Personal Lines 71.2 60.1 96.4
Interest Expense and Other (22.2) (23.7) (48.3)
-------------------------------------------------------------------------------------
$ 326.6 $ 314.3 $ 348.8
-------------------------------------------------------------------------------------
REVENUES
Premiums $ 2,584.6 $ 2,574.0 $ 2,231.9
Net investment income 487.8 498.8 528.8
Fee income 102.7 92.6 77.7
Realized investment gains (losses) 28.8 (15.4) 192.3
Other income 28.8 26.9 27.4
-------------------------------------------------------------------------------------
$ 3,232.7 $ 3,176.9 $ 3,058.1
-------------------------------------------------------------------------------------
SUMMARY OF FINANCIAL INFORMATION TRAVELERS PROPERTY CASUALTY CORP.
(in millions, except per
share and percentage data)
1Q 4Q 1Q
2002 2001 2001
-------------------------------------------------------------------------------------
REVENUES BY SEGMENT EXCLUDING REALIZED
INVESTMENT GAINS (LOSSES)
Commercial Lines $2,047.4 $2,016.2 $1,791.2
Personal Lines 1,155.4 1,155.7 1,076.1
Interest Expense and Other 1.1 20.4 (1.5)
-------------------------------------------------------------------------------------
$3,203.9 $3,192.3 $2,865.8
-------------------------------------------------------------------------------------
NET WRITTEN PREMIUMS
Commercial Lines $1,687.7 $1,547.7 $1,444.9
Personal Lines 1,037.4 1,034.2 942.8
-------------------------------------------------------------------------------------
$2,725.1 $2,581.9 $2,387.7
-------------------------------------------------------------------------------------
STATUTORY COMBINED RATIO
Loss and loss adjustment expense ratio 74.9% 74.3% 70.7%
Other underwriting expense ratio 26.5% 27.0% 28.4%
-------------------------------------------------------------------------------------
Combined ratio 101.4% 101.3% 99.1%
-------------------------------------------------------------------------------------
(1) 1Q02 dividends were primarily paid in the form of notes which were
partially prepaid from the $4.1 billion of net proceeds from the March 22,
2002 initial public offering and the issuance of $0.9 billion of
convertible notes.
(2) Pro forma earnings per share (basic and diluted) has been computed
assuming the 231.0 million shares issued in connection with the March 22,
2002 initial public offering were outstanding for all periods presented.
TRAVELERS PROPERTY CASUALTY CORP. [TRAVELERS LOGO]
FINANCIAL SUPPLEMENT - FIRST QUARTER 2002
TRAVELERS PROPERTY CASUALTY CORP. IS ONE OF THE LARGEST PROPERTY AND CASUALTY
INSURANCE COMPANIES IN THE UNITED STATES. THE COMPANY IS ENGAGED IN PROVIDING A
WIDE RANGE OF COMMERCIAL AND PERSONAL PROPERTY AND CASUALTY INSURANCE PRODUCTS
AND SERVICES TO BUSINESSES, ASSOCIATIONS AND INDIVIDUALS.
2002 First Quarter Financial Highlights
3Q
1Q 2Q 3Q 2001 4Q 1Q
2001 2001 2001 Adjusted (2) 2001 2002
---- ---- ---- ------------ ---- ----
Operating income (loss) (millions) (1) $ 348.8 $ 314.3 $ (121.7) $ 367.8 $ 314.3 $ 326.6
Net income (loss) (millions) $ 478.6 $ 343.4 $ (59.9) $ 429.6 $ 303.3 $ 102.1
Adjusted net income (loss) (millions) (3) $ 496.5 $ 361.3 $ (42.0) $ 447.5 $ 323.9 $ 102.1
Earnings per share (basic and diluted):
Operating income (loss) $ 0.45 $ 0.41 $ (0.16) $ 0.48 $ 0.41 $ 0.41
Net income (loss) $ 0.62 $ 0.45 $ (0.08) $ 0.56 $ 0.39 $ 0.13
Adjusted net income (loss) (3) $ 0.65 $ 0.47 $ (0.05) $ 0.58 $ 0.42 $ 0.13
Pro forma earnings per share (4):
Operating income (loss) $ 0.35 $ 0.31 $ (0.12) $ 0.37 $ 0.31 $ 0.33
Net income (loss) $ 0.48 $ 0.34 $ (0.06) $ 0.43 $ 0.30 $ 0.10
Adjusted net income (loss) (3) $ 0.50 $ 0.36 $ (0.04) $ 0.45 $ 0.32 $ 0.10
Total assets, at period end (billions) $ 54.8 $ 53.4 $ 56.4 $ 56.4 $ 57.8 $ 57.9
Total equity, at period end (billions) $ 9.9 $ 9.9 $ 10.1 $ 10.1 $ 10.7 $ 9.6
Book value per share, at period end $ 12.84 $ 12.89 $ 13.08 $ 13.08 $ 13.90 $ 9.63
Book value per share, excluding
FAS 115, at period end $ 12.24 $ 12.48 $ 12.41 $ 12.41 $ 13.58 $ 9.56
Return on equity 14.7% 12.7% (4.9)% 14.4% 12.2% 12.9%
Return on equity, excluding FAS 115 15.4% 13.2% (5.1)% 15.0% 12.7% 13.1%
Weighted average number of common
shares outstanding and common stock
equivalents (basic and diluted) (millions) 769.0 769.0 769.0 769.0 769.0 794.7
Common shares outstanding at
period end (millions) 769.0 769.0 769.0 769.0 769.0 1,000.0
This report has been restated to reflect the corporate reorganization of
Travelers Property Casualty Corp. (TPC, formerly known as The Travelers
Insurance Group Inc.).
(1) Operating income excludes realized investment gains (losses),
restructuring charges and the cumulative effect of changes in accounting
principles, and is reflected net of tax.
(2) The 3Q01 operating loss and net loss include a charge of $489.5 million
related to the terrorist attack on September 11, 2001. This also impacted
ROE for the quarter. The 3Q01 adjusted excludes the effect of this event.
Assets, equity and book value have not been adjusted.
(3) Adjusted to exclude goodwill amortization effective January 1, 2002 due to
the adoption of Statement of Financial Accounting Standards No. 142
"Goodwill and Other Intangible Assets."
(4) Pro forma earnings per share (basic and diluted) has been computed
assuming the 231.0 million shares issued from the March 22, 2002 initial
public offering were issued and outstanding for all periods presented.
TRAVELERS PROPERTY CASUALTY CORP. [TRAVELERS LOGO]
AFTER-TAX INCOME BY SOURCE
(in millions)
1Q 2Q 3Q 4Q 1Q
2001 2001 2001 2001 2002
---- ---- ---- ---- ----
Property Casualty Operations
Underwriting:
Commercial Lines (1) $ (11.2) $ (18.2) $ (417.8) $ (20.6) $ (12.9)
Personal Lines (1) 3.3 (35.7) (45.8) (22.8) (17.4)
--------- --------- --------- --------- ---------
Total GAAP underwriting loss (7.9) (53.9) (463.6) (43.4) (30.3)
--------- --------- --------- --------- ---------
Other income 18.0 26.6 13.4 15.0 18.7
Net investment income 387.0 379.5 353.0 366.4 360.4
Effective tax rate on net investment income 27.1% 27.0% 26.2% 26.2% 26.0%
--------- --------- --------- --------- ---------
Operating income (loss) from Property Casualty Operations 397.1 352.2 (97.2) 338.0 348.8
Operating loss from Interest Expense and Other (48.3) (37.9) (24.5) (23.7) (22.2)
--------- --------- --------- --------- ---------
Total operating income (loss) 348.8 314.3 (121.7) 314.3 326.6
Realized investment gains (losses) 125.3 32.2 62.6 (10.2) 18.9
Restructuring charges (2) -- (1.8) (0.8) (0.8) (0.8)
Cumulative effect of changes in accounting for :
Derivative instruments and hedging activities, net of tax 4.5 -- -- -- --
Securitized financial assets, net of tax -- (1.3) -- -- --
Goodwill and other intangible assets, net of tax -- -- -- -- (242.6)
--------- --------- --------- --------- ---------
Net income (loss) 478.6 343.4 (59.9) 303.3 102.1
Goodwill amortization 17.9 17.9 17.9 20.6 --
--------- --------- --------- --------- ---------
Adjusted net income (loss) $ 496.5 $ 361.3 $ (42.0) $ 323.9 $ 102.1
========= ========= ========= ========= =========
Earnings per share (basic and diluted)
Operating income (loss) $ 0.45 $ 0.41 $ (0.16) $ 0.41 $ 0.41
Realized investment gains (losses) 0.16 0.04 0.08 (0.02) 0.02
Cumulative effect of changes in accounting principles 0.01 -- -- -- (0.30)
--------- --------- --------- --------- ---------
Net income (loss) 0.62 0.45 (0.08) 0.39 0.13
Goodwill amortization 0.03 0.02 0.03 0.03 --
--------- --------- --------- --------- ---------
Adjusted net income (loss) $ 0.65 $ 0.47 $ (0.05) $ 0.42 $ 0.13
========= ========= ========= ========= =========
Pro forma earnings per share (3)
Operating income (loss) $ 0.35 $ 0.31 $ (0.12) $ 0.31 $ 0.33
Realized investment gains (losses) 0.13 0.03 0.06 (0.01) 0.01
Cumulative effect of changes in accounting principles -- -- -- -- (0.24)
--------- --------- --------- --------- ---------
Net income (loss) 0.48 0.34 (0.06) 0.30 0.10
Goodwill amortization 0.02 0.02 0.02 0.02 --
--------- --------- --------- --------- ---------
Adjusted net income (loss) $ 0.50 $ 0.36 $ (0.04) $ 0.32 $ 0.10
========= ========= ========= ========= =========
Dividends declared (4) $ 50.0 $ 318.5 $ 157.5 $ -- $ 5,252.5
(1) 3Q01 includes the effect of the terrorist attack on September 11, 2001,
which resulted in a decrease of $447.9 million and $41.6 million in
Commercial Lines and Personal Lines, respectively.
(2) Includes accelerated depreciation related to restructuring activities.
(3) Pro forma earnings per share (basic and diluted) has been computed
assuming the 231.0 million shares issued from the March 22, 2002 initial
public offering were issued and outstanding for all periods presented.
(4) 1Q02 dividends were primarily paid in the form of notes which were
partially prepaid from the $4.1 billion of net proceeds from the March 22,
2002 initial public offering and the issuance of $0.9 billion of
convertible notes.
2
TRAVELERS PROPERTY CASUALTY CORP.
CONSOLIDATED STATEMENT OF INCOME [TRAVELERS LOGO]
(in millions)
1Q 2Q 3Q 4Q 1Q
2001 2001 2001 2001 2002
-------- -------- -------- -------- --------
Revenues
Premiums $2,231.9 $2,290.8 $2,314.2 $2,574.0 $2,584.6
Net investment income 528.8 518.3 488.1 498.8 487.8
Fee income 77.7 83.9 93.2 92.6 102.7
Realized investment gains (losses) 192.3 49.3 96.3 (15.4) 28.8
Other revenues 27.4 40.7 20.7 26.9 28.8
-------- -------- -------- -------- --------
Total revenues 3,058.1 2,983.0 3,012.5 3,176.9 3,232.7
-------- -------- -------- -------- --------
Claims and expenses
Claims and claim adjustment expenses* 1,624.8 1,757.4 2,428.5 1,954.0 1,986.1
Amortization of deferred acquisition costs 348.5 373.9 380.8 435.5 426.4
Interest expense 65.7 52.7 46.4 40.1 35.8
General and administrative expenses 350.9 329.3 309.4 343.6 330.1
-------- -------- -------- -------- --------
Total claims and expenses 2,389.9 2,513.3 3,165.1 2,773.2 2,778.4
-------- -------- -------- -------- --------
Income (loss) before federal income taxes and cumulative
effect of changes in accounting principles 668.2 469.7 (152.6) 403.7 454.3
Federal income taxes (benefit) 194.1 125.0 (92.7) 100.4 109.6
-------- -------- -------- -------- --------
Income (loss) before cumulative effect of changes
in accounting principles 474.1 344.7 (59.9) 303.3 344.7
Cumulative effect of changes in accounting for:
Derivative instruments and hedging activities, net of tax 4.5 -- -- -- --
Securitized financial assets, net of tax -- (1.3) -- -- --
Goodwill and other intangible assets, net of tax -- -- -- -- (242.6)
-------- -------- -------- -------- --------
Net income (loss) $ 478.6 $ 343.4 $ (59.9) $ 303.3 $ 102.1
======== ======== ======== ======== ========
Operating income (loss) $ 348.8 $ 314.3 $ (121.7) $ 314.3 $ 326.6
*Includes pre-tax
Catastrophe losses, net of reinsurance $ 12.6 $ 84.0 $ 753.0 $ 6.7 $ 16.0
Asbestos and environmental losses $ 49.0 $ 50.0 $ 49.0 $ 87.0 $ 64.0
3
TRAVELERS PROPERTY CASUALTY CORP. [TRAVELERS LOGO]
CONSOLIDATED STATEMENT OF INCOME - PROPERTY CASUALTY OPERATIONS ONLY
(EXCLUDES INTEREST EXPENSE AND OTHER) - (1)
(in millions)
1Q 2Q 3Q 4Q 1Q
2001 2001 2001 2001 2002
-------- -------- -------- -------- --------
Revenues
Premiums $2,231.9 $2,290.8 $2,314.2 $2,557.9 $2,584.6
Net investment income 530.9 519.6 478.0 496.4 486.7
Fee income 77.7 83.9 93.2 92.6 102.7
Realized investment gains (losses) 192.7 48.9 98.3 (15.0) 28.5
Other revenues 26.8 40.6 20.7 25.0 28.8
-------- -------- -------- -------- --------
Total revenues 3,060.0 2,983.8 3,004.4 3,156.9 3,231.3
-------- -------- -------- -------- --------
Claims and expenses
Claims and claim adjustment expenses 1,615.9 1,754.1 2,421.2 1,935.3 1,978.7
Policyholder dividends 8.9 3.3 7.3 8.8 7.4
Amortization of deferred acquisition costs 348.5 373.9 380.8 431.9 426.4
General and administrative expenses 344.3 325.6 308.6 340.4 330.8
-------- -------- -------- -------- --------
Total claims and expenses 2,317.6 2,456.9 3,117.9 2,716.4 2,743.3
-------- -------- -------- -------- --------
Income (loss) before federal income taxes and cumulative
effect of changes in accounting principles 742.4 526.9 (113.5) 440.5 488.0
Federal income taxes (benefit) 219.7 144.6 (79.4) 113.1 121.3
-------- -------- -------- -------- --------
Income (loss) before cumulative effect of changes in
accounting principles 522.7 382.3 (34.1) 327.4 366.7
Cumulative effect of changes in accounting for:
Derivative instruments and hedging activities, net of tax 4.5 -- -- -- --
Securitized financial assets, net of tax -- (1.3) -- -- --
Goodwill and other intangible assets, net of tax -- -- -- -- (242.6)
-------- -------- -------- -------- --------
Net income (loss) from Property Casualty Operations* $ 527.2 $ 381.0 $ (34.1) $ 327.4 $ 124.1
======== ======== ======== ======== ========
*Includes investment results, net of taxes
Net investment income $ 387.0 $ 379.5 $ 353.0 $ 366.6 $ 360.4
Realized investment gains (losses) $ 125.6 $ 31.9 $ 63.9 $ (9.8) $ 18.7
(1) These financial statements include the combination of the Commercial Lines
and Personal Lines segments and exclude Interest Expense and Other (which
principally includes holding company financing activities.)
4
TRAVELERS PROPERTY CASUALTY CORP. [TRAVELERS LOGO]
PROPERTY CASUALTY OPERATIONS - SELECTED STATISTICS
(in millions)
1Q 2Q 3Q 4Q 1Q
2001 2001 2001 2001 2002
--------- --------- --------- --------- ---------
Statutory underwriting (1)
Net written premiums $ 2,387.7 $ 2,431.1 $ 2,433.4 $ 2,581.9 $ 2,725.1
Net earned premiums $ 2,231.9 $ 2,290.8 $ 2,314.2 $ 2,557.1 $ 2,584.6
Losses and loss adjustment expenses 1,578.2 1,723.5 2,380.3 1,900.9 1,935.5
Other underwriting expenses 678.3 642.0 669.7 695.8 722.2
--------- --------- --------- --------- ---------
Statutory underwriting loss (24.6) (74.7) (735.8) (39.6) (73.1)
Policyholder dividends 8.9 3.3 7.3 8.8 7.4
--------- --------- --------- --------- ---------
Statutory underwriting loss after policyholder dividends $ (33.5) $ (78.0) $ (743.1) $ (48.4) $ (80.5)
========= ========= ========= ========= =========
Statutory combined ratio (1,2)
Loss and loss adjustment expense ratio 70.7% 75.2% 102.9% 74.3% 74.9%
Other underwriting expense ratio 28.4% 26.4% 27.5% 27.0% 26.5%
--------- --------- --------- --------- ---------
Combined ratio 99.1% 101.6% 130.4% 101.3% 101.4%
========= ========= ========= ========= =========
GAAP combined ratio (1,2,3)
Loss and loss adjustment expense ratio 70.6% 75.0% 102.7% 73.9% 74.6%
Other underwriting expense ratio 27.5% 26.8% 26.4% 28.1% 25.9%
--------- --------- --------- --------- ---------
Combined ratio 98.1% 101.8% 129.1% 102.0% 100.5%
========= ========= ========= ========= =========
Other statutory statistics
Reserves for losses and loss adjustment expenses (1) $19,272.4 $19,189.6 $19,772.1 $20,214.5 $20,193.0
Increase (decrease) in reserves (1)* $ (155.7) $ (82.8) $ 582.5 $ 442.4 $ (21.5)
Statutory surplus $ 7,436.5 $ 7,554.0 $ 7,465.4 $ 7,687.3 $ 7,692.9
Net written premiums/surplus (4) 1.24:1 1.25:1 1.27:1 1.36:1 1.37:1
* Payments on environmental and cumulative injury claims incurred in prior
years are reflected as a decrease in reserves. Such payments do not have
any impact on reported GAAP earnings.
(1) 3Q01 includes the effect of the terrorist attack on September 11, 2001,
which resulted in a decrease of $49.0 million to premiums, and an increase
of $704.0 million and $753.0 million to losses and loss adjustment
expenses and reserves and statutory underwriting loss, respectively.
Excluding the effect of this event, the statutory loss and loss adjustment
expense ratio, other underwriting expense ratio, and combined ratio for
the third quarter 2001 were 70.9%, 27.0% and 97.9%, respectively.
Excluding the effect of this event, the GAAP loss and loss adjustment
expense ratio, other underwriting expense ratio, and combined ratio for
the third quarter 2001 were 70.7%, 25.9% and 96.6%, respectively.
(2) Before policyholder dividends.
(3) For purposes of computing GAAP combined ratios, fee income is allocated as
a reduction of losses and loss adjustment expenses and other underwriting
expenses. Fee income allocated as a reduction of losses and loss
adjustment expenses and other underwriting expenses was $40.5 million and
$37.2 million in 1Q01, $36.6 million and $47.3 million in 2Q01, $45.6
million and $47.6 million in 3Q01, $45.3 million and $47.3 million in 4Q01
and $51.6 million and $51.1 million in 1Q02, respectively.
(4) Based on 12 month rolling net written premiums.
5
TRAVELERS PROPERTY CASUALTY CORP. [TRAVELERS LOGO]
COMMERCIAL LINES - SELECTED STATISTICS
(in millions)
1Q 2Q 3Q 4Q 1Q
2001 2001 2001 2001 2002
-------- -------- -------- -------- --------
GAAP operating income (loss) $ 300.7 $ 302.5 $ (132.0) $ 277.9 $ 277.6
======== ======== ======== ======== ========
Net written premiums by market (1)
National accounts $ 126.2 $ 77.0 $ 115.8 $ 99.9 $ 96.8
Commercial accounts 546.9 527.1 528.8 792.9 859.3
Select accounts 429.4 439.6 411.7 432.5 455.0
Bond 167.6 142.4 147.8 132.4 131.6
Gulf 174.8 189.5 153.9 90.0 145.0
-------- -------- -------- -------- --------
Total net written premiums $1,444.9 $1,375.6 $1,358.0 $1,547.7 $1,687.7
======== ======== ======== ======== ========
Statutory underwriting (1)
Net written premiums $1,444.9 $1,375.6 $1,358.0 $1,547.7 $1,687.7
======== ======== ======== ======== ========
Net earned premiums $1,288.5 $1,312.5 $1,310.8 $1,518.3 $1,554.6
Losses and loss adjustment expenses 901.5 947.0 1,578.9 1,102.5 1,149.8
Other underwriting expenses 430.3 383.7 396.2 434.4 460.6
-------- -------- -------- -------- --------
Statutory underwriting loss (43.3) (18.2) (664.3) (18.6) (55.8)
Policyholder dividends 8.9 3.3 7.3 8.8 7.4
-------- -------- -------- -------- --------
Statutory underwriting loss after policyholder dividends $ (52.2) $ (21.5) $ (671.6) $ (27.4) $ (63.2)
======== ======== ======== ======== ========
Statutory combined ratio (1,2)
Loss and loss adjustment expense ratio 70.0% 72.2% 120.5% 72.6% 74.0%
Other underwriting expense ratio 29.8% 27.9% 29.2% 28.1% 27.3%
-------- -------- -------- -------- --------
Combined ratio 99.8% 100.1% 149.7% 100.7% 101.3%
======== ======== ======== ======== ========
GAAP combined ratio (1,2,3)
Loss and loss adjustment expense ratio 69.8% 71.7% 120.1% 71.9% 73.4%
Other underwriting expense ratio 27.4% 28.7% 27.3% 29.1% 25.7%
-------- -------- -------- -------- --------
Combined ratio 97.2% 100.4% 147.4% 101.0% 99.1%
======== ======== ======== ======== ========
Other statistics
Net investment income (pre-tax) $ 416.7 $ 416.9 $ 382.1 $ 399.0 $ 382.4
Effective tax rate on net investment income 26.5% 26.7% 25.8% 25.8% 25.4%
Catastrophe losses, net of reinsurance (after-tax) $ 8.2 $ 12.3 $ 447.9 $ 2.1 $ --
(1) 3Q01 includes the effect of the terrorist attack on September 11, 2001,
which resulted in a decrease of $45.0 million to premiums, and an increase
of $644.0 million and $689.0 million to losses and loss adjustment
expenses and statutory underwriting loss, respectively. Excluding the
effect of this event, the statutory loss and loss adjustment expense
ratio, other underwriting expense ratio, and combined ratio for the third
quarter 2001 were 69.0%, 28.2% and 97.2%, respectively. Excluding the
effect of this event, the GAAP loss and loss adjustment expense ratio,
other underwriting expense ratio, and combined ratio for the third quarter
2001 were 68.6%, 26.4% and 95.0%, respectively.
(2) Before policyholder dividends.
(3) For purposes of computing GAAP combined ratios, fee income is allocated as
a reduction of losses and loss adjustment expenses and other underwriting
expenses. Fee income allocated as a reduction of losses and loss
adjustment expenses and other underwriting expenses was $40.5 million and
$37.2 million in 1Q01, $36.6 million and $47.3 million in 2Q01, $45.6
million and $47.6 million in 3Q01, $45.3 million and $47.3 million in 4Q01
and $51.6 million and $51.1 million in 1Q02, respectively.
6
TRAVELERS PROPERTY CASUALTY CORP. [TRAVELERS LOGO]
PERSONAL LINES - SELECTED STATISTICS
(in millions)
1Q 2Q 3Q 4Q 1Q
2001 2001 2001 2001 2002
-------- -------- -------- -------- --------
GAAP operating income $ 96.4 $ 49.7 $ 34.8 $ 60.1 $ 71.2
======== ======== ======== ======== ========
Net written premiums by product line (1)
Auto $ 621.7 $ 653.7 $ 663.0 $ 652.3 $ 687.1
Homeowners and other 321.1 401.8 412.4 381.9 350.3
-------- -------- -------- -------- --------
Total net written premiums $ 942.8 $1,055.5 $1,075.4 $1,034.2 $1,037.4
======== ======== ======== ======== ========
Net written premiums by distribution channel (1)
Independent agents $ 756.2 $ 847.0 $ 868.1 $ 836.6 $ 850.7
Additional distribution 159.1 174.5 179.7 173.8 165.0
Other 27.5 34.0 27.6 23.8 21.7
-------- -------- -------- -------- --------
Total net written premiums $ 942.8 $1,055.5 $1,075.4 $1,034.2 $1,037.4
======== ======== ======== ======== ========
Statutory underwriting (1)
Net written premiums $ 942.8 $1,055.5 $1,075.4 $1,034.2 $1,037.4
======== ======== ======== ======== ========
Net earned premiums $ 943.4 $ 978.3 $1,003.4 $1,038.8 $1,030.0
Losses and loss adjustment expenses 676.7 776.5 801.4 798.4 785.7
Other underwriting expenses 248.0 258.3 273.5 261.4 261.6
-------- -------- -------- -------- --------
Statutory underwriting gain (loss) $ 18.7 $ (56.5) $ (71.5) $ (21.0) $ (17.3)
======== ======== ======== ======== ========
Statutory combined ratio (1)
Loss and loss adjustment expense ratio 71.7% 79.4% 79.9% 76.9% 76.3%
Other underwriting expense ratio 26.3% 24.5% 25.4% 25.3% 25.2%
-------- -------- -------- -------- --------
Combined ratio 98.0% 103.9% 105.3% 102.2% 101.5%
======== ======== ======== ======== ========
GAAP combined ratio (1)
Loss and loss adjustment expense ratio 71.7% 79.4% 79.9% 76.9% 76.3%
Other underwriting expense ratio 27.5% 24.3% 25.2% 26.6% 26.2%
-------- -------- -------- -------- --------
Combined ratio 99.2% 103.7% 105.1% 103.5% 102.5%
======== ======== ======== ======== ========
Other statistics
Net investment income (pre-tax) $ 114.2 $ 102.7 $ 95.9 $ 97.4 $ 104.3
Effective tax rate on net investment income 29.2% 28.1% 27.7% 27.9% 28.2%
Catastrophe losses, net of reinsurance (after-tax) $ -- $ 42.3 $ 41.6 $ 2.3 $ 10.4
(1) 3Q01 includes the effect of the terrorist attack on September 11, 2001,
which resulted in a decrease of $4.0 million to premiums, and an increase
of $60.0 million and $64.0 million to losses and loss adjustment expenses
and statutory underwriting loss, respectively. Excluding the effect of
this event, the statutory loss and loss adjustment expense ratio, other
underwriting expense ratio, and combined ratio for the third quarter 2001
were 73.6%, 25.3% and 98.9%, respectively. Excluding the effect of this
event, the GAAP loss and loss adjustment expense ratio, other underwriting
expense ratio, and combined ratio for the third quarter 2001 were 73.6%,
25.1% and 98.7%, respectively.
7
TRAVELERS PROPERTY CASUALTY CORP.
INVESTMENT PORTFOLIO [TRAVELERS LOGO]
(at carrying value, in millions)
At At
March 31, Pre-tax Book December 31, Pre-tax Book
2002 Yield 2001 Yield
---- ----- ---- -----
INVESTMENT PORTFOLIO
Taxable fixed maturities (including
redeemable preferred stock) $14,385.0 7.15 % $14,911.0 7.27 %
Tax-exempt fixed maturities 10,952.2 5.10 10,939.7 5.13
Non-redeemable preferred stocks 945.0 6.83 1,000.9 6.86
Common stocks 79.4 N/A 81.4 N/A
Mortgage loans 272.3 10.21 274.4 10.29
Real estate held for sale 38.3 0.07 38.3 10.24
Short-term securities 3,092.6 1.99 2,798.3 2.23
Trading securities 754.4 N/A 628.1 N/A
Other investments (1) 1,956.8 N/A 1,946.5 N/A
--------- --------- --------- --------
TOTAL INVESTMENTS $32,476.0 5.91 % $32,618.6 6.05 %
========= ========= ========= ========
Net unrealized gain on investment securities,
net of tax, included in stockholders' equity $ 86.3 $ 256.2
========= =========
(1) Primarily includes securities partnership interests held for
long-term appreciation. Other investments that generate only
intermittent income are also included in this category and
yields fluctuate accordingly.
8
TRAVELERS PROPERTY CASUALTY CORP. [TRAVELERS LOGO]
INVESTMENT PORTFOLIO - FIXED MATURITIES DATA
(at carrying value, in millions)
At At
March 31, December 31,
2002 2001
--------- ---------
Fixed maturities
Mortgage-backed securities - principally obligations of U.S. Government agencies $ 5,485.5 $ 5,608.8
U.S. Treasury securities and obligations of U.S. Government corporations and agencies 1,358.0 1,383.1
Corporates (including redeemable preferreds) 6,944.8 7,231.1
Obligations of states and political subdivisions 11,009.3 11,009.7
Debt securities issued by foreign governments 539.6 618.0
Trading securities 617.3 507.9
--------- ---------
Total fixed maturities $25,954.5 $26,358.6
========= =========
FIXED MATURITIES
QUALITY CHARACTERISTICS*
(as of March 31, 2002)
Amount % of Total
--------- ---------
Quality Ratings
Aaa $13,015.8 51.4 %
Aa 4,421.3 17.4
A 2,679.8 10.6
Baa 3,537.8 14.0
--------- ---------
Total investment grade 23,654.7 93.4
--------- ---------
Ba 1,041.7 4.1
B 464.2 1.8
Caa and lower 176.6 0.7
--------- ---------
Total below investment grade 1,682.5 6.6
--------- ---------
Total fixed maturities, excluding trading securities $25,337.2 100.0 %
========= =========
Trading securities $ 617.3
=========
Average weighted quality AA3,AA-
---------
Average duration of fixed maturities and short-term securities 5.8 years
---------
Average duration of fixed maturities (excluding short-term securities) 6.4 years
---------
* Rated using external rating agencies, or by Travelers Property Casualty
Corp.'s internal analysts when a public rating does not exist. Below
investment grade assets refer to securities rated "Ba1" or below.
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 15, 2002 Travelers Property Casualty Corp.
By: /s/ Daniel W. Jackson
--------------------------------
Name: Daniel W. Jackson
Title: Assistant Secretary