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Travelers Reports Second Quarter Net Income of $683 Million, or $1.95 per Diluted Share, Including Catastrophe Losses of $284 Million, or $0.82 per Diluted ShareNEW YORK --(Business Wire)-- The Travelers Companies, Inc. today reported net income of $683 million, or $1.95 per diluted share, for the quarter ended June 30, 2014, compared to net income of $925 million, or $2.41 per diluted share, in the prior year quarter. Operating income in the current quarter was $673 million, or $1.93 per diluted share, compared to $816 million, or $2.13 per diluted share, in the prior year quarter.
"Our second quarter operating income of $673 million and operating return on equity of 11.4% were strong, particularly given the relatively high level of catastrophe losses we experienced this quarter," commented Jay Fishman, Chairman and Chief Executive Officer. "The comparison of these results to last year's second quarter was meaningfully impacted by the significant increase in catastrophe losses in the current quarter as well as the inclusion of significant favorable tax and legal settlements in the prior year quarter.We are very pleased with our underlying combined ratio of 90.9%, which improved from 91.7% in the prior year quarter. Net investment income was comparable to the prior year quarter, notwithstanding the impact of the low interest rate environment, as we continued to generate strong returns from our non-fixed income portfolio. In addition, our strong earnings in recent quarters enabled us to return over $1 billion of capital to shareholders in the current quarter, including $876 million of share repurchases. "Our results year-to-date were very strong and demonstrated our continued success in actively managing our businesses to produce superior returns on capital over time. In Business Insurance, the cumulative effect of the price increases we have achieved over the last several years, combined with our highly analytic approach to risk selection, has resulted in a product portfolio that is achieving meaningfully improved and attractive returns. That said, we are not declaring mission accomplished. There remains opportunity to further improve the product portfolio by continuing to take appropriate action on those accounts or classes of business that still do not meet our return thresholds and by achieving additional rate increases for those accounts that continue to experience unusual weather volatility. In Personal Insurance, we still have more work to do to improve our returns, but we have made considerable progress in both Auto and Homeowners. The market response of Quantum 2.0, our new auto product, is particularly encouraging. Finally, Financial, Professional & International Insurance posted record operating income. "In summary, we will continue to execute on our long-held financial strategy of building and sustaining meaningful competitive advantages, delivering superior profitability and returns, and returning excess capital to shareholders. As a consequence, we remain well positioned to continue to deliver compelling shareholder value over time."
Second Quarter 2014 Results (All comparisons vs. second quarter 2013, unless noted otherwise) Net income of $683 million after-tax decreased $242 million or 26% due to a reduction in both operating income and net realized investment gains. Operating income of $673 million after-tax decreased $143 million or 18% primarily reflecting a $122 million after-tax benefit in the prior year quarter from favorable tax and legal settlements, as well as higher catastrophe losses in the current quarter, partially offset by higher underlying underwriting gains (which exclude prior year reserve development and catastrophe losses). Underwriting results
Net investment income of $553 million after-tax ($695 million pre-tax) benefited from strong private equity returns, partially offset by lower reinvestment rates in the fixed income portfolio. Net realized investment gains were $10 million after-tax ($16 million pre-tax) compared to $109 million after-tax ($167 million pre-tax) in the prior year quarter. The prior year quarter included an $87 million after-tax ($134 million pre-tax) realized gain related to a short position in U.S. Treasury futures contracts. Record quarterly net written premiums of $6.162 billion increased 6% primarily due to the inclusion of Dominion within Financial, Professional & International Insurance, as well as slightly higher net written premiums in Business Insurance. These increases were partially offset by slightly lower net written premiums in Personal Insurance. Year-to-Date 2014 Results (All comparisons vs. year-to-date 2013, unless noted otherwise) Net income of $1.735 billion after-tax decreased $86 million or 5% due to a reduction in net realized investment gains, partially offset by higher operating income. Operating income of $1.725 billion after-tax increased $22 million or 1% primarily reflecting higher underlying underwriting gains, higher net favorable prior year reserve development and higher net investment income. These improvements were partially offset by higher catastrophe losses. The current period included a $49 million after-tax benefit in the first quarter resulting from a reduction in the estimated liability for state assessments to be paid by the company related to workers' compensation premiums. The prior year period included a $122 million after-tax benefit from favorable tax and legal settlements. Underwriting results
Net investment income of $1.135 billion after-tax ($1.431 billion pre-tax) increased primarily due to the same factors discussed above for the second quarter, as well as higher real estate partnership returns. Net written premiums of $12.035 billion increased 5% due to the same factors discussed above for the second quarter. Shareholders' Equity Shareholders' equity of $25.532 billion increased 1% and 3%, respectively, from the end of first quarter 2014 and year-end 2013. Included in shareholders' equity were after-tax net unrealized investment gains of $2.013 billion, compared to $1.674 billion at the end of the first quarter 2014 and $1.322 billion at the end of the prior year. The company repurchased 9.5 million shares during the second quarter and 18.0 million shares year-to-date at a total cost of $876 million and $1.581 billion, respectively. The company has $3.234 billion of remaining capacity under its existing share repurchase authorization. At the end of second quarter 2014, statutory surplus was $21.036 billion and the ratio of debt-to-capital (excluding after-tax net unrealized investment gains) was 21.3%, well within the target range of 15% to 25%. The Board of Directors declared a quarterly dividend of $0.55 per share. This dividend is payable on September 30, 2014, to shareholders of record as of the close of business on September 10, 2014.
Second Quarter 2014 Results (All comparisons vs. second quarter 2013, unless noted otherwise) Operating income of $409 million after-tax decreased $170 million or 29%, primarily reflecting a $102 million after-tax benefit in the prior year quarter from favorable tax and legal settlements, as well as higher catastrophe losses, lower net favorable prior year reserve development and lower net investment income, partially offset by higher underlying underwriting gains. Underwriting results
Net written premiums of $3.101 billion increased 1%, primarily driven by continued improvement in renewal rate. Net written premiums also benefited from positive exposure change at renewal. Retention rates remained strong, and new business volumes increased from the prior year quarter. Year-to-Date 2014 Results (All comparisons vs. year-to-date 2013, unless noted otherwise) Operating income of $1.062 billion after-tax decreased $107 million or 9%, primarily reflecting the same factors as discussed above for the second quarter, except that net investment income was higher than the prior year period. The current period also included a $49 million after-tax benefit resulting from a reduction in the estimated liability for state assessments to be paid by the company related to workers' compensation premiums in the first quarter. Underwriting results
Net written premiums of $6.405 billion increased 1%, primarily driven by the same factors as discussed above for the second quarter except that new business volumes decreased slightly from the prior year period.
Second Quarter 2014 Results (All comparisons vs. second quarter 2013, unless noted otherwise) Record quarterly operating income of $254 million after-tax increased $100 million or 65%, primarily reflecting improved underwriting results driven by higher net favorable prior year reserve development, lower catastrophe losses and higher underlying underwriting gains, as well as higher net investment income. Underwriting results
Record quarterly Financial, Professional & International Insurance net written premiums of $1.168 billion increased 38% as a result of higher net written premiums in both Bond & Financial Products and International. International net written premiums of $628 million increased 97% due to the inclusion of Dominion. Bond & Financial Products net written premiums of $540 million increased 2%, primarily due to continued strong retention rates and renewal rate increases in the management liability business within Bond & Financial Products. Year-to-Date 2014 Results (All comparisons vs. year-to-date 2013, unless noted otherwise) Operating income of $449 million after-tax increased $132 million or 42%, primarily reflecting the same factors as discussed above for the second quarter. Underwriting results
Financial, Professional & International Insurance net written premiums of $2.118 billion increased 42% as a result of higher net written premiums in both Bond & Financial Products and International. Net written premiums of $1.096 billion in International and $1.022 billion in Bond & Financial Products increased 92% and 10%, respectively, driven by the same factors as discussed above for the second quarter, as well as the elimination of a reinsurance program in Bond & Financial Products.
Second Quarter 2014 Results (All comparisons vs. second quarter 2013, unless noted otherwise) Operating income of $75 million after-tax decreased $67 million or 47%, primarily reflecting lower net favorable prior year reserve development and higher catastrophe losses. Underwriting results
Personal Insurance net written premiums of $1.893 billion decreased 1%. Renewal premium change remained positive. Retention rates continued to be strong and generally consistent with recent quarters. New business was significantly higher than the prior year quarter due to the company's new auto product, Quantum 2.0, which had been introduced in 31 states and the District of Columbia by the end of the second quarter. Year-to-Date 2014 Results (All comparisons vs. year-to-date 2013, unless noted otherwise) Operating income of $343 million after-tax increased $4 million or 1%, primarily reflecting improved underwriting results driven by higher net favorable prior year reserve development and higher underlying underwriting gains, as well as higher net investment income. These improvements were mostly offset by higher catastrophe losses. Underwriting results
Personal Insurance net written premiums of $3.512 billion decreased 2%. Renewal premium change remained positive, retention rates continued to be strong and new business was significantly higher than the prior year period. Financial Supplement and Conference Call The information in this press release should be read in conjunction with a financial supplement that is available on our website at www.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 Tuesday, July 22, 2014. Investors can access the call via webcast at http://investor.travelers.com or by dialing 1-800-728-2056 within the U.S. and 1-212-231-2901 outside the U.S. (use passcode 14788 for both the U.S. and international calls). Prior to the webcast, a slide presentation pertaining to the quarterly earnings will be available on the company's website. Following the live event, an audio playback of the webcast and the slide presentation will be available at the same website. An audio playback can also be accessed by phone at 1-800-633-8284 within the U.S. and 1-402-977-9140 outside the U.S. (use reservation 21720985 for both the U.S. and international calls). About Travelers The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of property casualty insurance for auto, home and business. The company's diverse business lines offer its customers a wide range of coverage sold primarily through independent agents and brokers. A component of the Dow Jones Industrial Average, Travelers has more than 30,000 employees and operations in the United States and selected International markets. For more information, visit www.travelers.com. From time to time, Travelers may use its website and/or social media outlets, such as Facebook and Twitter, 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 http://investor.travelers.com, our Facebook page at https://www.facebook.com/travelers and our Twitter account (@TRV_Insurance) at https://twitter.com/TRV_Insurance. In addition, you may automatically receive email alerts and other information about Travelers when you enroll your email address by visiting the "Email Alert Service" section at http://investor.travelers.com. For the periods presented in this earnings release, Travelers was organized into the following reportable business segments: Business Insurance: The Business Insurance segment offers a broad array of property and casualty insurance and insurance-related services to its clients primarily in the United States. Business Insurance is organized into the following six groups, which collectively comprise Business Insurance Core operations: Select Accounts; Commercial Accounts; National Accounts; Industry-Focused Underwriting including Construction, Technology, Public Sector Services, Oil & Gas and Agribusiness; Target Risk Underwriting including National Property, Inland Marine, Ocean Marine, Excess Casualty, Boiler & Machinery and Global Partner Services; and Specialized Distribution including Northland and National Programs. Business Insurance also includes the Special Liability Group (which manages the company's asbestos and environmental liabilities) and the assumed reinsurance and certain other runoff operations, which collectively are referred to as Business Insurance Other. Financial, Professional & International Insurance: The Financial, Professional & International Insurance segment includes surety and financial liability coverages, which primarily use credit-based underwriting processes, as well as property and casualty products that are primarily marketed on a domestic basis in Canada, the United Kingdom and the Republic of Ireland, and on an international basis as a corporate member of Lloyd's. The segment includes the Bond & Financial Products groups as well as the International group. The International group includes The Dominion of Canada General Insurance Company, which the company acquired in November 2013 and which writes personal lines and small commercial insurance business in Canada. In addition, the company owns 49.5% of the common stock of J. Malucelli Participações em Seguros e Resseguros S.A., its joint venture in Brazil. Personal Insurance: The Personal Insurance segment writes a broad range of property and casualty insurance covering individuals' personal risks. The primary products of automobile and homeowners insurance are complemented by a broad suite of related coverages. On June 10, 2014, the company announced a realignment of its management team that gave rise to a realignment of two of its three business segments, effective July 1, 2014. The company's International Insurance group, which had previously been included in the Financial, Professional & International Insurance segment, will be combined with the company's previous Business Insurance segment to create a new Business & International Insurance segment. The Bond & Financial Products group, which was the remaining business in the Financial, Professional & International Insurance segment, will now comprise the new Bond & Financial Products segment. The Personal Insurance segment will not be impacted by these changes. The changes were designed to reflect the realignment of the company's management team and the manner in which the company's businesses are managed effective July 1, 2014, and represent an aggregation of products and services based on type of customer, how the business is marketed and the manner in which risks are underwritten. The newly aligned segments will be presented in the company's financial statements beginning with the period ending September 30, 2014 and the prior periods presented will be restated to conform to the new presentation. * * * * * Forward-Looking Statement 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", "anticipates", "expects", "intends", "plans", "projects", "believes", "estimates" and similar expressions are used to identify these forward-looking statements. Specifically, statements about the company's outlook, share repurchase plans, expected margin improvement, potential returns, future pension plan contributions and the potential impact of investment markets and other economic conditions on the company's investment portfolio and underwriting results, among others, are forward looking, and the company may also make forward-looking statements about, among other things:
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:
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" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent annual report on Form 10-K and our quarterly report on Form 10-Q filed with the Securities and Exchange Commission (SEC). ***** GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF NON-GAAP MEASURES TO GAAP MEASURES The following measures are used by the company's management to evaluate financial performance against historical results and establish targets on a consolidated basis. 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 non-GAAP measures to their most directly comparable GAAP measures also follow. In the opinion of the company's management, a discussion of these measures provides investors, financial analysts, rating agencies and other financial statement users with a better understanding of the significant factors that comprise the company's periodic results of operations and how management evaluates the company's financial performance. Internally, the company's management uses these measures to evaluate performance against historical results, to establish financial targets on a consolidated basis and for other reasons, which are discussed below. Some of these measures exclude net realized investment gains (losses), net of tax, and/or net unrealized investment gains (losses), net of tax, which can be significantly impacted by both discretionary and other economic factors and are not necessarily indicative of operating trends. Other companies may calculate these measures differently, and, therefore, their measures may not be comparable to those used by the company's management. RECONCILIATION OF OPERATING INCOME AND CERTAIN OTHER NON-GAAP MEASURES TO NET INCOME Operating income is net income excluding the after-tax impact of net realized investment gains (losses) and discontinued operations. Management uses operating income to analyze each segment's performance and as a tool in making business decisions. Financial statement users also consider operating income when analyzing the results and trends of insurance companies. Operating earnings per share is operating income on a per common share basis. Reconciliation of Operating Income less Preferred Dividends to Net Income
Reconciliation of Operating Earnings per Share to Net Income per Share on a Basic and Diluted Basis
Reconciliation of Operating Income by Segment to Total Operating Income
RECONCILIATION OF ADJUSTED SHAREHOLDERS' EQUITY TO SHAREHOLDERS' EQUITY AND OPERATING RETURN ON EQUITY TO RETURN ON EQUITY 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 shareholders' equity is shareholders' equity excluding net unrealized investment gains (losses), net of tax, net realized investment gains (losses), net of tax, for the period presented, preferred stock and discontinued operations. Adjusted average shareholders' equity is average shareholders' equity excluding net unrealized investment gains (losses), net of tax, for all quarters included in the calculation and, for each quarterly period included in the calculation, that quarter's net realized investment gains (losses), net of tax and discontinued operations. Reconciliation of Adjusted Shareholders' Equity to Shareholders' Equity
Return on equity is the ratio of annualized net income less preferred dividends to average shareholders' equity for the periods presented. Operating return on equity is the ratio of annualized operating income 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. Calculation of Operating Return on Equity and Return on Equity
Average annual operating return on equity over a period is the
ratio of: Calculation of Average Annual Operating Return on Equity from January 1, 2005 through June 30, 2014
RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN ITEMS TO NET INCOME Underwriting gain 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. Pre-tax underwriting gain, excluding the impact of catastrophes and net favorable 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 margin or underlying underwriting gain. A catastrophe is a severe loss, resulting from natural and man-made events, including risks such as fire, earthquake, windstorm, explosion, terrorism and other similar events. Each catastrophe has unique characteristics, and catastrophes are not predictable as to timing or amount. Their effects are included in net and operating income 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. In the opinion of the company's management, a discussion of the impact of catastrophes is meaningful to users of the financial statements to understand the company's periodic earnings and the variability in periodic earnings caused by the unpredictable nature of catastrophes. Net favorable (unfavorable) prior year loss reserve development is the increase or decrease in incurred claims and claim adjustment expenses as a result of the re-estimation of claims and claim adjustment expense reserves at successive valuation dates for a given group of claims, which may be related to one or more prior years. In the opinion of the company's management, a discussion of loss reserve development is meaningful to users of the financial statements as it allows them to assess the impact between prior and current year development on incurred claims and claim adjustment expenses, net and operating income (loss), and changes in claims and claim adjustment expense reserve levels from period to period. Reconciliation of Pre-tax Underwriting Gain (Excluding the Impact of Catastrophes and Net Favorable Prior Year Loss Reserve Development) to Net Income
COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED RATIO 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 premium and the underwriting expense ratio as used in this earnings release is based on net earned premiums. For SAP, 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, 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 and billing and policy fees, to net earned premiums. The combined ratio, loss and LAE ratio, and underwriting expense ratio are used as indicators of the company's underwriting discipline, efficiency in acquiring and servicing its business and overall underwriting profitability. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss. Other companies' method of computing similarly titled measures may not be comparable to the company's method of computing these ratios. 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. Calculation of the Combined Ratio
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. ADJUSTMENT TO NET WRITTEN PREMIUMS FOR THE IMPACT OF CHANGES IN FOREIGN EXCHANGE RATES Adjusting for the impact of changes in foreign exchange rates allows the effect of foreign exchange rate differences to be isolated in the analysis of changes in various financial statement line items that are translated from a local currency to the company's reporting currency, U.S. dollars. The impact is determined by assuming constant foreign exchange rates between periods as illustrated in the reconciliation below. In the opinion of the company's management, this is useful to an analysis of the results of the International market and the Financial, Professional & International (FP&II) segment. Reconciliation of the Impact of Changes in Foreign Exchange Rates on International Net Written Premiums to International Net Written Premiums
Reconciliation of the Impact of Changes in Foreign Exchange Rates on FP&II Net Written Premiums to FP&II Net Written Premiums
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO BOOK VALUE PER SHARE AND SHAREHOLDERS' EQUITY 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 the after-tax impact of net unrealized investment gains and losses, divided by the number of common shares outstanding. In the opinion of the company's management, adjusted book value is useful in an analysis of a property casualty company's book value 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. Reconciliation of Tangible and Adjusted Shareholders' Equity to Shareholders' Equity
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO TOTAL CAPITALIZATION Total capitalization is the sum of total shareholders' equity and debt. Debt-to-capital ratio excluding net unrealized gain on investments is the ratio of debt to total capitalization excluding the after-tax impact of net unrealized investment gains and losses. In the opinion of the company's management, the debt to capital ratio is useful in an analysis of the company's financial leverage. Reconciliation of Total Debt and Equity Excluding Net Unrealized Investment Gain to Total Capitalization
OTHER DEFINITIONS Gross written premiums reflect the direct and assumed contractually determined amounts charged to policyholders for the effective period of the contract based on the terms and conditions of the insurance contract. Net written premiums reflect gross written premiums less premiums ceded to reinsurers. These are GAAP measures. For the Business Insurance and Financial, Professional and International Insurance segments, retention is the amount of premium available for renewal that was retained, excluding rate and exposure changes. For the Personal Insurance segment, 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 volume is the amount of written premium related to new policyholders and additional products sold to existing policyholders. These are operating statistics, which are subject to change based upon a number of factors, including changes in actuarial estimates. For the Business Insurance segment, retention, renewal premium change and new business volumes exclude National Accounts and Business Insurance-Other. An insurance company's statutory surplus represents the excess of its assets over its liabilities in accordance with the statutory accounting practices required by state laws and regulations. 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 Securities and Exchange Commission.
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