The Travelers Companies, Inc. net income for the first quarter of 2009 fell more than 30 percent to $662 million, for the quarter ended March 31, 2009, compared to $967 million, for the quarter ended March 31, 2008. Operating income in the current quarter was $799 million, compared to $1.008 billion, in the prior year quarter.
Despite difficult economic and investment environments, Travelers delivered a net and operating return on equity of 10.2 percent and 12.4 percent, respectively, said Jay Fishman, Chairman and CEO.
“These results reflect a solid underwriting performance, as evidenced by our 90.6 percent combined ratio,” he said. “While long-term fixed income returns were stable, total net investment income declined due to lower short-term interest rates and negative returns on our non-fixed income investment portfolio. Notwithstanding current investment market conditions, we remain pleased with the quality of our investment portfolio.”
Travelers reported net written premiums of $5.203 billion, an increase from $5.188 billion in the prior year quarter.
Overall, business retention remained at historically high levels and increased in many lines of business from the prior year quarter, the insurer said. Improving rate trends continued in each business segment, although coverage demands from existing policyholders declined due to general economic conditions. New business volumes were slightly lower than the prior year quarter as small growth in business insurance was offset by lower volumes in financial, professional and international insurance and personal insurance, according to the insurer.
The company reported solid underwriting results in all segments with GAAP combined ratios in business insurance of 89.0 percent; financial, professional and international insurance of 90.2 percent; and personal insurance of 93.3 percent.
The consolidated GAAP combined ratio was 90.6 percent for the quarter.
The current quarter underwriting gain reflects a GAAP combined ratio of 93.9 percent, excluding net favorable prior year reserve development and catastrophe losses, as compared to 93.3 percent in the prior year quarter. Travelers said the increase of 0.6 points primarily resulted from reduced underwriting margins related to pricing and loss cost trends, partially offset by a $61 million pre-tax reduction in the estimate of Texas Windstorm Insurance Association (TWIA) assessments related to Hurricane Ike.
Travelers reported catastrophe losses of $54 million after-tax ($83 million pre-tax), compared to $62 million after-tax ($95 million pre-tax) in the prior year quarter. Catastrophe losses in the current quarter were related to several tornadoes and hail storms.
Travelers’ net favorable prior year reserve development of $168 million after-tax ($258 million pre-tax), compared to $261 million after-tax ($400 million pre-tax) in the prior year quarter. The insurer said net favorable prior year reserve development in the current quarter resulted from better than expected loss experience in each segment, particularly in business insurance.
Net investment income of $474 million after-tax ($542 million pre-tax), declined from $650 million after-tax ($815 million pre-tax) in the prior year quarter, due to negative returns in the non-fixed income portfolio and significantly lower short-term interest rates. Net realized investment losses of $137 million after-tax ($214 million pre-tax), compared to net realized investment losses of $41 million after-tax ($62 million pre-tax) in the prior year quarter primarily due to an increase in impairments.
“Our position in the marketplace remains strong and we continue to gain momentum,” Fishman said. “The benefits from our ongoing investments in technology platforms and product enhancements, as well as the flight to quality that is occurring in our industry, can be seen in our high retention rates and increased business submission flows. Adding to our franchise has been an improving rate trend across each of our business segments which has more than offset the impact of declining coverage needs resulting from general economic conditions,” concluded Fishman.