Travelers Property Casualty Corp. reported that operating income increased 14 percent over the prior year quarter to $356.8 million or $0.36 per share compared to $314.3 million or $0.31 per share for the prior year quarter (adjusted to reflect the shares issued in the March 2002 initial public offering). On an unadjusted basis operating income was $0.41 per share in the prior year quarter.
The increase in operating income was driven by the continuing favorable rate environment and production levels, lower catastrophe losses and our ongoing focus on managing expenses. These factors were partly offset by unfavorable prior year reserve development in the current quarter versus favorable prior year reserve development in the prior year quarter and by lower net investment income. The Company’s statutory combined ratio was 99.1 percent compared to 101.6 percent in the prior year quarter.
Net income, which also includes realized investment gains and losses, was $332.0 million for the quarter or $0.33 per share compared to $343.4 million or $0.34 per share on an adjusted basis in the prior year quarter ($0.45 per share on an unadjusted basis). The decrease in net income was primarily attributable to $24.0 million of after-tax net realized investment losses in the second quarter of 2002 versus $32.2 million of net realized investment gains in the prior year quarter.
Net written premiums increased $664.4 million or 27 percent from the prior year quarter to $3.096 billion, which included $326.2 million from the Northland and Associates businesses acquired in the fourth quarter of 2001.
“We are very pleased with our overall business performance in the quarter, particularly in light of the challenging investment environment,” Robert I. Lipp, chairman and CEO, remarked. “We continue to see the benefits of very solid fundamentals in our insurance operations, which allowed us to achieve a return on equity in excess of 14 percent. Rate increases remain strong across all businesses. Independent agents are seeking to place more of their business with stable, high quality insurers like Travelers, and we remain focused on being a consistent and financially strong partner to this critically important distribution channel.
“A significant part of our competitive strength is our continuing emphasis on expense control and operational discipline. During the quarter, we consolidated a number of claims offices and eliminated marginally performing distribution channels within Personal Lines. We also continued the migration of personal lines customers and small commercial accounts to our various service centers, further leveraging and expanding our technology and process platform.”
For the six months ended June 30, 2002, operating income increased 3 percent over the prior year period to $683.4 million or $0.68 per share on an adjusted basis ($0.76 on an unadjusted basis) compared to $663.1 million or $0.66 per share on an adjusted basis ($0.86 on an unadjusted basis).
Net income for the six months was $434.1 million compared to $822.0 million for the prior year period. The current period included a first quarter charge of $242.6 million, after tax, resulting from a change in accounting principles attributed to goodwill and $5.1 million of net realized investment losses, after tax. The prior year period included $157.5 million of net realized investment gains, after tax.
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