Travelers Profit Up 6.3% in Q2 on Lower Catastrophe Losses, Higher Investments

July 23, 2019

The Travelers Companies managed to boost its net income to $557 million for the second quarter, six percent more than the $524 million in the prior year quarter.

The insurer reported lower catastrophe losses and higher net investment income, partially offset by elevated non-catastrophe weather-related losses and lower net favorable prior year reserve development.

Total net written premiums grew in all of its business segments by four percent overall, reaching $7.5 billion, a company record. Commercial lines premiums were up 6.7%. Personal lines premiums increased 6%.

Net investment income of $648 million pre-tax ($548 million after-tax) increased 9%. Net investment gains were $25 million pre-tax, compared to $36 million pre-tax in the prior year quarter.

“Our performance this quarter and year-to-date reflect both the successful execution of our long-term strategy and our relentless execution in the marketplace every day. In an environment of persistently low interest rates, ongoing uncertainty surrounding weather-related losses and a more challenging tort environment, we will continue to leverage the power of our franchise to meet our return objectives, including by selectively and thoughtfully seeking price and improved terms and conditions,” Alan Schnitzer, chairman and chief executive officer, said in prepared remarks.

Second quarter combined results:

  • The combined ratio of 98.4% increased 0.3 points due to a higher underlying combined ratio (1.3 points) and lower net favorable prior year reserve development (1.0 points), partially offset by lower catastrophe losses (2.0 points).
  • Net favorable prior year reserve development occurred in all segments. Catastrophe losses primarily resulted from wind storms in several regions of the United States.
  • Net investment income of $648 million pre-tax ($548 million after-tax) increased 9%. Income from the fixed income investment portfolio increased due to a higher average level of fixed maturity investments, as well as higher long-term and short-term interest rates. Private equity partnership returns were higher than in the prior year quarter.

Business Insurance second quarter results:

Business Insurance income was $351 million after-tax, a decrease of $34 million attributable primarily due to higher catastrophe losses, a lower underlying underwriting gain and lower net favorable prior year reserve development, partially offset by higher net investment income.

Net written premiums of $3.874 billion increased 2%, benefiting from continued strong retention and higher renewal premium change.

Business Insurance underwriting results:

  • The combined ratio of 101.1% increased 2.3 points due to higher catastrophe losses (1.0 points), a higher underlying combined ratio (0.9 points) and lower net favorable prior year reserve development (0.4 points).
  • Net favorable prior year reserve development was primarily driven by better than expected loss experience in the segment’s domestic operations in the workers’ compensation product line for multiple accident years, partially offset by higher than expected loss experience in the segment’s domestic operations in the general liability product line for primary and excess coverages for multiple accident years, including a $60 million increase to environmental reserves for accident years 2009 and prior, in the commercial automobile product line for recent accident years and higher than expected loss experience in the segment’s international operations.

Bond & Specialty second quarter results

Income for Bond & Specialty Insurance was $174 million after-tax, a decrease of $30 million that was primarily due to lower net favorable prior year reserve development.

Net written premiums of $710 million increased 9%, with contributions from both management liability and surety.

Bond & Specialty underwriting results:

  • The combined ratio of 74.9% increased 8.4 points due to lower net favorable prior year reserve development (8.6 points) and a higher underlying combined ratio (0.5 points), partially offset by lower catastrophe losses (0.7 points).
  • Net favorable prior year reserve development was driven by better than expected loss experience in domestic general liability for management liability coverages for multiple accident years.

Personal Insurance second quarter results

Personal Insurance income was $88 million after-tax, compared to a loss of $17 million in the prior year quarter. Segment income benefited primarily from lower catastrophe losses and higher net investment income, partially offset by a lower underlying underwriting gain.

Net written premiums of $2.866 billion increased 6%. Agency Automobile net written premiums increased 3%, driven by renewal premium change of 5%. Agency Homeowners and Other net written premiums increased 11%, driven by renewal premium change of 7% and higher levels of new business.

The Personal Insurance combined ratio of 100.2% improved 4.7 points due to lower catastrophe losses (6.7 points), partially offset by a higher underlying combined ratio (2.0 points).

Source: Travelers Cos.

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