Travelers Reports Strong Q4, Full Year Results on Lower Catastrophe Losses

Strong quarterly and full year 2019 results for Travelers Cos. were helped by lower catastrophe losses and premium hikes.

Net income rose to $873 million in the fourth quarter ended Dec. 31 from $621 million for the same period in 2018. Total revenue was up 3.4% to $8.06 billion.

The insurer reported that net written premiums for the fourth quarter rose about 6% to $7.08 billion while underwriting gains more than tripled to $513 million. Earned premiums increased by 4% over the prior year quarter to a record $7.3 billion.

The fourth quarter consolidated combined ratio improved by 5.1 points to 92.4. Catastrophe losses declined to $85 million from $610 million in the quarter. The expense ratio improved to 29.1%, lowering the full year expense ratio to 29.6%, which the carrier called “a significant improvement from recent years.”

It was the twelfth straight quarter in which the insurer grew premiums in each of its business segments. In domestic Business Insurance, renewal premium change was 7.8%. In the domestic management liability business, renewal premium change was 6.6%. In its Agency Homeowners business, renewal premium change increased to 7.4%, its highest level since 2014.

For the full year 2019, net income of $2.622 billion increased $99 million thanks to significantly lower catastrophe losses. The full year combined ratio of 96.5% decreased 0.4 points due to significantly lower catastrophe losses (3.2 points)

“Our strong earnings and improved combined ratio of 92.4% benefited from lower catastrophe losses and the continued successful execution of our strategy to grow the top line at attractive returns while improving operating leverage,” said Alan Schnitzer, chairman and chief executive officer.

However, the insurer said it continues to contend with an “increasingly challenging” tort environment. “These improvements were partially offset by the impacts of ongoing challenges in the tort environment,” Schnitzer said.

Business Insurance

Segment income for the quarter for Business Insurance was $448 million, an increase of $57 million.

The combined ratio of 97.5% decreased 1.9 points due to significantly lower catastrophe losses (3.9 points).

The underlying combined ratio of 96.4% increased 1.0 points, primarily driven by the impacts of higher loss estimates in the general liability product line for primary and excess coverages and in the commercial automobile product line.

Workers’ compensation displayed better than expected loss experience in the segment’s domestic operations for multiple accident years, while general liability and commercial multi-peril saw higher than expected loss experience in the segment’s domestic operations

Income for Business Insurance for the full year 2019 was $1.392 billion, a decrease of $246 million. The full year combined ratio of 100.9% increased 1.8 points.

For the year, Business Insurance net unfavorable prior year reserve development was primarily driven by:

• General liability (excluding asbestos and environmental) – higher than expected loss experience in the segment’s domestic operations for primary and excess coverages for multiple accident years, including the impact for accident years 2009 and prior related to the enactment of legislation by a number of states that extended the statute of limitations for childhood sexual molestation claims;
• Commercial automobile – higher than expected loss experience in the segment’s domestic operations for recent accident years;
• Asbestos reserves – an increase of $220 million, primarily in the segment’s domestic general liability product line;
• Commercial multi-peril – higher than expected loss experience in the segment’s domestic operations for recent accident years; and
• Environmental reserves – an increase of $76 million, primarily in the segment’s domestic general liability product line.

Those results were partially offset by better than expected loss experience in worker’s compensation and in commercial property.

Full year Business Insurance gross written premiums of $17.151 billion grew 6%, benefiting from continued strong retention, higher renewal premium change and higher levels of new business. Net written premiums of $15.629 billion increased 4%. Growth in net written premiums was impacted by the new catastrophe reinsurance treaty.

Bond & Specialty Insurance

For the fourth quarter, income for Bond & Specialty Insurance was $167 million, a decrease of $53 million. The quarter’s combined ratio of 78.6% increased 13.8 points due to lower net favorable prior year reserve development (11.5 points) and a higher underlying combined ratio (3.2 points), partially offset by lower catastrophe losses (0.9 points). Net written premiums of $714 million increased 9%,

For the full year 2019, segment income for Bond & Specialty Insurance was $618 million, a decrease of $175 million. The full year combined ratio of 79.5% increased 10.5 points while the underlying combined ratio was 81.8%. Net written premiums of $2.739 billion increased 8% and benefited from the same factors as discussed above for the fourth quarter 2019.

Personal Insurance

Personal Insurance segment income for the fourth quarter was $327 million, an increase of $295 million, up primarily due to significantly lower catastrophe losses. The underlying underwriting gain benefited from higher business volumes.

The quarterly combined ratio for Personal Insurance of 88.5% decreased 14.1 points due to significantly lower catastrophe losses (14.6 points). Net written premiums of $2.658 billion increased 6%. Agency Automobile net written premiums increased 2%, driven by strong retention, renewal premium change of 3% and higher levels of new business. Agency Homeowners and Other net written premiums increased 13%, driven by strong retention, renewal premium change of 7% and higher levels of new business.

Full year 2019 segment income for Personal Insurance was $824 million, an increase of $527 million. The 2019 full year combined ratio of 94.2% improved 6.4 points due to significantly lower catastrophe losses.

Gross written premiums of $10.981 billion grew 6%. Net written premiums of $10.783 billion increased 5%. Agency Automobile gross written premiums of $5.154 billion grew 3%, driven by strong retention, renewal premium change of 4% and higher levels of new business. Net written premiums increased 3%. Agency Homeowners and Other gross written premiums of $4.685 billion grew 11% driven by strong retention, renewal premium change of 7% and higher levels of new business. Net written premiums increased 9%.

Source: Travelers

Topics Catastrophe Profit Loss Excess Surplus