Travelers Reports Strong 3Q with Profit More Than Doubling

October 20, 2020

The Travelers Companies had a strong third quarter, reporting net income grew to $827 million, up from $396 million in the prior year quarter.

An increase in the quarter’s core income to $798 million compared to $378 million in the prior year quarter was attributed primarily to favorable prior year reserve development, a higher underlying underwriting gain and higher net investment income, partially offset by above-average catastrophe losses.

The combined ratio came in at 94.9, while underwriting results benefited from an earned rate in excess of loss trend.

Total revenues were up 3% to $8.3 billion from $8.0 billion.

Net realized investment gains were $37 million pre-tax compared to $23 million pre-tax in the prior year quarter.

Travelers’ 2020 Third Quarter Results of Operations

  • Net income of $827 million, or $3.24 per share basic and $3.23 per share diluted
  • Net earned premiums of $7.38 billion
  • Catastrophe losses of $397 million ($314 million after-tax)
  • Net favorable prior year reserve development of $142 million ($113 million after-tax)
  • Combined ratio of 94.9%
  • Net investment income of $671 million ($566 million after-tax)
  • Net realized investment gains of $37 million ($29 million after-tax)
  • Operating cash flows of $2.33 billion

“We are also very pleased with the strength of our top line, particularly in light of the ongoing challenges in the economic environment,” said Alan Schnitzer, chairman and chief executive officer.

Net written premiums in the quarter were up nearly 3%, driven in part by by high retentions and strong renewal rate change. In Business Insurance, the insurers saw a renewal rate change of 8.2%, four points higher than the prior year quarter, while retention remained strong. In Bond & Specialty Insurance, net written premiums increased by 4%, as renewal premium change in domestic management liability business rose to 8.1%. In Personal Insurance, net written premiums increased by 8%, driven by strong retention and new business in both Agency Auto and Agency Homeowners. Agency Homeowners business achieved renewal premium change of 8.2%, its highest level since 2014.

The results were boosted by net favorable prior year reserve development including a $403 million subrogation benefit from Pacific Gas and Electric Co. (PG&E) related to the 2017 and 2018 California wildfires and a $295 million increase to asbestos reserves, compared with a $220 million increase in the prior year quarter.

Catastrophe losses were $397 million pre-tax compared to $241 million pre-tax in the prior year quarter. These losses primarily resulted from the derecho windstorm in the midwestern region of the U.S., the Glass wildfire in California, Tropical Storm Isaias, Hurricane Laura and additional wildfires in the western U.S. Catastrophe losses included the third quarter also included tornado activity in Tennessee and other wind storms and winter storms in several regions of the country in the first quarter of 2020, and severe storms and civil unrest in the second quarter of 2020.

Schnitzer said Travelers is in “a position of strength” as it continues to actively pursue an innovation agenda and improve productivity and efficiency. “With our significant competitive advantages, including our highly engaged and talented workforce, we are well positioned to capitalize on opportunities and successfully grow our business as the economy continues to reopen,” he commented.

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