Travelers Insurance Reports Solid Q3 Results Despite $700M Cat Losses

The Travelers Companies today reported $293 million in net income for the third quarter despite absorbing more than $700 million in catastrophe claims.

The $293 million in net income was a 59 percent decline from the $716 million in last year’s third quarter. The sharp drop was primarily due to significantly higher catastrophe losses, which rose almost 700 percent from a year ago. However, investment income was up for the quarter.

CEO and Chairman Alan Schnitzer credited the company’s “strength in underwriting” and its “investment expertise” with helping it deliver solid results despite the oversized catastrophe losses. Travelers reported $89 million in catastrophe losses for the third quarter last year.

An increase in net investment income to $588 million for the quarter benefited from an increase in net realized investment gains of $61 million, primarily driven by gains on the sale of equity securities.

The insurer, the first to report quarterly results, also had record net written premiums of $6.6 billion, up four percent over prior year quarter, with growth in all segments. The increase reflected renewal premium changes in personal lines and an increase in new business in commercial lines.

The $700 million in catastrophe losses in the third quarter of 2017 primarily resulted from Hurricanes Harvey, Irma and Maria, as well as wind and hail storms in the southern region of the United States.

The combined ratio of 103.2 increased 10.3 points due to higher catastrophe losses (9.3 points), a higher underlying combined ratio (0.7 points) and lower net favorable prior year reserve development (0.3 points).

The underlying combined ratio of 92.8 increased 0.7 points, primarily driven by a high level of non-catastrophe fire-related losses in Business Insurance and loss cost trends that modestly exceeded earned pricing, partially offset by a lower expense ratio.

Net favorable prior year reserve development occurred in Business Insurance and Bond & Specialty Insurance.

“In a quarter of unprecedented hurricane activity, our strength in underwriting and our investment expertise enabled us to deliver core income of $253 million and core return on equity of 4.5 percent,” commented Alan Schnitzer in prepared remarks. “Our disciplined coastal underwriting stood up to the storms, and we also delivered a consolidated underlying combined ratio of 92.8, with all three segments contributing to the solid result.”

He said the insurer remains pleased with the execution of its marketplace strategies, which resulted in record net written premiums.

“In the wake of the many devastating events this quarter, our thoughts and prayers are with all who have been impacted. We also extend our deep gratitude to our claim professionals, who tirelessly demonstrate to our customers and agents the value of the Travelers promise,” he said.

Segment income for Business Insurance was $105 million after-tax, a decrease of $328 million, primarily driven by significantly higher catastrophe losses and a lower underlying underwriting gain. The underlying underwriting gain declined primarily due to the impact of a high level of fire-related losses.

The Business Insurance combined ratio of 109.8 increased 13.7 points due to higher catastrophe losses (11.6 points) and a higher underlying combined ratio (2.3 points), partially offset by higher net favorable prior year reserve development (0.2 points).

The underlying Business Insurance combined ratio of 96.4 increased 2.3 points, driven by a high level of non-catastrophe fire-related losses and loss cost trends that modestly exceeded earned pricing, partially offset by a lower expense ratio.

Net favorable prior year reserve development primarily resulted from better than expected loss experience in the segment’s domestic operations in workers’ compensation and general liability product lines (excluding the increase to asbestos reserves), largely offset by an increase to asbestos reserves and the impact of higher than expected loss experience in the commercial automobile.

Net written premiums in Business Insurance of $3.434 billion increased one percent and benefited from continued strong retention, improved renewal premium change and an increase in new business.

Segment income for Personal Insurance of $77 million after-tax decreased $86 million due to significantly higher catastrophe losses, partially offset by a higher underlying underwriting gain.

The combined ratio of 99.7 increased 6.2 points due to higher catastrophe losses (8.1 points), partially offset by a lower underlying combined ratio (1.4 points) and no net prior year reserve development compared to net unfavorable prior year reserve development in the prior year quarter (0.5 points).

The underlying combined ratio of 91.0 improved 1.4 points, primarily driven by a lower expense ratio.

Net written premiums of $2.615 billion increased 9 percent. Agency Automobile net written premiums grew 12 percent, including renewal premium change of 9.5 percent. Agency Homeowners & Other net written premiums grew 5 percent and benefited from policies in force growth of 5 percent year-over-year and positive renewal premium change.

The improved underlying combined ratio in auto reflected the “continued successful execution of pricing and underwriting actions we began implementing a year ago,” said Schnitzer.

Related:

• Insurers, Reinsurers Tally Maria, Irma, Harvey and Other Disaster Losses
• Zurich Estimates Claims of US$700M from Hurricanes Harvey, Irma & Maria
• Chubb: Hurricanes Harvey, Irma Losses to Top $1 Billion
• XL Group Estimates $1.48B in Q3 Natural Catastrophe Losses
• Q3 2017 Likely to Be One of Costliest for Natural Disasters: Aon Report