Travelers profit falls on higher cat losses, lower investment income
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Travelers Cos. Inc. on Thursday reported a lower profit for the second quarter as catastrophe losses rose and investment income dropped, but the insurer saw revenue rise as rates and insured exposures continued to increase.
Travelers reported $551 million in net income for the second quarter, a 41% decrease compared with the same period last year. The insurer’s combined ratio deteriorated to 98.3% in the quarter, compared with 95.3% in the same period last year, as catastrophe losses increased 57.1% to $746 million. Net investment income fell 13.6% to $707 million.
The deterioration also reflected strong performance in the comparable quarter last year, said Dan Frey, chief financial officer, on a conference call with analysts.
“The prior-year quarter included a very benign level of cat losses and record returns from the non-fixed income portfolio,” he said. “While cats were higher year-over-year, they were not outsized relative to our model estimates for the second quarter.”
Travelers’ expense ratio fell slightly to 29%, Mr. Frey said. The insurer reported $291 million in pretax net favorable reserve development in the second quarter, he said.
Net written premium increased 10.9% to $9.02 billion.
In its business insurance division, net written premium was up 9.9% to $4.37 billion, and segment income was up 3.6% at $666 million.
The profit increase was driven by higher net favorable reserve development and higher underwriting income, said Greg Toczydlowski, president, business insurance, at Travelers.
Domestic business insurance renewal premium change was up 10.3% for the quarter, he said.
The increase “includes renewal rate change of 4.9%, which was up a half a point from the first quarter, and exposure growth of almost 6%,” he said.
Its bond and specialty division reported a 12.6% increase in net written premium to $962 million and segment income was up 21.9% at $228 million.
