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Travelers Cos. Inc.’s profit rose in the first quarter of 2018 despite losses caused by natural catastrophes.
The insurer reported net income of $669 million for the first quarter, an 8.4% increase from the same period in 2017, according to the insurer’s earnings statement released Tuesday.
However, $280 million in after-tax catastrophe losses adversely impacted earnings in the first quarter, with nearly 70% of the losses related to one of the four nor’easter storms that occurred in March, causing high claim counts in Virginia, Maryland and the District of Columbia due to hurricane-force winds up to 90 miles per hour, and a tornado and hailstorm that did considerable damage in the southeast, Travelers officials said during the company’s earnings call on Tuesday.
Mudslides in California and a severe winter storm in the United Kingdom also contributed to the catastrophe losses.
“All in, an unusual weather quarter,” Alan Schnitzer, Travelers chairman and CEO, said during the call.
Net written premiums rose 5% to a record $6.824 billion from $6.495 billion in the first quarter last year, according to the report.
“To a large degree, this growth once again reflects high levels of retention and positive renewal premium change,” Mr. Schnitzer said.
Renewal rates rose on an overall basis, but the company did experience “pricing pressure in the workers comp line,” he said.
“There’s nothing about the workers comp pricing environment so far that surprises us, given the industry’s favorable loss experience,” Mr. Schnitzer said.
The insurer’s consolidated combined ratio improved to 95.5% in the first quarter compared with 96% in the same quarter of 2017, according to the report.
Travelers officials were asked if they need to engage in mergers and acquisition to transform its business.
“I do not think we need acquisitions … but nobody should take away from that that we’re not highly focused on it,” Mr. Schnitzer said. “Our shareholders should demand that we are active in terms of M&A, and that in the lines of business that we’re interested in, in the geographies we’re interested in, that we are very active and will continue to be. We often say some of the best deals we do are the ones we don’t do, so we’re highly disciplined about it. We’re anxious to do them if they improve our return profile, if they lower volatility or if they provide another important strategic benefit for us.”
Travelers officials were asked about the possibility of a reinsurance-related transaction in light of announced deals such as American International Group Inc.’s proposed purchase of Validus Holdings Ltd.
“We’ve been pretty explicit over a reasonably long period of time that just given our core capabilities and skill sets, reinsurance isn’t a business that’s been particularly attractive to us,” Mr. Schnitzer said.
Natural catastrophes and U.S. tax reform pressured profit in the fourth quarter of 2017 for Travelers Cos. Inc., but company officials expressed overall optimism about the more level playing field created by the tax code revamp for domestic insurers.