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The Travelers Cos. Inc. on Tuesday said 2015 third-quarter net income rose 1% over the prior-year quarter to $928 million as the company prepares for a major leadership change.
Chairman and CEO Jay Fishman, who has led the organization since 2004, will hand the reins to Alan Schnitzer, vice chairman and CEO of business for Travelers' international insurance unit, on Dec. 1.
Total revenue dropped 1% in the quarter to $6.8 billion, but the insurer achieved record net written premiums of about $6.2 billion, a 3% uptick over the third quarter of 2014, due to premium increases in each business segment and strong retention, according to the company's third-quarter earnings release.
Travelers' consolidated combined ratio improved to 86.9% compared with the 90% in the third quarter of 2014, reflecting strong underwriting results in each business segment, the company said.
Higher underwriting gains and net favorable prior-year reserve development were partially offset by lower net investment income, according to the earnings release. Net investment income decreased 14.6% to $614 million in the third quarter due to lower returns in both the non-fixed income and fixed income portfolios, according to the release.
Operating income for the quarter increased 3% to $918 million compared with the same period last year.
“In short, the place is in great shape,” Mr. Fishman said during the company's earnings call Tuesday morning. “It was another impressive quarter. It's business as usual, and it feels like the perfect time to be conveying the leadership to the next generation.”
Favorable prior-year reserve development benefited from better-than-expected loss experiences related to catastrophes in the company's property business, its general liability segment, the workers comp business and its Canadian operations, the company said.
“I think we tend to see a pretty stable environment in general liability, and there were things we were thinking might impact that” such as higher unemployment rates or increasing jury awards, Doreen Spadorcia, Travelers' vice-chairman and CEO for claim, personal insurance, bond and specialty insurance, said during the conference call. “We didn't see any of that. It performed better than we thought it would during the really tough years.”
However, the positive development was partially offset by the company's decision to strengthen its asbestos reserve with a $224 million pretax increase, according to the press release.
“The asbestos reserve increase related to a broad number of policyholders and was driven by higher estimates for projected settlement and defense costs for mesothelioma claims than we had previously assumed,” said Jay Benet, vice-chairman and chief financial officer, during the call. “Notwithstanding these higher costs estimates, our overall view of the underlying asbestos environment is essentially unchanged from recent periods.”
Several questions and comments during the company's earnings conference call were related to the upcoming leadership transition. Larry Greenberg, managing director of insurance with Janney Capital Markets, congratulated Mr. Fishman on his “incredible career and legacy” and for creating “phenomenal value” for the company's shareholders.
“It's not just that I'm stepping into terrific results, but I'm stepping into a very familiar situation,” Mr. Schnitzer said. “The management team, the strategy, the board — all of that is really familiar, and that gives me a great opportunity to be very thoughtful and very deliberate and to take my time with the rest of the team as we think about what's next.”
Aetna Inc. on Wednesday announced two appointments to its senior leadership team, including one that will direct the company's planned integration with rival health insurer Humana Inc.