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Travelers Cos. Inc.’s top executive said Tuesday the insurer expects commercial insurance pricing will remain strong, driven by inflation, catastrophes and a low-interest-rate environment, as the company’s profit fell 20% in the third quarter.
The New York-based insurer reported net income of $662 million for the quarter, compared with $827 million in the year-earlier quarter, due mainly to unfavorable prior-year reserve development and higher catastrophe losses.
Net written premiums increased by 7% to a record $8.324 billion, while the combined ratio deteriorated 3.7 points to 98.6%.
Each of the company’s three business segments contributed meaningfully to top-line growth in the quarter, Travelers Chairman and CEO Alan Schnitzer said in an earnings call Tuesday.
Catastrophe losses of $501 million pre-tax compared with $397 million in the year-earlier period, reflecting the impact of Hurricane Ida and other storms in the U.S. Cat losses were “well below our market share and well above the prior-year quarter, and the 10-year average for the quarter,” Mr. Schnitzer said. Chief Financial Officer Daniel Frey said the sheer size of Hurricane Ida, on top of the other cat losses in the quarter, resulted in “overall cat losses that were higher than our assumption.”
Travelers recognized a partial recovery of $95 million from its excess-of-loss reinsurance treaty in the quarter, compared with a full recovery in last year’s third quarter. “That leaves us with $255 million for potential recovery in the fourth quarter depending on the level of qualifying losses we actually experience,” Mr. Frey said.
In the business insurance segment, net written premiums grew 5% to $4.021 billion and the combined ratio improved by 4.8 points to 97.5%. Renewal premiums grew 9.9%, “near an all-time high, driven by continued strong renewal rate change and higher exposure growth,” Mr. Schnitzer said.
At the same time, retention was higher. Travelers’ ability to continue to drive price change at historical highs, while increasing retentions reflects “the stability of the pricing environment,” he said.
Written pricing continues to outpace estimated loss trend in Travelers’ commercial business, Mr. Schnitzer said.
The renewal premium change was up more than two points from the third quarter last year, with strong renewal rate change of 6.3% and continued improvement in customer exposure growth, said Greg Toczydlowski, Travelers’ president of business insurance.
“In addition to our granular price execution we’ve also focused on careful management of deductibles, attachment points, limits, sub-limits and exclusions which can also contribute to an increase in the price,” Mr. Toczydlowski said.
New business was down from the prior-year quarter as Travelers continued to be “thoughtful about balancing risk and reward for new business in the marketplace,” he said.
Travelers’ bond and specialty insurance segment reported net written premiums of $894 million, up 19% from the year-earlier period, driven by record renewal premium change of 13.6%, strong retention in its management liability business, and production in its surety business.
Its personal insurance segment saw net written premiums of $3.409 billion, a 7% increase from the prior-year period.
Net investment income increased by 14% to $645 million, up from $566 million in last year’s third quarter.
Travelers returned $821 million of excess capital to shareholders in the quarter, including $601 million of share repurchases.
Travelers Cos. Inc. said Wednesday it has made minority investment in privately owned Bermuda-based specialty insurer and reinsurer Fidelis Insurance Holdings Ltd.