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Travelers sees property rate increases continuing

Alan Schnitzer

Travelers Cos. Inc. expects property insurance rate increases to continue in 2023 following Hurricane Ian as reinsurers hike rates and capacity constraints take their toll, the insurer’s top executives said Wednesday.

Travelers will be less impacted by rising reinsurance costs as it does not buy as much reinsurance as some insurers do, they said during a conference call with analysts discussing the insurer’s third-quarter results.

A constellation of factors will put upward pressure on property pricing and may extend to other parts of the market, Travelers CEO Alan Schnitzer said.

“Given what we expect to happen to reinsurance, there’s going to be a rate need and on top of that capacity constraints that will be significant across the market,” he said.

Travelers reported third-quarter net income of $454 million, down 31% from the prior-year quarter, as Hurricane Ian losses, lower investment income and realized investment losses hit the company’s bottom line.

However, the insurer saw revenue rise as rates and insured exposures increased.

Pre-tax catastrophe losses were $512 million in the quarter, up 2.3% from the prior-year quarter, of which $326 million was related to Hurricane Ian, Travelers said.

Travelers’ share of Hurricane Ian losses based on estimates is favorable relative to its market share, Mr. Schnitzer said. The insurer has more effectively managed its exposure to catastrophes and more efficiently mobilized its claims response in recent years, he said.

The insurer’s combined ratio improved to 98.2% in the quarter, compared with 98.6% in the year-earlier period. This was partially offset by a higher underlying combined ratio.

Net investment income fell 23% to $593 million pre-tax. Net realized investment losses were $93 million pre-tax, compared with net realized investment gains of $8 million pre-tax in the year-earlier quarter.

Net written premium increased 10.5% to $9.198 billion.

In its business insurance division, net written premium was up 9% to $4.37 billion, but segment income fell 16% to $471 million after-tax.

Lower net investment income and higher catastrophe losses were partially offset by lower net unfavorable prior-year reserve development and a higher underwriting gain, Travelers said.

The increase in net written premium was driven by growth in all domestic markets and lines of business, said Greg Toczydlowski, president, business insurance, at Travelers.

“Premiums benefited from strong renewal premium change and retention, both of which were once again historically high, as well as higher levels of new business,” Mr. Toczydlowski said.

Domestic business insurance renewal premium change was up 10.2% for the quarter, he said.

Its bond and specialty division reported an 8% increase in net written premium to $964 million, and segment income was up 39% at $242 million.