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Travelers Insurance Cos. Inc. Chairman and CEO Alan Schnitzer said Tuesday that the insurer secured significant price gains over the past two years and it expects similar conditions this year.
Speaking on a conference call with analysts Tuesday to discuss the company’s fourth quarter 2022 results, which as it previously announced showed a sharp fall in profit due to catastrophe losses, Mr. Schnitzer said Travelers saw double-digit renewal premium increases over the past eight quarters.
“I think it's hard to characterize this pricing environment as anything other than very strong,” Mr. Schnitzer said.
Travelers reported a 10.1% increase in renewal premium in the quarter, which includes changes in rate and insured value, he said.
“We feel fantastic about the pricing and the overall execution this year and … we’re going to go out and do it again in 2023,” Mr. Schnitzer said.
Travelers reported a fourth-quarter profit of $819 million, down 38.6% from the prior-year period. The insurer reported $459 million in pre-tax catastrophe losses, compared with $36 million in the prior-year quarter, largely from the severe winter storm that hit large parts of the United States and Canada in December.
Net written premium increased 10.4% to $8.83 billion. Net investment income fell 15.9% to $625 million, largely due to lower private-equity partnership returns, Travelers said in its earnings statement.
The insurer’s combined ratio worsened to 94.5% from 88% in the same quarter in 2021.
In its business insurance segment, Travelers reported $4.39 billion in net written premium, up 10.7% from the prior-year period. Its bond and specialty insurance segment, which includes its management liability and surety operations, reported net written premium of $924 million, up 2.1%.
For the full year, Travelers reported net income of $2.84 billion, down 22.4% from 2021; net written premium of $35.41 billion, up 5.9%; and a combined ratio of 95.6%, deteriorating from 94.5%.
On the analysts call, Travelers said that with rising premium volume for its property business, it has increased the retention on its $2 billion catastrophe excess of loss reinsurance treaty to $3.5 billion from $3 billion. The insurer did not renew an underlying property aggregate catastrophe excess of loss treaty, which was only 45% placed in 2022.
Travelers said it has also entered into a quota share agreement with Fidelis Insurance Holdings Ltd., a Bermuda-based specialty insurer and reinsurer in which it took a minority stake in 2021.
“This quota share arrangement allows us to participate in the hard market, while also accelerating our understanding of this marketplace,” said Dan Frey, chief financial officer of Travelers, on the call.
The quota share arrangement will likely generate between $550 million and $600 million in annual premium, he said.