Travelers reports lower profit on higher cat losses; price hikes continuePosted On: Apr. 19, 2023 10:11 AM CST
Higher catastrophe losses cut into Travelers Cos. Inc.’s profit for the first quarter, but the insurer continued to benefit from rate increases across most lines of insurance coverage, the insurer’s top executive said Wednesday.
Increased property losses, a harder reinsurance market and inflation continue to drive price hikes, Alan Schnitzer, chairman and CEO of Travelers, said on a conference call with analysts Wednesday to discuss the company’s results.
Travelers reported $975 million in first-quarter net income, down 4.2% from the same period last year. Catastrophe losses for the quarter were $535 million, compared with $160 million in the year-earlier period. Most of the cat losses were from severe wind and hailstorms across several states.
Net written premium increased to $9.4 billion, a 12.3% increase over the same period last year. Renewal rates “ticked up a little” from the fourth quarter, driven by property, umbrella and auto insurance lines, Mr. Schnitzer said.
The insurer reported a combined ratio of 95.4% for the first quarter, deteriorating from 91.3% in the same period last year, largely due to catastrophe losses. Pre-tax net investment income increased 4.1% to $663 million.
Travelers is traditionally the first large insurer to report quarterly results and is seen as a bellwether for the industry.
In its business insurance segment, the insurer’s net written premium increased 14.5% to $5.2 billion, driven largely by an average 9.6% increase in renewal premium rates.
While insurers continue to face headwinds, such as increased reinsurance costs, inflation, tighter labor markets and heightened weather severity, the pricing environment remains “very strong,” Mr. Schnitzer said.
“After years of some pretty good pricing and improvements in terms and conditions, returns are in a better place,” he said.
Property insurance pricing, which several industry surveys show is leading price increases among major lines of coverage, continued to accelerate in the first quarter, Mr. Schnitzer said.
“Given the hardening of the reinsurance market, there’s a fair amount of activity in the pricing space, there’s overall probably a constraint in capacity and I think underwriters generally just reacting to the loss environment,” he said.