Travelers sets the Q3 tone

Travelers sets the Q3 tone

US-based Travelers has reported net income after tax of $919m for Q3, up from $864m in the same period last year. Premiums rose to $5.98bn, from $5.67bn. Net investment income rose to $719m, from $657m.

The pretax impact of catastrophes fell year on year to $83m, from $99m in Q3 2013. The catastrophe losses stemmed mostly from wind and hail storms in several regions of the US.

The combined ratio was 90%, up slightly from 88.9% a year earlier.

Travelers bought back $751m in shares during the quarter, bringing the year-to-date total to $2.3bn.

Net favourable prior year reserve development in the third quarters of 2014 and 2013 was $113m and $158m, respectively. The slight decline in underlying underwriting margins "primarily reflected an increase in non-catastrophe weather-related losses, largely offset by the impact of earned pricing that exceeded loss cost trends in each of the Company’s business segments", Travelers said.


The majority of premiums and income at Travelers continues to come from Business & International Insurance (BII). It generate premiums of $3.66bn in Q3, producing an operating gain of $552m.

For the first nine months year to date, after tax income fell a fraction to $2.65bn, from $2.68bn in the corresponding period last year. Premiums rose to $17.7bn, from $16.8bn, while net investment income rose to $2.15bn, from $2.01bn.

The increase in turnover was due in part to the November 2013 acquisition of Dominion iin Canada

Net favourable prior year reserve development for the first nine months was $590m, up from $581m in the first nine months of 2013. Two of the four reasons given by Travelers for its improvement in underlying underwriting margins year on year were (i) earned pricing that exceeded loss cost trends in each of the Company’s business segments, (ii) lower reinsurance costs.

For the first nine months BII generated premiums of $10.85bn, and operating income of $1.72bn.

The combined ratio for the year to date was 90.3%, down a fraction from the 90.6% recorded in the first nine months of 2013.
Morgan Stanley reported "Op EPS of $2.61 well above consensus of $2.27 and our $2.38 estimate."
However, the bank also noted that the "closely watched" Business Insurance (ex. National Accounts) pricing "decelerated further to +3.3% (vs. +3.9% in 2Q, +4.9 in 1Q, and +5-8% in 2013)."

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