22 April 2015 Insurance

Profits drop at Travelers in Q1

Profits at US insurer Travelers fell in the first quarter of 2015 driven by lower underwriting gains and net investment income.

Its profits fell to $833 million in the first quarter of 2015, compared with $1.1 billion in the first quarter of 2014, while the insurer also suffered from a lower favourable prior year development of $32 million after tax.

Travelers’ combined ratio deteriorated to 88.9 percent in the first quarter of 2015, compared with 85.7 percent in the first quarter of 2014.

Its net written premiums increased by 1 percent to $3.8 billion in the first quarter. Domestic net written premiums increased by 2 percent, driven by positive renewal premium changes, an increase in retention rates, and an increase in new business volumes. Travelers said this was partially offset by the impact of changes in the timing and structure of some of the company’s reinsurance treaties.

International net written premiums decreased 7 percent to $435 million, compared with $468 million in the first quarter of 2014, primarily due to the impact of changes in foreign currency exchange rates.

During the quarter, Travelers returned $850 million to shareholders, including $178 million of dividends and $672 million in share repurchases.

Today (April 22, 2015), the board also announced an 11 percent increase in its quarterly dividend, raising it to $0.61 per share, marking 11 consecutive years of dividend increases with a compound annual growth rate of nearly 10 percent. The board also authorised an additional $5 billion of share repurchases.

“We were very pleased with our first quarter operating income of $827 million and operating return on equity of 14.5 percent,” said Jay Fishman, chairman and chief executive officer.

“Underwriting results remained very strong, as evidenced by our combined ratio of 88.9 percent, while net investment income declined due to lower private equity and fixed income returns.

“Our performance this quarter is an encouraging start to the year, and our strategies remain unchanged. We do continue to note the severity of weather patterns, as evidenced by another very difficult winter on the East Coast and prolonged drought on the West Coast.

“In that regard, we continue to refine our highly segmented underwriting and pricing analytics to ensure that we are appropriately reflecting this uncertainty. We remain committed to delivering superior profitability and returns on equity over time.”

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