Travelers likes commercial rate, can add margin at no cost to retention

Commercial segment pricing shows a “stable and rational rate environment” allowing Travelers to expand margin across accounts, company officials argued for an investor call.

In Travelers’ business segment, net written premiums of $4.5 billion were up 9% year on year largely matching premium growth of 9.1% but rendering the group's all-time record retention rate of 87%. New business was up 17% year over year.

“The pricing environment is quite strong,” Travelers chief executive officer Alan Schnitzer told the investor call to ward off criticism of premium growth largely matching rate.

Travelers swears off the business logic of having to choose a priority between growth and price and insists they start from the price they're seeking, then check the top-line post-factum to see how they've stood up.

Restated to the Schnitzer accounting: margins on a written base are expanding, a majority of accounts get positive rate and retention is at an all-time high. “It tells you that the market is pretty stable and what we are doing is delivering.”

“If we weren't able to achieve what we want to achieve, retention would be lower,” Schnitzer argued for analysts. “Strong retention is a sign of a stable and rational rate environment.”

Schnitzer will admit to “some clouds” on the horizon, but feels they are sufficiently clear and familiar. “We are not troubled by anything in this production environment or the outlook.”

Travelers’ business insurance segment more than doubled its Q1 segment profit, in large part as catastrophic losses came down by a notable 84% to take 11.4 percentage points from the segment's combined ratio to 90.6%. The underlying combined ratio of 91.8% improved 1.9 points on improvements for both loss and expense components.