Travelers’ Q4 profits rise but can’t compensate FY drop

Profits at US insurer Travelers increased in the fourth quarter of 2016 compared with the same period a year earlier, but this did not prevent the company from reporting a drop in net profit for the full year 2016.

The New York-based property liability insurer increased its net income by 9 percent year on year to $943 million in the fourth quarter of 2016. In the full year 2016, however, its net income dropped 12 percent year on year to $3.01 billion.

2016 net income declined due to lower operating income, which was primarily driven by higher catastrophe losses, a lower underlying underwriting gain, lower net favourable prior year reserve development and lower net investment income, the company said.

The fourth quarter benefitted from an $82 million after-tax settlement of a reinsurance dispute and higher net investment income, the insurer said in a statement.

While operating income in the fourth quarter grew 4 percent year on year, it dropped 14 percent in the full year.

For 2016 as a whole, Travelers reported net written premiums of $24.96 billion, up 3 percent year on year. Its combined ratio deteriorated to 92 percent in 2016 from 88.3 percent in the 2015.

“We are pleased to report fourth quarter operating income of $919 million and operating return on equity of 16.4 percent,” said Alan Schnitzer, chief executive officer. “Underwriting results in the quarter were solid, as evidenced by our consolidated combined ratio of 90 percent inclusive of the impacts of higher catastrophe losses and higher-than-expected personal auto bodily injury losses.

“Net investment income increased sequentially on a quarter-by-quarter basis during the year, driven by higher returns in our non-fixed income portfolio. After-tax net investment income in the fourth quarter increased 12 percent over the prior year quarter. This quarter’s results brought our full year operating income to $2.967 billion and operating return on equity to 13.3 percent. Our balance sheet remains strong, and our results for the year enabled us to return over $3.2 billion of excess capital to our shareholders, including over $2.4 billion in share repurchases.”

He added that in its commercial businesses, he is pleased with the stability of the markets in which it operates and the execution of its strategies.

“Once again, we were able to maintain historically high levels of retention while achieving stable and positive renewal premium change. These results demonstrate the continued success of our granular pricing and segmentation strategies — retaining those accounts that meet our return thresholds and taking appropriate measures to improve profitability on those accounts that do not, while seeking attractive new business opportunities.

“Within Personal Insurance, both homeowners and auto delivered accelerating growth in policies in force and net written premiums throughout the year. While homeowners profitability remains strong, we are disappointed with the underwriting results in personal auto and are taking pricing and other actions to improve its profitability.

“With our proven commitment to building meaningful and sustainable competitive advantages, our track record of successfully managing our businesses for the long term and our active capital management strategy, we remain well positioned to continue to deliver superior returns over time.”

Did you enjoy reading this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.