Lower reserve releases and weather losses hit profits at Travelers

A combination of lower reserve releases and higher non-catastrophe weather-related losses hit profits at US insurer Travelers in the third quarter.

The company’s net profit fell by 23 percent in the third quarter to $716 million compared with $928 million in the same period a year earlier; for the first nine months of the year its net profits are down 20 percent to $2.07 billion.

Its operating income dropped to $701 million in the third quarter, compared with $918 million a year earlier.

Travelers also reported a slight increase in its combined ratio, which increased to 92.9 percent in the third quarter from 86.9 percent a year earlier. For the first nine months, its combined ratio now stands at 92.8 percent compared with 88.9 percent for the first nine months of 2015.

Like many other companies Travelers saw its investment income fall, going from $1.84 billion in the first three quarters of 2015 to $1.67 billion for the comparable period of 2016.

The company did however report a slight increase in net written premiums, up 4 percent from $18.3 billion to $18.9 billion.

“We were pleased with our third quarter operating income of $701 million and operating return on equity of 12.5 percent, which brings our year-to-date operating return on equity to 12.2 percent,” said Alan Schnitzer, chief executive of Travelers.

“Underwriting results for the quarter reflected lower net favourable prior year reserve development, higher non-catastrophe weather-related losses and higher-than-expected losses associated with auto bodily injury, but nonetheless remained strong as reflected in our 92.9 percent combined ratio.

“While returns from our high-quality fixed income portfolio declined in line with our expectations due to the continued low interest rate environment, returns from our non-fixed income portfolio improved from recent quarters and were comparable to the prior year quarter,” said Schnitzer.

“In terms of capital management, we returned $755 million of excess capital to shareholders, including $562 million of share repurchases. Year to date, we have returned nearly $2.3 billion to shareholders, including over $1.7 billion in share repurchases.

“We are encouraged that the markets in which we operate continue to remain stable. In our commercial businesses, we are pleased with our historically high levels of retention and positive renewal premium change.

“Once again, these results were due to the successful execution of our strategy to retain those accounts that meet our return thresholds and to take appropriate measures to improve profitability on those accounts that do not, while also seeking attractive new business opportunities.”