Travelers Profit Climbs as Catastrophe Losses Decline
The insurer’s combined ratio improved 6.7 points to 83.6%.
Travelers Companies (TRV), the property-casualty insurer, reported a 46% increase in second-quarter net income to $2.208 billion as lower catastrophe losses and stronger reserve development lifted underwriting results.
The quarter extended the earnings acceleration seen early in the year. Net income increased 29% from the first quarter, while core income rose 44% from a year earlier to $2.160 billion and advanced 27% sequentially.
Revenue was essentially flat from a year earlier at $12.153 billion, though it increased about 2% from the first quarter. Diluted earnings rose 57% to $10.26 a share, with a 7% decline in weighted-average diluted shares amplifying the per-share gain.
Underwriting drove much of the improvement. Catastrophe losses fell to $518 million from $927 million a year earlier, while favorable prior-year reserve development increased to $578 million from $315 million. Pre-tax underwriting income rose to $1.738 billion from $1.022 billion, and after-tax net investment income increased 14% to $883 million on higher fixed-income yields and growth in average invested assets.
Business Insurance premiums grew 3% to $5.984 billion, accelerating from 2% growth in the first quarter, as Middle Market growth increased to 7%. The segment’s combined ratio improved to 86.8%, while new business reached a record $805 million even as renewal premium change slowed to 4.8%.
Personal Insurance supplied the largest segment profit gain, with income rising $293 million to $827 million as its combined ratio improved 8.9 points to 79.5%. Premiums declined 8%, partly reflecting the Canadian divestiture, but the underlying combined ratio improved to 77.3%, primarily because of Automobile results.
Bond & Specialty presented a split picture. Net written premiums grew 14%, led by a 40% increase in Surety, while segment income declined $10 million to $234 million and the underlying combined ratio worsened 1.8 points to 89.6%.
Travelers continues to expect a full-year underwriting expense ratio of about 28.5%, compared with 29.0% for the first half. The company returned $1.577 billion to shareholders during the quarter, including $1.311 billion through repurchases, while book value increased to $158.81 a share from $150.42 at the end of March.