Travelers earns $1.9 billion in third quarter as storm losses grow

What happened

The Travelers Companies reported net income of $1.917 billion for the third quarter on Friday 16 October, against $1.888 billion a year earlier. ^{[1, 2]}

Core income, which leaves out gains and losses from selling investments, was $1.947 billion against $1.867 billion, the release said. The combined ratio, claims and expenses per dollar of premium, was 86.8 percent against 87.3 percent. The company says a ratio under 100 percent generally means an underwriting profit. ^[1]

Why it matters

Catastrophe losses, net of reinsurance and before tax, were $538 million against $402 million a year earlier, the release said, mostly from severe wind and hail storms in several states. They added 4.8 points to the combined ratio. Core income still grew, which the company put down to $234 million of favorable development on past years' claims and record investment income of $1.098 billion before tax. ^{[1, 2]}

Where the storm cost landed

The $538 million is the whole company's figure. The quarterly report splits it: $380 million in Personal Insurance, which sells car and home cover, $157 million in Business Insurance and $1 million in Bond and Specialty. Chief Financial Officer Daniel Frey said on the call the losses came mainly from tornado and hail events in the central United States. ^{[1, 2, 4]}

Personal Insurance felt it most: its segment income was $706 million against $807 million, and its combined ratio was 83.5 percent against 81.3 percent, the report said. Reinsurance News put the year-earlier catastrophe figure at $302 million, while the release, the quarterly report and Insurance Journal give $402 million. ^{[1, 2, 3, 5]}

Favorable development means reserves set aside for older claims proved larger than needed. It came in all three segments, after a $295 million addition to asbestos reserves in Business Insurance, according to the release. ^{[1, 4]}

What settles it next

The board declared a quarterly dividend payable Thursday 31 December to holders of record on Thursday 10 December. From Thursday 1 October the company gives a larger share of its cyber business to reinsurers. The quarterly report said that will cut net written premiums by about $165 million in the fourth quarter, with a minimal effect on income. ^{[1, 2]}

On the call, Frey said the company expects about $875 million after tax of fixed income investment income in the fourth quarter. The fourth-quarter results will show both. ^[4]

Who it reaches

The Travelers Companies (TRV) is direct: the results, the storm losses and the quarterly report are its own. Its Personal Insurance segment, car and home cover, carried $380 million of the quarter's catastrophe cost, according to the report. ^{[1, 2]}