Travelers reports slight increase in first-quarter net written premiums

The Travelers Companies Inc. released Tuesday its financial results for the three months ending March 31, recording a slight drop in total revenues but improved combined ratios, especially in home and personal auto as well as financial and professional insurance.

New York-based Travelers reported total revenue of $6.328 billion in the first quarter, down 1% from $6.392 billion during the same period in 2012. All figures are in U.S. currency.

Last January Travelers had reported its net income for all of 2012 was $2.473 billion on revenues of $25.74 billion.

On Tuesday, Travelers reported that while its first-quarter net written premiums edged up year-to-year – from $5.497 billion in 2012 to $5.597 billion this year – net investment income dropped 9.4%, from $740 million during the first three months of 2012 to $670 million during the first quarter of this year.

However, Travelers reported its combined ratio using generally accepted accounting principles (GAAP) dropped from 92.2% in the first quarter of 2012 to 88.5% during the same period this year.

Within the personal sector, the combined ratio dropped from 97.8% in the first quarter of 2012 to 89.4% in the first quarter of 2013.

“This improvement of 8.4 points in the combined ratio was primarily due to higher underlying underwriting margins (3.1 points), higher net favourable prior year reserve development (2.8 points) and lower catastrophe losses (2.5 points),” the firm stated in a press release. “The net favourable prior year reserve development in the current quarter primarily resulted from better than expected loss experience in Homeowners & Other for accident year 2011.”

Travelers segments its financial data by personal, business and a third category it calls financial, professional and international. That category includes surety, financial liability and P&C in Canada, Britain and Ireland.

Travelers did not break out its results by Canada specifically. In Canada, the carrier sells insurance through both the St. Paul Fire and Marine Insurance Company and Travelers Insurance Company of Canada.

Within the financial, professional and international segment, the combined ratio dropped from 87.8% in the first quarter of 2012 to 82.3% in the most recent quarter.

“The underlying loss ratio for the quarter benefited from underwriting actions across the segment and increased rate in our Management Liability businesses, and has now improved sequentially for nine consecutive quarters,” Travelers president and chief operating officer Brian MacLean stated in a press release. “Net written premiums in the segment increased 7% from the first quarter of 2012, primarily driven by favourable reinsurance costs, as well as increased rate in our Management Liability businesses.”

Within its bond and financial products, Travelers reported an 11% year-to-year increase in net written premiums, “primarily driven by lower reinsurance costs (resulting from price decreases and slightly higher retention levels), as well as renewal rate increases in Management Liability,” the company stated.

Across the entire firm, the 3.7-percentage-point improvement in GAAP combined ratio was attributed to lower catastrophe losses (1.3 points) and higher underlying underwriting margins (3.8 points), while offset, by 1.4 per percentage points, by a lower net favourable prior year reserve development.

“Included in net prior year reserve development in the current quarter was a $42 million pre-tax ($27 million after-tax) charge that was precipitated by legislation in New York enacted during the first quarter 2013 related to the New York Fund for Reopened Cases for workers’ compensation.”

Cat losses in the first quarter of 2013 were from tornadoes and hail storms in the southeastern U.S., the company added.