Loss Prices ‘Difficult as Ever to Predict’

In the words of its CEO, there’s a “fair amount to pay attention to” from the first-quarter earnings call of Travelers, as the P/C insurer grew net written premiums 11% to a record $8.4 billion.

“Geopolitical risk is at a decade high as war wages in Eastern Europe, tensions rise elsewhere and the world nationalizes, reversing a trend of globalization,” said CEO Alan Schnitzer. “Between the plaintiffs’ bar, regulatory uncertainty and weather severity, loss costs are as challenging as ever to predict. The global pandemic reminds us of the risk of unknown unknowns.”

Schnitzer said the insurer’s underwriting and investment discipline allows it to handle “nearly any environment.”

During the first quarter, catastrophe losses were $160 million, significantly lower than $835 million a year ago. Renewal rates increased in business, specialty, and personal segments, but retentions were also at all-time highs, Schnitzer added.

Travelers’ first-quarter net income jumped 39% to about $1.02 billion. The underwriting gain was $659 million compared with $217 million last year.

Insurer Travelers’ Profit Beats on Lower Catastrophe Losses

With more than 95% of premiums from North America, Schnitzer said Travelers is “to a significant degree, insulated from the heightened geopolitical risk environment,” and if the economy continues to grow, Travelers expects to benefit from higher insured exposures.

Alan Schnitzer
CEO, Travelers

The CEO said data and a “tight feedback loop” among underwriting, claims and actuaries allowed it to recognize social inflation trends early and implement strategies. As the court system returns to pre-pandemic activity, Schnitzer said Travelers expects a return of social inflation trends.

“I don’t think the court system is opening up yet – it’s unwinding very slowly,” Schnitzer told analysts. “You think it would be open and running at pre-pandemic levels but it’s not. Our full expectation is to see that pre-pandemic environment in terms of social inflation.”

Greg Toczydlowski, president of the business insurance segment, said that “given the headwinds and uncertainty in the current environment,” Travelers will “continue to execute our granular pricing, careful management of deductibles, attachment points, limits, sublimits, and exclusions to achieve profitable growth.”

He added net written premiums were up 9% to $4.5 billion, an all-time quarterly high.

“All lines of business were up over the prior-year quarter,” Toczydlowski said.

The Bond & Specialty segment saw premiums grow 22%. Renewals were up double-digits in management liability. For cyber, Travelers nonrenewed cyber accounts without minimum cybersecurity, including multifactor authentication, reported Jeff Klenk, president of the segment. The change in underwriting strategy is “having a meaningfully positive impact on cyber claim frequency,” he said.

First quarter income for the personal lines business was down $89 million to $225 million. Although premiums during the quarter were up 12%, the combined ratio in auto increased 17.5 points to 99.3. Michael Klein, president, said claim frequency returned to normal levels and increased speed due to elevated replacement and repair costs. Travelers increased rates in 23 states during the first quarter and other states will see the same “in the coming months,” Klein said.

In homeowners, renewals were up 12.3% in response to increased insured values. Klein said Travelers “will continue to seek increased pricing,” adding that the second quarter is expected to be the highest quarter for weather-related losses.

Profit Loss

Interested in Profit Loss?

Get automatic alerts for this topic.

Leave a Comment