The Travelers Companies, Inc. reported on Tuesday a consolidated combined ratio of 90.8% for the second quarter of 2015 – an improvement of 4.3 points from Q2 2014 – due to lower catastrophe losses (3.6 points), higher net favourable prior year reserve development (0.4 points), and a lower underlying combined ratio (0.3 points).
Travelers, a provider of property casualty insurance for auto, home and business, reported net income of US$812 million for the quarter ending June 30, compared to net income of US$683 million in the prior year quarter. Operating income in the current quarter was US$806 million, compared to US$673 million in the prior year quarter, Travelers said in a press release. “The increase in net and operating income primarily resulted from lower catastrophe losses and a US$32 million benefit from the resolution of prior year tax matters, partially offset by lower net investment income,” the release said.
“Our results were driven by strong underwriting performance across all of our business segments, as reflected in our consolidated combined ratio of 90.8%, as well as net investment income which was consistent with our expectations,” said Jay Fishman, chairman and CEO of Travelers. “For the first half of the year, we have achieved our goals as evidenced by historically high retentions, broadly stable renewal pricing, and solid new business. We believe these results demonstrate the value we provide to our agents, brokers, and customers.”
Travelers said that net written premiums of US$6.169 billion were comparable to the prior year quarter, “benefitting from positive renewal premium changes, strong retention in each business segment, and a significant increase in new business in Personal Insurance, partially offset by the impact of changes in foreign currency exchange rates.”
The Business and International Insurance segment had another strong quarter, with operating income of US$543 million after-tax and a combined ratio of 93.2%. Operating income increased US$72 million primarily due to lower catastrophes, higher net favourable prior year reserve development, and a US$12 million benefit from the resolution of prior year tax matters in the current quarter, partially offset by lower net investment income and a slightly lower underlying underwriting gain. Net written premiums decreased 1% to US$3.679 billion.
For the Personal Insurance segment, operating income was US$174 million after-tax, increased by US$99 million due to strong underwriting performance, primarily driven by lower catastrophe losses, higher net favourable prior year reserve development, a higher underlying underwriting gain, and a US$4 million benefit from the resolution of prior year tax matters in the current quarter. The combined ratio also improved 8.7 points to 91.1%, primarily driven by lower catastrophe losses (4.5 points), higher net favourable prior year reserve development (2.8 points), and a lower underlying combined ratio (1.4 points). Personal Insurance net written premiums of $1.956 billion increased 3%.
The release said that net favourable prior year reserve development primarily resulted from better than expected loss experience in the homeowners and other product lines for liability coverages for accident years 2011 through 2014 and for non-catastrophe weather-related losses for accident year 2014, and better than expected loss experience in the Automobile product line for liability coverages for accident years 2012 through 2014.