Catastrophe losses drop for Travelers, while Dominion acquisition boosts premium revenue

The Travelers Companies Inc. released Tuesday its financial results for the quarter ending Dec. 31, reporting an increase in premium revenue due in part to The Dominion of Canada General Insurance Company acquisition.

Travelers also recorded a 17-point drop in its fourth-quarter loss ratio, a 20% year-to-year drop in fourth-quarter claims and adjustment expenses, a 3.8% drop in personal insurance premiums and a 5.9% drop in net investment income.

The New York City-based carrier recorded net written premiums of $22.767 billion in calendar-year 2013, up 1% from $22.447 billion in 2012. All figures are in U.S. currency.

For the fourth quarter, net written premiums increased 5% year-over year, “primarily due to the inclusion” of The Dominion of Canada General Insurance Company’s results within the financial, professional and international insurance category of Travelers’ results.

Last fall, Travelers acquired The Dominion from E-L Financial Corp. Ltd. for $1.1 billion in cash. The combined organization in Canada will be based in Toronto and referred to as Travelers Canada. The U.S. parent company recorded — for the entire company — net written premiums of $5.633 billion for the three months ending Dec. 31, 2013, up 5% from 5.385 billion in Q4 2012.

Travelers also had an improvement in its combined ratio due in part to lower catastrophe losses. The loss and loss adjustment expense ratio in Q4 2013 was 56.0%, down from 73.0% in Q4 2012. The Q4 underwriting expense ratio was down 0.4 points year-to-year, from 32.4% in 2012 to 31.7% in 2013. The combined ratio dropped from 105.4% in Q4 2012 to 87.7% in 2013.

“The (generally accepted accounting principles) combined ratio improved 17.7 points to 87.7% due to lower catastrophe losses (17.8 points) and higher net favorable prior year reserve development (0.4 points), partially offset by lower underlying underwriting margins (0.5 points),” Travelers stated in a press release. “Net favorable prior year reserve development occurred in all segments. Catastrophe losses primarily resulted from wind and hail storms in the Midwestern United States and Storm Xaver in the United Kingdom.”

AIR Worldwide predicted last month that the majority of losses from Storm Xaver would be in Britain, Denmark and Germany. The storm had caused hurricane-force gusts, torrential rains and storm surge, AIR Worldwide said at the time.

Travelers’ catastrophe expenses dropped drastically from 2012 to 2013. In 2013, Travelers recorded catastrophes, net of reinsurance, after tax, of $387 million for the full year, down from $1.214 billion in 2012.  Fourth-quarter cat expenses — net of reinsurance and after tax — were $689 million in 2012 and $37 million in 2013.

For the full year, Travelers reported a loss and loss adjustment expense ratio of 57.9% (down from 64.9% in 2012) and an underwriting expense ratio of 31.9%  (down from 32.2% in 2012), for a combined ratio of 89.8% (down from 97.1% in 2012).

In a financial supplement filed with the U.S. Securities and Exchange Commission, Travelers reported net investment income of $2.716 billion in 2013, down 5.9% from $2.889 billion in 2012.

Claims and claims adjustment expenses were $13.3 billion in 2013, down 9.5% from $14.7 billion in 2012. For the fourth quarter, claims and claims adjustment expenses were $3.327 billion in 2013, down 20% from $4.167 billion for the same period in 2012.

Net written premiums in business for the full year was $12.233 billion in 2013, up from $11.872 billion in 2012.  Travelers’ business insurance is organized into select accounts, commercial accounts, national accounts industry-focussed underwriting, specialized distribution and a specialized liability group, which manages asbestos and environmental liabilities. It also includes a target risk underwriting group, which includes national property, marine, excess casualty and boiler and machinery.

Travelers reported premiums of $3.229 billion for financial, professional and international insurance in 2013, up from $3.045 billion in 2012. That group includes surety and financial liability coverages, plus property and casualty products in Canada, Britain and Ireland, as well as in other countries through Lloyd’s.

In personal insurance, premiums dropped 3.8%, from $7.621 billion in 2012 to $7.324 billion in 2013. Gross written premiums, from personal auto policies sold through agents, brokers and other intermediaries, was $3.277 billion in 2013, down from $3.544 billion in 2012. Gross written premiums in homeowner and other personal insurance sold through agents, brokers and other intermediaries dropped from $4.22 billion in 2012 to $4.094 billion in 2013.