April 26, 2016 by Canadian Underwriter
The Travelers Companies Inc. reported catastrophe losses of $318 million during the three months ending March 31, up 96% from $162 million during the same period in 2015, while Q1 earned premiums in personal insurance rose 6.2% year-over year. All figures are in United States dollars.
In its financial results for the first quarter, released April 21, New York City-based Travelers suggested it anticipates it will pay $525 million during the second quarter to settle asbestos-related coverage litigation related to claims arising from thermal insulation made by Pittsburgh Corning Corp.
Travelers reported premiums of $5.981 billion during the most recent quarter, up 1.6% from $5.888 billion during the first three months of 2015. The combined ratio was 92.3% in Q1 2016, up 3.4 points from 88.9% in Q1 2015. The insurer reported net income of $691 million on revenue of $6.686 billion in the latest quarter, compared to net income of $833 million on revenue of $6.629 billion in 2015.
“Catastrophe losses in the first quarter of 2016 primarily resulted from wind and hail storms in Texas and several other regions of the United States, as well as winter storms in the eastern United States,” Travelers stated in a filing with the U.S. Securities and Exchange Commission. “Catastrophe losses in the first quarter of 2015 resulted from a winter storm in the eastern United States.”
For all of 2015, 4.6% of Travelers’ direct written premiums were from Canada, Travelers said in its annual report released in February.
On April 21, Travelers reported net asbestos paid loss and loss expenses of $37 million in Q1 2016, compared to $520 million in Q1 2015.
“Net asbestos reserves were $1.77 billion at March 31, 2016, compared with $1.84 billion at March 31, 2015.”
Travelers also suggested that a plan of reorganization – proposed as part of the bankruptcy proceeding of Pittsburgh Corning Corp. – will “become effective.” That plan, Travelers noted, incorporates an agreement in principle – between PPG Industries Inc., Travelers and 30 other insurers – to settle asbestos-related coverage litigation.
PPG owns 50% of Pittsburgh Corning, while Corning Inc. owns the other 50%. Pittsburgh-based PPG Industries’ products include industrial coatings, glass, epoxy, titanium dioxide.
“For many years, PPG has been a defendant in lawsuits involving claims alleging personal injury from exposure to asbestos,” PPG stated in its annual report for 2015. “Most of PPG’s potential exposure relates to allegations by plaintiffs that PPG should be liable for injuries involving asbestos-containing thermal insulation products, known as Unibestos, manufactured and distributed by Pittsburgh Corning Corporation.”
On Jan. 29, 2009, Travelers, 30 other insurers and PPG “agreed in principle to an agreement to settle asbestos-related coverage litigation under insurance policies issued to PPG,” Travelers stated in its Q1 2016 filing. That settlement “has been incorporated” into an amended plan of reorganization in PC’s bankruptcy proceeding, which would give Travelers, PPG and other firms protections from “certain” asbestos-related bodily injury claims.
“Under the agreement in principle, [Travelers] has the option to make a series of payments over 20 years totaling approximately $620 million to the Trust created under the Amended Plan, or it may elect to make a one-time discounted payment, which, as of June 30, 2016, would total approximately $525 million,” Travelers said April 21, 2016, adding those obligations were included in Travelers’ claim and claim adjustment expense reserves.
Pittsburgh Corning says it filed a voluntary petition for bankruptcy in April, 2000 because that was “the only remaining legal process available to reasonably resolve its asbestos liability claims.”
Pittsburgh Corning’s reorganization plan includes a $3 billion trust to pay asbestos personal injury claimants, LexisNexis reported recently. In 2000, Pittsburgh Corning was “facing more than 200,000 asbestos personal injury claims,” added LexisNexis, a legal news site operated by RELX Group.
“On January 7, 2016, the final objections to [Pittsburgh Corning’s Modified Third Amended Plan of Reorganization] were dismissed,” Travelers said April 21 in an SEC filing. “The agreement in principle with PPG is still subject to the condition that the Amended Plan becomes effective. The Company expects that the Plan will become effective, and that it will make the one-time payment, in the second quarter of 2016.”
Travelers broke down its financial results by three separate segments. The business and international segment – which includes P&C insurance in Canada – had earned premiums of $3.599 billion in Q1 2016, essentially unchanged from $3.62 billion in Q1 2015. The combined ratio deteriorated 1.5 points, from 93.3% in Q1 2015 to 94.8% in the most recent quarter.
In addition to writing coverage in Canada, Britain, Ireland and Brazil, Travelers’ business and international segment also includes Lloyd’s Syndicate 5000, for which Travelers provides 100% of the capital. Syndicate 5000’s coverages include marine, property, power, utilities and aviation.
In its bond and specialty segment, Travelers reported earned premiums of $508 million in the latest quarter, up 0.8% from $504 million in Q1 2015. The combined ratio improved 6.8 points, from 76.1% in Q1 2015 to 69.3% in the three months ending March 31. That segment provides surety, crime, management and professional liability coverage, as well as cyber coverage.
Earned premiums in personal insurance increased 6.2%, from $1.764 billion in Q1 2015 to $1.874 billion in the latest quarter. The combined ratio deteriorated increased points, from 83.5% in Q1 2015 to 93.7% in the latest quarter.
Travelers’ net environmental reserve was $352 million as of March 31.
“Net environmental paid loss and loss expenses in the first quarters of both 2016 and 2015 were $10 million,” the company stated, adding that Travelers “continues to receive notices from policyholders tendering claims for the first time, frequently under policies issued prior to the mid-1980s. These policyholders continue to present smaller exposures, have fewer sites and are lower tier defendants.”