US primary insurer Travelers has identified unfavourable prior year reserve development as having driven an increased combined ratio and lower net income for the third quarter.
At 101.5%, Travelers’ CR stands at 4.9% higher against the prior year quarter.
Net income was reported at $396 million, compared to $709 million.
Overall, Travelers took a $294 million underwriting loss due to adverse reserve development in Q3, compared to $14 million in the prior year quarter.
“Earnings this quarter were impacted by net unfavorable reserve development in Business Insurance,” explained Alan Schnitzer, Chairman and Chief Executive Officer.
“While workers’ compensation reserves continued to develop favorably, asbestos reserves developed in an amount comparable to the prior year quarter and general liability and commercial auto reserves developed unfavorably primarily due to the more challenging tort environment.”
Unfavourable prior year reserve development in Business Insurance included a $220 million increase in asbestos reserves, compared with a $225 million increase in the prior year quarter.
Net favourable prior year reserve development occurred in Personal Insurance and Bond & Specialty Insurance.
Catastrophe losses primarily resulted from wind and hail storms in several regions of the United States and Hurricane Dorian.
“Despite the impacts of an increasingly challenging tort environment facing our industry and higher non-catastrophe weather-related losses, our underlying underwriting results were solid, benefiting from 4% growth in earned premiums and continued disciplined and thoughtful expense management,” Schnitzer added.
Travelers also posted record net written premiums of $7.569 billion – an increase of 7% – reflecting growth in all segments.
“We have a long track record of successfully managing our various businesses to create value over time, including through periods of elevated and volatile weather losses, changing loss trends, economic uncertainty and low interest rates,” noted Schnitzer.
“With insight from leading data and analytics driving our pricing and underwriting, the best claim organization in the industry and deep relationships with our agents and brokers, we will continue to leverage the power of our franchise to deliver industry-leading returns over time.”