Primary insurance group The Travelers Companies, Inc., has reported a net loss of $14 million for the second quarter of 2023, compared to a net income of $551 million in the prior year quarter.
The net loss was heavily driven by a $640 million underwriting loss, which was driven by the significant amount of catastrophe losses the company occurred throughout Q2.
At the same time, Travelers’ net investment income of $712 million pre-tax ($594 million after-tax) increased 1% in Q2.
The company’s combined ratio of 101.1% increased 6.3 points due to higher catastrophe losses (5.7 points), as well as lower net favorable prior year reserve development (1.8 points), partially offset by a lower underlying combined ratio (1.2 points).
Net written premiums (NWP) of $10.318 billion increased 14% for the quarter.
Meanwhile, in Business insurance, the company posted a $509 million net investment income, compared to the previous year’s $521 million. The company noted that NWP of $5.175 billion increased 18%, reflecting strong renewal premium change and retention, as well as higher levels of new business.
Travelers also noted that the increase in NWP also included the impact of the company’s quota share reinsurance agreement with subsidiaries of Fidelis Insurance Holdings Limited effective January 1, 2023
In Bond & Specialty Insurance, segment income was $230 million after-tax, an increase of $2 million. Travelers highlighted that the increase was primarily due to higher net favorable prior year reserve development and higher net investment income, partially offset by a lower underlying underwriting gain and higher catastrophe losses. NWP of $964 million increased slightly over the very strong prior year quarter too.
In Personal Insurance, segment loss was $538 million after-tax, compared with a segment loss of $193 million in the prior year quarter. However, NWP of $4.179 billion increased 13%, reflecting higher pricing in both Domestic Homeowners and Other and Domestic Automobile.
Alan Schnitzer, Chairman and Chief Executive Officer, commented: “This quarter we reported strong underlying results and investment returns, as well as net favorable prior year reserve development, which were essentially offset by an historic level of industry-wide catastrophe losses. The fact that we were able to generate positive core income notwithstanding $1.5 billion of pre-tax catastrophe losses reflects the strength of our franchise and the resiliency of our underlying business model.
“We are very pleased with the underlying fundamentals of our business. Pre-tax underlying underwriting income of $781 million for the quarter was up 38% over the prior year quarter, driven by record net earned premiums of $9.2 billion and a consolidated underlying combined ratio which improved by 1.7 points to an excellent 91.1%. Earned premiums were higher in all three of our business segments. The underlying combined ratio in our Business Insurance segment improved by three points to an excellent 89.4%; the underlying combined ratio in our Bond & Specialty Insurance business was higher but still strong at 87.8%; and the underlying combined ratio in Personal Insurance improved by two points to 94.1%. Our high-quality investment portfolio continued to perform well, generating after-tax net investment income of $594 million. As a reflection of our confidence in our business, we returned $633 million of excess capital to our shareholders this quarter, including $400 million of share repurchases.
He continued: “Excellent marketplace execution across all three segments delivered growth of $1.3 billion, or 14%, in net written premiums to a record $10.3 billion. In Business Insurance, we grew net written premiums by 18%. Renewal premium change in the segment was a record high at 12.8%, driven by renewal rate change which accelerated 2.5 points sequentially to 7.2%, while retention remained very strong at 88%. New business increased 36% led by the property line. In Bond & Specialty Insurance, record net written premiums were about even with the prior year quarter. Given the attractive returns, we are very pleased with the strong production results in both of our commercial business segments. In Personal Insurance, 13% top-line growth was driven by higher pricing. Renewal premium change was 19.2% in our Homeowners and Other business and increased to a record high 16.1% in our Auto business.
“We are very confident in the outlook for our business. We have terrific underlying fundamentals in our commercial businesses, improving underlying results in our personal insurance business and steadily rising investment returns in our fixed income portfolio. Across the organization, we are leveraging our scale, expertise and proven track record of execution to invest in exciting new capabilities to advance our ambitious innovation agenda. With that momentum and the best talent in the industry, we are well positioned to continue to deliver industry-leading returns and shareholder value over time.”
