Reinsurance News

Travelers reports record Q4 net income, but exhausts agg reinsurance

20th January 2022 - Author: Katie Baker

The Travelers Companies has today reported its net income of $1.3 billion for the fourth quarter of 2021, which was driven by higher net investment income and a higher underlying underwriting gain.

TravelersAt $1.333 billion, the insurer’s net income hit a record number in comparison to $1.31 billion which was reported for the same quarter last year.

Travelers made a first recovery from the aggregate reinsurance of $95 million, including hurricane Ida recoveries, which was reported in Q3, but then recovered a further $255m for Q4 loss events, bringing its recovery to $350m for the full-year.

This is in line with analyst’s predictions which were reported last week, where figures at Bloomberg, KBW and Morgan Stanley predicted that the results would show further aggregate reinsurance recoveries made in the quarter following severe weather events.

The company also reported its combined ratio increased to 88% compared to 86.7% for the same prior year period, this was due to lower net favourable prior year reserve development and higher catastrophe losses.

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Its underwriting performance declined by $29 million, year-on-year, to $926 million, and included net favourable prior year reserve development of $95 million, and catastrophes, net of reinsurance of $36 million.

This compares with net favourable prior year reserve development of $180 million in 2020 and catastrophes, net of reinsurance, of $29 million.

On an underlying basis, the combined ratio of 88.7% was comparable to the prior year.

Its net investment income came in at $743 million pre-tax, an increase of 10%. The income from the non-fixed income investment portfolio increased over the prior year quarter, primarily due to higher private equity and real estate partnership returns.

Alan Schnitzer, Chairman and Chief Executive Officer (CEO), commented: “We are very pleased to report outstanding results for the fourth quarter and full year, including meaningful top line growth, strong margins and excellent returns from our investment portfolio.

“Core income for the quarter was $1.3 billion, or $5.20 per diluted share, generating core return on equity of 19.8%. These results were driven by strong underlying underwriting income and returns from our investment portfolio. Our higher underlying underwriting income was driven by record net earned premiums of $8 billion and an excellent underlying combined ratio of 88.7%. For the full year, record underlying underwriting income of $2.3 billion after-tax contributed meaningfully to the 31% increase in core income to $3.5 billion, or $13.94 per diluted share. Our high-quality investment portfolio generated after-tax net investment income of $2.5 billion for the year. Our impressive operating results, together with our strong balance sheet, enabled us to grow adjusted book value per share by more than 10% during the year, after returning $3.1 billion of excess capital to shareholders, including $2.2 billion of share repurchases, and making important investments in our business.

“Our best-in-class marketplace execution enabled us to grow net written premiums by 10% this quarter to $8 billion, with each of our three segments contributing. In Business Insurance, net written premiums grew by 9%, with renewal premium change of 9.2% near an all-time high, while retention was higher than in the prior year quarter. In addition, new business was up 16% year over year. In Bond & Specialty Insurance, net written premiums increased by 13%, driven by renewal premium change of 10.9% and continued strong retention in our management liability business. In Personal Insurance, net written premiums increased by 10%. Policies in force in both Auto and Homeowners increased to record levels, driven by continued strong retention and new business. Renewal premium change improved in Auto to 1.2% and remained strong in Homeowners at 8.7%.

“Our Perform and Transform call to action once again served us well in 2021. In addition to delivering excellent financial results today, we continue to leverage our scale and resources to execute on our ambitious innovation agenda for tomorrow. We’re enriching 160 years of insurance expertise by investing in digital tools and virtual capabilities, deploying robotics and proprietary AI models, and hiring and developing top data scientists, engineers, roboticists and meteorologists, among others, to build the insurance company of the future. Looking forward, with the best talent in the industry, we remain well positioned to capitalize on opportunities and deliver industry leading returns.”

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