Travelers profit climbs on reserve releases as personal auto keeps shrinking

Travelers’ third-quarter core income rose 4% to $1.95 billion, or $9.18 a share, as reserve releases and a record investment haul more than covered heavier storm losses.

Net favorable prior-year reserve development reached $234 million pre-tax, up from $22 million a year earlier. That figure is after a $295 million addition to asbestos reserves, so releases before the charge were about $529 million. Catastrophe losses rose to $538 million from $402 million, mostly from wind and hail in multiple states. The combined ratio improved half a point to 86.8%.

The current-accident-year picture was flatter. The underlying combined ratio slipped to 84.1% from 83.9%. Pre-tax underlying underwriting income fell 1% to $1.74 billion.

Net investment income was a record $1.10 billion pre-tax, up 6%, helped by higher fixed-income yields and more invested assets.

Net written premiums were flat at $11.48 billion. Excluding the Canadian businesses sold in the first quarter, they rose 2%.

• Business Insurance: premiums rose 3% to $5.87 billion, or 4% excluding Canada. Renewal premium change was 4.1%. Excluding property, it was 7.0%, which suggests property pricing is now a drag. National Property premiums fell 4%. Middle Market grew 7%. New business set a third-quarter record at $699 million. The segment’s underlying combined ratio worsened 0.6 points to 88.9%.
• Bond & Specialty: premiums rose 12% to $1.21 billion. Surety grew 21%, and new business was up 18%. The combined ratio was 77.3%.
• Personal Insurance: premiums fell 7% to $4.40 billion, or 3% excluding Canada. Domestic auto dropped 8% to $1.89 billion, while homeowners rose 1%. The combined ratio rose 2.2 points to 83.5% because catastrophes added 9.2 points. The underlying ratio improved a point to 76.7%, mainly on auto.

“It was another in a run of successful quarters,” Chief Executive Officer Alan Schnitzer said in a statement Friday.

Travelers repurchased 4 million shares at an average of $376, costing $1.51 billion. Total capital returned was $1.77 billion. Diluted share count fell 7% from a year earlier, which helped per-share earnings grow 13% while core income grew 4%. The company has $2.42 billion left under its buyback authorizations.

Book value per share fell 6% from year-end to $141.48. After-tax unrealized investment losses rose to $6.35 billion from $1.48 billion as interest rates climbed. Adjusted book value, which excludes those losses, rose 9% to $172.47.

For the first nine months, core income rose 52% to $5.80 billion. The main driver was catastrophe losses falling by half, to $1.82 billion from $3.60 billion.