Travelers: Q4 investment profits marked by cat losses
US giant Travelers announced improved Q4 results for investment portfolio and overall business as CEO played down effects from higher claims.
Andrew Putwainposted on Tuesday, January 17, 2023
According to its statement, Connecticut-based Travelers said its expected results in the fourth quarter of 2022 included an underlying underwriting gain of $723 million pre-tax of $571 million after-tax, with a net investment income of $625 million pre-tax versus $531 million after-tax, which includes $601 million pre-tax $510 million after-tax - from the fixed income portfolio.
Net favourable prior year reserve development of $185 million pre-tax, which was $145 million after-tax.
In its statement, the company said it expects to report net income of $819 million. In its Q3 results in October, it saw disappointing investment returns.
Q3 net income was $454m – which was a decrease of $208m – due to lower core income and net realised investment losses compared to net realised investment gains in the prior year's quarter. “Core income of $526 million decreased $129 million, primarily due to lower net investment income and a lower underlying underwriting gain, partially offset by net favourable prior year reserve development compared to net unfavourable prior year reserve development in the prior year quarter,” said the company’s statement.
The effects of 2022’s hurricane season saw some larger cat losses. The hurricane season has been blamed for a muddled 1/1 renewal period and tense times for profits for some re/insurers.
Carlos Wong-Dupuy, Senior Director at AM Best, told Insurance Investor this month that the current era of higher interest rates and the increasing concerns related to climate trends and geopolitical risks added to the need for well-established players to restore profitability. This, he said, was needed to compensate for a long period of technical underperformance.
"While the footprint of the storm was substantial, impacting 37 US states, the District of Columbia and Canada, our loss experience is consistent with our modelled estimates.”
Travelers Q4 results
Fourth quarter 2022 results include Travelers estimate for catastrophe losses of $459 million pre-tax - $362 million after-tax, net of reinsurance. Catastrophe losses primarily resulted from the significant winter storm that impacted much of the U.S and Canada in late December.
“We are pleased with the solid results for the quarter in light of the late December winter storm,” said Alan Schnitzer, Chairman and Chief Executive Officer. “While the footprint of the storm was substantial, impacting 37 US states, the District of Columbia and Canada, our loss experience is consistent with our modelled estimates”
"Underlying results in Personal Insurance remain challenged by elevated industry-wide loss costs."
Schnitzer said that aside from the catastrophic weather, underlying results in its commercial businesses were “exceptional”.
“Underlying results in Personal Insurance remain challenged by elevated industrywide loss costs. We recorded another quarter of progress with strong pricing and other actions to address these challenges. Across all three segments, we are also pleased with continued strong net written premium growth in the quarter, positioning us well as we enter the new year.”