New York, NY – The Travelers Companies, Inc. recently reported net income of $293 million, or $1.05 per diluted share, for the quarter ended September 30, 2017, compared to $716 million, or $2.45 per diluted share, in the prior year quarter. Core income in the current quarter was $253 million, or $0.91 per diluted share, compared to $701 million, or $2.40 per diluted share, in the prior year quarter. The decrease in net income and core income was primarily due to significantly higher catastrophe losses. In addition, net income benefited from an increase in net realized investment gains of $61 million pre-tax ($40 million after-tax) in the current quarter, primarily driven by gains on the sale of equity securities, compared to $23 million pre-tax ($15 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.
“In a quarter of unprecedented hurricane activity, our strength in underwriting and our investment expertise enabled us to deliver core income of $253 million and core return on equity of 4.5%,” commented Alan Schnitzer, Chairman and Chief Executive Officer. “Our disciplined coastal underwriting stood up to the storms, and we also delivered a consolidated underlying combined ratio of 92.8%, with all three segments contributing to the solid result. The results in Business Insurance benefited from higher earned premiums and lower general and administrative expenses, while Bond & Specialty Insurance delivered another quarter of impressive profitability. Within Personal Insurance, the underlying combined ratio in auto improved, reflecting the continued successful execution of pricing and underwriting actions we began implementing a year ago. Our high-quality investment portfolio continued to perform well, benefiting from strong private equity returns. Additionally, we were able to return $528 million to shareholders in the quarter, including $328 million in share repurchases.
“We also continue to be pleased with the execution of our marketplace strategies, which resulted in record net written premiums of $6.7 billion this quarter, a 4% increase over the prior year quarter. In our commercial businesses, retention remained at historic highs, renewal premium change remained positive and consistent with recent periods and the level of new business increased. In Personal auto, renewal premium change reached double digits in September, consistent with our plans to improve profitability, and we maintained the positive momentum in our homeowners business with 5% growth in policies in force quarter-over-quarter.
“In the wake of the many devastating events this quarter, our thoughts and prayers are with all who have been impacted. We also extend our deep gratitude to our claim professionals, who tirelessly demonstrate to our customers and agents the value of the Travelers promise.”
Third Quarter 2017 Results
(All comparisons vs. third quarter 2016, unless noted otherwise)
Net income of $293 million after-tax decreased $423 million due to lower core income, partially offset by higher net realized investment gains. Core income of $253 million after-tax decreased $448 million, primarily driven by significantly higher catastrophe losses. Net realized investment gains of $61 million pre-tax ($40 million after-tax) in the current quarter, compared to $23 million pre-tax ($15 million after-tax) in the prior year quarter, were primarily driven by gains on the sale of equity securities.
- The combined ratio of 103.2% increased 10.3 points due to higher catastrophe losses (9.3 points), a higher underlying combined ratio (0.7 points) and lower net favorable prior year reserve development (0.3 points).
- The underlying combined ratio of 92.8% increased 0.7 points, primarily driven by a high level of non-catastrophe fire-related losses in Business Insurance and loss cost trends that modestly exceeded earned pricing, partially offset by a lower expense ratio.
- Net favorable prior year reserve development occurred in Business Insurance and Bond & Specialty Insurance. Net favorable prior year reserve development in Business Insurance was net of a $225 million increase in asbestos reserves, the same amount as in the prior year quarter. Catastrophe losses in the third quarter of 2017 primarily resulted from Hurricanes Harvey, Irma and Maria, as well as wind and hail storms in the Southern region of the United States.
Net investment income of $588 million pre-tax ($457 million after-tax) increased 1% driven by higher private equity returns, partially offset by fixed income returns that declined in line with our expectations due to lower reinvestment rates available in the market.
Record net written premiums of $6.660 billion increased 4%, reflecting strong retention in all three segments and improved renewal premium change in Personal Insurance, as well as an increase in new business in our commercial businesses.
The complete results release is available here: Travelers Third Quarter 2017 Results