New York, NY – The Travelers Companies, Inc. recently reported net income of $669 million, or $2.42 per diluted share, for the quarter ended March 31, 2018, compared to $617 million, or $2.17 per diluted share, in the prior year quarter. Core income in the current quarter was $678 million, or $2.46 per diluted share, compared to $614 million, or $2.16 per diluted share, in the prior year quarter.
Core income before income taxes increased due to higher net favorable prior year reserve development as well as a strong underlying underwriting gain. Core income also benefited from a decrease in income tax expense, primarily driven by the lower U.S. corporate income tax rate, partially offset by the inclusion in the prior year quarter of a $39 million benefit from the resolution of prior year tax matters.
“We were pleased to report first quarter core income of $678 million, up 10% over the prior year quarter, and core return on equity of 11.9%, particularly in light of yet another unusually high level of first quarter catastrophe losses,” commented Alan Schnitzer, Chairman and Chief Executive Officer.
“We delivered strong underlying underwriting results, including an underlying combined ratio of 92.4%, while achieving record first quarter net earned premiums and improvement in the expense ratio. Our investment portfolio continued to perform well, with income from our fixed income investment portfolio increasing for the first time in a decade due to higher average invested assets and an improved interest rate environment. In the quarter, we returned $598 million of excess capital to shareholders, including $401 million of share repurchases. I am pleased to announce that our Board of Directors declared a 7% increase in our quarterly cash dividend to $0.77 per share, marking 14 consecutive years of dividend increases with a compound annual growth rate of about 10% over that period.
“Net written premiums grew 5% in the quarter reflecting growth in all segments, as we continued to successfully execute on our marketplace strategies. In Business Insurance, the pricing environment continued to improve. Domestic renewal premium change of 4.5% increased both year-over-year and from recent quarters as we achieved rate increases more broadly across our product portfolio, while retention improved from already high levels and new business levels remained solid. In Bond & Specialty Insurance, net written premiums increased 6%, with growth in both the management liability and surety businesses. In Personal Insurance, net written premiums grew 8%, benefiting from renewal premium change of 10% in agency auto and continued momentum in our leading homeowners business where we grew policies in force by 5%.
“Our first quarter performance is an encouraging start to the year, and we’re making important progress on our innovation agenda to ensure that our competitive advantages continue to set us apart. In short, our 30,000 employees, our most significant competitive advantage, are driving the perform and transform imperative that I discussed in my annual letter to shareholders. We remain well positioned to continue to deliver superior returns over time.”
First Quarter 2018 Results
(All comparisons vs. first quarter 2017, unless noted otherwise)
Net income of $669 million after-tax increased $52 million due to higher core income, partially offset by net realized investment losses as compared to net realized investment gains in the prior year quarter. Core income of $678 million after-tax increased $64 million. Core income before income taxes benefited from higher net favorable prior year reserve development and a continued strong underlying underwriting gain. Core income also benefited from a decrease in income tax expense, primarily driven by the lower U.S. corporate income tax rate, partially offset by the inclusion in the prior year quarter of a $39 million benefit from the resolution of prior year tax matters.
- The combined ratio of 95.5% decreased 0.5 points due to higher net favorable prior year reserve development (1.0 point), as well as a benefit (0.2 points) from catastrophes, partially offset by a higher underlying combined ratio (0.7 points).
- The underlying combined ratio of 92.4% remained strong and increased 0.7 points, driven by normal quarterly variability in both loss activity and expenses.
- Net favorable prior year reserve development occurred in all segments. Catastrophe losses in the first quarter of 2018 primarily resulted from winter storms in the eastern United States, a wind and hail storm in the southern United States and mudslides in California.
Net investment income of $603 million pre-tax decreased slightly from the prior year quarter. Private equity returns remained strong but were lower than the prior year quarter, while income from our fixed income investment portfolio increased due to a higher average level of fixed maturity investments and higher short-term interest rates.
Net written premiums of $6.824 billion increased 5%, reflecting growth in all segments. Retention remained high and renewal premium change improved from recent quarters across all segments, while new business levels remained solid.
The complete results release is available here: Travelers First Quarter 2018 Results