Travelers reports record full-year net written premiums of US$24.121 billion

The Travelers Companies, Inc. reported record 2015 full-year net written premiums (NWPs) of US$24.121 billion, a 1% change from 2014 full-year NWPs of US$23.904 billion. Fourth quarter 2015 NWPs were US$5.864 billion, from US$5.836 billion in Q4 2014.

The company – a property and casualty insurer for auto, home and business – recorded a combined ratio of 86.6% for the three months ending Dec. 31, 2015, an increase of 1.6 points from the same period in 2014. Travelers said in a press release on Thursday that the combined ratio increased primarily due to lower net favourable prior year reserve development (1 point) and a higher underlying combined ratio (0.5 points). The underlying combined ratio also remained strong at 90.7%, increasing 0.5 points due to higher non-catastrophe weather-related losses. For year-end 2015, the combined ratio was 88.3% compared to 89% for year-end 2014.

“Underwriting results for both the quarter and the year, which were strong across all of our businesses, continued to benefit from our superior execution in risk selection and pricing, as well as lower than expected catastrophe losses,” said Travelers’ CEO Alan Schnitzer in a press release.

Net favourable prior year reserve development occurred in all segments, Travelers said in the release, noting that catastrophe losses primarily resulted from flooding and wind storms in the Midwest region of the United States.

Travelers also reported net income of US$866 million and a return on equity of 14.5% for the fourth quarter of 2015, compared to US$1.038 billion in Q4 2014. Operating income in the current quarter was US$886 million and operating return on equity was 15.8%, compared to US$1.023 billion in the prior year quarter. For the full year 2015, net income of US$3.439 billion after-tax decreased US$253 million due to lower operating income and lower after-tax net realized investment gains.

The full-year 2015 combined ratio of 88.3% improved 0.7 points due to lower catastrophe losses (0.9 points), partially offset by a slightly higher underlying combined ratio (0.2 points). The underlying combined ratio of 90.1% was comparable to the prior year period. Catastrophe losses included the fourth quarter 2015 flooding and wind storms, as well as wind and hail storms in the Midwest region of the U.S. in the third quarter of 2015, wind and hail storms in several regions of the U.S. in Q2 2015 and a winter storm in the eastern U.S. in the Q1 2015.

For Q4 2015, operating income for Business and International Insurance was US$566 million after-tax, a decrease of US$64 million, the release said. The fourth quarter combined ratio of 89.6% improved 0.2 points. The underlying combined ratio of 94.4% in Q4 2015 increased 0.5 points primarily due to higher non-catastrophe weather-related losses. Net favourable prior year reserve development primarily resulted from better than expected loss experience in (i) the workers’ compensation line of business for accident years 2006 and prior as well as for accident year 2014, (ii) the general liability product line for both primary and excess coverages for accident years 2012 and prior, reflecting a more favourable legal environment than the company previously expected and (iii) the Company’s operations in Canada. [click image below to enlarge]

NWPs of US$3.517 billion for Q4 2015 decreased 2%, Travelers said. Domestic NWPs increased 1% due to higher retention, positive renewal premium changes and a slight increase in new business volume. International NWPs decreased 16% primarily due to the impact of changes in foreign exchange rates and lower volumes in the company’s Canadian and Lloyd’s operations, the release added.

For the full-year of 2015, operating income for Business and International Insurance was US$2.170 billion after-tax, a decrease of US$177 million primarily due to lower net investment income, partially offset by a higher underwriting gain. The combined ratio of 92.1% improved 1 point due to lower catastrophe losses (0.8 points) and higher net favourable prior year reserve development (0.6 points), partially offset by a higher underlying combined ratio (0.4 points). The underlying combined ratio of 93.2% increased 0.4 points primarily due to an increase in the expense ratio. Net written premiums of $14.583 billion decreased slightly for the fourth quarter of 2015, the release said.

For Q4 2015, operating income for Bond & Specialty Insurance was US$162 million after-tax, a decrease of US$54 million. The combined ratio of 65.1% increased 15.4 points. Bond & Specialty Insurance NWPs of US$504 million decreased 4% primarily due to lower surety business volume. Operating income for Bond & Specialty Insurance for the 2015 year was US$633 million after-tax, a decrease of US$94 million. The combined ratio of 67.9% increased 7.1 points. Bond & Specialty Insurance net written premiums of $2.081 billion decreased 1%.

Q4 2015 operating income for Personal Insurance was US$222 million after-tax, a decrease of US$20 million. The combined ratio of 86.7% increased 1.4 points. Personal Insurance net written premiums of US$1.843 billion increased 6%. Agency Automobile NWPs grew 12% with an increase in policies in force of 8% from the prior year quarter, driven by Quantum Auto 2.0. Agency Homeowners & Others policies in force and NWPs were comparable to the prior year period.

Full-year operating income for Personal Insurance was US$889 million after-tax, an increase of US$65 million. The combined ratio of 86.6% improved 2.1 points. Personal Insurance net written premiums of US$7.457 billion increased 4%. Agency Automobile NWPs increased 8% due to higher new business volume, driven by Quantum Auto 2.0, while Agency Homeowners & Other NWPs decreased 1%.

“Our results in 2015 across all of our businesses have demonstrated the successful execution of our business strategies, and we remain focused on building on these strategies in 2016 and beyond,” Schnitzer said in the release, adding that since Jan. 1, 2005, the company has produced an average annual operating return on equity of 13.5%.