Travelers Posts Earnings Growth on Surging Premium Volume

Travelers Cos. reported a 2% increase in fourth-quarter net income to set a new company record, with strong growth in premium volume contrasting with a year-earlier period that was hard hit by the Covid-19 pandemic's economic disruptions.

Source: WSJ | Published on January 20, 2022

Travelers earnings

Travelers, one of the nation's largest sellers of business insurance and a top consumer-car insurer, reported a net income of $1.33 billion, up from $1.31 billion the previous year. Its closely watched core income, which excludes realized capital gains and other items deemed nonrecurring, increased by 2% to $1.29 billion from $1.26 billion.

However, net written premiums increased 10% to $8 billion as the insurer benefited from a much different economy than the previous year, when business shutdowns and other disruptions caused by the Covid-19 pandemic were widespread across the United States.

Travelers reported that premiums from renewing business increased 9.2 percent in the most recent fourth quarter, reflecting higher insured amounts and rate increases. Furthermore, new business was up 16 percent year on year.

The carrier's main business of insuring business clients increased segment income by 22% to $867 million, while its business of selling car and home insurance policies to consumers decreased by 28% to $327 million. The deterioration in the personal-insurance segment reflected a difficult comparison with the previous year, when mileage was down across the United States as a result of the pandemic, and wreck volume was down sharply industrywide.

Americans have recently returned to the roads, and mileage is returning to or near pre-pandemic levels in many parts of the country.

The most recent results of travelers were also aided by higher net investment income. While low interest rates have reduced interest income from the bonds that dominate their investment portfolios, Travelers and other large insurers own a small percentage of alternative investments that have performed well in recent quarters. Travelers' net investment income increased 10% to $743 million, owing primarily to higher private-equity and real-estate partnership returns.

Travelers' catastrophe costs, net of reinsurance, rose by 7% to $36 million from $29 million. Tornadoes that hit Kentucky and neighboring states, as well as wildfires that destroyed suburban areas outside Boulder, Colorado, were among the most recent disasters.

The Dow Jones Industrial Average company is one of the first large property-casualty insurers to report quarterly earnings, and its results are closely watched as a bellwether for others.