NU Online News Service, Jan. 25, 12:09 p.m. EST
Due to a decrease in net favorable prior-year reserve development and an increase in catastrophe losses, The Travelers Companies reported a 30 percent drop in 2010 fourth-quarter net income compared to the prior year’s fourth quarter.
The company reported net income of $894 million for the quarter, down from net income of $1.285 billion reported in the 2009 fourth quarter.
The company said its consolidated combined ratio was 90.6 for the 2010 fourth quarter compared to 83.4 the prior year. The increase was driven by a $154 million decrease in reserve development and $70 million in pre-tax catastrophe losses primarily from wind and hail storms in Arizona, Travelers said.
Chairman and Chief Executive Officer Jay Fishman said Travelers is more optimistic about the situation in 2011 than in previous quarters.
During a conference call to discuss the earnings, Brain MacLean, president and chief operating officer, said there was “some lift in the commercial pricing environment” and that the mood the company has gathered from distributors is “marginally more positive.”
If what the company saw in the fourth quarter continues, Travelers can get to a positive commercial rate sometime in 2011, Mr. Fishman added. Exposures increased for the first time since 2008 and renewal premium change was positive in commercial lines for the first time since early in 2007.
Mr. Fishman said Travelers expects more improvement in exposures in 2011 and is hopeful about improvement in the pricing environment. But on a consolidated basis, Travelers predicts a modest increase in loss ratio in 2011 and a decline in net investment income due to low interest rates.
Mr. MacLean said earned rate increases outpaced loss cost trends for the year in Travelers’ personal insurance segment. Net written premiums increased 5 percent to $1.82 billion from the prior year quarter.
For 2010, Travelers recorded net income of about $3.22 billion compared to $3.62 billion in 2009. For the year the combined ratio was 93.2 compared to 89.2, driven by $656 million in pre-tax catastrophe losses and $82 million in pre-tax favorable prior year reserve development.