NU Online News Service, July 22, 10:55 a.m. EDT
The Travelers Companies Inc. experienced a 9 percent drop in 2010 second quarter net income when compared to the same period last year as $439 million of record pre-tax catastrophe losses cut into profits.
The weather-related losses, though generated from events that would not grab national headlines, were at the highest level in the company's history for a second quarter, said Brian MacLean, president and chief operating officer, during a conference call.
Net income for the 2010 second quarter was $670 million, down from $740 million in the 2009 second quarter.
Travelers took $200 million in pre-tax catastrophe losses last year in the second quarter.
Both quarters in 2010 have been well above average in terms of catastrophe losses, Mr. MacLean said during the call.
The personal insurance segment had $257 million in pre-tax catastrophe losses compared to $139 million during the same period in 2009, and a decrease in prior year reserve development of $25 million. Losses were due to several severe wind and hail storms.
These factors resulted in a combined ratio of 105.9 in the personal lines segment and an underwriting loss of $130 million compared to a loss of $15 million at last year's second quarter.
Net written premiums in the personal insurance segment increased 4 percent after adjustments such as the introduction of a 12-month policy in certain automobile insurance markets and the timing of reinsurance in the homeowners market.
"Renewal premium changes continued to be strong and we are pleased with the improving rate of change of policies in force across both our auto and homeowners book of business," said Jay Fishman, chairman and chief executive officer.
Commercial accounts experienced a renewal premium increase of 1 percent due to slightly lower rate increases but an improvement in exposure. Retention remained about flat at 86 percent.
Travelers has chosen not to increase rates in commercial lines, choosing instead to try and retain existing business.
To attract new accounts, Travelers said it would need to reduce rate and underwriting, and the company is "not willing to make these concessions," Mr. MacLean said.
Mr. Fishman said loss cost increases will continue to outpace earned rate increases in the commercial business.
Net written premiums were down slightly for the group of companies but the negative impacts from the economic environment have "moderated," Mr. Maclean added.
The insurer said consolidated losses were offset somewhat by $123 million in favorable prior year reserve development, pre-tax. Moving ahead Travelers anticipates no additional prior year reserve development, favorable or unfavorable.
In addition, the company said it expects catastrophe losses of $1.27 billion pre-tax and for the full year.
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