NU Online News Service, Jan. 24, 10:03 a.m. EST
The Travelers Cos. says 2011 fourth-quarter net income fell 31 percent as underwriting gains suffered from lower prior-year favorable reserve development and catastrophe losses.
However, the New York-based insurer is getting rate increases, particularly in its business insurance segment. Overall, rate increases here were up more than 6 percent at renewal and renewal increases reached 8 percent in commercial accounts, the "highest level since the end of 2003," according to Jay Fishman, chairman and chief executive officer, in a statement.
Fishman says Travelers is also getting rate in its personal insurance segment while improving conditions and tightening underwriting guidelines.
Fourth-quarter net income was $618 million compared to $894 million during the same quarter in 2010.
Operating income fell $389 million to $764 million, pre-tax, due to a $221 million decrease in net favorable prior-year reserve development and $102 million in pre-tax catastrophe losses, mostly from the October snowstorm in the Northeast.
During the 2010 fourth quarter, Travelers recorded $347 million in prior-year reserve development and $86 million in catastrophe losses.
Travelers records a 95.9 combined ratio for the fourth quarter compared to 90.6 during the same period in 2010.
Without favorable reserve development and catastrophe losses, the company's underlying combined ratio was 96.4, up from 95.5 the year prior due to higher homeowners and auto losses.
Turning to rate in the business segment, Brian MacLean, president and chief operating officer, says increases "continued to accelerate during the quarter across all product lines and on a written basis exceed our current view of loss trend."
MacLean says increases are beginning to show in results but, again due to lower favorable reserve development, pre-tax operating income in the business insurance segment was $567 million in the fourth quarter, compared to $842 million the prior year.
Renewal premium in commercial accounts was positive for the fifth quarter in a row. New business volume fell, "as a result of the company's approach to improving returns on new accounts."
MacLean says actions taken by Travelers will lead to underwriting margin improvement during the first half of 2012.
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