Travelers Swings to Q2 Profit; Says Personal Lines Rates Need to Rise More

NU Online News Service, July 19, 11:20 a.m. EDT

While insurers have achieved steady rate increases in personal lines, more needs to be done to contend with weather-related losses in the homeowners line and high-severity losses in personal auto, according to a Travelers executive.

Commenting in a statement accompanying the insurer's second-quarter results, Brian MacLean, the company's president and chief operating officer, says, “In personal insurance, we are very pleased with the pricing gains in the quarter.” But, he adds, losses and loss trends “remain at levels that necessitate further action.”

He says Travelers will continue to seek “improved pricing, terms and conditions in order to improve returns.”

Travelers reported net income of $499 million in 2012's second quarter compared to a net loss of $364 million a year ago. Chairman and Chief Executive Officer Jay Fishman attributes the swing to a sharp decrease in catastrophe losses, which fell to $357 million after tax compared to $1.1 billion after tax in the prior year's second quarter.

Still, Fishman says that, while cat losses were lower, they were still “considerably higher than we would have expected based on historical experience.”

The company's combined ratio was 100.5 for the second quarter, an improvement from 125 in 2011's second quarter. Travelers took an underwriting loss of $62 million compared to an underwriting loss of $1.4 billion a year ago. Underwriting results were hurt by $549 million in pre-tax cat losses, but helped by $221 million in net favorable prior-year reserve development.

In its personal-lines segment, Travelers reported $6 million in operating income for the quarter compared to a $749 million loss a year ago.

The personal-lines segment saw a $113 million underwriting loss in the quarter, a significant improvement from the $879 million underwriting loss for personal lines a year ago. Travelers says the improvement was mainly due to a $664 million pre-tax decrease in catastrophe losses and a $22 million pre-tax increase in net favorable prior-year reserve development.