Travelers Cos. Inc. said Friday that further rate increases, particularly in casualty lines, are possible, as it reported a rebound in second-quarter profit, buoyed by strong premium growth across its business.
Despite higher catastrophe losses during the quarter and a $250 million reserve strengthening in general liability for recent accident years, profitability was driven by strong renewal rate increases and new business in the quarter, Travelers executives said on an earnings call with analysts.
In business insurance, “renewal premium change was once again historically high at 10.1%, with renewal rate change of 6.5% driving the majority of the strong pricing,” said Greg Toczydlowski, president of business insurance. New business was up 9% in the quarter.
The renewal premium change in every line other than workers compensation was at or close to double-digits, Mr. Toczydlowski said.
“In terms of sequential rate movement from the first quarter, CMP (commercial multi-peril), auto, umbrella and workers comp all increased,” he said.
Umbrella and auto led with double-digit rate increases, while renewal rate increases in the property line moderated, he said.
Travelers Chief Financial Officer Dan Frey said the strengthening in general liability in the quarter was driven by the umbrella line for the accident years 2021 through 2023 and reflected the prospect of rising settlement costs and lengthening settlement patterns.
“These are very young accident years made up almost entirely of (incurred but not reported) claims. We will obviously continue to evaluate loss activity as it comes in,” Mr. Frey said.
A combination of economic and social inflation is driving claim activity into the umbrella line, said Travelers Chairman and CEO Alan Schnitzer.
“It’s an aggressive plaintiffs bar, it’s third-party litigation funding, it’s sympathetic juries,” Mr. Schnitzer said.
Travelers reported a profit of $534 million for the second quarter, a sharp turnaround from a net loss of $14 million in the same period last year.
Catastrophe losses for the quarter were $1.51 billion, compared with $1.48 billion in last year’s second quarter, primarily due to losses from numerous severe wind and hailstorms in multiple states, Travelers said in its earnings statement.
Net written premium increased 8% to $11.12 billion. By sector, business insurance net written premium increased 7% to $5.54 billion, bond and specialty rose 8% to $1.04 billion, and personal insurance increased 9% to $4.54 billion.
Travelers is leaning into the excess and surplus lines market, where margins continue to be “attractive,” Mr. Schnitzer said. Year-to-date the insurer has grown E&S net written premium by 16%, he said.
Travelers’ combined ratio for the second quarter improved to 100.2% compared with 106.5% in the same period last year.
Net investment income for the quarter was $885 million, a 24% increase over the prior-year period.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.