Travelers Cos. Inc. on Tuesday reported a higher net profit for the third quarter but said it has exhausted its total disaster for reinsurance contracts of over $ 280 million, as disaster losses continue to push earnings.
New York-based insurers reported a net profit of $ 827 million, or $ 3.23 per share, compared to net income of $ 396 million or $ 1.50 per share for the same period last year.
The result benefited from a net favorable reserve development during the previous year. , including a $ 403 million subrogation benefit from Pacific Gas and Electric Co. related to fires in California in 2017 and 2018, travelers said. This was partially offset by an increase in asbestos reserves of $ 295 million, the insurer said.
Pre-tax disaster losses for the third quarter were $ 397 million, up from $ 241
This included the effects of Hurricane Laura, tropical storm Isaias, the Midwest West West derecho storm in August and several major California fires, including the glass fire, the traveler's executives said during the insurer's earnings interview with analysts Tuesday.
Full recovery during the quarter from its reinsurance contract with surplus loss tempered the effects of disaster losses, but means there is no "coverage from this treaty as we enter the fourth quarter", said Daniel Frey, Travel's CFO, during the revenue call.
“Maybe we will buy that reinsurance again, maybe not. It depends on how we feel about the risk transfer compared to the pricing we can get, "Frey said.
Net premiums increased to $ 7.77 billion, a 3% increase from $ 7.57 billion over the same period last year. Travelers saw a strong change in the renewal rate and high retentions in all three business segments, says Alan Schnitzer, Chairman and CEO.
In its commercial insurance department, the renewal rate increased by 8.2% during the quarter, 4 points higher than in the previous quarter, while retention remained Significant interest rate hikes are achieved on all fronts except for workers' compensation, executives said.
However, commercial insurance nets fell 1% to $ 3.83 billion, as strong retention and higher renewal rates were offset by a "modest reduction "" In exposures and a decrease in new business volume due to COVID-19 and related economic conditions.
Its obl igation and special insurance department increased net premiums by 4% when the change in the premium change in the domestic government debt business rose to 8.1%, including a change in records and a high retention, travelers said.
In personal insurance, net premium income increased by 8%, driven by strong retention and new business in both agency companies and homeowners, and renewal premiums increased 8.2% – the highest level since 2014, travelers said.
The current market environment points to continued pricing factors, say managers under t he call.
"Social inflation does not disappear, we have weather losses, fires that burn. Interest rates are lower longer. … We have some capacity problems in some lines, some markets are pulling back on capacity. We believe that all these broader environmental trends will continue to provide a positive driving force in the market, ”says Schnitzer.
The insurer's total total expense ratio for the quarter improved by 6.6 points to 94.9% while the underlying equity ratio improved by 2.6 points to Travelers said 91.5%.
This was due to disciplined guarantee and earned interest in addition to the loss trend, said the insurer.
Losses directly related to COVID-19 for the quarter amounted to $ 133 million before tax, $ 92 million in business Frey said.
"More than offsetting these losses were lower levels of car receivables and fewer non-COVID workers' compensation and general liability claims due to lower levels of economic activity," he said.
Net income from investments during the quarter was $ 671 million, an increase of almost 8% from $ 622 million over the same period last year.