Higher catastrophe losses cut into Travelers Cos. Inc.’s first-quarter profit, but the insurer continued to benefit from rate increases in most lines of insurance, the insurer’s top executive said Wednesday.
Increased property losses, a tougher reinsurance market and inflation continue to drive price increases, Alan Schnitzer, chairman and CEO of Travelers, said on a conference call with analysts Wednesday to discuss the company’s results.
Travelers reported $975 million in net income for the first quarter, down 4.2% from the same period last year. Catastrophe losses for the quarter were $535 million, compared to $160 million last year. Most of the cat losses were due to high winds and hail storms in several states.
Net premium income increased to $9.4 billion, an increase of 12.3% compared to the same period last year. Renewal rates “ticked up a bit” from the fourth quarter, driven by property, umbrella and auto insurance lines, Schnitzer said.
The insurer reported a total expense ratio of 95.4% for the first quarter, down from 91.3% in the same period last year, largely due to catastrophe losses. Net investment income before tax increased 4.1% to $663 million.
Travelers is traditionally the first major insurer to report quarterly results and is seen as a bellwether for the industry.
In its business insurance segment, the insurer’s net written premium increased 14.5% to $5.2 billion, largely driven by an average 9.6% increase in renewal premiums.
While insurers continue to face headwinds, such as increased reinsurance costs, inflation, tighter labor markets and increased weather, the pricing environment remains “very strong,” Schnitzer said.
“After years of pretty good prices and improvements in conditions, yields are in a better place,” he said.
Property insurance pricing, which several industry surveys show is leading rate increases among large coverage areas, continued to accelerate in the first quarter, Schnitzer said.
“Given the tightness of the reinsurance market, there’s a lot of activity in the pricing space, overall there’s probably a constraint in capacity and I think generally insurers are just reacting to the loss environment,” he said.