Travelers Insurance Cos. Inc. Chairman and CEO Alan Schnitzer said Tuesday that the insurer has secured significant rate increases over the past two years and expects similar conditions this year.
On a conference call with analysts Tuesday to discuss the company’s fourth-quarter 2022 results, which, as it previously announced, showed a sharp drop in profit due to catastrophe losses, Schnitzer said travelers have seen double-digit renewal premium increases over the past eight quarters.
“I think it’s hard to characterize this pricing environment as anything other than very strong,” Schnitzer said.
Travelers reported a 10.1% increase in renewal premiums during the quarter, which includes changes in interest and policy value, he said.
“We feel great about the pricing and the overall execution this year and … we̵7;re going to go out and do it again in 2023,” Schnitzer said.
Travelers reported a fourth-quarter profit of $819 million, down 38.6% from a year earlier. The insurer reported $459 million in pretax catastrophe losses, compared with $36 million in the year-ago quarter, largely from the severe winter storm that hit much of the United States and Canada in December.
Net premium income increased 10.4% to $8.83 billion. Net investment income fell 15.9% to $625 million, largely due to lower returns on private equity partnerships, Travelers said in its earnings statement.
The insurer’s total expense ratio deteriorated to 94.5% from 88% in the same quarter of 2021.
In its business insurance segment, Travelers reported $4.39 billion in net premiums, up 10.7% from the prior year. Its bond and specialty insurance segment, which includes its managed liability and surety business, reported net premium of $924 million, up 2.1%.
For the full year, Travelers reported net revenue of $2.84 billion, down 22.4% from 2021; net written premium of $35.41 billion, up 5.9%; and a combined ratio of 95.6%, down from 94.5%.
On the analyst call, Travelers said that with rising premium volume for its property business, it has increased the retention on its $2 billion catastrophe excess reinsurance contract to $3.5 billion from $3 billion. The insurer did not renew an underlying real estate agreement, which was only 45% placed in 2022.
Travelers said it has also entered into a quota share agreement with Fidelis Insurance Holdings Ltd., a Bermuda-based specialty insurer and reinsurer in which it took a minority stake in 2021.
“This quota share arrangement allows us to participate in the tough market, while accelerating our understanding of this marketplace,” Dan Frey, chief financial officer of Travelers, said on the call.
The quota-share arrangement is likely to generate between $550 million and $600 million in annual premium, he said.