@Travelers.
US P&C insurer Travelers has released its Q2 and H1 results for 2024, which it said showed “net favourable prior year reserve development” and a higher net investment income, which “more than offset significant catastrophe losses from severe convective storms”.
The company’s net investment income increased 24% pre-tax over the prior year quarter, primarily due to strong fixed income returns and growth in fixed maturity investments.
This could mean more US insurers will reveal positive results in the coming weeks, which could be largely attributable to the current market. However, depending on natural catastrophe exposure, some losses could be much larger.
In its press release, Travelers said that company-wide core income increased primarily due to a higher underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses), higher net favourable prior year reserve development, and higher net investment income, partially offset by higher catastrophe losses.
Year-to-date results – compared to H1 2023 – showed core income of $1.681 billion, which has increased $696 million, primarily due to a higher underlying underwriting gain, higher net investment income, and higher net favourable prior year reserve development, partially offset by higher catastrophe losses.
“We are pleased to have generated a strong bottom-line result in a quarter that included a record level of severe convective storms across the US,” said Alan Schnitzer, Chairman and CEO. “Core income of $585 million, benefited from excellent underlying results, favourable net prior year reserve development and higher investment income."
For Q2 specifically, net realised investment losses in the current quarter were $65 million pre-tax ($51 million after-tax), compared to net realised investment losses of $35 million pre-tax ($29 million after-tax) in the prior year quarter.
"Our results for the first half of the year include … steadily rising investment returns in our growing fixed income portfolio."
“Underlying underwriting income of $1.2 billion pre-tax was up 55% over the prior year quarter, driven by record net earned premiums of $10.2 billion and a consolidated underlying combined ratio that improved 3.4 points to an excellent 87.7%,” Schnitzer added. “Our investment portfolio continued to perform well, generating after-tax net investment income of $727 million, driven by strong and reliable returns from our growing fixed income portfolio and higher returns from our non-fixed income portfolio.”
Schnitzer continued, saying: “We [are] confident in the outlook for our business. Our results for the first half of the year include strong premium growth, underwriting profitability, record operating cash flow and steadily rising investment returns in our growing fixed income portfolio."
He concluded saying the company had a “strong and diversified” balance sheet, which saw a 13.6% core return on equity over the last twelve months, despite elevated industry-wide catastrophe losses.
For Q2 results specifically, there was a net investment income of $885 million pre-tax ($727 million after-tax) increased 24%. Income from the fixed income investment portfolio increased over the prior year quarter due to a higher average yield and growth in fixed maturity investments, the statement added. Income from the non-fixed income investment portfolio increased over the prior year quarter primarily due to higher private equity partnership returns.
In Q1, Travelers said core income was $1.096 billion compared to $970 million in the prior year quarter.
This compares to when it published its full year 2023 and Q4 2023 results in January, which revealed it saw losses for its investments in Q4: net realised investment losses were $11 million pre-tax ($7 million after tax), compared to net realised investment gains of $7 million pre-tax ($9 million after tax) in the prior year quarter.
For the full year, it saw a net realised investment loss of $81 million compared to a loss of $156 million for full year 2022. Net investment income for Q4 2023 was $778 million and for the full year was $2.92 billion, an increase of $360 million from 2022.
