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Travelers, as usual, has attained the coveted spot to announce its results first for both Q4 2024 and the year as a whole.
The US giant said it had been an ‘exceptional’ year in its statement on the results.
However, the results came as many expected the US Federal Reserve to keep lowering interest rates. This would directly affect the company – and many other insurers – and their profitability for investments.
It’s likely Q1 and further 2025 results could begin to look less optimistic.
Though, the results do not take in the unexpected and devastating LA wildfires that are expected to be a huge nat cat loss as well as the policies of newly inaugurated Donald Trump. Many of Trump’s policies such as deporting of immigrants and tariffs could be highly inflationary.
“As of September 2024, exposure in Los Angeles County was $112.2 billion,
representing approximately 23.1% of the entire FAIR portfolio."
In an analysis released earlier this month, Moody’s said “It is clear the wildfires are a major insured and economic loss, with significant losses expected to be retained by primary insurance providers, reinsurance coverage likely to be triggered, and the Insurance-linked Securities (ILS) market keeping a close eye on wildfire-exposed bonds”.
It added that as private insurers have withdrawn from California, the state-backed FAIR Plan has seen a remarkable surge in policies and total exposure.
“As of September 2024, exposure in Los Angeles County was $112.2 billion, representing approximately 23.1% of the entire FAIR portfolio and a year-over-year growth of 53%,” said Moody’s.
“Between September 2020-September 2024, FAIR residential total exposure in Pacific Palisades ZIP Code 90272 jumped approximately 576%, from $436.2 million to $2.95 billion, while commercial total exposure increased by about 2,770%, from $8.46 million to $241.5 million.”
Travelers statement mentioned the wildfires in passing but made no mention of any forward-looking statements on potential changes to the current ‘higher-for-longer’ environment. The aforementioned policies of Trump’s could actually see inflation staying around, many have predicted, and therefore interest rates staying higher.
Travelers will be the first in a long line of US insurers keeping one on 2025’s potentially volatile path while celebrating 2024’s results.
In its statement, Travelers said its net investment income increased 23% over pre-tax over the 2023’ Q4 results.
Net income was $2.082 billion for the quarter ended December 31, 2024, compared to $1.626 billion in the prior year quarter.
“Core income increased primarily due to a higher underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses), higher net investment income and higher net favourable prior year reserve development, partially offset by higher catastrophe losses,” it said. “Net realised investment losses in the current quarter were $55 million pre-tax ($44 million after-tax), compared to $11 million pre-tax ($7 million after-tax) in the prior year quarter.”
“Full year results were driven by strong earned premiums, excellent
underwriting margins and a higher level of net investment income.”
Travelers’ net written premiums was $10.742 billion, up 7%, with growth in all three segments; record full year net written premiums of $43.356 billion, up 8%, with growth in all three segments.
Alan Schnitzer, Chairman and CEO said the company’s investment portfolio performed well, generating after-tax net investment income of $785 million.
“For the full year, core income was up 64% to more than $5 billion generating core return on equity of 17.2%,” he said. “Full year results were driven by strong earned premiums, excellent underwriting margins and a higher level of net investment income.”
Net income of $2.082 billion increased $456 million, driven by higher core income and was partially offset by higher net realised investment losses. Core income of $2.126 billion increased $493 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.
The company’s net income of $4.999 billion increased by $2.008 billion, which was driven by higher core income and lower net realised investment losses over the course of 2024.
Core income of $5.025 billion increased $1.953 billion, 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, it said.
Net realised investment losses were $30 million pre-tax ($26 million after-tax), compared to $105 million pre-tax ($81 million after-tax) in the prior year.
Further results will be released in the coming weeks.
It is clear the wildfires are a major insured and economic loss, with significant losses expected to be retained by primary insurance providers, reinsurance coverage likely to be triggered, and the Insurance-linked Securities (ILS) market keeping a close eye on wildfire-exposed bonds.
