@Travelers.
US insurance major and the traditional first to announce its results, Travelers, has said its net investment income increased 18% pre-tax over the prior year quarter for Q3 2024.
In a press release on Thursday, the company said it had seen higher net investment income, which was partially offset by higher catastrophe losses.
“Net realised investment gains in the [Q3] were $55 million pre-tax ($42 million after-tax), compared to net realised investment losses of $65 million pre-tax ($50 million after-tax) in the prior year quarter,” it said.
In July, the company said its Q2 “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 help ease fears of last year when the company 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 2023 results, 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.
"We are pleased to report excellent results for the quarter, with both underwriting and investment income contributing to our performance."
Between now and then the US Federal Reserve has begun to cut interest rates for the first time in four years, which could see many changes to investment strategies after several years of “higher for longer”. Federal Open Market Committee (FOMC) said in September that “in light of the progress on inflation and the balance of risks”, it had decided to lower the target range for the federal funds rate by 0.5 percentage points to 4.75 to 5%.
The higher rates were mentioned specifically by some insurers as part of the reason for healthy investment returns. Insurers such as Hanover Insurance Group, SiriusPoint, and Markel expressly put their healthy investment returns down to higher interest rates and the resulting bump. “We expect the current interest rate environment to continue to provide an accumulating benefit of higher investment yields,” said Jeffrey Farber, Executive Vice President and Chief Financial Officer of Hanover.
“We are pleased to report excellent results for the quarter, with both underwriting and investment income contributing to our performance,” said Alan Schnitzer, Chairman and CEO of Travelers in today’s statement.
Overall Q3 net income was $1.260 billion, which was an increase of $856 million.
For Q3, 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.
“Income from the non-fixed income investment portfolio increased over the prior year quarter primarily due to higher private equity partnership returns,” it said. Non-fixed income returns are generally reported on a one-quarter lagged basis and directionally follow the broader equity markets.
For the year-to-date until September 30, Travelers said net income was $2.917 billion, an increase of $1.552 billion, due to higher core income and net realised investment gains, compared to net realised investment losses in the prior year period.
Core income was $2.899 billion – an increase of $1.460 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.
For the nine months, net investment income of $2.635 billion pre-tax – $2.167 billion after-tax – increased 23% and was driven by the same factors as Q3.
Other major insurance companies will announce their results over the course of the next month.
