Travelers Cos. posted a 39% jump in net profit in the first quarter, as premium rate increases and new business fueled revenue gains. Significantly lower disaster costs than a year earlier also boosted earnings.
The property and casualty insurer reported net income of $1.02 billion, with catastrophe costs falling to $160 million before tax, from $835 million previously. Industry-wide carriers focused on the United States should benefit from favorable comparisons with their results of the previous year due to the lower level of disasters. In the first quarter of 2021, winter and windstorms hit the United States to make it a particularly expensive three months.
Travelers is one of the largest US business insurance issuers and sells auto and home insurance to individuals and families. Part of the Dow Jones Industrial Average, the company is one of the first major P&C insurers to report quarterly results, and its results are closely watched as a flag for others.
The first quarter is expected to be more difficult for P&C insurers operating around the world. Wells Fargo Securities estimates insured catastrophe losses at around $12 billion, driven by global events including European windstorms, an earthquake in Japan and flooding in Australia.
Some carriers around the world are also expected to suffer losses from Russia’s invasion of Ukraine, analysts said.
Base traveler revenue, which excludes some items considered non-recurring and tracked by Wall Street analysts, rose 48% to $1.04 billion.
Travelers’ net written premiums, a commonly used measure of revenue growth, jumped 11% to $8.37 billion, a record high, with each of its segments contributing. In its large commercial customer insurance unit, premiums rose 9%, reflecting a strong change in renewal premiums, as well as higher levels of new business. Its surety and specialty insurance unit benefited from a 22% increase in net written premiums.
Both of these segments recorded strong revenue increases.
The personal insurance segment, which combines the results of the company’s auto and home insurance businesses, reported premium growth of 12%, but revenue fell 28% to $225 million. The decline was mainly due to an unfavorable comparison with a low level of losses in the prior year quarter, when the Covid-19 pandemic was still dampening driving activity.
U.S. auto insurers’ first-quarter results were also hurt by higher claims costs, partly related to supply chain issues, analysts said. In recent months, insurers have been rapidly raising their rates in an attempt to stay ahead of inflation, which has driven up the prices of car repairs, replacements and rentals. Many insurers are raising premiums by 6% to 8% while some are asking for double-digit increases, according to industry executives and analysts.
Travelers chief executive Alan Schnitzer said in the earnings release that the board increased the quarterly cash dividend by 6% to 93 cents per share, marking 18 consecutive years of dividend increases.