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Travelers Reports Third Quarter 2019 Net Income per Diluted Share of $1.50 and Return on Equity of 6.2%

NEW YORK--(BUSINESS WIRE)--

Third Quarter 2019 Core Income per Diluted Share of $1.43 and Core Return on Equity of 6.5%

  • Third quarter net income of $396 million and core income of $378 million.
  • Increasingly challenging tort environment impacted results.
  • Consolidated combined ratio of 101.5%; underlying combined ratio of 94.1%.
  • Record net written premiums of $7.569 billion, up 7%, reflecting growth in all segments.
  • Renewal premium change in Business Insurance of 7.4% at highest level since 2014.
  • Total capital returned to shareholders of $590 million, including $375 million of share repurchases. Year-to-date total capital returned to shareholders of $1.808 billion, including $1.172 billion of share repurchases.
  • Book value per share of $99.21, up 14% from year-end 2018. Adjusted book value per share of $90.09, up 3% from year-end 2018.
  • Board of Directors declared quarterly dividend per share of $0.82.

The Travelers Companies, Inc. today reported net income of $396 million, or $1.50 per diluted share, for the quarter ended September 30, 2019, compared to $709 million, or $2.62 per diluted share, in the prior year quarter. Core income in the current quarter was $378 million, or $1.43 per diluted share, compared to $687 million, or $2.54 per diluted share, in the prior year quarter. Core income decreased primarily due to net unfavorable prior year reserve development in the current quarter, including the impact of an increasingly challenging tort environment. Net realized investment gains were $23 million pre-tax ($18 million after-tax), compared to $29 million pre-tax ($22 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.

 

 

Consolidated Highlights

         

($ in millions, except for per share amounts, and after-tax, except for
premiums and revenues)

Three Months Ended September 30, Nine Months Ended September 30,
  2019   2018   Change 2019   2018 Change
Net written premiums $ 7,569 $ 7,062 7 % $ 22,076 $ 21,017 5 %
 
Total revenues $ 8,013 $ 7,723 4 $ 23,518 $ 22,486 5
Net income $ 396 $ 709 (44 ) $ 1,749 $ 1,902 (8 )
per diluted share $ 1.50 $ 2.62 (43 ) $ 6.59 $ 6.97 (5 )
Core income $ 378 $ 687 (45 ) $ 1,670 $ 1,859 (10 )
per diluted share $ 1.43 $ 2.54 (44 ) $ 6.29 $ 6.81 (8 )
Diluted weighted average shares outstanding 261.8 268.4 (2 ) 263.4 271.1 (3 )
Combined ratio 101.5 % 96.6 % 4.9 pts 97.9 % 96.8 % 1.1 pts
Underlying combined ratio 94.1 % 93.0 % 1.1 pts 93.5 % 93.0 % 0.5 pts
Return on equity 6.2 % 12.6 % (6.4 ) pts 9.5 % 11.1 % (1.6 ) pts
Core return on equity 6.5 % 12.0 % (5.5 ) pts 9.6 % 10.9 % (1.3 ) pts
 
As of Change From

September 30,
2019

 

December 31,
2018

 

September 30,
2018

December 31,
2018

 

September 30,
2018

Book value per share $ 99.21   $ 86.84 $ 84.82 14 % 17%
Adjusted book value per share 90.09 87.27 86.51 3 % 4%

See Glossary of Financial Measures for definitions and the statistical supplement for additional financial data.

“Third quarter core income was $378 million and core return on equity was 6.5%,” said Alan Schnitzer, Chairman and Chief Executive Officer. “Despite the impacts of an increasingly challenging tort environment facing our industry and higher non-catastrophe weather-related losses, our underlying underwriting results were solid, benefiting from 4% growth in earned premiums and continued disciplined and thoughtful expense management. Earnings this quarter were impacted by net unfavorable reserve development in Business Insurance. While workers’ compensation reserves continued to develop favorably, asbestos reserves developed in an amount comparable to the prior year quarter and general liability and commercial auto reserves developed unfavorably primarily due to the more challenging tort environment. Our high-quality investment portfolio performed well, generating net investment income of $528 million after-tax. In terms of capital management, we returned $590 million of excess capital to our shareholders this quarter, including $375 million through share repurchases, bringing the total capital returned to shareholders so far this year to more than $1.8 billion.

“Turning to the top line, we remain very pleased with the execution of our marketplace strategies. Net written premiums increased by 7% to a record $7.6 billion, with each of our business segments contributing. In Business Insurance, net written premiums increased 7% as we achieved renewal premium change of 7.4%, including renewal rate change of 4.3%, in both cases the highest levels in more than five years. At the same time, we maintained strong retention and grew new business. Given the elevated loss activity, we will continue to actively and thoughtfully seek rate increases. In Bond & Specialty Insurance, net written premiums increased by 13%, with strong production across our Management Liability and Surety businesses. In Personal Insurance, net written premiums increased by 7%, with Agency Auto up 3% and Agency Homeowners up 11%, both benefiting from renewal premium change and strong new business.

“We have a long track record of successfully managing our various businesses to create value over time, including through periods of elevated and volatile weather losses, changing loss trends, economic uncertainty and low interest rates. With insight from leading data and analytics driving our pricing and underwriting, the best claim organization in the industry and deep relationships with our agents and brokers, we will continue to leverage the power of our franchise to deliver industry-leading returns over time.”

       

Consolidated Results

 
Three Months Ended September 30, Nine Months Ended September 30,
($ in millions and pre-tax, unless noted otherwise) 2019     2018     Change 2019     2018     Change
Underwriting gain (loss): $ (149 ) $ 198 $ (347 ) $ 320 $ 546 $ (226 )

Underwriting gain (loss) includes:

Net favorable (unfavorable) prior year reserve development (294 ) 14 (308 ) (120 ) 350 (470 )
Catastrophes, net of reinsurance (241 ) (264 ) 23 (801 ) (1,106 ) 305
Net investment income 622 646 (24 ) 1,852 1,844 8
Other income (expense), including interest expense (64 ) (67 ) 3   (209 ) (229 ) 20  
Core income before income taxes 409 777 (368 ) 1,963 2,161 (198 )
Income tax expense 31   90   (59 ) 293   302   (9 )
Core income 378 687 (309 ) 1,670 1,859 (189 )
Net realized investment gains after income taxes 18   22   (4 ) 79   43   36  
Net income $ 396   $ 709   $ (313 ) $ 1,749   $ 1,902   $ (153 )
Combined ratio 101.5 % 96.6 % 4.9 pts 97.9 % 96.8 % 1.1 pts

Impact on combined ratio

Net (favorable) unfavorable prior year reserve development 4.1 pts (0.2 ) pts 4.3 pts 0.6 pts (1.7 ) pts 2.3 pts
Catastrophes, net of reinsurance 3.3 pts 3.8 pts (0.5 ) pts 3.8 pts 5.5 pts (1.7 ) pts
Underlying combined ratio 94.1 % 93.0 % 1.1 pts 93.5 % 93.0 % 0.5 pts
 
Net written premiums
Business Insurance $ 3,889 $ 3,648 7 % $ 11,926 $ 11,423 4 %
Bond & Specialty Insurance 728 644 13 2,025 1,871 8
Personal Insurance 2,952   2,770   7 8,125   7,723   5
Total $ 7,569   $ 7,062   7 % $ 22,076   $ 21,017   5 %

Third Quarter 2019 Results
(All comparisons vs. third quarter 2018, unless noted otherwise)

Net income of $396 million decreased $313 million due to lower core income and lower net realized investment gains. Core income of $378 million decreased $309 million, primarily due to net unfavorable prior year reserve development in the current quarter.

Underwriting results:

  • The combined ratio of 101.5% increased 4.9 points due to net unfavorable prior year reserve development in the current quarter versus net favorable prior year reserve development in the prior year quarter (4.3 points) and a higher underlying combined ratio (1.1 points), partially offset by lower catastrophe losses (0.5 points).
  • The underlying combined ratio of 94.1% increased 1.1 points. See below for further details by segment.
  • Net unfavorable prior year reserve development in Business Insurance included a $220 million increase in asbestos reserves, compared with a $225 million increase in the prior year quarter. Net favorable prior year reserve development occurred in Personal Insurance and Bond & Specialty Insurance. See below for further details by segment. Catastrophe losses primarily resulted from wind and hail storms in several regions of the United States and Hurricane Dorian.

Net investment income of $622 million pre-tax ($528 million after-tax) decreased 4%. Income from the fixed income investment portfolio increased due to a higher average level of fixed maturity investments, as well as slightly higher interest rates. Private equity partnership and real estate partnership returns were strong but lower than in the prior year quarter.

Record net written premiums of $7.569 billion increased 7%, reflecting growth in all segments.

Year-to-Date 2019 Results
(All comparisons vs. year-to-date 2018, unless noted otherwise)

Net income of $1.749 billion decreased $153 million due to lower core income, partially offset by higher net realized investment gains. Core income of $1.670 billion decreased $189 million. Core income decreased primarily due to net unfavorable prior year reserve development in the current period versus net favorable prior year reserve development in the prior year period and a lower underlying underwriting gain, partially offset by lower catastrophe losses. The underlying underwriting gain, while lower, benefited from higher business volumes. Net realized investment gains of $101 million pre-tax ($79 million after-tax) were higher by $47 million pre-tax ($36 million after-tax).

Underwriting results:

  • The combined ratio of 97.9% increased 1.1 points due to net unfavorable prior year reserve development in the current period versus net favorable prior year reserve development in the prior year period (2.3 points) and a higher underlying combined ratio (0.5 points), partially offset by lower catastrophe losses (1.7 points).
  • The underlying combined ratio of 93.5% increased 0.5 points. See below for further details by segment.
  • Net unfavorable prior year reserve development occurred in Business Insurance. Net favorable prior year reserve development occurred in Personal Insurance and Bond & Specialty Insurance. See below for further details by segment. Catastrophe losses included the third quarter events described above, as well as winter storms and wind storms in several regions of the United States in the first half of 2019.

Net investment income of $1.852 billion pre-tax ($1.572 billion after-tax) was comparable to the prior year period. Income from the fixed income investment portfolio increased due to a higher average level of fixed maturity investments, as well as higher long-term and short-term interest rates. Private equity partnership and real estate partnership returns were strong but lower than in the prior year.

Record gross written premiums of $23.685 billion grew 6%, reflecting growth in all segments. Net written premiums of $22.076 billion increased 5%. Growth in net written premiums was impacted by the Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty entered into effective January 1, 2019 (“the new catastrophe reinsurance treaty”), the entire cost of which impacted net written premiums in the first quarter. Accordingly, the treaty did not impact net written premiums in the second or third quarters and will not impact net written premiums in the fourth quarter.

Shareholders’ Equity

Shareholders’ equity of $25.607 billion increased 12% from year-end 2018, primarily due to the impact of lower interest rates on net unrealized investment gains (losses). Net unrealized investment gains included in shareholders’ equity were $2.991 billion pre-tax ($2.354 billion after-tax), compared to net unrealized investment losses of $137 million pre-tax ($113 million after-tax) at year-end 2018. Book value per share of $99.21 increased 14% from year-end 2018, also primarily due to the impact of lower interest rates on net unrealized investment gains (losses). Adjusted book value per share of $90.09 increased 3% from year-end 2018.

The Company repurchased 2.5 million shares during the third quarter at an average price of $147.23 per share for a total cost of $375 million. Capacity remaining under the existing share repurchase authorization was $2.161 billion at the end of the quarter. Also at the end of the quarter, statutory capital and surplus was $20.780 billion, and the ratio of debt-to-capital was 20.4%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains included in shareholders’ equity was 22.0%, within the Company’s target range of 15% to 25%.

The Board of Directors declared a quarterly dividend of $0.82 per share. The dividend is payable on December 31, 2019, to shareholders of record at the close of business on December 10, 2019.

       

Business Insurance Segment Financial Results

 
Three Months Ended September 30, Nine Months Ended September 30,
($ in millions and pre-tax, unless noted otherwise) 2019     2018     Change 2019     2018     Change
Underwriting gain (loss): $ (284 ) $ (36 ) $ (248 ) $ (282 ) $ 69 $ (351 )

Underwriting gain (loss) includes:

Net favorable (unfavorable) prior year reserve development (316 ) (56 ) (260 ) (266 ) 94 (360 )
Catastrophes, net of reinsurance (116 ) (136 ) 20 (422 ) (442 ) 20
Net investment income 457 482 (25 ) 1,365 1,368 (3 )
Other income (expense)   4   (4 ) (6 ) (3 ) (3 )
Segment income before income taxes 173 450 (277 ) 1,077 1,434 (357 )
Income tax expense (benefit) (6 ) 40   (46 ) 133   187   (54 )
Segment income $ 179   $ 410   $ (231 ) $ 944   $ 1,247   $ (303 )
 
Combined ratio 107.0 % 100.6 % 6.4 pts 102.1 % 99.0 % 3.1 pts

Impact on combined ratio

Net (favorable) unfavorable prior year reserve development 8.1 pts 1.5 pts 6.6 pts 2.3 pts (0.9 ) pts 3.2 pts
Catastrophes, net of reinsurance 3.0 pts 3.7 pts (0.7 ) pts 3.7 pts 4.1 pts (0.4 ) pts
Underlying combined ratio 95.9 % 95.4 % 0.5 pts 96.1 % 95.8 % 0.3 pts
 
Net written premiums by market
Domestic
Select Accounts $ 695 $ 666 4 % $ 2,236 $ 2,168 3 %
Middle Market 2,150 2,032 6 6,569 6,279 5
National Accounts 273 238 15 800 778 3
National Property and Other 553   485   14 1,528   1,383   10
Total Domestic 3,671 3,421 7 11,133 10,608 5
International 218   227   (4 ) 793   815   (3 )
Total $ 3,889   $ 3,648   7 % $ 11,926   $ 11,423   4 %

Third Quarter 2019 Results
(All comparisons vs. third quarter 2018, unless noted otherwise)

Segment income for Business Insurance was $179 million after-tax, a decrease of $231 million. Segment income decreased primarily due to higher net unfavorable prior year reserve development, lower net investment income and a slightly lower underlying underwriting gain, partially offset by lower catastrophe losses. The underlying underwriting gain, while lower, benefited from higher business volumes.

Underwriting results:

  • The combined ratio of 107.0% increased 6.4 points due to higher net unfavorable prior year reserve development (6.6 points) and a higher underlying combined ratio (0.5 points), partially offset by lower catastrophe losses (0.7 points).
  • The underlying combined ratio of 95.9% increased 0.5 points, primarily driven by the impacts in the quarter of (1) higher loss estimates in the commercial automobile product line and in the general liability product line for primary and excess coverages, including the re-estimation of losses incurred in the first six months of 2019, and (2) the new catastrophe reinsurance treaty, partially offset by (3) lower loss estimates in the workers’ compensation product line, including the re-estimation of losses incurred in the first six months of 2019, and (4) a lower underwriting expense ratio.
  • Net unfavorable prior year reserve development was primarily driven by (1) a $220 million increase to asbestos reserves, and higher than expected loss experience in the segment’s domestic operations in (2) the general liability product line (excluding the increase to asbestos reserves) for primary and excess coverages for multiple accident years and (3) the commercial automobile product line for recent accident years, partially offset by (4) better than expected loss experience in the segment’s domestic operations in the workers’ compensation product line for recent accident years.

Net written premiums of $3.889 billion increased 7%, benefiting from continued strong retention, higher renewal premium change and higher levels of new business.

Year-to-date 2019 Results
(All comparisons vs. year-to-date 2018, unless noted otherwise)

Segment income for Business Insurance was $944 million after-tax, a decrease of $303 million. Segment income decreased primarily due to net unfavorable prior year reserve development in the current period versus net favorable prior year reserve development in the prior year period and a slightly lower underlying underwriting gain, partially offset by lower catastrophe losses. The underlying underwriting gain, while lower, benefited from higher business volumes.

Underwriting results:

  • The combined ratio of 102.1% increased 3.1 points due to net unfavorable prior year reserve development in the current period versus net favorable prior year reserve development in the prior year period (3.2 points) and a higher underlying combined ratio (0.3 points), partially offset by lower catastrophe losses (0.4 points).
  • The underlying combined ratio of 96.1% increased 0.3 points, primarily driven by the impacts of (1) higher loss estimates in the commercial automobile product line and in the general liability product line for primary and excess coverages, (2) the new catastrophe reinsurance treaty and (3) higher non-catastrophe weather-related losses, partially offset by (4) a lower level of domestic large losses, (5) lower loss estimates in the workers’ compensation product line and (6) a lower underwriting expense ratio.
  • Net unfavorable prior year reserve development was primarily driven by (1) higher than expected loss experience in the segment’s domestic operations in the general liability product line (excluding increases to asbestos and environmental reserves) for primary and excess coverages for multiple accident years, including the impact for accident years 2009 and prior of the enactment of legislation by a number of states which extended the statute of limitations for childhood sexual molestation claims, (2) the $220 million increase to asbestos reserves, (3) higher than expected loss experience in the segment’s domestic operations in the commercial automobile product line for recent accident years, (4) a $68 million increase to environmental reserves and (5) higher than expected loss experience in the segment’s domestic operations in the commercial multi-peril product line for recent accident years, partially offset by better than expected loss experience in the segment’s domestic operations in (6) the workers’ compensation product line for multiple accident years and (7) the commercial property product line for recent accident years.

Gross written premiums of $13.194 billion grew 6%, benefiting from the same factors as discussed above for the third quarter 2019. Net written premiums of $11.926 billion increased 4%. Growth in net written premiums was impacted by the new catastrophe reinsurance treaty.

         

Bond & Specialty Insurance Segment Financial Results

 
Three Months Ended September 30, Nine Months Ended September 30,
($ in millions and pre-tax, unless noted otherwise) 2019     2018     Change 2019     2018     Change
Underwriting gain: $ 104 $ 183 $ (79 ) $ 373 $ 526 $ (153 )

Underwriting gain includes:

Net favorable prior year reserve development

3 53 (50 ) 45 177 (132 )
Catastrophes, net of reinsurance (1 ) (4 ) 3 (4 ) (9 ) 5
Net investment income 59 57 2 173 172 1
Other income 6   4   2   16   13   3  
Segment income before income taxes 169 244 (75 ) 562 711 (149 )
Income tax expense 30   48   (18 ) 111   138   (27 )
Segment income $ 139   $ 196   $ (57 ) $ 451   $ 573   $ (122 )
 
Combined ratio 83.3 % 70.2 % 13.1 pts 79.8 % 70.4 % 9.4 pts

Impact on combined ratio

Net favorable prior year reserve development (0.5 ) pts (8.7 ) pts 8.2 pts (2.3 ) pts (9.9 ) pts 7.6 pts
Catastrophes, net of reinsurance 0.2 pts 0.6 pts (0.4 ) pts 0.2 pts 0.5 pts (0.3 ) pts
Underlying combined ratio 83.6 % 78.3 % 5.3 pts 81.9 % 79.8 % 2.1 pts
 
Net written premiums
Domestic
Management Liability $ 424 $ 379 12 % $ 1,194 $ 1,089 10 %
Surety 232   217   7 660   637   4
Total Domestic 656 596 10 1,854 1,726 7
International 72   48   50 171   145   18
Total $ 728   $ 644   13 % $ 2,025   $ 1,871   8 %

Third Quarter 2019 Results
(All comparisons vs. third quarter 2018, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $139 million after-tax, a decrease of $57 million. Segment income decreased primarily due to lower net favorable prior year reserve development and a lower underlying underwriting gain. The underlying underwriting gain, while lower, benefited from higher business volumes.

Underwriting results:

  • The combined ratio of 83.3% increased 13.1 points due to lower net favorable prior year reserve development (8.2 points) and a higher underlying combined ratio (5.3 points), partially offset by lower catastrophe losses (0.4 points).
  • The underlying combined ratio of 83.6% remained very strong. The increase of 5.3 points from the prior year quarter included a 2.7 point adjustment in the third quarter of 2019 for management liability coverages, 1.9 points of which related to the re-estimation of losses incurred in the first six months of 2019. The current quarter result compares to a particularly strong prior year quarter.
  • Net favorable prior year reserve development was driven by better than expected loss experience in the domestic general liability product line for management liability coverages for multiple accident years.

Net written premiums of $728 million increased 13%, reflecting continued strong retention, increased levels of renewal premium change and strong new business in management liability and continued strong surety production.

Year-to-Date 2019 Results
(All comparisons vs. year-to-date 2018, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $451 million after-tax, a decrease of $122 million. Segment income decreased primarily due to lower net favorable prior year reserve development and a lower underlying underwriting gain. The underlying underwriting gain, while lower, benefited from higher business volumes.

Underwriting results:

  • The combined ratio of 79.8% increased 9.4 points due to lower net favorable prior year reserve development (7.6 points) and a higher underlying combined ratio (2.1 points), partially offset by lower catastrophe losses (0.3 points).
  • The underlying combined ratio of 81.9% remained very strong.
  • Net favorable prior year reserve development was driven by better than expected loss experience in the domestic general liability product line for management liability coverages for multiple accident years.

Net written premiums of $2.025 billion increased 8% and benefited from the same factors as discussed above for the third quarter 2019.

         

 

 

Personal Insurance Segment Financial Results

 
Three Months Ended September 30, Nine Months Ended September 30,
($ in millions and pre-tax, unless noted otherwise)     2019     2018     Change 2019     2018     Change
Underwriting gain (loss): $ 31 $ 51 $ (20 ) $ 229 $ (49 ) $ 278

Underwriting gain (loss) includes:

Net favorable prior year reserve development 19 17 2 101 79 22
Catastrophes, net of reinsurance (124 ) (124 ) (375 ) (655 ) 280
Net investment income 106 107 (1 ) 314 304 10
Other income 22   17   5   65   48   17  
Segment income before income taxes 159 175 (16 ) 608 303 305
Income tax expense 28   22   6   111   38   73  
Segment income $ 131   $ 153   $ (22 ) $ 497   $ 265   $ 232  
 
Combined ratio 98.0 % 97.2 % 0.8 pts 96.2 % 99.9 % (3.7 ) pts

Impact on combined ratio

Net favorable prior year reserve development (0.7 ) pts (0.6 ) pts (0.1 ) pts (1.3 ) pts (1.1 ) pts (0.2 ) pts
Catastrophes, net of reinsurance 4.7 pts 4.9 pts (0.2 ) pts 4.9 pts 8.9 pts (4.0 ) pts
Underlying combined ratio 94.0 % 92.9 % 1.1 pts 92.6 % 92.1 % 0.5 pts
 
Net written premiums
Domestic
Agency (1)
Automobile $ 1,347 $ 1,305 3 % $ 3,871 $ 3,746 3 %
Homeowners and Other 1,300   1,168   11 3,395   3,137   8
Total Agency 2,647 2,473 7 7,266 6,883 6
Direct to Consumer 115   108   6 313   299   5
Total Domestic 2,762 2,581 7 7,579 7,182 6
International 190   189   1 546   541   1
Total $ 2,952   $ 2,770   7 % $ 8,125   $ 7,723   5 %

(1) Represents business sold through agents, brokers and other intermediaries, and excludes direct to consumer.

Third Quarter 2019 Results
(All comparisons vs. third quarter 2018, unless noted otherwise)

Segment income for Personal Insurance was $131 million after-tax, a decrease of $22 million. Segment income decreased primarily due to a lower underlying underwriting gain. The underlying underwriting gain, while lower, benefited from higher business volumes.

Underwriting results:

  • The combined ratio of 98.0% increased 0.8 points due to a higher underlying combined ratio (1.1 points), partially offset by lower catastrophe losses (0.2 points) and higher net favorable prior year reserve development (0.1 points).
  • The underlying combined ratio of 94.0% increased 1.1 points, primarily driven by the impacts of (1) higher non-catastrophe weather-related losses in Agency Homeowners and Other and (2) the new catastrophe reinsurance treaty, mostly impacting Agency Homeowners and Other, partially offset by (3) lower other loss activity.
  • Net favorable prior year reserve development was driven by better than expected loss experience in domestic homeowners and other and automobile product lines for recent accident years.

Net written premiums of $2.952 billion increased 7%. Agency Automobile net written premiums increased 3%, driven by renewal premium change of 4% and higher levels of new business. Agency Homeowners and Other net written premiums increased 11%, driven by renewal premium change of 7% and higher levels of new business.

Year-to-Date 2019 Results
(All comparisons vs. year-to-date 2018, unless noted otherwise)

Segment income for Personal Insurance was $497 million after-tax, an increase of $232 million. Segment income increased primarily due to lower catastrophe losses and higher net favorable prior year reserve development, partially offset by a lower underlying underwriting gain. The underlying underwriting gain, while lower, benefited from higher business volumes.

Underwriting results:

  • The combined ratio of 96.2% improved 3.7 points due to lower catastrophe losses (4.0 points) and higher net favorable prior year reserve development (0.2 points), partially offset by a higher underlying combined ratio (0.5 points).
  • The underlying combined ratio of 92.6% increased 0.5 points, primarily driven by the impacts of (1) higher non-catastrophe weather-related losses in Agency Homeowners and Other and (2) the new catastrophe reinsurance treaty, mostly impacting Agency Homeowners and Other, partially offset by (3) earned pricing that exceeded loss cost trends in Agency Automobile and (4) lower other loss activity.
  • Net favorable prior year reserve development was driven by better than expected loss experience in domestic automobile and homeowners and other product lines for recent accident years.

Gross written premiums of $8.312 billion grew 6%. Net written premiums of $8.125 billion increased 5%.

Agency Automobile gross written premiums of $3.896 billion grew 3%, driven by renewal premium change of 5% and higher levels of new business. Net written premiums increased 3%.

Agency Homeowners and Other gross written premiums of $3.538 billion grew 11% driven by renewal premium change of 6% and higher levels of new business. Net written premiums increased 8%.

Growth in net written premiums was impacted by the new catastrophe reinsurance treaty.

Financial Supplement and Conference Call

The information in this press release should be read in conjunction with the financial supplement that is available on our website at www.travelers.com. Travelers management will discuss the contents of this release and other relevant topics via webcast at 9 a.m. Eastern (8 a.m. Central) on Tuesday, October 22, 2019. Investors can access the call via webcast at http://investor.travelers.com or by dialing 1.844.895.1976 within the United States and 1.647.689.5389 outside the United States. Prior to the webcast, a slide presentation pertaining to the quarterly earnings will be available on the Company’s website.

Following the live event, an audio playback of the webcast and the slide presentation will be available on the same website.

About Travelers

The Travelers Companies, Inc. (TRV) is a leading provider of property casualty insurance for auto, home and business. A component of the Dow Jones Industrial Average, Travelers has approximately 30,000 employees and generated revenues of approximately $30 billion in 2018. For more information, visit www.travelers.com.

Travelers may use its website and/or social media outlets, such as Facebook and Twitter, as distribution channels of material Company information. Financial and other important information regarding the Company is routinely accessible through and posted on our website at http://investor.travelers.com, our Facebook page at https://www.facebook.com/travelers and our Twitter account (@Travelers) at https://twitter.com/travelers. In addition, you may automatically receive email alerts and other information about Travelers when you enroll your email address by visiting the Email Notifications section at http://investor.travelers.com.

Travelers is organized into the following reportable business segments:

Business Insurance - Business Insurance offers a broad array of property and casualty insurance and insurance-related services to its customers, primarily in the United States, as well as in Canada, the United Kingdom, the Republic of Ireland and throughout other parts of the world as a corporate member of Lloyd’s.

Bond & Specialty Insurance - Bond & Specialty Insurance provides surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to its customers in the United States and certain specialty insurance products in Canada, the United Kingdom, the Republic of Ireland and Brazil, utilizing various degrees of financially-based null