Travelers CEO: Direct impacts from tariffs 'manageable'

By David Bull

April 16 - (The Insurer) – Travelers CEO Alan Schnitzer told analysts that the most significant effect of tariffs on the insurer’s underwriting portfolio will be physical damage repair costs, primarily in its private passenger auto book, as he said that “as far as direct impacts go, we think it’s pretty manageable for us."

He added that the company would expect around a mid-single-digit increase to personal lines auto severity as a “one-time impact” and said that it would be able to react quickly to evolving loss trends and reflect them in its pricing levels.

Schnitzer was speaking on the U.S. insurer’s earnings call Wednesday after it comfortably beat Wall Street forecasts with first-quarter core income per diluted share of $1.91, compared to analyst consensus of $0.79.

The results included the impact of preannounced Los Angeles wildfires of $1.73 billion, out of overall cat losses of $2.27 billion for the quarter, up from $712 million in Q1 2024.

Investors reacted favorably to the earnings beat, sending Travelers share price up almost 4% by mid-morning in New York.

Asked to comment specifically on how the Trump administration’s tariff and trade policy actions would affect Travelers, the company’s CEO said: “It’s just a fraction of auto and property losses that are physical damage related, and only a fraction of those are for materials that would be impacted by the tariffs.

“The most significant impact for us is likely to be a one-time impact to physical damage repair costs. For us, that most notably impacts private passenger auto. From there, the impacts diminish pretty significantly.”

He added that if the tariffs remain in place as announced, which he suggested is questionable, Travelers would expect around a mid-single-digit increase to auto severity in its personal lines book.

“That’s a one-time impact, not a slope impact. Having said that, we would actually expect the actual impact to be somewhat less,” said Schnitzer.

He suggested that the effect could be mitigated by insureds through a combination of advanced inventory buildups, substitution of goods, reorganization of the supply chain, lower tariff pass-through rates and other factors.

Schnitzer said that the insurer’s auto margins are “in a pretty good place,” adding that if favorable loss trends persist it may be able to absorb any tariff-related impact in its current loss picks.

“So I would say for now, we're prepared to watch and react to the extent that we need to. And however the loss trends evolve, we've got the tools and the capabilities to see it pretty quickly and we'll reflect it in our pricing levels,” he continued.

In prepared comments, the executive said the company entered 2025 in a position of strength, as it considers its positioning for what looks to be an “uncertain macroeconomic road ahead.”

He highlighted underlying margins that are “in great shape” and said that across each of its business segments Travelers has attractive loss ratios and expense ratios that “reflect years of strategic focus on optimizing operating leverage."

Schnitzer described a “fortress” balance sheet, strong and resilient cash flow, and the resources and financial strength to continue making strategic investments in its business without interruption.

“All of which is to say, just as we have successfully served our customers and distribution partners (and) created shareholder value over time, including through periods of economic disruption, we are very well positioned to continue doing so now,” he stated.

PRICING MOMENTUM

On the call, management noted that Travelers had grown net written premiums in its business insurance segment by 2% to a record $5.7 billion in the quarter, despite NWP being reduced as it ceded more under its previously announced enhanced casualty reinsurance program.

Renewal premium change in the carrier’s domestic business insurance book ex-national accounts was at plus 9.2%, with renewal rate change of plus 6.4%.

President of business insurance, Greg Toczydlowski, also pointed to retention levels that increased to 86% and new business of $735 million that was an all-time quarterly high.

“We're pleased with these production results and our ability to sustain strong levels of pricing and retention. That combination is a reflection of market-wide discipline in response to ongoing environmental trends and uncertainty,” he commented.

The executive added that renewal rate change ticked down from the fourth quarter driven by its national property book, but he added that returns in that segment “are very strong after several years of compounding rates and improvements in terms and conditions."

In select accounts renewal premium change was at plus 11.6%, with renewal rate change of plus 5.8%. Middle market accounts generated renewal premium change of plus 9.6% with renewal rate change of plus 7.5%.

Toczydlowski said renewal rate change across select and core middle market business was highest in umbrella and auto, while general liability “remains strong”.

He also highlighted an “excellent” underlying combined ratio of 88.2% which he said was driven by higher pricing earning through.

In personal insurance, Travelers fell to a first quarter loss of $374 million, with a combined ratio of 115.2% which reflected the impact of the California wildfires.

The underlying combined ratio of 79.9% for the quarter was described as a record quarterly result for the segment by personal insurance president Michael Klein.

In auto, the first-quarter combined ratio was 83.4%, including a 6 point benefit from favorable prior-year development, while the underlying combined ratio of 87.5% was a 7.4 points improvement on Q1 2024.

In homeowners, preannounced wildfire losses drove the combined ratio up to 145.5%, but on an underlying basis the metric improved by 5 points to 72.6%, which Klein attributed to the continued benefit of earned pricing and lower non-weather losses compared to the prior year.

In domestic homeowners and other, renewal premium change increased to plus 19.6%, which the executive said was down to actions to align insured values with rising replacement costs as it also continues to achieve strong rate increases.