Travelers' combined ratio improves to 90.3% in Q2 earnings beat

By Michael Loney

July 17 - (The Insurer) - Travelers reported a 9.9 percentage point improvement in its combined ratio to 90.3% and a 4.0% increase in net written premiums to $11.54 billion as it delivered a comfortable second-quarter earnings beat on Thursday.

Travelers reported core income for the quarter of $1.50 billion, or $6.51 per diluted share, compared to $585 million in the second quarter of last year.

The $6.51 core income per diluted share beat the $3.65 consensus estimate of 27 analysts, as per MarketWatch, and was up from $2.51 in the prior-year quarter.

Core income increased primarily because of lower catastrophe losses, a higher underlying underwriting gain, higher net favourable prior year reserve development and higher net investment income.

The underwriting gain of $1.02 billion in the quarter compared with a $65 million underwriting loss in the same period last year.

The consolidated combined ratio of 90.3% was an improvement of 9.9 points compared with the 100.2% recorded in the second quarter of 2024.

Pre-tax catastrophe losses totalled $927 million, or 6.2 combined ratio points, primarily from severe wind and hail storms in multiple states. This compared to $1.51 billion in the prior-year quarter.

Net favourable prior year reserve development was $315 million pre-tax, or a 0.7 point benefit, with favourable development in all three segments. This was up from $230 million of favourable development in the second quarter of 2024.

Travelers’ underlying combined ratio improved by 3.0 points year on year to 84.7%.

By segment, the combined ratio for business insurance improved by 2.5 points to 93.6%, bond and specialty improved by 7.4 points to 80.3% and personal lines improved by 20.1 points to 88.4%.

Travelers reported record net written premiums of $11.54 billion for the quarter. This was up 4.0% from the $11.12 billion in last year's second quarter, with growth in all three segments.

Business insurance net written premiums increased by 5.0% to $5.79 billion. The company said the segment’s renewal premium change remained “strong” at 7.7%, which was a sequential deceleration from 9.2% in the first quarter.

This included renewal premium change of 8.6% in core middle market business (9.6% in Q1 2024) and 10.7% in small commercial select business (11.3%).

“Retention in the segment remained strong at 85%, and new business was a record $744 million,” the company said.

Bond and specialty insurance net written premiums grew by 4.0% to $1.09 billion, with retention of 87% in management liability business. The segment’s surety business grew net written premiums by 5.0%.

Personal insurance net written premiums grew 3.0% to $4.67 billion, which Travelers said was “driven by strong renewal premium change in our homeowners business”.

Net investment income increased 6.0% after tax to $942 million in the second quarter.

“We are pleased to report excellent results for the quarter, with both underwriting and investment income contributing meaningfully to our performance,” said Alan Schnitzer, chairman and CEO of Travelers.