The Travelers Companies felt relatively small effects from the coronavirus pandemic in the 2020 first quarter, with catastrophe losses from tornadoes and other storms taking more of a bite.
COVID-19-related net charges for the quarter reached $86 million pre-tax, or $68 million after tax. Pre-tax catastrophe losses, by contrast, landed at $333 million pre-tax in Q1 2020 versus $193 million pre-tax in the 2019 first quarter. Travelers blamed Tennessee tornadoes plus other wind storms and winter storms throughout the U.S. for much of its higher catastrophe costs.
Travelers Chairman and CEO Alan Schnitzer noted that the insurer booked strong underlying results despite catastrophe and early COVID-19 challenges, though he acknowledged that its longer-term pandemic risks remain unclear.
“Although there are many uncertainties surrounding COVID-19’s impact on our global economy and on us, it has been in the most challenging circumstances that the strength of our ‘AA’-rated franchise and the value we provide to all of our stakeholders shine through,” Schnitzer said. “Our balance sheet is extremely strong, our debt-to-capital ratio is comfortably within our target range, our holding company liquidity of $1.6 billion is well above our target level, and we have a very high-quality investment portfolio. We have the talent, technology, risk management processes and procedures, and, importantly, financial strength to manage through these extraordinary times and to continue to deliver meaningful shareholder value over time.”
Travelers stock price traded at $103.11 early afternoon on April 21, up just under 1.4 percent.
Here’s a rundown of Travelers’ Q1 2020 result highlights:
- Consolidated net income reached $600 million, or more than $2.33 per diluted share, down from $796 million, or $2.99 per share, over the same period a year ago.
- The consolidated combined ratio was 95.5, a bit higher than the 93.7 produced during Q1 2019.
- Net written premiums surpassed $7.3 billion compared to $7 billion in the 2019 first quarter.
- Net investment income hit $611 million, a big increase from $582 million in Q1 2019.
- Broken down further, net written premiums for business insurance were essentially flat, year over year, at more than $4.1 billion. Bond and specialty insurance net written premiums were $663 billion, up from $587 million in Q1 2019. Personal insurance net written premiums grew to nearly $2.5 billion in Q1, up from $2.3 billion the previous year.
- The business insurance combined ratio landed at 102.2 in Q1 compared to 98.1 last year. Travelers blamed catastrophe losses for the combined ratio increase. The sector booked a $99 million underwriting loss compared to a $57 million underwriting gain in the 2019 first quarter.
- Travelers’ personal insurance combined ratio reached 88.2 during Q1, improved from 90.1 the year before. The segment generated a $295 million underwriting gain during the quarter, up from a $226 million underwriting gain last year. Travelers noted in its earnings that “the net impact of COVID-19 and related economic conditions” on this sector “was not significant.”
Travelers is among companies that have taken steps to alleviate the coronavirus pandemic impact, including quickening commission payments of more than $100 million to eligible agents and brokers to help address COVID-19-related liquidity worries. Its other actions include the pledging of $5 million to COVID-19 relief efforts for families and communities in North America, the United Kingdom and Ireland. It is also suspending cancellation and nonrenewal of coverage due to nonpayment through May 15 for all of its U.S. customers. As well, more digital tools are coming into play for claims audits and workers compensation.