Key Takeaways From Travelers’ Q4 Earnings

by Trefis Team
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The Travelers Companies (NYSE: TRV) reported its fourth-quarter earnings on January 23. The company’s earnings beat expectations, despite catastrophe losses from the California wildfires. Total revenues for the fourth quarter grew to $7.45 billion, a 3.6% year-on-year increase, primarily driven by growth in premiums. However, EPS declined sharply from $3.28 in Q4’16 to $1.98 in Q4’17 because of growth in claims and expenses. As a result, the combined ratio for the company deteriorated to 95.5%.

We have summarized the key takeaways from Travelers’ Q4 earnings in our interactive dashboard for the company.

Catastrophes Dampened Personal Insurance Growth

The California wildfires were extremely destructive, resulting in over $3.3 billion of insured losses. Traveler’s catastrophe losses of $499 million, although lower than the expected range of $525 million to $675 million, were significant. As a result, profits from the Personal Insurance Segment were put under pressure and the combined ratio shot up to 108.7%. However, revenue growth partially offset those losses, as it grew 9% year-on-year to $2.52 billion in Q4’17. This was primarily due to pricing increases in the Automobile category and Policy-In-Force (PIF) growth in the Homeowners category, which fueled growth in premiums.

Business Insurance Provided Support

Business Insurance contributes almost 50% to Traveler’s total revenue, and this segment saw modest growth in Q4’17. In the U.S., the retention rate was 85% while new business grew by 16%. Travelers also benefitted from growth in Europe and Canada. As a result, earned premiums grew by nearly 4% year-on-year, driving Business Insurance revenue to $4.2 billion. The combined ratio remained stable at 88.6%.

 

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