Travelers Earnings Up In Quarter, Down For Year

Jan. 25--The Travelers Cos. reported an 8.9 percent increase in profits in the fourth quarter of 2016, though full-year earnings were down 12 percent, as low interest rates and increased auto claims challenge the insurer.

Net income was $943 million for the quarter, or $3.28 per diluted share, up from $866 million, or $2.83 per diluted share during the same period in 2015.

The improvements were driven by a 12 percent increase on investment returns compared to the same time last year and an $82 million after tax settlement of a reinsurance dispute. Insurers pay reinsurers to backstop large losses.

Operating income rose 4 percent for the quarter to $919 million, or $3.20 per diluted share, easily beating analysts' expectations of $2.81 per share.

Revenues rose 8 percent to $7.19 billion, up from $6.68 billion in the last quarter of 2016. Full year revenues climbed 3 percent to $27.63 billion.

CEO Alan Schnitzer said: "Both homeowners and auto delivered accelerating growth in policies in force and net written premiums throughout the year. While homeowners profitability remains strong, we are disappointed with the underwriting results in personal auto and are taking pricing and other actions to improve its profitability."

Travelers President and Chief Operating Officer Brian MacLean said on a call with analysts Tuesday that there have been more claims involving distracted driving, such as texting, as well as more severe accidents overall.

The full-year combined ratio -- which combines both the cost of claims and expenses -- was 95.1 in personal insurance, which includes both homeowners' insurance and auto insurance. Travelers said its proportion of auto policies to homeowners' policies rose, which, since the auto policies are having higher claims compared to premiums, drives the number in the wrong direction. For 2015, the personal insurance combined ratio was 86.6.

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