Toczydlowski: Travelers’ national property NWP fell 3% in Q2

(The Insurer) - Investors on Thursday responded to Travelers’ Q2 earnings beat by sending its share price up, while the carrier’s business insurance president noted strong net written premiums growth in his segment was partially offset by a 3% decline in "national property and other."

Before markets opened on Thursday, Travelers reported a comfortable Q2 earnings beat, with $6.51 core income per diluted share that beat the $3.65 analyst consensus.

New York-listed Travelers’ share price was up 2.9% as of 12.30 p.m. ET compared to the $252.19 closing price on Wednesday.

Travelers reported record net written premiums of $11.54 billion for the quarter, up 4% compared with the same period last year.

On an investor call, Travelers business insurance president Greg Toczydlowski highlighted that net written premiums in his segment increased by 5.0% to $5.79 billion, which he said was “led by strong growth of 10% in our core middle market business.”

“This was partially offset by a 3% decline in net written premiums in national property and other (to $885 million), reflecting our disciplined underwriting,” he said.

Business insurance renewal premium change of 7.7% was a sequential deceleration from 9.2% in the first quarter. Renewal rate change of 5.3% was down from 6.4% sequentially.

“Renewal rate change and renewal premium change in every line other than CMP and property were about the same or higher compared to the first quarter,” said Toczydlowski. “Renewal premium change in both umbrella and auto were both well into double digits. Renewal premium change in CMP was a little lower, but remained in the double digits.”

The executive said that the decline in renewal premium change in national property reflected the outlook for continued attractive returns after several years of compounding price increases and improvements in terms and conditions.

He added that renewal premium change in the property line outside of national property “was down some, but remained solid.”

“Retention across the segment remained excellent at 85%,” said Toczydlowski. “Retention in middle market was strong, while retention in our national property business was a bit lower as we ceded some large accounts to the subscription market on terms and pricing that we weren't willing to access.”

WORKERS' COMP RESERVE RELEASES

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

On the investor call, chief financial officer Dan Frey said: “In business insurance, net favorable PYD of $79 million pretax was driven by better-than-expected loss experience in workers' comp, partially offset by reserve additions in our runoff book related to environmental, abuse, and other long-tail exposures with no single adjustment being particularly noteworthy,” he said.

Bond and specialty net favorable PYD was $81 million with favorability in fidelity and surety. Personal insurance net favorable PYD was $155 million driven by recent accident years in both auto and home.

The personal insurance combined ratio of 88.4% improved 20 points relative to the prior-year quarter, driven by a decrease in catastrophe losses of nearly 14 points and a 7 point improvement in the underlying combined underlying combined ratio.

Personal insurance president Michael Klein noted on the investor call that domestic homeowners and other renewal premium change of 19.3% “reflects our continued actions to align insured values with rising replacement costs and secure rate increases in geographies where we have the need.”

Klein highlighted a continued decline in homeowners policies in force because of deliberate actions to manage exposures in high cat risk geographies.

“We're pleased with the progress we've made. While we will maintain restrictions on property capacity where we can't achieve appropriate risk reward, we expect to relax many of our rate and non-rate actions in most markets by the end of 2025,” he said.