Travelers expects ‘material’ LA fire claims; reports profit increase

Travelers Cos. Inc. said Wednesday that claims from the ongoing wildfires in Los Angeles will hit the insurer’s first-quarter earnings but that it’s too early to estimate its losses.

The comments came during Travelers’ fourth-quarter results presentation, where it reported a higher profit, as insurance rates continued to increase and investment income and prior-year reserve releases rose.

“The California wildfires that began earlier this month are going to be a material event for the industry and will have a material impact on our first-quarter earnings,” said Dan Frey, Travelers’ chief financial officer, on a conference call with analysts.

Chairman and CEO Alan Schnitzer said the insurer has contacted the majority of its claimants in the area.

“We look forward to working with policymakers in California to make sure the state has a resilient insurance market going forward,” he said.

Travelers reported net income of $2.08 billion for the fourth quarter, a 28% increase over the same period in 2023. Net written premium increased 7.5% to $10.74 billion.

The insurer reported a combined ratio of 83.2% for the quarter, an improvement from 85.8% in the 2023 period. Catastrophe losses totaled $175 million for the quarter, including a $100 million increase related to the re-estimation of cat losses in prior quarters.

Net investment income increased 22.8% to $955 million.

Travelers reported $262 million in favorable reserve development for the quarter, with $147 million attributable to workers compensation, Mr. Frey said. The only area where reserves deteriorated noticeably was sexual molestation and abuse claims in runoff, he said.

The company’s business insurance segment reported $5.43 billion in net written premium, up 8.1%; personal insurance was $4.26 billion, up 6.9%; and bond and specialty reported $1.05 billion, up 6.6%.

The average renewal rate increase in business insurance was 6.9% during the quarter, Mr. Schnitzer said.

Umbrella liability and commercial auto rate increases were “well into double-digits and both up sequentially from the third quarter,” added Greg Toczydlowski, president of business insurance.

Property rate hikes slowed compared with the third quarter, he said, noting that rate increases have compounded over the past several years.

Management liability renewal premium change was “positive” and an improvement over the third quarter, said Jeffrey Klenk, president of bond and specialty insurance.

For the full year, Travelers reported net income of $5 billion, a 67.1% increase over 2023. Net written premium grew 7.8% to $43.36 billion.

The 2024 combined ratio was 92.5%, compared with 97% in 2023.