Travelers offers Q4 earnings report

Insurer manages to end the year strongly, in spite of concern over a rise in “social inflation”

Travelers offers Q4 earnings report

Insurance News

By Lyle Adriano

For the fourth quarter of 2019, Travelers Companies said that its earnings increased – despite a progressively challenging tort environment.

The company’s profit for Q4 2019 was US$873 million (US$3.35 per share), an increase from US$621 million (US$2.32 per share) for Q4 2018. Travelers total revenue, including investment income, rose to US$8.06 billion from US$7.8 billion.

The insurer’s net premiums written also increased 5.7% to US$7.08 billion.

However, the company reported a decline in profits from the previous quarter, Q3 2019. Travelers has attributed this falloff to “social inflation,” a term that refers to a greater willingness to sue insurers, as well as a higher expectation among juries of what insurers should pay to injured parties.

The Wall Street Journal reported that Travelers has been the most prominent insurer to date that has attributed losses to the rise of social inflation. The insurer notably added to its reserves in both the third and fourth quarter in response to increased claims payments in several lines of business.

“We continue to believe that social inflation is an environmental issue driven primarily by a more aggressive plaintiffs’ bar,” Travelers CEO Alan Schnitzer explained in a recent earnings call.

Although insurers are used to long, drawn-out legal disputes over big insurance policies, Schnitzer said that Travelers is now “feeling the heat” in those policies that have limits of US$2 million or less.

“What we’re seeing now is the attorney participation spreading into, across these small accounts,” the CEO added.

Travelers revealed that in response to social inflation, it is raising insurance prices and changing its litigation strategies.

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