Travelers 3Q16 Earnings Call Notes

The Travelers Companies’ (TRV) CEO Alan Schnitzer on Q3 2016 Results

Renewal rate has improved in domestic business insurance

“In domestic business insurance, renewal rate change has improved a little bit for two sequential quarters led by our middle market business where rate has also increased sequentially month-to-month in the quarter. Underneath that middle market, we again achieved rate gains in excess of loss trend on our poorer-performing segments.”

Auto injury severity is increasing

“Looking at auto profitability, the underlying combined ratio for the quarter was 101.1, up about 5 points from the prior year. About 4.5 points of this increase was due to the year-to-date impact of an adjustment we made to the loss ratio related to bodily injury severity for 2016, which, for the most part, reflects higher severity in our smaller claims. About 3 points of that increase relates to the first two quarters of this year. With respect to this change, I want to emphasize a few points. First, as Alan said, we believe this is environmental in nature; that is we are seeing it across all our auto products both in personal and commercial lines. Second, what we are seeing is from the last four accident quarters and for a long tail line like auto liability, that is very recent activity…for reference I’d say look back to commentary we had going back as far as 2011, 2012 into 2013. We were talking about liability trends, what we were seeing in the auto product relative to distracted driving relative to increased litigation relative to increased utilization of medical diagnostic tools and the impacts on bodily injury. And to be totally honest, there were a couple of years there where we were getting a lot of questions from folks on this call about why are you seeing something that no one else is talking about? And over the years, I think everybody has been talking about it.”

Still early to say impact from the storm

“Kai, we anticipated that and we’re happy to give you an early range but I do want to indicate that we’re just three weeks post storm, so it’s still early for us. And it could be influenced from here through the end of the quarter by large BI claims that come up that we haven’t identified yet. So we would say our range at this point is $75 million to $150 million and that’s pre-tax. And again, the risk factor going forward is going to be claims that we haven’t seen or don’t know of yet but they could come in between now and the end of the quarter.”