The following is a compilation of the First Quarter of 2018 for the major insurers in Massachusetts. Only those insurers that are public companies and thus are required to report on a quarterly basis are included in this report.
Chubb Limited
April 24, 2018. Chubb Limited today reported net income for the quarter ended March 31, 2018 of $1,082 billion, or $2.30 per share, compared with $1,093 billion, or $2.31 per share, for the same quarter last year. Core operating income was $1.097 billion, or $2.34 per share, compared with $1,175 billion, or $2.48 per share, for the same quarter last year. The property and casualty (P&C) combined ratio was 90.1%.
Management discussion (Selected)
Evan G. Greenberg, Chairman and Chief Executive Officer of Chubb Limited, commented: “We had a very good quarter though it was impacted by a higher level of catastrophe losses. We produced world-class ex-CAT underwriting results, strong net investment income and good premium revenue growth while achieving better commercial P&C pricing in many of our businesses globally, which improved as the quarter went along, particularly in the U.S.
P&C net premium growth for the company was 5.8%. P&C premiums were up over 5% in our North America insurance business while internationally premium revenue was up 8.5% and benefited from a weaker dollar. I expect our growth to accelerate as the year goes along, particularly outside the U.S.
“Commercial P&C pricing for the business we wrote in the quarter continued to improve in the U.S. and a number of territories outside the U.S. We achieved some of the best pricing in quite some time, and it improved as we moved through the quarter. In some classes, customer segments and territories we are observing a clear direction in price firming; in others it’s more chaotic.”
Operating highlights for the quarter ended March 31, 2018 were as follows:
- Net premiums earned increased 3.8%.
- Total pre-tax and after-tax catastrophe losses were $380 million (5.8 percentage points of the combined ratio) and $303 million, respectively, compared with $206 million (3.3 percentage points of the combined ratio) and $164 million, respectively, last year.
- Pre-tax catastrophe losses, net of reinsurance and including reinstatement premiums, included $195 million for the northeast winter storms, $125 million for the California mudslides and $60 million for all other catastrophe losses globally in the quarter.
- Total pre-tax and after-tax favorable prior period development were $209 million (3.3 percentage points of the combined ratio) and $166 million, respectively, compared with $231 million (3.8 percentage points of the combined ratio) and $155 million, respectively, last year.
- Adjusted net investment income was $877 million, up 4.9%, which was just above the guidance range due to increased call activity in the company’s corporate bond portfolio.
- Operating cash flow was $551 million.
Key segment items for the quarter ended March 31, 2018 are presented below:
North America Commercial P&C Insurance:
- Net premiums written in the middle market division increased 2.4%. This growth reflects a 3.5% increase in P&C lines and a decline of 0.6% in financial lines. Net premiums written in the small commercial division increased 1.9%.
North America Agricultural Insurance:
- Net premiums written were $108 million, an increase of $47 million over the prior year, driven by higher crop premiums, reflecting less premium returned to the U.S. government based on premium-sharing formulas, and increased new business. Underwriting income of $102 million in the quarter included $76 million of favorable prior period development.
Global Reinsurance:
- Net premiums written decreased 3.0%, or 4.8% in constant dollars. The combined ratio was 69.5%, compared with 82.1%. The current accident year combined ratio excluding catastrophe losses was 77% in both years.
Life Insurance:
- Segment income was $64 million, compared to $62 million, which included International life insurance income of $17 million, up $4 million, or 32.5%. International life insurance net premiums written and deposits collected increased 12.8% in constant dollars. Net premiums written in Combined Insurance North America increased 7.8%.
GEICO
Berkshire Hathaway as part of its insurance and reinsurance businesses, GEICO, Berkshire Hathaway Reinsurance Group (“BHRG”) and Berkshire Hathaway Primary Group.
GEICO writes private passenger automobile insurance, offering coverages to insureds in all 50 states and the District of Columbia. GEICO markets its policies mainly by direct response methods where most customers apply for coverage directly to the company via the Internet or over the telephone. The management discussion of GEICO’s first quarter results were described as:
- Premiums written and earned in the first quarter of 2018 were approximately $8.7 billion and $7.9 billion, representing increases of 14.5% and 15.6%, respectively, compared to 2017.
- These increases reflected voluntary auto policy-in-force growth of 6.5% and increased premiums per auto policy of approximately 8.2% over the past twelve months.
- The increase in premiums per policy was attributable to rate increases, coverage changes and changes in state and risk mix. The increases in rates were in response to accelerating losses in recent years.
- Voluntary auto new business sales in the first quarter of 2018 decreased 11.8% compared to the record first quarter of 2017, while GEICO’s voluntary auto policies-in-force increased approximately 290,000 during the first quarter of 2018.
- Losses and loss adjustment expenses in the first quarter of 2018 were approximately $6.1 billion, an increase of $485 million (8.7%) compared to 2017.
- GEICO’s ratio of losses and loss adjustment expenses to premiums earned (the “loss ratio”) in the first quarter of 2018 was 76.7%, a decline of 5.0 percentage points compared to the first quarter of 2017. The decline in the loss ratio reflected the effects of premium rate increases and comparatively lower storm-related losses.
- The company also reduced ultimate claim loss estimates for prior years’ loss events by $407 million in the first quarter of 2018 and $93 million in 2017. These reductions produced corresponding increases in pre-tax underwriting gains. The increase in such gains was primarily related to collision and property damage losses, which usually have short claim-tails.
- Claims frequencies in the first quarter of 2018 for property damage and collision coverages and personal injury protection coverage were down slightly compared to 2017, and decreased about two percent for bodily injury coverage.
- Average claims severities in the first quarter of 2018 were higher for property damage and collision coverages (four to six percent range) and bodily injury coverage (five to seven percent range).
- GEICO’s underwriting expenses in the first quarter of 2018 were approximately $1.2 billion, an increase of $83 million (7.7%) over 2017.
- GEICO’s expense ratio (underwriting expenses to premiums earned) in the first quarter of 2018 decreased 1.0 percentage point compared to 2017.
Liberty Mutual Holding Company
Boston-based Liberty Mutual Holding Company (“Company”), the parent corporation of the Liberty Mutual Insurance group of entities, is a diversified global insurer and third largest property and casualty insurer in the U.S. based on 2017 direct written premium. The Company ranks 75th on the Fortune 100 list of largest corporations in the U.S. based on 2016 revenue. As of December 31, 2017, LMHC had $142.502 billion in consolidated assets, $121.814 billion in consolidated liabilities, and $39.409 billion in annual consolidated revenue.
Reorganization into two worldwide business units announced in first quarter
On January 19, 2018, the Company announced the realignment of its businesses to enhance its ability to meet the changing needs of consumer and business customers. The Company’s realignment featured the following changes:
- Global Risk Solutions which brings together Liberty’s Global Specialty, Ironshore (formerly in Global Specialty), National Insurance (formerly in Commercial Insurance) and the Global Reinsurance Strategy Group (formerly in Corporate and Other) into a single business. Dennis J. Langwell, formerly the Company’s Chief Financial Officer, has been appointed to lead Global Risk Solutions.
- Global Retail Markets combines Global Consumer Markets with Business Insurance and Accident and Health organizations (both formerly in Commercial Insurance). Timothy Sweeney, formerly the President of Global Consumer Markets, has been appointed to lead Global Retail Markets.
- Christopher L. Peirce, formerly the President of Global Specialty, has been appointed Liberty’s Chief Financial Officer.
Financial results for the first quarter of 2018
- Revenues for the three months ended March 31, 2018 were $10.290 billion, an increase of $1.029 billion over the same period in 2017. The major components of revenues are net premium earned, net investment income, net realized gains, and fee and other revenues.
- Net premium earned for the three months ended March 31, 2018 was $9.250 billion, an increase of $903 million over the same period in 2017.
- Net investment income for the three months ended March 31, 2018 was $619 million, an increase of $43 million over the same period in 2017.
- Net realized gains for the three months ended March 31, 2018 were $155 million, an increase of $4 million over the same period in 2017.
- Fee and other revenues for the three months ended March 31, 2018 were $266 million, an increase of $79 million over the same period in 2017.
- Claims, benefits and expenses for the three months ended March 31, 2018 were $9.526 billion, an increase of $677 million over the same period in 2017.
- Income tax expense on continuing operations for the three months ended March 31, 2018 was $157 million, an increase of $50 million over the same period in 2017. The Company’s effective tax rate on continuing operations for the three months ended March 31, 2018 was 21%, compared to 27% for the same period in 2017.
The consolidated combined ratio before catastrophes and net incurred losses attributable to prior years for the three months ended March 31, 2018 was 95.2%, an increase of 1.0 point over the same period in 2017.
Significant changes by major line of business for the three months ended March 31, 2018 include:
- Private passenger automobile net written premium increased $175 million. The increase reflects rate in U.S. Consumer Markets and organic growth in Global Retail Markets East | West. The year was further impacted by favorable foreign exchange due to the U.S. dollar weakening against the euro.
- Global Risk Solutions specialty insurance increased $446 million. The increase reflects the Ironshore acquisition and growth, partially offset by a new reinsurance program. The year was further impacted by favorable foreign exchange due to the U.S. dollar weakening against the euro and British pound.
- Global Risk Solutions reinsurance net written premium increased $98 million. The increase reflects new business growth.
- Workers compensation net written premium increased $54 million. The increase reflects a change in booking methodology in Global Retail Markets and the booked as billed adjustment within Corporate.
- Corporate reinsurance net written premium decreased $113 million. The decrease reflects the net impact of increased property catastrophe reinsurance costs and an accounting change to book ceded written premium for excess of loss contracts at inception of the contract.
Overview – Global Retail Markets
During the quarter ended March 31, 2018, Global Consumer Markets, comprised of U.S. Consumer Markets and East | West Consumer Markets, combined with the Business Insurance segment (formerly in Commercial Insurance) to form Global Retail Markets. Global Retail Markets combines the Company’s local expertise in growth markets outside the U.S. with strong and scalable U.S. capabilities in order to take advantage of opportunities to grow its business globally.
U.S. Consumer Markets sells automobile, homeowners and other types of property and casualty insurance coverage to individuals in the United States. U.S. Consumer Markets’ products are distributed through approximately 2,000 licensed employee sales representatives, approximately 800 licensed telesales counselors, independent agents, third-party producers, the Internet, and sponsored affinity groups, which are a significant source of new business.
Net written premium for Global Retail Markets for the three months ended March 31, 2018 was $6.622 billion, an increase of $323 million over the same period in 2017. The growth was primarily driven by an increase in private passenger automobile in both the U.S. and East | West segments. The growth in U.S. private passenger automobile reflects growth in average written premiums due to increased rate to keep pace with industry loss cost trends.
For the first quarter private passenger automobile insurance produced $3.4 billion of $6.6 billion in premium written by Global Retail Markets.
Claims, benefits and expenses for the three months ended March 31, 2018 were $6.557 billion, an increase of $56 million over the same period in 2017. The increase was driven primarily by higher current accident year non-catastrophe losses in all segments, partially offset by decreased catastrophe losses due to lower severity.
The Global Retail Markets combined ratio before catastrophes and net incurred losses attributable to prior years for the three months ended March 31, 2018 was 92.0%, a decrease of 0.6 points from the same period in 2017. The decrease was driven by a decrease in the underwriting expense ratio primarily due to earned premium growth.
Including the impact of catastrophes and net incurred losses attributable to prior years, the total combined ratio for the three months ended March 31, 2018 was 96.8%, a decrease of 5.2 points from the same period in 2017. The decrease was driven by lower catastrophe losses due to lower severity and the changes in the underwriting expense ratio previously discussed.
Overview – Global Risk Solutions
On January 19, 2018, the Company announced the realignment of its businesses to enhance its ability to meet the changing needs of consumer and business customers. Global Risk Solutions brings together Global Specialty, Ironshore (formerly in Global Specialty), National Insurance (formerly in Commercial Insurance) and the Global Reinsurance Strategy Group (formerly in Corporate and Other) into a single business. Global Risk Solutions offers a wide array of property, casualty, specialty and reinsurance coverages through brokers, independent agents and captive agents globally. The new segments for Global Risk Solutions are as follows:
- Liberty Specialty Markets – Includes Liberty Specialty Markets, Ironshore’s international business, and the international business in Liberty International Underwriters (“LIU”), excluding Canada. Liberty Specialty Markets provides insurance and reinsurance for a wide range of product capabilities and capacity for specialty markets worldwide.
- National Insurance – Includes National Insurance and Asurion (formerly part of Global Specialty). National Insurance consists of domestic commercial property and casualty products and services as well as inland marine coverage for lost or damaged wireless devices.
- North America Specialty – includes Ironshore’s North American operations and LIU Canada. North America Specialty consists of specialty insurance through offices in the United States and Canada.
- Global Surety – Leading provider of global contract and commercial surety bonds to businesses of all sizes.
- Other Global Risk Solutions primarily consists of internal reinsurance programs across the Liberty Mutual enterprise.
Net written premium for the three months ended March 31, 2018 was $2.955 billion, an increase of $511 million over the same period in 2017. The increase was driven by specialty insurance primarily due to the Ironshore acquisition and growth and new business growth in reinsurance.
Revenues for the three months ended March 31, 2018 were $2.973 billion, an increase of $590 million over the same period in 2017. The increase reflects premium earned associated with the changes in net written premium previously discussed, as well as higher writings in prior years.
Claims, benefits and expenses for the three months ended March 31, 2018 were $2.750 billion, an increase of $569 million over the same period in 2017. The increase reflects the impact of the Ironshore acquisition, higher current accident year casualty losses in National Insurance commercial automobile and general liability as well as attritional losses from growth, partially offset by lower catastrophe losses.
The Global Risk Solutions combined ratio before catastrophes and net incurred losses attributable to prior years for the three months ended March 31, 2018 was 98.8%, an increase of 2.4 points over the same period in 2017. The increase in the claims and claim adjustment expense ratio reflects higher current accident year casualty losses in National Insurance commercial automobile and general liability, partially offset by the impact of the Ironshore business, which operates at a lower claims and claim adjustment expense ratio relative to total Global Risk Solutions. The decrease in the underwriting expense ratio was driven by higher earned premium, partially offset by the impact of the Ironshore acquisition, which operates at a higher underwriting expense ratio relative to total Global Risk Solutions.
Including the impact of catastrophes and net incurred losses attributable to prior years, the total combined ratio for the three months ended March 31, 2018 was 99.7%, an increase of 1.2 points over the same period in 2017. The increase reflects the changes to the combined ratio mentioned above, partially offset by lower catastrophe losses.
MAPFRE’s first quarter results reported on worldwide operations
May 3, 2018. MAPFRE’s revenue for the first quarter of 2018 totaled almost 7.3 billion euros (One euro equals presently $1.17), 7.6 percent less than the same period the previous year, and premiums were just under 6.2 billion euros (-7.2 percent). The first quarter was heavily influenced by the absence of extraordinary results, the depreciation of the main currencies (the U.S. dollar, Brazilian real and Turkish lira), which in this period lost between 13 and 16 percent of their value, as well as low interest rates, which lead to a drop in financial income.
Net earnings came to 187 million euros (-9.3 percent).
In this context, it is important to highlight the good earnings of the Iberia Regional Area which, discounting the impact of extraordinary items, would have grown 17.2 percent, the reinsurance business, which was up 22.2 percent, and the numbers from the LATAM North Regional Area, where profits doubled in this quarter. The combined ratio improved by one percentage point to 96.5 percent, and all business lines in Spain developed positively. The Group’s solvency ratio stood at 200 percent, in line with the target range set down by the company.
MAPFRE’ shareholders’ equity at the end of March totaled 8.47 billion euros. Total assets were 69.3 billion, 2.5 percent more than at the close of 2017.
The group’s investments broke though the 50-billion-euro barrier and totaled 50.6 billion euros at the end of the first quarter. Of these investments, 56 percent corresponds to sovereign debt, while 19 percent is in corporate fixed income, and 8 percent in variable income and mutual funds. Sixty-seven percent of these investments have a credit rating of A or better.
Insurance business performance:
The Insurance Unit produced premiums of just under 5.3 billion euros (-7.2 percent) between January and March of this year.
→ First quarter business volume in the North America Regional Area came in at 562 million euros (-14.1 percent). In the United States, premiums were 486 million euros (-14.6 percent), due to the cancelation of unprofitable business. It is also important to note the impact of various storms on the east coast, which brought about a net reinsurance cost of 13.5 million euros.
→ Premiums for the Iberia Regional Area (Spain and Portugal) came in at more than 2.3 billion (-1.9 percent). In Spain, where the sector contracted by 4.6 percent due to the drop in the Life business as a result of low interest rates. The combined ratio in Spain improved by 2.4 points to 91.9 percent, with the automobile business standing out, coming in at 90.3 percent – an improvement of 1.7 percentage points.
→ The Brazil Regional Area finished the first quarter of this year with premium volume of more than 1 billion euros (-15.8 percent). This decline is due to the drop in value of the Brazilian real, which depreciated 16.3 percent over the last year.
→ The Latin America North Regional Area remained stable with recorded premiums of 365 million euros. Mexico’s performance stood out in particular, growing by 4.6 percent (12 percent in local currency) to 211 million euros, boosted by the Automobile, Life and Health businesses. The combined ratio for this business was 96.6 percent.
→ The Latin America South Regional Area premiums for the first quarter of the year totaled 395 million euros (-7.7 percent). This Regional Area’s combined ratio also improved by 2.2 points to 97 percent.
→ The Eurasia Regional Area produced premiums of 541 million euros (-7.8 percent) in the first quarter, affected by the strong depreciation of the Turkish lira, which has fallen by 16.1 percent over the last year.
→ The Reinsurance Unit’s premiums exceeded 1.1 billion euros (-3.4 percent) and net earnings for the quarter rose 22.2 percent to 63 million euros, accompanied by a strongly improved combined ratio of 91.1 percent.
→ The Global Risks Unit registered premium volume of 267 million euros (-16.3 percent), with net earnings of 8 million euros. The combined ratio performed particularly well, dropping from 109.5 to 92 percent.
→ Lastly, the Assistance, Services and Specialty Risks Unit delivered premiums totaling 244 million euros (-19.7 percent) for the first quarter of the year.
MetLife
The insurer’s results for the quarter ended March 31, 2018
MetLife had a very good first quarter driven by favorable underwriting, volume growth, and the effects of tax reform,” said Steven A. Kandarian, chairman, president and CEO of MetLife, Inc. “The narrowing gap between MetLife’s net income and adjusted earnings demonstrates the company’s progress toward less market sensitivity. We were also pleased to announce a 5 percent increase in our common stock dividend last week, underscoring our financial strength and continued commitment to return capital to our shareholders.”
First Quarter Results Summary
- Net income of $1.2 billion, compared to net income of $867 million in the first quarter of 2017. On a per share basis, net income of $1.19, compared to net income of $0.79 in the prior-year period.
- Adjusted earnings* of $1.4 billion, or $1.36 per share, compared to adjusted earnings of $1.3 billion, or $1.20 per share in the first quarter of 2017.
- Book value of $52.49 per share down 14 percent from $61.14 per share at March 31, 2017, primarily due to the separation of Brighthouse Financial, Inc. and its subsidiaries (Brighthouse).
- Book value, excluding accumulated other comprehensive income (AOCI) other than foreign currency translation adjustments (FCTA)*, of $43.36 per share, down 15 percent from $50.75 per share at March 31, 2017, also primarily due to the separation of Brighthouse.
- Return on Equity (ROE) of 9.0 percent.
- Adjusted ROE*, excluding AOCI other than FCTA, of 12.8 percent.
Progressive Corporation
Results for the quarter ending March 31, 2018
The Progressive Corporation recognized strong growth in both premiums and policies in force in the first quarter 2018, compared to the same period last year. During the quarter, Progressive generated $8.0 billion of net premiums written, nearly $1.5 billion, or 23%, more than in the first quarter 2017.
In addition, companywide net premiums earned increased 19% and policies in force grew 12% to end the quarter at 18.9 million policies, 0.7 million more policies in force than at year-end 2017.
- For the first quarter 2018, Progressive produced an underwriting margin of 11.6%, 3.3 points better than the first quarter last year, and a 66% increase in Progressive’s pretax underwriting profitability, in part reflecting Progressive’s increase in average written premium per policy, 56% less catastrophe losses this year, and continued decreases in Progressive’s auto claims frequency.
- Progressive’s personal lines underwriting margin was 11.6%, commercial lines was 11.7%, and Property was 10.0%.
- Progressive’s overall incurred personal auto frequency was down around 1.5%, while severity was up about 3%. While The company priced for the increase in severity, the company was not anticipating the continued decrease in frequency, which contributed to the underwriting profitability in the quarter.
- During the quarter, total new personal auto applications (i.e., issued policies) increased 25% on a year-over-year basis, including a 19% and 31% increase in Progressive’s agency auto and direct auto businesses, respectively.
- On a year-over-year basis, the personal auto businesses benefited from increased advertising spend, as well as competitive product offerings and position in the marketplace.
- Progressive continued to generate strong new business application growth in its bundled auto and home customers in both the agency and direct channels.
- For the commercial lines business, new applications increased 27% on a year-over-year basis during the first quarter 2018. Progressive began to lift underwriting restrictions at the end of the first quarter of 2017, which is contributing to Progressive’s growth.
- The Property business had an 85% increase in new applications for the first quarter 2018, compared to the same period last year. Progressive’s home/condo products grew nearly 60%, while the balance is due to an increase in Progressive’s renters, umbrella, and manufactured home products.
- Progressive’s product offerings are becoming more competitive and it is seeing growth through “HomeQuote Explorer,” Progressive’s online quoting platform for home insurance.
- During the quarter, on a year-over-year basis, Progressive’s written premium per policy for its personal auto businesses increased 5%, primarily reflecting the rate increases taken during the last 12 months.
- The commercial lines increase reflects rate actions throughout 2017, as well as shifts in Progressive’s mix of businesses to higher premium products. The written premium per policy for Progressive’s Property business decreased 5%, reflecting a relatively larger increase in the renters’ policies, which has lower premiums per policy.
- Progressive ended the first quarter 2018 with 12.3 million personal auto policies in force, with agent auto and direct auto growing 13% and 15%, respectively, over the same period last year. commercial lines grew 8%, and Property grew 30%.
- On a year-over-year basis, total Personal lines increased policies in force by about 1.5 million policies, commercial lines increased policies by nearly 52,000, and Property increased policies by about 40,000.
- Increasing policy life expectancy, which is Progressive’s actuarial estimate of the average length of time that a policy will remain in force before cancellation or lapse in coverage is critical.
Policy life expectancy has increased in Personal Lines, with Progressive’s trailing 12-month total auto policy life expectancy up 10% over the first quarter last year and special lines up 1%. Progressive’s agency auto and direct auto policy life expectancy were up 11% and 8%, respectively.
Safety Insurance
Safety Insurance Group, Inc. reportedits first quarter 2018 results on May 2nd
Net income for the quarter ended March 31, 2018 was $9.1 million, or $0.60 per diluted share, compared to net income of $12.0 million, or $0.79 per diluted share, for the comparable 2017 period. Significant factors reported included:
- Direct written premiums for the quarter ended March 31, 2018 increased by $4.0 million, or 2.0%, to $203.7 million from $199.7 million for the comparable 2017 period.
- The 2018 increase occurred primarily in commercial automobile and homeowners lines of business.
- Net written premiums for the quarter ended March 31, 2018 decreased by $0.9 million, or 0.4%, to $190.0 million from $190.9 million for the comparable 2017 period.
- Net earned premiums for the quarter ended March 31, 2018 increased by $2.3 million, or 1.2%, to $192.0 million from $189.7 million for the comparable 2017 period.
- For the quarter ended March 31, 2018, loss and loss adjustment expenses incurred increased by $9.2 million, or 7.2%, to $137.6 million from $128.4 million for the comparable 2017 period.
- Loss, expense, and combined ratios for the quarter ended March 31, 2018 were 71.7%, 31.7%, and 103.4%, respectively, compared to 67.7%, 31.5%, and 99.2%, respectively, for the comparable 2017 period.
- Total prior year favorable development included in the pre-tax results for the quarter ended March 31, 2018 was $14.2 million compared to $10.4 million for the comparable 2017 period.
- Net investment income for the quarter ended March 31, 2018 increased by $1.4 million, or 15.8%, to $10.5 million from $9.1 million for the comparable 2017 period. The increase was a result of fixed maturity amortization and a larger invested asset base.
- Net effective annualized yield on the investment portfolio for the quarter ended March 31, 2018 was 3.3% compared to 2.9% for the comparable 2017 period.
Also, on May 2, Safety’s Board of Directors approved and declared a quarterly cash dividend of $0.80 per share on the issued and outstanding common stock, payable on June 15, 2018 to shareholders of record at the close of business on June 1, 2018.
The Hanover Insurance Group
May 2, 2018. The Hanover Insurance Group, Inc. reported net income of $67.7 million, or $1.57 per diluted share, in the first quarter of 2018, compared to $45.2 million, or $1.05 per diluted share, in the prior-year quarter.
First Quarter Highlight
- Combined ratio of 96.9%, including 5.6 points of catastrophe losses and 0.7 points of favorable prior-year development
- Catastrophe losses of $71.2 million, or 5.6 points of the combined ratio, driven primarily by winter weather events in the Northeast and Midwest in January and March, in the domestic business
- Combined ratio, excluding catastrophes, of 91.3%, an improvement of 1.1 points over the prior-year quarter
- Net premiums written increased 6.6%, driven by strong growth in Personal and Commercial Lines
- Net investment income of $82.9 million, up 16.6% from the prior-year quarter, aided by growth in partnership income and higher operating cashflows
- Book value per share of $68.56, down 2.9% from December 31, 2017, primarily due to change in fair value of the fixed income portfolio due to interest rate movements, partially offset by earnings
Management discussion (Selected)
“We are off to a strong start to the year,” said John C. Roche, president and chief executive officer at The Hanover. “We are very satisfied with our overall operating earnings per share of $1.95 in the quarter, despite elevated catastrophe losses in our domestic business. Our domestic business delivered solid growth, at 8%, and improved underlying results, as demonstrated by our domestic ex-cat combined ratio of 90.4%.
“Our first quarter results demonstrate strong underwriting discipline, as well as continued execution of our business strategy, as highlighted by our nearly 12% operating ROE(4) during the quarter,” said Jeffrey M. Farber, executive vice president and chief financial officer. “We delivered improved underlying loss and LAE ratios in both Personal and Commercial Lines
Commercial Lines—First Quarter 2018 Results
- Commercial Lines operating income before taxes was $61.5 million, compared to $37.4 million in the first quarter of 2017.
- The Commercial Lines combined ratio was 97.2%, compared to 100.2% in the prior-year quarter.
- Catastrophe losses were $38.0 million, or 6.0 points of the combined ratio, compared to $36.4 million, or 6.2 points of the combined ratio, in the prior-year quarter.
- First quarter 2018 results included $1.6 million, or 0.3 points, of favorable prior-year reserve development compared to a minimal level of prior-year reserve development in the first quarter of 2017.
- Commercial Lines current accident year combined ratio, excluding catastrophe losses, improved by 2.5 points to 91.5%, from 94.0% in the prior-year quarter, driven by both the loss and LAE and expense ratios.
- The expense ratio improved by 1.1 points in the first quarter of 2018, driven by expense savings actions executed at the end of the second quarter of 2017, as well as fixed cost leverage from continued premium growth.
- Net premiums written were $671.9 million in the quarter, up 7.5% from the prior-year quarter, driven by continued pricing increases and strong retention, as well as the favorable impact of reinstatement premiums. Core commercial business price increases averaged 3.8% for the first quarter.
Personal Lines—First Quarter 2018 Results
Net premiums written were $396.8 million in the quarter, up 9.6% from the prior-year quarter, due to higher renewal premium, driven by rate increases and improved retention, as well as new business growth. Personal Lines operating income before taxes was $34.4 million in the quarter, compared to $9.9 million in the first quarter of 2017.
- Personal Lines average rate increases in the first quarter of 2018 were approximately 4.7%.
- The Personal Lines combined ratio was 95.8%, compared to 101.6% in the prior-year quarter. Catastrophe losses were $27.5 million, or 6.7 points of the combined ratio, compared to $40.4 million, or 10.6 points, in the prior-year quarter.
- First quarter 2018 results included $1.6 million, or 0.4 points, of net unfavorable prior-year reserve development, mainly attributable to property loss activity from late December winter weather.
- Personal Lines current accident year combined ratio, excluding catastrophe losses, improved by 2.3 points to 88.7%, from 91.0% in the prior-year quarter, driven by both the loss and LAE and expense ratios.
- Improvement in the Personal Lines current accident year loss and LAE ratio, excluding catastrophes, in the first quarter is mainly due to lower than usual non-catastrophe losses in homeowners.
- The expense ratio improved by 0.9 points in the first quarter of 2018, driven by fixed cost leverage from continued premium growth and expense savings actions executed at the end of the second quarter of 2017.
The Hartford
April 26, 2018—The Hartford reported first quarter 2018 income from continuing operations, after tax, of $428 million compared with $303 million in first quarter 2017. The $125 million increase was due to higher commercial lines and personal lines P&C underwriting results, including lower catastrophe losses and favorable prior accident year development, and increased consolidated net investment income, partially offset by a net realized capital loss compared with a net realized capital gain in first quarter 2017.
Management discussion (Selected)
“First quarter financial results were excellent, achieving higher earnings and top line growth,” said The Hartford’s Chairman and CEO Christopher Swift. “Solid underwriting and investment performance drove higher pre-tax income in each of our major business segments, while lower corporate income tax rates also contributed.”
The Hartford’s President Doug Elliot said, “P&C results were very strong this quarter, with improved underlying margins and lower catastrophe losses versus last year. Commercial Lines achieved top line growth with excellent margins, despite facing competitive market conditions and renewal written pricing pressure. Personal Lines auto margins continued to improve in line with our outlook. And Group Benefits produced outstanding margins and new business growth, consistent with our expectations for the combined book.”
Commercial Lines
Commercial Lines written premiums of $1.9 billion increased 2% from first quarter 2017, including growth of 1% in Small Commercial and 4% in Middle Market, partially offset by a 2% decline in Specialty Commercial.
- Written premium growth reflected strong new business growth in Small Commercial and Middle Market of 8% and 10%, respectively, partially offset by lower retention.
- Small Commercial and Middle Market policy count retention declined 3 points and 2 points, respectively, from first quarter 2017 to 82% and 78%, principally due to commercial auto.
- Commercial Lines net income of $298 million increased from $231 million in first quarter 2017 primarily due to a $46 million increase in underwriting gain, before tax.
- Core earnings of $302 million increased from $224 million in first quarter 2017, reflecting a higher underwriting gain and net investment income, as well as lower income taxes
- The underwriting gain of $114 million increased from $68 million in first quarter 2017, and the combined ratio of 93.3 improved 2.7 points from 96.0 in first quarter 2017, primarily due to a 2.0-point favorable change in prior accident year development, a 0.5-point decrease in the underlying combined ratio and a 0.2-point decline in catastrophe losses
- Net favorable prior accident year development of $19 million, before tax, (1.1 points on the combined ratio) compared with net unfavorable prior accident year development of $15 million, before tax, (0.9 point on the combined ratio) in first quarter 2017
- Excluding catastrophe losses and prior accident year development, the underwriting gain of $164 million improved 6% primarily due to better auto experience
- The Commercial Lines underlying combined ratio of 90.4 improved 0.5 point from first quarter 2017 principally due to margin improvement in auto and an essentially flat expense ratio.
- The Small Commercial underlying combined ratio increased 0.2 point from first quarter 2017 to 87.5, Middle Market improved 1.6 points to 92.2 and Specialty Commercial was flat at 97.5
Personal Lines
Personal Lines net income and core earnings of $89 million increased from $33 million and $32 million, respectively, in first quarter 2017 primarily due to lower catastrophe losses, higher favorable prior accident year development and improved underlying auto underwriting results
Underwriting gain improved to $67 million from $7 million in first quarter 2017 and the combined ratio of 92.2 decreased 7.1 points from 99.3 in first quarter 2017 primarily due to a 4.5-point decline in current accident year catastrophe losses, a 1.4-point improvement in the underlying combined ratio and a 1.1 point increase in favorable prior accident year development
- Current accident year catastrophe losses totaled $34 million, before tax (4.0 points on the combined ratio) down from $79 million, before tax (8.5 points on the combined ratio) in first quarter 2017.
- Net favorable prior accident year development prior accident year development of $13 million, before tax (1.5 points on the combined ratio), primarily from homeowners, compared with net favorable prior accident year development of $4 million.
- Excluding catastrophe losses and prior accident year development, the underwriting gain improved 7% to $88 million due to improvement in the auto underlying combined ratio.
- The underlying combined ratio of 89.8 declined 1.4 points from first quarter 2017 due to a 3.1-point improvement in the current accident year loss ratio before catastrophes, largely due to auto liability, partially offset by a 1.6 point increase in the expense ratio due to marketing spending.
- The auto combined ratio decreased 4.4 points to 93.1 from 97.5 in first quarter 2017 due to higher favorable prior accident year development, lower current accident year catastrophe losses and a lower current accident year loss ratio before catastrophes.
- The auto underlying combined ratio of 94.2 decreased 2.4 points due to an improved current accident year loss ratio from the profitability initiatives implemented since 2015 and lower auto liability frequency, partially offset by higher expenses, including increased marketing spending.
- The homeowners combined ratio decreased to 89.8 from 103.4 in first quarter 2017 primarily due to lower current accident year catastrophe losses.
Travelers Corporation
April 24, 2018 – The Travelers Companies, Inc. today reported first quarter 2018, net income and core income per diluted share of $2.42 and $2.46, respectively, up 12% and 14%, including catastrophe losses of $1.01 per diluted share. Other core financial results included:
- First quarter return on equity and core return on equity of 11.5% and 11.9%, respectively
- Board of directors declares 7% increase in the company’s regular quarterly cash dividend to $0.77 per share
- First quarter net income of $669 million and core income of $678 million, up 8% and 10%, respectively, from the prior year quarter, which includes $354 million pre-tax ($280 million after-tax) of catastrophe losses.
- Consolidated combined ratio of 95.5%; underlying combined ratio remained strong at 92.4%.
- Record net written premiums of $6.824 billion, up 5% from the prior year quarter, reflecting growth in all segments.
- Renewal premium change in Business Insurance at highest levels in three years.
- Total capital returned to shareholders of $598 million in the quarter, including $401 million of share repurchases.
- Book value per share of $85.03, down 3% from year-end 2017 due to the impact of higher interest rates on net unrealized investment gains. Adjusted book value per share of $84.54, up 1% from year-end 2017.
Management comments on first quarter results (selected)
“We were pleased to report first quarter core income of $678 million, up 10% over the prior year quarter, and core return on equity of 11.9%, particularly in light of yet another unusually high level of first quarter catastrophe losses,” commented Alan Schnitzer, Chairman and Chief Executive Officer. “We delivered strong underlying underwriting results, including an underlying combined ratio of 92.4%, while achieving record first quarter net earned premiums and improvement in the expense ratio.
- In Business Insurance, the pricing environment continued to improve. Domestic renewal premium change of 4.5% increased both year-over-year and from recent quarters as we achieved rate increases more broadly across our product portfolio, while retention improved from already high levels and new business levels remained solid.
- In Bond & Specialty Insurance, net written premiums increased 6%, with growth in both the management liability and surety businesses.
- In Personal Insurance, net written premiums grew 8%, benefiting from renewal premium change of 10% in agency auto and continued momentum in our leading homeowners business where we grew policies in force by 5%.
Underwriting results for first quarter
The combined ratio of 95.5% decreased 0.5 points due to higher net favorable prior year reserve development (1.0 point), as well as a benefit (0.2 points) from catastrophes, partially offset by a higher underlying combined ratio (0.7 points).
The underlying combined ratio of 92.4% remained strong and increased 0.7 points, driven by normal quarterly variability in both loss activity and expenses.
Net written premiums of $6.824 billion increased 5%, reflecting growth in all segments. Retention remained high and renewal premium change improved from recent quarters across all segments, while new business levels remained solid.
Personal Insurance—First Quarter 2018 Results
Segment income for Personal Insurance was $129 million after-tax, an increase of $40 million, due to higher segment income before income taxes, partially offset by higher income tax expense. Underwriting results:
- The combined ratio of 97.5% improved 2.1 points due to higher net favorable prior year reserve development (1.7 points) and a benefit (0.8 points) from catastrophe losses, partially offset by a higher underlying combined ratio (0.4 points).
- The underlying combined ratio of 90.5% increased 0.4 points. Agency Auto underlying combined ratio improved due to earned pricing that exceeded loss cost trends, while the underlying combined ratio in Agency Homeowners & Other increased, driven by normal quarterly variability in non-catastrophe weather-related losses.
- Net favorable prior year reserve development resulted from better than expected loss experience in the segment’s domestic operations in the Homeowners & Other product line for accident years 2016 and 2017 and in the Automobile product line for accident year 2017.
- Net written premiums of $2.256 billion increased 8%. Agency Automobile net written premiums grew 9%, driven by renewal premium change of 10%. Agency Homeowners & Other net written premiums grew 5%, benefiting from policies in force growth of 5% year-over-year and positive renewal premium change.
Business Insurance—First Quarter 2018 Results
Segment income for Business Insurance was $452 million after-tax, an increase of $10 million, reflecting lower segment income before income taxes that was more than offset by lower income tax expense.
- The combined ratio of 97.5% increased 1.1 points due to a higher underlying combined ratio (1.1 points) and higher catastrophe losses (0.1 points), partially offset by higher net favorable prior year reserve development (0.1 points).
- The underlying combined ratio of 95.5% increased 1.1 points, primarily driven by (i) loss cost trends that modestly exceeded earned pricing, the impact of which has been moderating in recent quarters, and (ii) normal quarterly variability in both loss activity and expenses.
- Net favorable prior year reserve development primarily resulted from better than expected loss experience in the segment’s domestic operations in the workers’ compensation product line for recent accident years and the commercial property product line for accident year 2016, partially offset by higher than expected loss experience in the commercial automobile product line for recent accident years.
- Net written premiums of $3.994 billion increased 4% and benefited from higher renewal premium change and retention, while new business remained solid.
Bond & Specialty Insurance—First Quarter 2018 Results
Segment income for Bond & Specialty Insurance was $173 million after-tax, an increase of $28 million, due to higher segment income before income taxes, partially offset by higher income tax expense.
- The combined ratio of 74.7% improved 4.7 points due to higher net favorable prior year reserve development (3.4 points), a lower underlying combined ratio (1.2 points) and lower catastrophe losses (0.1 points).
- The underlying combined ratio of 80.7% remained very strong and improved 1.2 points due to improvements in both the loss and expense ratios.
- Net favorable prior year reserve development resulted from better than expected loss experience in the segment’s domestic operations in the general liability product line for multiple accident years.
- Net written premiums of $574 million increased 6%, reflecting an increase in domestic surety premiums, continued strong retention and an increase in new business in domestic management liability, while renewal premium change remained consistent with recent quarters.