Travelers Insurance's financial report exceeds expectations, strong performance responds to previous downgrade
Property and casualty insurance giant Travelers Insurance announced its second-quarter financial report on Friday. Core profits surged 44% year-on-year, and both underwriting and investment income performed strongly. It responded to the recent downgrades of many investment banks with solid performance. The financial report shows that Travelers Insurance’s net profit in the second quarter was US$2.208 billion, or US$10.26 per share; core profit was US$2.160 billion, or US$10.04 per share, much higher than the US$6.51 in the same period last year. Total revenue was US$12.153 billion, basically the same as the same period last year. The substantial increase in performance was mainly due to a significant decline in catastrophe losses - from US$927 million in the same period last year to US$518 million, and a 14% increase in net investment income to US$883 million. The company's comprehensive ratio improved from 90.3% to 83.6%, and the core return on net assets reached 24.9%. Just one week before the financial report was released, Travelers Insurance was downgraded to sell from hold, with a target price of $290 from $333; TD Cowen and Evercore ISI also downgraded the stock in mid-July. Analysts are concerned that commercial property insurance pricing continues to soften and personal auto insurance is facing competitive pressure, which may squeeze profit margins. Morgan Stanley expects commercial property insurance prices to fall year-on-year for the first time since 2018, with property insurance prices already down 9%. However, the second-quarter results demonstrated Travelers Insurance's operating resilience. CEO Alan Schnitzer said the company achieved strong performance in all three business segments through strict underwriting discipline and a high-quality investment portfolio. Underwriting profit growth was driven by stable underlying underwriting earnings and favorable reserve releases from previous years. Although net written premiums of US$11.259 billion were the same as the previous year, excluding the impact of the sale of the Canadian business, premiums increased by 2% year-on-year. In the commercial insurance business, the mid-market business grew by 7%, with new business reaching a record US$805 million, a year-on-year increase of 8%. Travelers Insurance's stock price has risen more than 17% this year, outperforming the S&P 500 Index. After the financial report was released, the stock rose about 2.6% before the market opened.