Travelers CFO Dan Frey reported that the insurer’s Q1 ~$100mn workers' compensation reserve release within the business insurance unit was offset by “modest” unfavorable liability development in recent accident years, along with charges in the carrier's run-off book.
On a call this morning with analysts, the executive said: “We're not talking about '15 through '19, we're [talking about] years more recent than that.”
Frey noted that Travelers was seeking to “be reactive” to information from recent years in the liability lines, which tend to take longer to develop.
“We're just trying to get some more IBNR into those lines to recognize that uncertainty,” he said. “We're talking about some pretty small movements here.”
Travelers stock traded down as much as 7.6% this morning following the earnings release, to $206.86 per share.
The executive was speaking after Travelers posted a 1.5-point decrease in its Q1 combined ratio as an underlying core improvement offset higher cat losses.
The business insurance unit reported no overall net prior-year reserve development, as better-than-expected loss experience in domestic workers’ comp for multiple accident years was offset primarily by higher-than-expected loss experience in the general liability segment for recent accident years.
CEO Alan Schnitzer added: “These are generally the same trends we've been talking about for a long time, a little more of the same.”
The executives declined to split the liability reserve development by individual accident year.
As recently discussed, this publication’s research team remained cautious about some liability classes as workers' comp releases continue offsetting recent negative movements.
Transitioning Corvus’ $200mn book
On January 2 Travelers completed the $435mn acquisition of cyber-focused MGA Corvus.
This quarter, the firm’s bond and specialty division’s new business grew by 34% year-on-year to $91mn, fueled by Corvus production.
On the call, Travelers bond and specialty president Jeff Klenk said the carrier is in the midst of transitioning Corvus' $200mn “profitable” book of business on to Travelers paper.
“[Corvus’ portfolio] will continue to be reflected in our new business production in the coming quarters,” he said.
“We feel really good about the quality of the profitability of the Corvus book of business.”
“We've already completed the scans using their proprietary technology to the existing Travelers book of business, really comfortable with what we're seeing,” he added.