Travelers Cos. (TRV:US) said it must focus on raising insurance rates and responding to client claims with its own staff, rather than lamenting how low bond yields and the increased frequency of natural disasters pressure returns.
“We are a no-excuses company in a no-excuses industry,” Chairman and Chief Executive Officer Jay Fishman, 60, said in a letter to shareholders posted today on the New York-based insurer’s website.
Travelers gained 21 percent last year, beating the 19 percent advance of the eight-company Standard and Poor’s 500 Property & Casualty Insurance Index (S5PROP) as Fishman charged some clients more for coverage. That helped the CEO as bond yields fell, pressuring income from investments that back obligations to policyholders. Superstorm Sandy fueled record claims, a year after U.S. tornadoes caused more losses than Hurricane Katrina.
“We started to take action in response to the weather patterns and low interest rates in the middle of 2010,” Fishman wrote. “We embarked on a deliberate, carefully calibrated strategy of selectively but actively raising rates.”
Fishman said that Travelers, the lone property-casualty insurer in the Dow Jones Industrial Average, relies on its own staff, rather than outsourcing claims adjustment for natural disasters. That approach led to better customer service after Sandy battered the U.S. Northeast in the fourth quarter, he said in the letter.
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