Travelers to cut auto insurance rates to battle competition

The company's operating earnings of $2.13 per share was well above the average analyst estimate of
$1.60, according to Thomson Reuters I/B/E/S.
The company's shares fell 4 percent by midday and shares of other insurers also fell.
"Travelers reported a deceleration in its Business Insurance pricing in 2Q13 compared to 1Q13.
While still positive, the market is taking it as the sign that the property and casualty rate
improvements may have peaked," BMO Capital Markets analyst Charles Sebaski said in an email to
Reuters.
The personal auto insurance business reported a 7 percent fall in written premiums during the
second quarter as the company's strategy to increase prices hurt income from premiums. The
business contributed about 14 percent to the total premiums written during the quarter.
The company's combined ratio, the percentage of premium revenue an insurer has to pay out in
claims, fell to 94.3 percent from 100.5 percent last year.
The company said it would cut 450 jobs and take a related restructuring charge of about $16 million,
of which $10 million would be incurred in the current quarter.
Travelers shares were trading down 3.6 percent at $82.33 on the New York Stock Exchange on
Tuesday. Shares of Chubb and AIG were both down 2 percent. Allstate Corp fell 1 pct. (Reporting by
Aman Shah in Bangalore; Editing by Robin Paxton, Sreejiraj Eluvangal and Saumyadeb Chakrabarty)
"This appears to be a quality beat, not dependent on the favorable prior-period development," BMO's
Sebaski said.
J - Travelers Cos Inc said it would cut jobs and reduce prices of auto insurance, steps investors
took as an indication that rates had risen too far and competition was increasing.
Travelers' earnings often differ substantially from Wall Street consensus as the company does not
give forecasts.
Travelers last month said it would pay about $1.1 billion to buy Dominion of Canada General
Insurance Co to boost its presence in the Canadian market.
The broader Dow Jones Insurance Index, which includes Travelers and peers such as Chubb Corp
and AIG , fell 3 percent.
The company, a Dow Jones Industrial Average component, is the first major insurer to report results
and is seen as a bellwether for the industry.
But increasing competition has resulted in the company writing fewer policies, forcing it to resort to
rate cuts.
A combined ratio under 100 indicates an underwriting profit.
In a slide presentation for analysts, the company noted that the rate at which it raised premiums
across businesses fell from that in the first quarter.
Analysts' estimates for the insurer's per-share operating earnings ranged from $1.26 to $1.86 a
share, according to Thomson Reuters StarMine.
"Given the environment of low interest rates and volatile weather patterns, we will continue to seek
higher margins," Chief Executive Jay Fishman said in a statement.
"The concern is that Travelers was among the leaders pushing price increases, and now they are
talking about lowering prices, so that has broader implications for the entire market," Sandler
O'Neill & Partners analyst Paul Newsome said.
The company, however, said renewal rates at its business insurance unit were consistent with those
in recent quarters.
Travelers had previously been able to hold on to customers and keep insurance pricing consistent
across its businesses to offset perennially low interest rates.
Travelers reported a strong second-quarter profit that blew past estimates for the fourth straight
quarter, boosted by higher rates and lower claim payouts.
The cost cutting will result in cumulative savings of $140 million by 2015, Chief Operating Officer
Brian MacLean said on a conference call with analysts.