Travelers Cos. intends to raise rates and tighten the underwriting of its personal lines much the same way it did to its commercial lines, the company's top officer said.

In commercial lines, "we started extremely slowly. We started asking our folks 18 months ago if they could get 1 point [rate increases] and we built on that every month. We're going to take that same approach to auto insurance and homeowners insurance," Jay Fishman, chairman and chief executive officer of Travelers, said during the company's fourth-quarter earnings call.

The company's fourth-quarter net income fell 31% in the fourth quarter to $618 million. Revenue rose 1% to $6.37 billion.

Commercial business rates rose by 6% in the fourth quarter, including 8% in December, Fishman said. That higher pricing is expected to improve underwriting margins for the first half of 2012, he said. Travelers is the second-largest U.S. commercial group insurer, behind American International Group, by 2010 direct premiums written, according to BestLink.

While workers' compensation and commercial auto rates are increasing more dramatically than others, "every line in the commercial space is moving," said Brian MacLean, president and chief operating officer.

In workers' comp, and many other lines of commercial insurance, "it's very much a state-by-state story," Fishman said. "There tends to be this view that it's a national story, and it's not. Our reaction with respect to rate is very much driven by the state environment specific to that particular risk."

In personal lines, "the steps we are taking aren't limited to rate," Fishman said. "There’s a number of levers available to us."

Travelers, the ninth-largest U.S. personal group insurer, is considering underwriting actions, such as risk selection and location, as well as changing underwriting standards in respect to roofs, loss history and personal insurance.

"We are just not big believers in big magic market cycles," Fishman said. "We understand our business is about one underwriter and one agent discussing one account at a time."

Asked about the company's direct auto insurance sales, Fishman said, "we're getting pretty good at getting people through the quote process and getting quotes out, but we need to get better at converting those quotes into actual sales."

One difficulty is consumers who are looking to buy the minimum amount of coverage for the cheapest possible price.

We are never going to be comfortable selling half a sandwich. It's not who we are," Fishman said.

The story for the full year was the remarkable weather, Fishman said. "Weather losses were far and away the worst in our history," he said.

Travelers' combined ratio widened 5.3 points to 95.9 for the quarter. For the full year, the combined ratio was 105.1. The company's business insurance posted a combined ratio of 95.8, up from 90.1 for the same quarter a year ago. Personal insurance posted a combined ratio of 99.8, up from 92.1.

Earlier this month, Joseph Tracy, the president of the Travelers Cos. Inc.'s inland marine business, said inland marine underwriters are facing underwriting challenges due to innovations in the construction, shipping and energy industries (Best's News Service, Jan. 5, 2012).

Travelers Insurance Group currently has a Best's Financial Strength Rating of A+ (Superior).