Travelers Cos. Inc. is taking action to address the underwriting profitability and growth of an agency automobile business that produced its highest combined ratio for a quarter and a calendar year since its formative 2004 merger nearly 13 years ago.

For personal auto policies sold through agents, brokers and other intermediaries, Travelers reported a combined ratio of 116.7% in the fourth quarter of 2016 and 104.0% for the full year. Elevated bodily injury losses fueled by a trend of more severe accidents from scenarios such as distracted driving, more accidents involving higher speeds and more accidents on highways and at intersections added 8.8 and 3.5 percentage points, respectively, to the results for the quarter and the year. The company had only once reported an agency auto combined ratio of 109% or more in the 51 quarters since the April 2004 effective date of the merger of St. Paul Cos. and Travelers Property Casualty Corp.

Travelers officials characterized the full-year 2016 combined ratio and the underlying combined ratio of 101.8%, which excludes the effects of catastrophes and unfavorable prior-year reserve development, as being higher than they had expected and at levels that do not meet targeted returns. It was the third time in the 12 full calendar years since the merger closed that the full-year agency auto combined ratio exceeded 100%, and it marked an increase from 94.7% in 2015 (or 96.7% when excluding the impact of catastrophe losses and favorable prior-year development.) Legacy Travelers Property Casualty posted an agency auto combined ratio of 105.8% in 2001.

Executives attributed the deteriorating underwriting results principally, but not exclusively, to environmental factors. Travelers' Quantum Auto 2.0 has served as an area of focus since its formal introduction in October 2013, and company officials said they continue to work to improve the product.

The company's primary response to the higher losses has been to file for increased base rates.

S&P Global Market Intelligence has record of filings from at least 12 different states in which a Travelers unit submitted a filing for a private-passenger auto rate increase between Nov. 23, 2016, and Jan. 11, 2017, on books of business ranging in size from approximately $330,000 to $140.1 million. Nine of the filings involved rate increases associated with the Quantum Auto 2.0 product, including the largest of the proposed hikes: a 13% increase filed in Georgia by Travelers Property Casualty Insurance Co.

While it will take time for those actions to fully earn into the book, executives said they expect the agency auto combined ratio to improve in 2017.

The challenging underwriting results occurred even as certain key growth measures in Travelers' agency auto business trended higher.

Agency auto policies in force of nearly 2.43 million marked the highest point for the business since the first quarter of 2012. The year-over-year rate of growth in agency auto policy count approached 12.6%.

New agency auto business volume in the quarter of $260 million was the highest Travelers had reported in any quarter in at least the last nine years as it was $1 million above the third quarter of 2016's result. Higher levels of new business represented one of the factors that contributed to the higher agency auto combined ratio in 2016.

Company officials observed that Travelers' win rates have declined on quotes in the 16 states where they said it implemented rate increases in the last two months of 2016. They attributed the growth in agency policies in force, which was the strongest Travelers had reported in any quarter in at least the last five years, to a greater number of quotes as opposed to higher conversion rates.

Executives conceded that a slowdown in agency auto growth could impact top-line metrics in the "agency homeowners and other" book, which delivered a combined ratio of 83.9% in 2016.

New agency homeowners business volume topped $100 million in the fourth quarter of 2016 for a seventh consecutive reporting period. Policies in force growth for that segment increased to 3.3% in the fourth quarter of 2016 from 2.8% in the third quarter of 2016. In years past, Travelers executives credited the success of Quantum Auto 2.0 for providing a lift to the homeowners business.