Catastrophe losses hammer Traveler’s bottom line

Travelers Cos. reported record net written premiums in its second quarter but its earnings fell as several weather-related catastrophes and fires at commercial properties dented its bottom line.

The insurance company reported Thursday core income of $494 million, or $1.81 a share, missing the $2.42 a share analysts polled by Thomson Reuters were looking for. In the year-earlier period, core income was $543 million, or $1.92 a share. Core earnings are a closely watched metric because it excludes realized capital gains or losses on companies’ investment portfolios.

New York-based Travelers, part of the Dow Jones Industrial Average, is among the largest sellers of insurance to U.S. businesses and sells car and home insurance to individuals. It is one of the first big property-casualty insurers to report quarterly earnings, and its results are watched closely as a bellwether for others.

Pretax catastrophe losses, net of reinsurance, totaled $488 million during the quarter, due to nine storms involving tornadoes and hail during the quarter, compared with $403 million a year earlier. The company said that, absent a severe hurricane season, it expects catastrophe losses to be highest in the second quarter.

Although costs related to major catastrophes punctuated the quarter, Larry Greenberg, an analyst for financial services firm Janney Montgomery Scott LLC, wrote in a research note that the company’s underlying trends were positive.

"Growth was strong, commercial lines pricing was favorable, the expense ratio improved nicely and the improvement in personal auto underwriting was a decent bit better than we (and expect others) were forecasting," Mr. Greenberg wrote.

He added that the loss ratio, when adjusted for the $45 million of higher large commercial losses than a year ago and $18 million of the Texas Windstorm Insurance Association assessments related to Hurricane Harvey, would have been slightly better than modeled.

Net premiums written, an important measure of revenue growth, rose 7% to $7.13 billion, ahead of the consensus forecast of $6.92 billion.

Overall, net income was $524 million, or $1.92 a share, compared with $595 million, or $2.11 a share, for the same quarter a year before.

Shares, which have loss 0.5% over the past year, fell 3.2% to $125.85 in late morning trading.

Write to Aisha Al-Muslim at [email protected]

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