Travelers Earnings Fall After Active Hurricane Season
October 19 2017 - 7:12AM
Dow Jones News
By Imani Moise and Leslie Scism
Travelers Cos. earnings fell in the third quarter as results
were battered by a severe hurricane season.
So far, the Atlantic storm season has brewed several tropical
storms, with a higher-than-average number of them reaching damaging
hurricane status, according to the National Hurricane Center.
Last month, Travelers paused its share buyback program as it
assessed the impacts of Hurricanes Harvey and Irma. On Thursday,
the insurance firm said its catastrophe losses, net of reinsurance,
totaled $455 million during the quarter, compared with the range of
$245 million to $490 million it provided in mid-September for
Hurricane Harvey alone.
The company's catastrophe losses were $89 million a year
earlier.
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 and
families. 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 that follow.
There have been 14 named storms and eight hurricanes in the
current Atlantic hurricane season, fueled by warmer-than-average
Atlantic Ocean currents, weak westerly Pacific winds and turbulent
hot tropical air over the Indian Ocean, according to the National
Hurricane Center. The count doesn't include Hurricane Ophelia,
which made landfall in Ireland earlier this week.
An average season, which runs from June through November,
typically produces a dozen named storms, with six reaching
hurricane strength.
Travelers's catastrophe damage was partially offset by rising
investment income, stoked by a small sliver of its bond-heavy
investment portfolio in alternative holdings such as private-equity
funds. A substantial portion of an insurer's profit comes from
investing customers' premium dollars until they are needed to pay
claims. Travelers said its investment income rose 6% to $588
million.
Travelers also said its auto-insurance results were aided by
price increases. Many car insurers have raised premium rates over
the past year to combat a surge in traffic accidents as an improved
economy put more traffic on the roads and smartphone proliferation
contributed to distracted driving.
The company posted core operating earnings of $253 million, or
91 cents a share, a 64% decrease from $701 million, or $2.40 a
share, in the year-earlier period.
Core operating earnings are a widely watched industry benchmark
because they exclude realized capital gains and losses in
companies' big investment portfolios as well as items that aren't
considered recurring in nature.
Travelers' net premiums written, an important measure of revenue
growth, rose 4% to $6.7 billion from $6.4 billion.
Overall, Travelers reported net income of $293 million, or $1.05
a share, down 59% from $716 million, or $2.45 a share, a year
earlier. Total revenue, which includes investment income, rose 5%
to $7.3 billion.
Catastrophe-modeling firms have estimated insured losses from
Hurricanes Harvey, Irma and Maria and two earthquakes in Mexico,
which also struck during the quarter, will total $68 billion to
$148 billion industrywide.
Much of the damage is expected to be borne by reinsurers. These
are specialty firms that agree to take responsibility for some of
the risk in policies sold by insurers to businesses and
individuals.
Analysts have said some reinsurers will suffer hits equivalent
to a full year's worth of earnings, and possibly more, because of
the large amount of exposure they took on. Numerous primary
insurers, in contrast, are expected to suffer damage that is
limited to their third-quarter earnings.
Shares rose 1.5% in during low-volume premarket trading
Thursday. The stock has risen 6.2% so far this year.
Allison Prang contributed to this article.
Write to Imani Moise at imani.moise@wsj.com and Leslie Scism at
leslie.scism@wsj.com
(END) Dow Jones Newswires
October 19, 2017 07:57 ET (11:57 GMT)
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