Travelers Earnings Fall After Active Hurricane Season -- Update

By Imani Moise and Leslie Scism Features Dow Jones Newswires

Travelers Cos. earnings fell in the third quarter as results were battered by a severe hurricane season.

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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.

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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

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 ago.

Chief Executive Alan Schnitzer said the third-quarter results amounted to "a considerable profit in one of the costliest hurricane seasons on record."

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 wrecks after 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.

Net premiums written, an important measure of revenue growth, rose 4% to a record $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.

In an earnings call, Mr. Schnitzer said drones that performed more than 1,000 catastrophe inspections, reducing claims-handling expenses. He also noted that "virtually 100%" of claims inspections were done with its own employees. In contrast, many insurers have scrambled to find independent adjusters for the back-to-back hurricanes.

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. Travelers's estimated cost for quarterly catastrophe losses was $700 million on a pretax basis.

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. Some primary insurers, in contrast, are expected to suffer damage that is limited to their third-quarter earnings, while Travelers had earnings to spare.

Shares rose 0.6% in trading Thursday at midday. The stock has risen 6.9% so far this year.

Write to Imani Moise at imani.moise@wsj.com and Leslie Scism at leslie.scism@wsj.com

(END) Dow Jones Newswires

October 19, 2017 12:37 ET (16:37 GMT)