Travelers Companies reported that catastrophe losses from wind and hail storms in several regions of the United States cut into its second quarter profit.
Net income for the quarter was $524 million compared to $595 million for the same quarter last year.
A $122 million after-tax increase in catastrophe losses resulting from an active tornado and hail season, a charge of $45 million for a few commercial losses and an $18 million assessment from the Texas Windstorm Insurance Association (TWIA) related to Hurricane Harvey affected the quarter’s results.
Catastrophe losses, net of reinsurance, rose 21 percent to $488 million. The catastrophe losses for the quarter were approximately $50 million more than expected and came following several recent quarters in which catastrophe losses exceeded historical experience and expectations.
“Weather is inherently unpredictable, and accordingly, we take a balanced approach to developing conclusions from what happens in a relatively short period of time,” said Alan Schnitzer, chairman and CEO. “As always, the impact of weather on our business has our full attention, and we will continue to use our leading actuarial expertise and the latest in weather modeling to inform our underwriting and pricing decisions.”
The combined ratio increased 0.4 points to 96.8 due to a higher underlying combined ratio (0.3 points) and higher catastrophe losses (0.3 points), partially offset by higher net favorable prior year reserve development (0.2 points).
Schnitzer said the “results excluding catastrophe losses were strong,” citing record net earned premiums and the consolidated underlying combined ratio of 93.6.
Net written premiums increased by 7 percent to a record $7.1 billion. Net written premiums in Business Insurance increased by 7 percent, which reflected renewal premium change that reached 5.3 percent, its highest level since 2014, along with retention of 85 percent.
Schnitzer credited the recent establishment of business centers for contributing to an 8 percent increase in domestic new business in Business Insurance.
Personal Insurance lost $17 million for the quarter as compared to realizing income of $12 million in the prior year quarter. The loss reflected higher catastrophe losses, partially offset by improvement in Agency Automobile pricing that exceeded loss cost trends, which in turn was partially offset by $9 million from the TWIA assessment.
Agency Automobile net written premiums grew 9 percent and Agency Homeowners grew 5 percent.
In a call with analysts, Schnitzer said his company is watching developments on tariffs and how they might affect inflation and loss costs. But he said any effects would be on “short term” lines and Travelers should be able to react to any impact.
Company officials said they are aware of one auto insurance carrier cutting auto insurance rates but that they believe overall most carriers continue to file for rate increases, although perhaps not as high as in 2017. State Farm has filed to lower rates in a number of states including Pennsylvania, Alabama, North and South Carolina and Missouri.
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