TRV The Travelers Companies Inc

By Nicole Friedman 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 19, 2018).

Hurricane Florence is unlikely to dent property insurers' third-quarter earnings, especially when compared with the devastation from last year's hurricane season.

Florence, which made landfall in North Carolina on Sept. 14, caused significantly more flooding damage than wind damage. While insurers typically cover wind damage, most residential flooding damage is either covered by the federal government or uninsured.

Florence caused between $1.7 billion and $4.6 billion in insured losses due to wind and storm surge, according to an estimate by catastrophe modeler AIR Worldwide. In contrast, insurers in the third quarter of 2017 faced three massive hurricanes -- Harvey, Irma and Maria -- that, combined, caused about $92 billion in insured losses, according to Swiss Re.

"It seems like Florence didn't have as big of an impact as initially expected" for insurance losses, said Mike Zaremski, analyst at Credit Suisse. "It was definitely a much bigger flood event."

Travelers Cos. kicked off the insurance earning season Thursday, posting core operating earnings of $687 million, or $2.54 a share, up from $253 million, or 91 cents a share, in the year-earlier period.

Overall, the New York--based insurer reported a profit of $709 million, or $2.62 a share, up from $293 million, or $1.05 a share, a year earlier. Total revenue, which includes investment income, rose 5.4% to $7.72 billion.

Travelers, part of the Dow Jones Industrial Average, 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.

The insurer said Thursday its pretax catastrophe losses, net of reinsurance, totaled $264 million during the quarter due to Hurricane Florence and other storms, compared with $700 million a year earlier.

The company is among the largest sellers of insurance to U.S. businesses and sells car and home insurance to individuals and families.

Travelers has closed more than 90% of its homeowners claims tied to Florence, chief executive Alan Schnitzer said on a conference call, adding that the company expects significant losses from Hurricane Michael, which made landfall in Florida on Oct. 10.

Also on Thursday, American International Group Inc. and Allstate Corp. pre-announced their third-quarter catastrophe losses. AIG expects pretax catastrophe losses of $1.5 billion to $1.7 billion due to Florence, natural disasters in Japan and other events. Allstate said it expects pretax catastrophe losses of $625 million, including about $88.5 million due to Florence.

Insurance and reinsurance companies set to report earnings next week include Chubb Ltd., Hartford Financial Services Group Inc., Cincinnati Financial Corp. and Everest Re Group Ltd.

As of Oct. 3, more than 282,000 insurance claims representing about $1.7 billion in insured losses had been filed due to Hurricane Florence, not including the state's insurers of last resort, according to the North Carolina Department of Insurance. Of those claims, about 25% were for federal flood insurance.

Florence's uninsured flood losses in North Carolina, South Carolina and Virginia could range from $13 billion to $18.5 billion, according to an estimate from analytics firm CoreLogic.

Michael could be more expensive for the insurance industry, but its financial impact is still being tallied.

Many of the biggest U.S. homeowners insurers have a small presence in Florida, and small to midsize Florida-based companies provide a large portion of the state's home insurance. Those companies rely heavily on reinsurance.

As of midday Wednesday, private-sector insurers had received nearly 70,000 claims for about $680 million in insured losses due to Michael, according to the Florida Office of Insurance Regulation.

--Allison Prang contributed to this article.

Write to Nicole Friedman at nicole.friedman@wsj.com

(END) Dow Jones Newswires

October 19, 2018 02:47 ET (06:47 GMT)

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