Travelers Operating Earnings Fall 20%
July 21 2016 - 8:30AM
Dow Jones News
Travelers Cos. said its second-quarter operating earnings fell
20%, depressed by claims from catastrophes such as the Fort
McMurray wildfires in Alberta, Canada, and hail storms in various
parts of the U.S.
But the company posted record quarterly net written premiums, a
closely watched measure of revenue growth.
Per-share operating earnings and net written premiums beat
expectations.
New York-based Travelers is one of the first big
property-casualty insurers to release second-quarter results.
Higher catastrophe claims costs are expected to hurt earnings
across the industry, and a large number of companies already have
issued warnings.
Insurers with exposure to the Fort McMurray wildfires include
Chubb Ltd., which reports its results Wednesday; global insurance
conglomerate American International Group Inc., which reports Aug.
2 and Allstate Corp., which reports on Aug. 4, according to
analysts.
More broadly, the industry has been struggling with persistently
low interest rates, which have held down income from investing
customers' premium dollars until needed to pay claims. Travelers
cited lower net investment income as a factor in its earnings
decline.
For the three-month period ended June 30, Travelers said its
catastrophe losses were $333 million, up sharply from $221 million
in the year-earlier quarter.
"We continue to be very pleased with the execution of our
marketplace strategies, both in terms of the record volume of
premium we wrote in the quarter and the estimated returns on that
business," Chief Executive Alan Schnitzer said in the earnings
release. It is his second full quarter in the position, after
succeeding longtime CEO Jay Fishman on Dec. 1. Mr. Fishman, who
stepped down for health reasons, continues as executive chairman of
the board.
Travelers said its net written premium increased 2.9% to $6.35
billion amid strong retention of business, positive renewal premium
changes and increases in new-business volumes in each of its
segments.
Travelers reported an operating profit of $649 million, or $2.20
a share, compared with $806 million, or $2.52 a share, a year
earlier.
Operating earnings are a widely watched industry benchmark
because they exclude realized capital gains and losses in
companies' big investment portfolios.
Analysts expected per-share operating earnings of $2.07 and net
premiums written of $6.33 billion.
Over all, Travelers reported a profit of $664 million, or $2.24
a share, down from $812 million, or $2.53 a share, a year
earlier.
Chubb Ltd., formed earlier this year when ACE Ltd. closed on a
nearly $30 billion acquisition of Chubb, last week raised its
pretax catastrophe loss estimate for the quarter to $390 million
from its previous view for $280 million. At the time, the
Zurich-based insurer said the bulk of the estimated losses, about
$320 million, are tied to natural catastrophes in North
America.
Allstate in June estimated its catastrophe losses in April and
May totaled $835 million before taxes and $542 million after
taxes.
Write to Tess Stynes at tess.stynes@wsj.com and Leslie Scism at
leslie.scism@wsj.com
(END) Dow Jones Newswires
July 21, 2016 08:15 ET (12:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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