Travelers Profit Rises as Catastrophe Losses Shrink
October 18 2018 - 5:41PM
Dow Jones News
By Nicole Friedman
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 18, 2018 17:26 ET (21:26 GMT)
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