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Higher than expected cat losses drives lower Q2 net income for Travelers

19th July 2018 - Author: Luke Gallin

The Travelers Companies, Inc. (Travelers) has reported its second-quarter 2018 results, posting a decline in both net income and core income as a result of increased catastrophe losses that came in roughly $50 million higher than anticipated, at $488 million.

Travelers logoCatastrophe losses for the second-quarter of 2018 were $85 million higher than experienced in the same period last year, which pushed core income and net income down to $494 million and $524 million, respectively.

Alan Schnitzer, Chairman and Chief Executive Officer (CEO) of Travelers, attributed the year-on-year decline to a $122 million after-tax increase in catastrophe losses, “resulting from an active tornado and hail season.”

“Results excluding catastrophe losses were strong, reflecting record net earned premiums and a consolidated underlying combined ratio of 93.6%, with each of our business segments contributing,” he added.

Despite catastrophe losses being approximately $50 million higher than expected and $85 million higher than last year’s Q2, the firm’s CEO said that the $488 million loss total is within the range of normality.

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“This follows several recent quarters in which catastrophe losses exceeded our 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 Schnitzer.

Net income of $524 million is a decline of $71 million, year-on-year, and is a result of reduced core income and lower net realised investment gains, of $30 million. At the same time as higher catastrophe losses, core income was hit by a $45 million incremental charge in relation to a few large commercial losses, and the $18 million assessment from the Texas Windstorm Insurance Association (TWIA) related to hurricane Harvey.

Offsetting some of the negativity, core income was positively impacted by $54 million from a lower U.S. corporate income tax rate.

Despite the decline in income the firm did expand across all business segments in the quarter, with record net written premiums of $7.131 billion, which is an increase of 7% on Q2 2017.

“With a strong foundation, an active innovation agenda, superior talent and a track record of successfully managing our businesses for the long term, we remain well positioned to continue to deliver leading returns over time,” said Schnitzer.

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