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.
Catastrophe 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.
“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.