Property and casualty insurer, The Travelers Companies, Inc., expects to report a net loss for the second-quarter of 2020 on the back of a high level of catastrophe losses and losses in its non-fixed income investment portfolio.
The firm’s Q2 2020 catastrophe losses are estimated at $854 million pre-tax ($673 million after-tax), net of reinsurance recoveries. Travelers states that these losses primarily resulted from severe storms in numerous parts of the U.S., and also events related to civil unrest across the country.
For the second-quarter of the year, Travelers expects to report net investment income of $268 million pre-tax ($251 million after-tax), which includes investment income from the fixed income portfolio of $511 million pre-tax ($438 million after-tax) and losses in the non-fixed income investment portfolio of $234 million pre-tax ($180 million after-tax).
As a result of a heightened level of cat losses and the losses on its non-fixed income portfolio, Travelers has revealed that it expects to report a net loss per diluted share of $0.16 and a core loss per diluted share of $0.20.
In comparison, Travelers recorded catastrophe losses of $360 million in the second-quarter of 2019 and combined with the first-quarter, the firm’s H1 2019 cat loss bill totalled $560 million.
Combined with the $333 million pre-tax catastrophe loss total in Q1 2020, Travelers’ H1 2020 catastrophe loss experience totals $1.187 billion, which is almost double the same period last year.
Discussing its underlying underwriting performance in the period, and the firm notes that COVID-19 and related economic conditions had a modest net impact, which is a reflection of its disciplined underwriting in terms of products and lines of business, as well as the careful management of terms and conditions.
On COVID-19 losses, the firm says that, “insurance losses directly attributable to the pandemic of $114 million pre-tax and a $63 million pre-tax reduction in the estimate of ultimate audit premiums receivable were approximately offset by initial estimates of favorable frequency from the shelter-in-place environment, primarily in short-tail lines (net of premium refunds), and other items.”
Travelers has also provided an update on the estimate of its subrogation recoveries related to claims against PG&E resulting from the 2017 and 2018 wildfires in California. The firm states that in connection with PG&E’s emergence from bankruptcy, it will recognise favourable prior year reserve development related to these claims of roughly $400 million, pre-tax and net of expenses and reinsurance, in its Q3 2020 results.