Insurer’s earnings miss estimates as underwriting gain drops

Claims from natural disasters were partly to blame

Insurer’s earnings miss estimates as underwriting gain drops

Insurance News

By Alicja Grzadkowska

While Beazley reported a doubling of profits earlier today, the next earnings story has a less happy outcome.

Travelers has missed Wall Street estimates for second-quarter profit, thanks to weather-related losses that led to an 18% decrease in underwriting gain, according to reports from Reuters.

Gusty winds and hailstorms during the quarter destroyed homeowners’ roofs and policyholders’ cars, which in turn led to a wave of claims that were difficult for insurers like Travelers to handle.

Reuters reported that claims rose 5.7% to $4.82 billion, leading to a drop in underwriting gain to $74 million in the quarter. Meanwhile, catastrophe losses (net of reinsurance) also dropped 25% to $367 million. However, that result was an improvement compared to last year’s figure of $488 million.

Travelers is often seen as a bellwether for the insurance industry, since it tends to report before other competitors, and it did have some positive news to share. Net written premiums rose 4.5% to $7.45 billion, for one, and net investment income increased 9% to $648 million, because of higher returns from its fixed income and private equity portfolio business.

Travelers also reported a combined ratio of 98.4%, compared with 98.1% the year before. Reuters states that a ratio below 100% indicates the insurer earns more in premiums than it pays out in claims.

Net income increased to $557 million from $524 million in the quarter ended June 30. Finally, total revenue rose 4.8% to $7.83 billion.

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