Hurricanes Contribute To Decline In Travelers’ Q3 Income

by Trefis Team
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The Travelers Company (NYSE: TRV) announced its third quarter earnings on October 19th. The company’s net income declined by nearly 60% year over year to $293 million. The decline was primarily driven by nearly $700 million in pre-tax catastrophe losses in the quarter caused by hurricanes Harvey, Irma and Maria, among others. These three hurricanes caused property damages of over $180 billion, which put pressure on Travelers’ commercial insurance segment profits. As a result, Travelers’ combined ratio (the ratio of claims to premiums earned) deteriorated to 103.2% in the quarter compared to 92.9% a year ago.

Segment Performance

The business insurance division’s revenues grew just 2%, and the operating income declined by 76% due to higher catastrophe losses. Personal insurance premiums increased by nearly 10% due to higher pricing compared to the last year. However, the segment’s income declined by more than 50% due to higher catastrophe losses. Bond and specialty insurance premiums grew by 3%, but the segment’s operating income declined due to lower net favorable prior year reserve development. Going forward, we expect Travelers’ investment income to partially offset the catastrophe losses as improved macroeconomic conditions should improve the company’s overall net investment income.

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