Travelers hit by $1.5bn nat cat bill, pushed to Q2 loss

Natural catastrophe losses delivered a $1.48 billion pre-tax hit to US insurer  Travelers, pushing the group to a second quarter loss with a combined ratio up 8.2 points year on year to 106.5%.

“The fact that we were able to generate positive core income notwithstanding $1.5 billion of pre-tax catastrophe losses reflects the strength of our franchise and the resiliency of our underlying business model," CEO Alan Schnitzer said in consolation. Traveler’s own metric of core earnings at $15 million was down 98% year on year. The net profit line slipped lightly into the red.

Personal lines did the bulk of the suffering, taking $1.06 billion of the Q2 nat cat hit to deepen the second quarter segment loss 2.8x to $538 million.

Those cat losses, net of reinsurance, added an eye-opening 29.1 points to the segment's combined ratio to 122.0%. That reading was 10.6 points above an already loss-making prior year period.

Cleared of the spike in nat cat claims, Travelers claimed an improvement in underlying performance with a 2 point reduction in the underlying combined ratio to 94.1%.

Business lines, in contrast, have held their own. Pre-tax nat cat losses of $396 million were up 69% year on year, but added a mere 8.5 points to the segment combined ratio. That proved just enough to render a fractional technical loss with combined ratio at 100.1% but still maintain the segment profit in the black.

Growth continued apace for the business. Management claimed net written premium growth of 14% or $1.3 billion to $10.3 billion, with gains visible across the group's three main segments. Mark business insurance at 18% growth on renewal rate gains of 7.2% and a 36% increase in new business. Personal lines enjoyed 13% top line growth, including renewal premium gains of 19.2% in homeowners and 16.1% in auto. Bond & specialty lines delivered fractional 1% premium gain.

Travelers had already been in trouble with nat cats in the first quarter, facing down a pre-tax bill of $535 million net of reinsurance to put core earnings below prior year levels. The Q1 cat hit came in over 3.3x the prior year period for a 6.0 point impact on the group's combined ratio which rose four points year to year.

The YTD pre-tax nat cat tally is now above the $2 billion mark, more than twice the prior year’s $906 million.

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