Travelers reveals $114m COVID-19 losses in Q2 profit warning

Property/casualty insurer Travelers Companies expects to report a second quarter 2020 net loss resulting from a high level of catastrophe losses and losses in the company’s non-fixed income investment portfolio.

The company’s estimate for catastrophe losses is $854 million pre-tax ($673 million after-tax), net of reinsurance, primarily resulting from severe storms in several regions of the US, as well as events related to civil unrest.

Travelers stated that in terms of the company’s underlying underwriting results, COVID-19 and related economic conditions had a modest net impact in the quarter. Insurance losses directly attributed 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.

The company 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 portfolio of $234 million pre-tax ($180 million after-tax).

The carrier also provided an estimate of its subrogation recoveries related to claims against PG&E Corporation and Pacific Gas and Electric Company resulting from the 2017 and 2018 wildfires in California. Travelers said that in connection with PG&E’s emergence from bankruptcy, which occurred on July 1, 2020, the company will recognise favorable prior year reserve development related to these claims of approximately $400 million, pre-tax and net of expenses and reinsurance, in its third quarter 2020 results.