U.S. primary insurance giant Travelers has bucked the trend, to a degree, in announcing what its CEO calls an “unusually high” level of catastrophe losses in the first-quarter of 2018, reporting $354 million of losses net of reinsurance for the period.
As a result, Travelers has missed analysts estimates for its first-quarter 2018 results, reporting net income of $669 million, which equates to $2.42 per share, below analysts estimates that mostly ranged from $2.55 to $2.70.
The company reported a consolidated combined ratio of 95.5% for the quarter, with catastrophes adding 5.4% to it for the period.
Travelers results could have been worse, had it not been for reserve releases of $150 million, almost double those booked in the prior year period.
But it seems the biggest dent to the company in the first-quarter was catastrophe losses from the winter storms in the eastern United States including Riley, a wind and hail storm in the southern United States and the mudslides in California that followed the wildfires.
“We were pleased to report first quarter core income of $678 million, up 10% over the prior year quarter, and core return on equity of 11.9%, particularly in light of yet another unusually high level of first quarter catastrophe losses,” commented Alan Schnitzer, Chairman and Chief Executive Officer of Travelers.
Travelers catastrophe loss experience in Q1 2018 was slightly higher than it experienced a year earlier. For comparison, Allstate recently estimated that its first-quarter catastrophe losses would be much lower than the prior year period.
Also noteworthy, is the fact that reinsurance firm Munich Re has said that it expects a higher profit for the first-quarter because of a lower incidence of major losses, which may suggest that Travelers experience is not going to be widely repeated across the market.
Of course, it’s still very early in results season to identify any trends and while one major insurer (Allstate) said it expects below average catastrophe losses, while another (Travelers) said it experienced higher than normal, the impacts could even out across the market.
Also, while Munich Re has said major loss impacts were low, it doesn’t mean the eventual impact from first-quarter U.S. weather losses won’t be meaningful, as it may be that regional insurers take higher shares and also it does mean that aggregate reinsurance contracts could be finding their retentions eroded for companies like Travelers which do experience a higher than normal level of losses.
More encouragingly for Travelers and also for those reinsurance firms or ILS funds backing portfolios of commercial insurance risk, the insurer said that it experienced renewal premium changes that were at their “highest levels in three years.”
That bodes well for the company and its competitors as they move through the rest of this year.