Travelers Cos. Inc. Thursday reported a net loss of $40 million for the second quarter, as it was hit by higher catastrophe losses and lower net investment income.
The net loss of $0.16 per share compared with net income of $557 million, or $2.10 per share, for the same period last year.
Catastrophe losses for the second quarter more than doubled to $854 million pre-tax, compared with $367 million in the year-earlier period. The quarter’s catastrophes included severe storms in certain parts of the U.S. and $91 million of losses related to civil unrest.
Travelers reported coronavirus-related losses of $114 million, primarily in workers compensation, commercial insurance and management liability losses in the specialty business, executives said on an earnings call with analysts Thursday.
Executives flagged continued uncertainty in the trajectory of the pandemic and related economic conditions, in addition to ongoing financial market volatility.
The insurer’s commercial insurance segment swung to a loss of $58 million after-tax in the quarter, compared with income of $351 million after-tax in the same period last year.
COVID-19 and the downturn in the economy resulted in reduced exposures and a decline in new business volume, Travelers said.
“The pandemic and related economic conditions have had a modest net impact on the underwriting portfolio,” said Alan Schnitzer, chairman and CEO of Travelers.
COVID-19-related loss activity was offset by a decline in losses due to people sheltering in place, with fewer commercial auto accidents and slip and fall type claims, Mr. Schnitzer said.
The impact of COVID-19 on exposures was more than offset by strong rate change, executives said.
Commercial insurance renewal rates increased 7.4% in the second quarter, the highest level since 2013, and excluding workers compensation the renewal rate change was double digit, they said.
Even before the pandemic, factors such as increased market volatility, weather-related losses, higher liability loss trends, and interest rates at historic lows were putting upward pressure on prices, Mr. Schnitzer said.
“On top of that, the pandemic and related economic fallout add a sense of directional uncertainty making us feel like one of those times — not unlike in the wake of 9/11 and Hurricane Katrina — where the market recalibrates a risk,” Mr. Schnitzer said.
In workers compensation, COVID-19-related claims relate mainly to health care workers and first responders, but these “do not represent a significant part of our book of business,” he said.
While some states have statutorily expanded the scope of workers compensation coverage by creating presumptions of compensability, in most cases states have taken a “thoughtful approach protecting workers appropriately but not unreasonably burdening the workers comp system,” he said.
Where states have acted to expand compensability, Travelers has adjusted its loss estimates accordingly, he said.
The New York-based insurer will spend some money defending lawsuits concerning COVID-19-related business interruption coverage but doesn’t expect that to result in a “material loss,” Mr. Schnitzer said.
Court decisions so far — one in New York and another in Michigan — have both upheld the physical damage requirements in the context of COVID-19, and on the legislative front efforts to expand coverages for business interruption seem to be diminishing, he said.
From the liability perspective, Travelers is also seeing some moves by the plaintiffs’ bar to settle claims faster, but it’s too soon to know how significant that benefit might be, Mr. Schnitzer said. While Travelers is “encouraged” by efforts to adopt COVID-19 liability protections for businesses, “nonetheless we’re expecting the plaintiffs’ bar to be active,” he said.
Net investment income before tax declined to $268 million, compared with $648 million pre-tax in the same period last year.
The insurer’s consolidated combined ratio for the second quarter deteriorated by 5.3 points to 103.7%, while its underlying combined ratio improved 3.5 points to 91.4%.
Travelers reported $7.35 billion in net written premiums in the second quarter, down 1% from the same period last year. Excluding premium refunds to personal auto policyholders related to the pandemic, net written premiums increased 2%, Travelers said in a statement.
Its commercial insurance division reported a 107.1% combined ratio, compared with 101.1% in the same period last year. Better than expected results in its commercial property insurance business were offset by higher than expected losses in its general liability and commercial multi-peril businesses, the insurer said.
Net income for the first six months of 2020 was $560 million, down from $1.353 billion in the same period of 2019, according to the earnings statement.
Net written premiums increased 1% to $14.692 billion, but excluding premium refunds increased 3%, the statement said.
The insurer’s consolidated combined ratio for the first six months of 2020 worsened to 99.5%, from 96.1% in the same period in 2019.
More insurance and risk management news on the coronavirus crisis here.
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Severe weather, civil unrest hammer Travelers' Q2 results - Business Insurance
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