After the property and casualty insurer’s fiscal first-quarter earnings above forecasts due to a combination of increased investment income and an underwriting gain, as well as an increase in catastrophe-related losses, Travelers Cos.’ stock increased 4% on Wednesday.
In prepared remarks, Alan Schnitzer, the company’s chair and CEO, stated, “Despite the devastating January California wildfires, we are pleased to report a substantial profit for the quarter.”
For the quarter ending March 31, New York-based Travelers (TRV) reported net earnings of $395 million, or $1.70 per share, which was lower than the $1.123 billion, or $4.80 per share, for the same time last year. Its EPS of $1.91, adjusted for one-time factors, was significantly higher than the FactSet average of 79 cents.
Due to a rise in catastrophic losses from the California wildfires, adjusted income dropped from $1.096 billion to $443 million. Following losses of $712 million the previous year, catastrophe losses totaled $2.266 billion pretax.
Compared to FactSet’s prediction of $10.841 billion, revenue increased 5% to $11.810 billion. In contrast to FactSet’s prediction of $10.71 billion, net written premiums increased 3% to $10.515 billion.
At $1.583 billion pretax, the company’s underlying underwriting income increased by 32%. The FactSet consensus predicted a $524 million loss.
A year ago, the company’s combined ratio was 93.9%; now, it is 102.5%. A combined ratio of 105% was the agreement among FactSet.
An indicator of an insurer’s financial stability and profitability is the ratio. It is computed by dividing the entire losses and costs incurred by an insurance business as a result of claims by the total amount of premium revenue it received.
In contrast to FactSet’s prediction of 87.1%, the underlying combined ratio increased by 2.9 points to 84.8%.
From $846 million to $930 million, net investment income increased by $84 million.
“All three segments contributed to these terrific underlying results with strong and higher net earned premiums and excellent underlying profitability,” Schnitzer stated. “All three segments also contributed meaningful levels of net favorable prior year reserve development.”
Compared to $334 million a year before, the business-insurance sector, which provides property and liability insurance to clients primarily in the United States, had an underwriting benefit of $195 million. At $5.7 billion, net written premiums increased by 2%.
The underwriting income from bond and specialty insurance increased to $170 million from $144 million in the previous year. At $999 million, net written premiums increased 6%.
Following a $99 million gain the previous year, personal insurance—which covers both persons and households for property and casualty, including homeowners and auto insurance—provided an underwriting loss of $670 million. At $3.8 billion, net written premiums increased 5%.
During an analyst call, Schnitzer stated that the pretax catastrophe losses from the wildfires alone came to $1.7 billion, which was in line with Travelers’ February projections.
Schnitzer told analysts that the company had already paid out about three-quarters of $1 billion in claims, “including substantial advance payments to our customers who suffered total losses even after that,” according to a transcript from FactSet.
Travelers anticipates that losses for physically damaged vehicles and property that may require tariffed materials will be the primary effect of President Donald Trump’s tariffs, which have wreaked havoc on financial markets in recent weeks.
“That has the biggest impact on private passenger cars for us,” Schnitzer stated. “From there, the impacts diminish pretty significantly.”
According to him, the company anticipates that its suppliers will try to lessen the effects of tariffs by a variety of strategies, including advanced inventory accumulation, product substitution, supply chain reconfiguration, and reduced tariff pass-through rates.
In order to commemorate 21 consecutive years of dividend increases, the firm increased its quarterly cash dividend by 5% to $1.10 per share.
Over the past 12 months, the stock has increased by 11.9%, while the Dow Jones Industrial Average (DJIA) has increased by 6.8%.
