Property and casualty insurer Travelers Cos Inc reported a lower-than-expected quarterly profit as catastrophe losses nearly doubled, mainly due to hail storms in Texas in March.
Travelers said on Thursday its pre-tax catastrophe losses jumped to $318 million in the quarter ended March 31 from $162 million a year earlier.
In what is shaping up as a grim reporting quarter for insurers, home and auto insurer Allstate Corp said on Thursday it expected pretax catastrophe losses for the quarter jumped nearly threefold to $827 million.
The losses were partially offset by a minor reserve re-estimate of prior reported catastrophe losses, Allstate said in a statement.
Two severe hail events in March accounted for two-thirds of Allstate’s catastrophe losses for the first quarter. The storms extended from Texas to Florida and produced violent thunderstorms and hail as large as 2.75 inches.
Allstate said it has deployed more than 1,200 claim professionals to assist local agencies in handling the more than 39,000 claims reported to date.
Travelers’ shares were down 4 percent at $111.38 in early trading on Thursday, and the stock was the biggest drag on the Dow Jones industrial average.
Texas was hit by several storms in March, including tornadoes that toppled power lines, damaged structures and injured a number of people.
Auto insurer Progressive Corp earlier reported a near 14-fold rise in catastrophe losses due to the storms, while Kemper Corp and United Insurance Holdings Corp have said they expect their losses to increase sharply.
Travelers’ net income fell to $691 million, or $2.30 per share, in the period from $833 million, or $2.55 per share, a year earlier.
On an operating basis, the insurer earned $2.33 per share, falling short of analysts’ average estimate of $2.55 per share, according to Thomson Reuters I/B/E/S.
Near-zero interest rates have added to insurers’ problems as investment income has remained weak.
Travelers’ net investment income, which accounts for more than three-fifth of its earnings, fell 8.2 percent to $439 million in the first quarter.
Storms in Texas are expected to add to insurers’ losses in the second quarter.
Hail the size of baseballs caused widespread damage in the Dallas-Fort Worth area last week, shattering windshields and windows, while storms in Arkansas knocked down trees, crushing cars and homes. (http://reut.rs/1pj3az7)
The Insurance Council of Texas, a insurance trade association, estimates that insurers are likely to incur $1.36 billion in losses due to the latest storm, making it the most expensive hailstorm for insurers in Texas history.
Travelers, which vies with American International Group Inc for the title of biggest U.S. commercial property and casualty insurer, increased its quarterly dividend to 67 cents from 61 cents.
Up to Wednesday’s close, the company’s shares had risen 2.6 percent this year.
*Carrier Management added additional material to this story