Weather-Related Losses Lash Travelers Earnings in Second Quarter

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The Travelers Companies, Inc. (NYSE: TRV) reported its second-quarter financial results before the markets opened on Thursday, and the company missed on earnings per share but topped forecasts on revenue. The company said that it had $1.92 in EPS and $7.18 billion in revenue, compared with consensus estimates from Thomson Reuters that called for $2.11 in EPS and $6.56 billion in revenue. The same period from last year had $2.20 in EPS and $6.785 billion in revenue.

Net investment income totaled $598 million pre-tax ($468 million after-tax) and increased 9%, driven by higher private equity returns, but partially offset by fixed income returns that declined in line with expectations.

Record net written premiums of $6.640 billion increased 5%, reflecting growth in all segments.

The company noted an $86.46 book value per share and an $82.71 adjusted book value per share, respective increases of 1% and 7% from the same period last year.

Alan Schnitzer, CEO of Travelers, commented:

Second quarter core income of $543 million and core return on equity of 9.5% were impacted by high levels of catastrophe and non-catastrophe weather-related losses caused by significant U.S. tornado and hail activity. The storm activity had the greatest impact on personal insurance, affecting results in both home and auto. Within personal auto, we were pleased that the actions we have undertaken to improve profitability remain on track. We were also pleased with results in our commercial businesses this quarter. In business insurance, segment income was up 7% and the underlying underwriting gain improved. In bond & specialty insurance, while segment income was lower than in the prior year quarter, the decrease was entirely due to lower net favorable prior year reserve development as compared to a particularly high level in the prior year quarter. Our investment portfolio performed very well, with after-tax net investment income increasing 6% over the prior year quarter due to strong private equity returns. Additionally, we were able to return $676 million to shareholders in the quarter, including $475 million in share repurchases.

Shares of Travelers closed Wednesday at $126.46, with a consensus analyst price target of $123.64 and a 52-week range of $103.45 to $129.60. Following the release, the stock was down about 1% at $125, in early trading indications Thursday.