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Travelers profit drops on natural disaster exposures


Travelers Cos. Inc. on Thursday said second-quarter net income fell 18.2% compared with the prior-year quarter to $664 million due to losses from Canadian wildfires and severe storms in the United States.

Higher catastrophe and weather-related losses from the Fort McMurray wildfire in Alberta and hailstorms in Texas, in addition to lower net investment income, led to the drop, Travelers said in a statement.

However, growth in personal and domestic business insurance drove record net written premiums of $6.35 billion, up 2.9% over the second quarter of 2015, according to the insurer.

Total revenue for the quarter came in at $6.79 billion, a 1.1% increase over the year-ago period.

During a Thursday call with analysts, Travelers CEO Alan Schnitzer called the company's second-quarter results “solid … particularly in light of the weather and wildfires.”

Travelers also reported an increase of 1.1% in net written premiums for workers compensation to $916 million compared with the second quarter of 2015.

Fitch Ratings Inc. earlier this month reported that Travelers continues to grow steadily in the workers compensation space, capturing 8.7% of market share.

Travelers Vice Chairman and Chief Financial Officer Jay Benet said during the call that he is pleased with the results “despite them being lower than in the prior-year quarter.”

While losses from events that met or exceeded the company's threshold for catastrophe losses were $79 million higher after taxes than a year ago, losses from events “that fell below our cat threshold, which we recorded as noncat weather-related losses within underlying underwriting results, were $56 million higher after tax than in the prior-year quarter,” Mr. Benet added.

Such losses also contributed to a higher combined ratio of 93.1% for the quarter, compared with 90.8% from the same period last year.

Net investment income for the quarter was $549 million, down 13.1% from the same period in 2015.

Brian MacLean, Travelers president and chief operating officer, said during the call that catastrophe losses for the quarter were $143 million net after tax, including $61 million from the Canadian wildfires.

“Our strategy has not changed,” Mr. MacLean said, adding that Travelers will still look to retain its best performing accounts and write new business that meets target returns.

For the first six months of 2016, Travelers reported a 17.6% decline in net income to $1.36 billion from the first six months of 2015 and a nominal 1.0% increase in revenues to $13.47 billion. Net written premiums were up 3.7% to $12.51 billion, and the combined ratio deteriorated to 92.7% from 89.9%.