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Travelers estimates nearly $1B in catastrophe, COVID losses

Cristobal flood

Travelers Cos. Inc. expects to report pretax catastrophe losses of $854 million and coronavirus-related losses of $114 million when it publishes its second-quarter results next week.

For the second quarter of 2020, the insurer expects to report a net loss per diluted share of $0.16 and a core loss per diluted share of $0.20, Travelers said in a statement Tuesday.

The company’s third-quarter results, meanwhile, will benefit from recoveries for previously paid wildfire losses, the insurer said in a statement Tuesday.

Travelers’ catastrophe loss estimate relates primarily to severe storms in the United States during the second quarter of 2020 and civil unrest that swept the country following the death of George Floyd in police custody in Minneapolis in May.

The COVID-19 losses and reduced premium income resulting from the pandemic were largely counterbalanced by lower claims frequency, Travelers said.

“Insurance losses directly attributed to the pandemic of $114 million pretax and a $63 million pretax reduction in the estimate of ultimate audit premiums receivable were approximately offset by initial estimates of favorable frequency from the shelter-in-place environment, primarily in short-tail lines net of premium refunds and other items,” the statement said.

Travelers expects to report pretax net investment income of $268 million for the 2020 second quarter, compared with $648 million for the same period last year.

The 2020 second-quarter figure includes investment income from Travelers’ fixed-income portfolio of $511 million and losses from its nonfixed-income portfolio of $234 million, the statement said.

The insurer also said it expects to recognize in its third-quarter results $400 million in favorable prior year reserve development, net of expenses and reinsurance, reflecting subrogation recoveries related to California utility Pacific Gas and Electric Co.’s 2017 and 2018 wildfire losses. PG&E emerged from Chapter 11 bankruptcy on July 1 and paid $5.4 billion in initial funds and 22.19% of its stock into a trust for victims of wildfires caused by its faulty equipment.

Travelers, which is usually the first major property/casualty insurer to report results and is often seen as a bellwether for the sector, is scheduled to publish its second-quarter results on July 23.

Last week, Chubb Ltd. said it expects to report $1.81 billion in catastrophe losses for the quarter, including $1.37 billion in pandemic-related losses, and W.R. Berkley Corp. said it expects to report $145 million in catastrophe losses, including $85 million in losses related to COVID-19.

More insurance and risk management news on the coronavirus crisis here