From the Wall Street Journal:
Storm Claims Hit Travelers' Profit
Record claims costs from storms in the Midwest caused profit to fall 9.5% at Travelers Cos., while the poor economy forced the insurer to reduce its estimate for its full-year profits.From Trading Markets:
Smaller insurers including Cincinnati Financial Corp. and Hanover Insurance Group Inc.had already warned shareholders about the cost of the natural disasters that struck the country in the quarter. Hailstorms plagued Oklahoma, while thunderstorms hit Michigan, Ohio and Illinois. And Tennessee was hit by record floodwaters that swamped the Grand Ole Opry.
But some analysts seem to have underestimated the impact of those events on Travelers, which insures cars, homes and businesses nationwide. The firm reported operating profit of $1.39 a share, missing the $1.49 consensus among analysts polled by Thomson Reuters.
The company's $439 million in catastrophe costs was the most for the insurer in any second quarter since it took its current form after a merger in 2004. That follows a similar record set in this year's first quarter. The company's combined ratio, the percentage of premiums paid out as claims and to cover operating costs, grew to 95.2% from 93.2% in the same period a year earlier. A combined ratio of less than 100% means an insurance business is profitable, without the benefit of investments.
The result may cause investors to re-evaluate their assumptions for second-quarter earnings of other insurers with a nationwide reach, such as Allstate Corp. and Hartford Financial Services Group Inc. Analyst Meyer Shields of Stifel Nicolaus had already warned his clients before Travelers released results that Allstate was "most at risk for higher-than-expected cat[astrophe] losses."...MORE
Travelers Narrows Guidance Below Estimates
Travelers (NYSE: TRV | PowerRating) said it expects 2010 earnings of $5.20 to $5.45 per share. The company's previous guidance was earnings of $5.20 to $5.55 per share and the current consensus earnings estimate is $5.72 per share for the year ending December 31, 2010....