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Hurricane Michael, Fires Boost Catastrophic Losses For Travelers, But Earnings Beat Street Estimates

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Hurricane Michael, Fires Boost Catastrophic Losses For Travelers, But Earnings Beat Street Estimates

Investors were trying to react to mixed news from The Travelers Companies Inc (NYSE: TRV) on Tuesday as the insurer reported earnings that beat Wall Street estimates — even with higher claims losses from a major hurricane and wildfires.

The company also said Tuesday it plans to reduce its exposure in California due to higher fire risk.

Travelers reported fourth-quarter earnings of $2.13 per share on net income of $621 million, beating Wall Street estimates. For the year, the company reported earnings of $9.28 per share on $30.17 billion in revenue.

While the earnings report beat the Street, the insurer took a large claims hit from Mother Nature in 2018.

'Underlying Results Remained Strong' Despite Losses

Travelers said it saw catastrophe losses of $610 million pre-tax in the quarter due to Hurricane Michael, which devastated parts of the Florida Panhandle in October, and an extremely active fire season in California.

“Our consolidated underlying results remained strong, benefiting from the continued successful execution of our strategy to create top-line opportunities and improve productivity and efficiency,” CEO Alan Schnitzer said in a statement.

Overall, Hurricane Michael is estimated to have caused more than $14 billion in damages.

California officials have said last year’s fires caused nearly $10 billion in covered losses for all insurers, and Travelers said Tuesday that it is slowing its writing of new policies in California.

Travelers said it plans to raise commercial auto insurance rates, according to a report from Reuters.

Raymond James Stays Neutral 

Raymond James said in an early Tuesday note that Travelers remains set to report gradually improving results because of underlying strength in its underwriting and pricing strategies — despite the 2018 catastrophic losses — and maintained a Market Perform rating on the stock.

Travelers' active capital management strategy should provide some downside protection, according to the sell-side firm. 

Price Action

Travelers shares were down 0.83 percent at $122.91 at the time of publication Tuesday. 

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Latest Ratings for TRV

DateFirmActionFromTo
Jan 2021BarclaysMaintainsOverweight
Jan 2021Credit SuisseMaintainsNeutral
Jan 2021Morgan StanleyMaintainsUnderweight

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