Travelers catastrophe losses balloon to almost $2.9bn after Q3

US primary insurer Travelers has revealed another quarter of elevated catastrophe losses, as the impacts of severe convective storms, wind and hail took its nine month catastrophe losses to almost $2.9 billion by the end of September.

Travelers catastrophe losses were already running well ahead of the prior year after the first-half.

The company had already reported an elevated cat loss burden from Q1 of this year, but then the second-quarter saw Travelers reporting $1.481 billion of pre-tax catastrophe losses, net of reinsurance for Q2, which was almost double the prior year.

Now, for the third-quarter of 2023, Travelers results show the effect of the costly year on severe convective storm (SCS) activity that has been seen in the US.

Travelers reported $850 million of pre-tax and net of reinsurance catastrophe losses for Q3 2023, up from $512 million in the prior year quarter.

That tales the year-to-date total for the first nine months of this year to almost $2.9 billion, well up on the nine-month 2022 figure of just over $1.4 billion.

The result was an elevated combined ratio of 101% for Q3 2023 and the same for the first nine months, both up on the prior year.

Net income is down as a result, at $1.365 billion for the first three-quarters of this year, down from just over $2 billion a year earlier, but the investment result has helped to keep Travelers profitable.

However, on the inwards side Travelers has grown its premiums written by 14% in the quarter and year-to-date, signalling an appetite to continue growing.

“Core income of $454 million for the quarter benefited from very strong underlying underwriting returns and net investment income but was also impacted by elevated catastrophe losses,” explained Alan Schnitzer, Chairman and Chief Executive Officer. “We are very pleased with the underlying fundamentals of our business. Underlying underwriting income of $868 million pre-tax was up 43% over the prior year quarter, driven by record net earned premiums of $9.7 billion and a consolidated underlying combined ratio which improved 1.9 points to an excellent 90.6%. The underlying combined ratio in our commercial segments remained excellent, and the underlying combined ratio in Personal Insurance improved by more than 5 points to 94.2%. Our high-quality investment portfolio continued to perform extremely well, generating after-tax net investment income of $640 million.”

Of course, all of these catastrophe losses come at a time when Travelers has less frequency protection, having non-renewed its aggregate catastrophe reinsurance protection for 2023.

Travelers is often considered a bellwether for the quarterly results season, providing a glimpse of the factors that will affect the nationwide US insurers, with this catastrophe loss burden likely to read-across to other major players as well.

Given the higher reinsurance attachments now in place across the market, and the fact it has no aggregate cover in place any more, it’s likely Travelers has retained the majority of its losses so far this year, given multiple storm events will have been the driver.