The company said its catastrophe costs increased 11% year on year to $512 million pretax, net of reinsurance, during a difficult quarter for the nation's property insurers. Then, Hurricane Ida made landfall in Louisiana, bringing tornadoes and catastrophic flooding as it made its way to the Northeastern United States. Travelers' third-quarter catastrophe costs totaled $501 million the previous year.
Travelers is among the first large publicly traded property insurers to report quarterly earnings. Its net income was $454 million, down from $662 million the previous year. Total revenue increased 6% year on year to $9.3 billion, boosted by a 10% increase in its closely watched net written premiums, it said. Travelers reported a significant year-over-year increase in renewal premiums as well as an increase in new business.
Unlike Ida, the nation's largest carriers will not pay for much of Ian's insured damage to homeowners in Florida, where it landed. This is due to their decades of efforts to limit exposure in the hurricane-prone state, which has resulted in them having a relatively small slice of the home-insurance market.
Instead, Florida has a unique home-insurance market in which dozens of small to midsize carriers and a state-run insurer of last resort pay the vast majority of claims. All of these carriers, as well as the majority of national carriers, use reinsurance to defer some of the cost of catastrophe claims.
Travelers' earnings lagged behind those of the previous quarter, owing in large part to the company's failure to replicate the year-ago outsized gains from private-equity partnership returns. Its pretax net investment income fell 23% to $593 million from $771 million. In addition, Travelers had $72 million in net realized investment losses after tax, compared to a $7 million realized gain the previous year.
According to the Insurance Information Institute, Hurricane Ida last year was the nation's second-costliest natural disaster for property insurers, costing an estimated $36 billion. Early estimates for insured damage range from $30 billion to more than $70 billion, according to Ian. According to the trade group, the nation's most expensive hurricane was Katrina in 2005, which cost nearly $90 billion in insured damage in 2021 dollars.
Wall Street analysts predict that auto insurers will bear a significant portion of Ian's losses due to a massive storm surge and widespread inland flooding that submerged a large number of vehicles. "Comprehensive" car insurance typically protects a vehicle from flood damage.
In contrast, standard homeowner policies exclude surge and other flooding damage. In Florida and some other coastal states, homeowners are subject to special "hurricane deductibles," which are typically around 2% of the insured policy amount but can be much higher. These deductibles help insurers limit their exposure.
Travelers did not break down its estimated disaster damage into car, home, and business product lines. According to Moody's Investors Service, the company isn't in Florida's top ten for underwriting home or commercial property insurance, but it is a top ten insurer for physical damage to automobiles.
After incorporating its portion of the carrier's anticipated Ian claims, Travelers' personal-insurance unit, which combines results for car and home insurance, posted a loss of $111 million, compared to a loss of $2 million in the prior-year quarter. While Hurricane Ida was a devastation in the previous quarter, the period's unusually high net investment income mitigated some of the storm's impact. According to the company, net written premiums increased 13% to $3.86 billion in the most recent quarter, owing primarily to higher pricing.
Travelers reported $471 million in revenue for its large business insurance segment, a $87 million decrease. Net written premiums increased 9% year on year to $4.37 billion. Its bond and specialty insurance division earned $242 million, a $68 million increase.