Shares of Travelers Cos. fell sharply Tuesday after the large property-casualty insurer announced an unexpectedly large estimate for its fourth-quarter costs from winter storms. Investors are concerned about disappointments at other property insurers as a result of the news.
Travelers’ stock fell more than 6% following the preliminary fourth-quarter results. The company expects net income of $819 million, including $459 million in pre-tax catastrophe losses, net of reinsurance. These catastrophe costs are primarily the result of a late-December winter storm that hit much of the United States and Canada.
Travelers is a top consumer car and home insurer as well as one of the nation’s largest sellers of business insurance. It is a component of the Dow Jones Industrial Average and played a significant role in the average’s Tuesday decline.
While some Wall Street analysts noted that Travelers’ “cat loss” was higher than expected, they were also concerned about the company’s car and home insurance businesses performing worse than expected. In the pre-announcement, Travelers stated that its so-called personal-lines business is still “challenged by elevated industrywide loss costs,” which it has been addressing with rate increases.
According to analysts, all of this is bad news for other auto and home insurers. Allstate, one of the biggest competitors, saw its stock drop about 3% in recent trading.
According to Evercore ISI analysts, the “lack of detail on the drivers by segment will likely be held against” Travelers by leaving investors in the dark about whether the company’s big business-insurance unit’s results may be modestly disappointing.