On January 22, Travelers, a property and casualty insurer, significantly surpassed Wall Street's fourth-quarter profit expectations. Despite heightened catastrophe losses, its robust underwriting business boosted its shares by almost 5% on Wednesday.
The company also anticipated an impact from the devastating wildfires in California, labeling it as a significant event for the industry. CEO Alan Schnitzer mentioned it would affect their first-quarter earnings but refrained from giving precise details at this early stage.
The California blaze is anticipated to be a significant financial blow for insurers, with estimated losses reaching as high as $20 billion.
The growing demand for insurance coverage by individuals and businesses has allowed insurers to attract and retain clients, notwithstanding the rising premiums for policies like auto and property insurance.
In the fourth quarter, Travelers recorded a 7% increase in net written premiums to $10.74 billion, achieving a record $43.36 billion for the full year. This demonstrates the resilience of its business model in the face of tumultuous weather conditions and economic uncertainties.
The company's core income rose to $2.13 billion, equating to $9.15 per share, for the three months ending on December 31, compared to $1.63 billion, or $7.01 per share, in the previous year.
Despite the average analyst expectation of a quarterly profit of $6.63 per share, Travelers delivered strong performance with a net investment income of $955 million pre-tax, a 23% increase from the previous period.
The insurance industry grapples with a challenging environment marked by severe weather events like hurricanes, wildfires, and other disasters, which pressure underwriting margins. Travelers reported catastrophe losses, net of reinsurance, rising to $175 million from $125 million in the prior year, driven by Hurricane Milton and Hurricane Helene.