Topline
Shares of Travelers, one of the nation’s largest insurance companies, wiped out more than a month of gains Tuesday after the company warned fourth-quarter profits took a worse-than-expected hit after a catastrophic winter storm that swept across the nation late last month—becoming one of the first insurers to warn upcoming earnings may ultimately disappoint investors following one of the costliest years for weather disasters on record.
Last year marked the third-costliest year for catastrophic weather events since at least 1980.
Key Facts
In a Tuesday morning regulatory filing, Travelers announced it expects fourth-quarter catastrophe losses of $459 million stemming primarily from the significant winter storm that hit 37 states, the District of Columbia and Canada late last month—representing roughly $200 million more in costs than analysts had initially projected.
As a result, the firm expects it will post a profit of about $810 million, or $3.40 per share, when it reports quarterly earnings next Tuesday—coming in 16% below average analyst expectations.
Shares of Travelers fell 5% Tuesday after the announcement—pushing the stock to its lowest level since late December, though it’s still up about 15% over the past year, compared to a 13% decline for the S&P 500.
“Aside from the catastrophic weather, underlying results were exceptional,” CEO Alan Schnitzer said in a statement about the losses, noting the firm was able to hike prices in order to address challenges including higher industry-wide costs.
Key Background
Last year marked the third-costliest year for catastrophic weather events since at least 1980, according to the National Centers for Environmental Information, which last week reported the 18 costliest weather events in 2022 had losses totaling $165 billion. Only 2017 and 2005, which were marked by Hurricanes Harvey and Katrina, respectively, were more expensive. “The extreme nature of these events is very alarming,” climate scientist Stephanie Herring said of last year’s weather disasters. “To better understand what we might be facing in the future, we need to… consider the possibility that we are underestimating future risk.”
What To Watch For
Other insurance giants are also set to post earnings in the coming weeks. Progressive will report next Wednesday, while Allstate and Liberty Mutual are slated for next month.
Further Reading
Major Natural Disasters Cost U.S. $165 Billion Last Year—Here Are The Priciest Weather Events (Forbes)
8 Heat Records That Were Broken In The Last 8 Years—The Hottest On Record (Forbes)
Source: https://www.forbes.com/sites/jonathanponciano/2023/01/17/insurance-stock-tanks-after-firm-warns-catastrophic-winter-storm-last-year-dealt-459-million-in-losses/