Texas hailstorms take a toll on insurance company profits

Travelers Cos. said Thursday that its first-quarter profit slipped 17 percent as catastrophe costs rose from bad weather including last month’s North Texas hailstorms and investment income dropped on lower hedge fund returns.

Net income fell to $691 million, or $2.30 a share, from $833 million, or $2.55, a year earlier, New York-based Travelers said. Operating profit was $2.33 a share, missing the $2.55 estimate of 25 analysts surveyed by Bloomberg.

CEO Alan Schnitzer, who took over late last year for longtime leader Jay Fishman, is confronting near-record-low bond yields and uneven results in some of the alternative holdings — such as private equity and hedge funds.

Two hailstorms that pounded North Texas in March caused an estimated $1.1 billion in damage. And on Thursday, the Insurance Council of Texas estimated that a hailstorm in San Antonio may have been the costliest in Texas history, with damage estimated at nearly $1.4 billion.

Progressive, the first major U.S. property insurer to report results, was also hurt by the Texas hailstorms. First-quarter net income fell 13 percent to $258.2 million. Allstate said Thursday that catastrophe losses were about $538 million in the first quarter, led by costs tied to hail in southern states.

“This quarter’s results were mixed,” Charles Sebaski, an analyst at BMO Capital Markets, said in a note on Travelers. “While the earnings-per-share miss was mainly a catastrophe-loss issue, which we believe investors should look past, the business insurance segment seems to be showing some early signs of strain from the competitive pricing environment.”

This story was originally published April 21, 2016 at 1:27 PM with the headline "Texas hailstorms take a toll on insurance company profits."