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Q2 catastrophe losses up 50.6% for Travelers after hail, wildfires


July 21, 2016   by Canadian Underwriter


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The Travelers Companies Inc. reported Thursday its combined ratio deteriorated 2.3 points, it renewed July 1 a property catastrophe reinsurance contract for Canada covering losses between $200 and $600 million (plus 50% of losses over $100 million), and that it paid US$524 million towards settling asbestos-related litigation under policies issued to an American manufacturer of thermal insulation products.

New York City-based Travelers reported a combined ratio of 93.1% in the three months ending June 30, up 2.3 points from 90.8% in Q2 2015.

Claims and claims adjustment expenses were $3.762 billion in Q2 2016, up 6.1% from $3.547 billion in Q2 2015. All figures, except for its Canadian reinsurance treaty, are in United States dollars.

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“Catastrophe losses in the second quarters of 2016 and 2015 were $333 million and $221 million, respectively,” Travelers said in a filing with the U.S. Securities and Exchange Commission. “Net favorable prior year reserve development in the second quarters of 2016 and 2015 was $288 million and $207 million, respectively.”

During the three months ending June 30, catastrophe losses “primarily resulted from wind and hail storms in several regions of the United States and wildfires in Canada,” Travelers added.

The carrier reported premiums of $6.07 billion in the latest quarter, up from 2.3% from $5.931 billion in Q2 2015.

Net investment income dropped 13%, to $549 million in the most recent quarter from $632 million in Q2 2015.

Total revenues were up 1.1%, from $6.71 billion in Q2 2015 to $6.785 billion in the latest quarter.

Net income dropped 18.2%, from $812 million in Q2 2015 to $664 million in Q2 2016.

Of Travelers’ premiums in Q2, $3.361 billion was from business and international insurance, $1.918 billion was from personal insurance and $518 million was from bond and specialty. The business and international segment writes insurance in Canada, Britain, Ireland and Brazil. That segment also includes Lloyd’s Syndicate 5000, which provides insurance in marine, property, power, utilities and aviation.

Travelers has offices in Canada and previously acquired The Dominion of Canada General Insurance Company.

On July 21, Travelers reported its business and international segment had a combined ratio of 97.5% in Q2 2016, up 4.3 points from 93.2% in Q2 2015. The combined ratio in the bond and specialty segment improved 21.3 points (from 73.7% in Q2 2015 to 52.4% in Q2 2016). In that segment, “net favorable prior year reserve development in the second quarters of 2016 and 2015 was $150 million and $40 million, respectively,” Travelers noted.

The combined ratio in personal insurance deteriorated by 4.6 points, from 91.1% in Q2 2015 to 95.7% in Q2 2016.

In its Q2 filing with the SEC, Travelers also discussed treaties it renewed. One of those – renewed July 1 – was its Canadian Property Catastrophe Excess-of-Loss Reinsurance Contract. That contract “covers all property written by the Company’s Canadian businesses for Canadian insureds, including, but not limited to, habitational property, commercial property, inland marine, ocean marine and auto physical damages exposures, with respect to risks located worldwide, written for Canadian insureds,” Travelers said, adding it is effective through June 30, 2017. It “provides coverage for 50% of losses in excess of C$100 million (US$77 million at June 30, 2016), up to C$200 million (US$154 million at June 30, 2016) and for 100% of losses in excess of C$200 million (US$154 million at June 30, 2016), up to C$600 million (US$462 million at June 30, 2016).”

Another treaty renewed July 1 was one covering “up to $800 million part of $850 million of coverage, subject to a $2.25 billion retention, for certain losses arising from hurricanes, tornados, hail storms, earthquakes and winter storm or freeze losses from Virginia to Maine for the period July 1, 2016 through and including June 30, 2017,” Travelers reported. “Losses from a covered event (occurring over several days) anywhere in the United States, Canada, the Caribbean and Mexico and waters contiguous thereto may be used to satisfy the retention.”

Net asbestos reserves were $1.23 billion at June 30, 2016, compared with $1.73 billion at June 30, 2015, Travelers noted.

When Travelers released its Q1 financials in April, the firm suggested at the time that a plan of reorganization – proposed as part of the bankruptcy proceeding of Pittsburgh Corning Corp. – will “become effective.”

Travelers said Thursday that an amended plan “became effective” April 27. The firm reported July 21 that Travelers’ payments, in the second quarter of 2016, “totaled $524 million, of which $518 million was related to asbestos reserves.”

Pittsburgh Corning is 50% owned by Corning Inc. and 50% owned by PPG Industries, whose products include industrial coatings, glass, epoxy and titanium dioxide.

“For many years, PPG has been a defendant in lawsuits involving claims alleging personal injury from exposure to asbestos,” PPG stated in its annual report for 2015. “Most of PPG’s potential exposure relates to allegations by plaintiffs that PPG should be liable for injuries involving asbestos-containing thermal insulation products, known as Unibestos, manufactured and distributed by Pittsburgh Corning Corporation.”

Pittsburgh Corning filed a voluntary petition for bankruptcy in April, 2000 because that was “the only remaining legal process available to reasonably resolve its asbestos liability claims,” the firm stated earlier. Its reorganization plan includes a $3 billion trust to pay asbestos personal injury claimants, the LexisNexis news service reprted earlier, adding that in 2000, Pittsburgh Corning was “facing more than 200,000 asbestos personal injury claims.”

Travelers and 30 other insurers reached an agreement in principle, with PPG, in 2009, to settle asbestos-related coverage litigation under insurance policies issued to PPG, Travelers stated in its Q1 2016 filing.