Travelers’ stock drops after profit misses expectation, as catastrophe losses increased

Travelers Companies Inc., a leading provider of property and casualty insurance, reported lower-than-expected third-quarter earnings on October 26, 2021, causing a significant drop in its stock price. The New York-based insurer reported an earnings per share (EPS) of $1.58, missing analysts' estimates of $1.73 per share. The company's revenue for the quarter was $7.3 billion, which was in line with expectations.

The primary reason for the earnings miss was an increase in catastrophe losses. Catastrophe losses totaled $732 million in the third quarter, which was higher than the $500 million that analysts had anticipated. These losses were mainly due to hurricanes Ida and Nicholas in the United States and tropical storms in Europe.

Catastrophe losses refer to insurance claims arising from natural disasters such as hurricanes, earthquakes, and wildfires. These events can cause significant damage to property and infrastructure, leading to substantial financial losses for insurers like Travelers.

Despite the earnings miss, Travelers' CEO, Alan Schnitzer, expressed optimism about the company's future prospects. He stated that the company's underlying business remained strong and that it was well-positioned to manage the impact of catastrophic events.

The company also announced that it would increase its prices for new policies to offset the impact of catastrophe losses. This price increase is expected to take effect in the fourth quarter of 2021 and will apply to new business written in the United States and Canada.

Investors reacted negatively to the earnings miss and the increase in catastrophe losses, causing Travelers' stock price to drop by more than 5% in after-hours trading following the earnings announcement. However, it is important to note that the stock price has since recovered somewhat, but it is still below its pre-earnings announcement level.

In summary, Travelers' third-quarter earnings missed analysts' expectations due to higher-than-anticipated catastrophe losses. The company reported an EPS of $1.58, compared to analysts' estimates of $1.73, and a total revenue of $7.3 billion. The catastrophe losses were primarily due to hurricanes Ida and Nicholas and tropical storms in Europe. The company announced that it would increase prices for new policies to offset the impact of these losses. The earnings miss and the increase in catastrophe losses caused a significant drop in Travelers' stock price following the earnings announcement.