Bad weather across the U.S has been widely reported all year and has included hail storms, tornadoes, severe thunderstorms, and wildfires. Some of the impacts of these storms are coming to fruition as insurers like Travelers and Allstate begin reporting their second-quarter financials.
Hit by severe weather events such as tornadoes and hail storms in various regions of the U.S., Travelers reported that its 2008 second-quarter losses reached $231 million after-tax ($356 million pre-tax). Compared to the same quarter last year, in which the company paid out $26 million after-tax ($40 million pre-tax), that's an increase of gargantuan proportion: more than 780 percent. However, the company reported that it was able to offset the results by through its investment portfolio.
"We experienced another quarter of solid underwriting performance, as evidenced by our 89 percent combined ratio, which included 9.8 points of net favorable prior year reserve development and 6.6 points of catastrophe losses," said Jay Fishman, chairman and CEO, in a release. "Our diversified, high-quality investment portfolio continued to deliver impressive results, although at a lower level than in the prior year quarter. In addition, impairments continued to be negligible. While the marketplace remains competitive, it is consistent with the expectations we had coming into the year."
Travelers noted that it expects catastrophe losses to reach even higher levels by the end of the year, especially as hurricane season continues to gear up. It estimates it will end 2008 with $785 million pre-tax ($510 million after-tax) in catastrophe loses by the time Dec. 31 rolls around.
Things weren't much different in Northbrook, where Allstate's ballooning catastrophe losses followed Travelers' experience, though not nearly as severe. For the second quarter 2008, the company's catastrophe losses totaled $698 million, compared to $433 million in the second quarter of 2007, an increase of more than 61 percent. As noted previously by Travelers, Allstate attributed the increase to severe weather experienced across the country, including tornado activity, that resulted in 43 catastrophe events in the second quarter of 2008 compared to 34 in the second quarter of 2007.
Though catastrophes played a large role in the amount of losses reported, it wasn't the sole culprit. Allstate reported that its homeowners' gross claim frequency, excluding catastrophes, increased almost 14 percent compared to the second quarter of 2007, fueled by non-catastrophe weather-related claim trends.
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