Tornado claims leave Travelers with its first loss in seven years

NEW YORK - Travelers Cos., the lone insurer in the Dow Jones industrial average, posted its first quarterly loss in seven years as U.S. tornadoes fueled catastrophe claims that cost the company more than Hurricane Katrina.

The second-quarter net loss of $364 million, or 88 cents per share, compares with a profit of $670 million, or $1.35, a year earlier, the insurer said Thursday.

Chief Executive Jay Fishman scaled back share repurchases as catastrophe claims swelled for New York-based Travelers. U.S. property-casualty insurers including Allstate Corp. and State Farm Mutual Automobile Insurance Co. took losses on a U.S. tornado season that killed more than 150 people in Joplin, Mo., and leveled parts of Tuscaloosa, Ala.

Those two events "really produced the great majority" of losses, Mark Dwelle, an analyst at RBC Capital Markets, said in an interview Thursday. "A lot of the losses were commercial, not just the routine residential losses that we normally see."

Catastrophes cost the company $1.67 billion before taxes in the three months ended June 30, compared with $439 million a year earlier. Travelers posted $1.52 billion in pretax losses in the third quarter of 2005 on claims tied to Hurricanes Katrina and Rita. Travelers writes the majority of its policies for commercial customers.

Policy sales climbed 2.3 percent to $5.82 billion from $5.69 billion on higher rates for some business clients, including those buying workers' compensation coverage.

Rate increases may follow

Travelers closed up 63 cents, or 1.1 percent, at $57.69 Thursday. The insurer had said last month that it would post an operating loss for the period.

Travelers' book value, a measure of assets minus liabilities, fell to $59.62 per share from $59.91 at the end of March as the company scaled back share repurchases to preserve capital. The firm bought back $237 million in shares in the quarter, compared with $1.4 billion in the same period in 2010.

Travelers lost 25 cents per premium dollar in the second quarter, compared with a gain of 4.8 cents a year earlier on increased catastrophe losses. "These losses for us were larger than those we incurred from Hurricane Katrina in 2005 and the equivalent of losses we would expect from a 1-in-100-year hurricane," Fishman said.

More than 1,600 tornadoes have been reported this year, compared with 1,282 in all of 2010, according to the National Oceanic and Atmospheric Administration. The tornado that tore through Joplin on May 22 was the deadliest U.S. storm in at least 60 years. Homes and businesses in Tuscaloosa were flattened as tornadoes touched down in six states in the Southeast on April 27.

Insured losses near $15 billion

Travelers booked a $168 million gain by withdrawing funds from reserves after determining that it had more money set aside than needed for claims on policies sold in prior quarters. That compares with a benefit of $384 million a year earlier.

Travelers has about 2,400 people in downtown St. Paul and about 32,000 companywide, including major operations in Hartford, Conn., and New York. In 2004, the St. Paul Cos. acquired Travelers Property Casualty, changing the name to St. Paul Travelers Cos. and, in 2007, to Travelers Cos. Inc. The company moved its corporate headquarters from St. Paul to New York in March 2009.

Fishman, 58, avoided losses in 2008 and 2009 by keeping the fixed-income portfolio in municipal bonds, as rivals such as American International Group Inc. posted losses on mortgage-backed securities. Travelers held about $39 billion of municipal debt as of June 30, according to a filing.