Travelers profit misses estimates on hit from catastrophe losses

By Niket Nishant

(Reuters) -Travelers Companies missed first-quarter profit estimates on Wednesday as severe storms in the United States drove up its catastrophe losses, sending shares of the insurance bellwether down nearly 8%.

For years, extreme weather activity has troubled the insurance industry, which is liable to pay for damages caused by such events.

Global insured losses from natural catastrophes in the first quarter were estimated to be $20 billion, heavily driven by storm activity in the United States, according to a report by reinsurance broker Gallagher Re.

Travelers' catastrophe losses, net of reinsurance, jumped to $712 million from $535 million a year earlier, due to severe wind and hail storms in the central and eastern regions of the United States.

The stock hit its lowest in nearly three months and was the biggest loser on the Dow Jones Industrial Average Index.

"Travelers had a strong start to the year, but the market may have been looking for more," Morningstar analyst Brett Horn wrote in a note.

The company continued to reap the benefits of growing hopes of a soft landing and a still-tight labor market that has revived spending on insurance policies.

Core income rose 13% to $1.1 billion, or $4.69 per share, for the three months ended March 31 from a year earlier, boosted by a 57% surge in underwriting gains and 28% jump in net investment income.

The core income, however, was lower than the $4.90 per share analysts had expected, according to LSEG.

Underlying combined ratio also improved to 87.7% in the quarter, compared with 90.6% a year earlier. A ratio below 100% means the insurer earned more in premiums than it paid out in claims.

As of Tuesday's close, Travelers' shares had gained 17% this year compared with a near 19% jump in the S&P 500 Property & Casualty Insurance Index.

(Reporting by Niket Nishant in Bengaluru; Editing by Shinjini Ganguli and Shailesh Kuber)