(Bloomberg) -- Travelers Cos. was burned again by Mother Nature.
Alan Schnitzer has been contending with volatile weather since becoming chief executive officer in late 2015, extending a trend of recent years in which storm seasons last longer than usual and strike regions that previously weren’t considered vulnerable. There were more than 400 tornadoes in the first quarter in the U.S., quadruple the three-year average, according to National Weather Service data.
The causes for the rising costs are in dispute. Some blame climate change. Increased development along coastlines or near forests have added to risks from hurricanes and wildfires. Whatever the reason, the industry is seeking to raises prices as companies from American International Group Inc. to XL Group Ltd. encounter unusually high costs.
“During the past decade, the U.S. has experienced significant shifts in the frequency, severity and location of natural disasters,” Mike Consedine, CEO of the National Association of Insurance Commissioners, said in a statement last month.
Travelers, the lone property-casualty insurer in the Dow Jones Industrial Average, slipped $2 to $118.40 in early trading at 7:57 a.m. in New York. The company dropped about 1.7 percent from Dec. 31 through Wednesday, after posting annual gains every year since the end of 2008.
Net income for the first quarter dropped to $617 million, or $2.17 a share, from $691 million, or $2.30, a year earlier, New York-based Travelers said Thursday in a statement. It was the fifth year-over-year decline in six quarters. Operating profit was $2.16 a share, missing the $2.35 estimate of 20 analysts surveyed by Bloomberg.
Results reflect the “unusually high first-quarter catastrophe losses that arose from a record number of tornado and hail events,” Schnitzer said in the statement. Pretax catastrophe costs jumped to $347 million from $318 million a year earlier.
Allstate Corp., the largest publicly traded U.S. home and auto insurer, said separately Thursday that catastrophes cost the company more than half a billion dollars in March alone. The Northbrook, Illinois-based company is scheduled to report complete first-quarter results on May 2.
Travelers in recent months said it would raise rates for car insurance to offset losses from higher frequency of accident claims, a move that’s helped Allstate and Progressive Corp. improve profitability. Travelers’ policy sales rose 5.3 percent to $6.5 billion.
The insurer charged domestic business customers 2.8 percent more at renewal during the quarter, according to a presentation. That compares with a 2.3 percent increase in the fourth quarter.
The gain from reserves was $81 million, narrowing from $180 million a year earlier. Insurers regularly reassess the money they’ve set aside for future claims and can scale back or raise the amount based on their expectation of losses.
Investment income rose to $610 million, from $544 million on gains from private-equity holdings. Insurers hold premiums before paying claims, allowing them to build huge portfolios dominated by bonds. Companies have been diversifying, however, for more attractive returns in an era when fixed-income yields are near historic lows.