Travelers Cos. crushed earnings estimates for the fourth quarter of 2024 on Wednesday but signaled the California wildfires will take a toll in the current first quarter. Travelers stock, a Dow Jones component, trimmed gains near a buy point.
On Wednesday, Verisk Analytics estimated insured losses from the California wildfires of $28 billion-$35 billion, a record-setting level. Last week, Keefe Bruyette & Woods analysts estimated $40 billion. At one point, densely populated Los Angeles county had multiple wildfires raging, fueled by drought and severe winds. The death toll rose to 28 on Wednesday, reports said.
California Wildfires To Hurt Travelers Earnings
Travelers Chief Financial Officer Dan Frey told analysts on an earnings call that the insurer's 2025 catastrophe plan figures, released Wednesday, "obviously" did not anticipate the January wildfires. But Frey warned the California wildfires, which started on Jan. 7, will have a "material impact" on the company's Q1 earnings.
"Because the event is so recent and to some degree still ongoing, we'd like to take more time to refine our analysis before providing an estimate," Frey added.
Here is everything management said about the California wildfires on the Travelers earnings call:
Expediting claim payments: Travelers CEO Alan Schnitzer opened Wednesday's call with analysts by acknowledging "the tragic wildfires that have devastated communities across Los Angeles" and promising to support customers "as they recover and rebuild." Further, Travelers has "assessed impacted areas through aerial imagery and made live contact with a substantial majority of our customers with claims, enabling us to expedite claim payments." Travelers seeks "a resilient insurance market going forward" and will work with California lawmakers to achieve that, he added.
Managing wildfire exposure: "We've taken steps to thoughtfully manage our exposure in wildfire-prone areas, others have too," Schnitzer said. That came in reply to a question from analyst Alex Scott at Barclays about wildfire exposure, "to Pacific Palisades in particular." Ahead of the Travelers earnings report, CFRA analyst Catherine Seifert had noted that Travelers, Allstate, Chubb and Cincinnati Financial had "limited" exposure to the California wildfires after they "severely curtailed" writing homeowners policies in the state due to the "climate-related risks and challenging regulatory environment" there.
Calculating insured losses: Schnitzer cautioned against using a company's estimated market share and estimated industry losses to try to size a company's potential hit. He said "insured losses for the industry will develop over time" and "publicly available market share is dated information" that "doesn't reflect actions we or others have taken to manage exposure." Further, "it doesn't reflect any differences that might exist between local market share and statewide market share." That reply came after analyst Elyse Greenspan of Wells Fargo asked about Travelers' "potential share in the impacted areas."
Weighing California market: Schnitzer said the California wildfires could become "a catalyst for further and meaningful reforms," with Travelers waiting "to see how that shakes out before we make any decisions." He was responding to a question from analyst Yaron Kinar of Jefferies about whether the event "would impact the company's appetite for home and property business in the state." Travelers president of personal insurance Michael Klein added that the company has filed proposed rate increases for property with the state that "doesn't include the losses from the California wildfires. So all of that will certainly feed into our assessment of actions we need to take going forward."
Travelers Stock, Travelers Earnings Crush Views
Travelers stock pared gains to 3.2% on the stock market today. In morning trade, TRV stock had gapped up more than 6% to retake the 50-day moving average, but closed below it. Shares are working on a 269.56 buy point from a flat base, still 8% below the entry, according to MarketSurge charts.
A move above Wednesday's high of 254.42 could offer an early entry into the Dow Jones giant.
For Q4, Travelers Cos. reported operating EPS of $9.15, a 31% increase year over year. That smashed views for $6.63, FactSet shows. Total revenue rose 10% during the quarter. Net written premiums rose 7%. The combined ratio — a key profit metric — declined by 2.6 points vs. a year ago to reach 83.2% (a lower number is better).
"The improvement in the combined ratio was driven by very strong underlying profitability," Travelers CEO Schnitzer said in the earnings release.
"Earned premiums and underwriting margins were strong in all three segments," he added. Those segments include business insurance, personal insurance, and bond and specialty insurance.
