Shares in The Travelers Cos. Inc. experienced a dip this week following the release of first-quarter earnings that revealed unexpectedly high catastrophe losses, contrasting with other sector heavyweights. The insurer reported a first-quarter net income of $1.12 billion, an increase from $975 million during the same period in 2023. However, catastrophe losses also escalated due to severe wind and hailstorms in the central and eastern regions of the US, reaching $712 million pretax, up from $535 million in 2023.
Travelers' stock closed at $223.12 on Tuesday before the company reported its first-quarter earnings and was trading at $212.94 by noon on Friday, marking a 4.56% decline.
According to Piper Sandler analyst Paul Newsome, the insurer's earnings resulted in an earnings miss despite it being a generally good quarter for catastrophe losses. "The elevated catastrophe losses are interesting because Progressive has already reported catastrophe losses that were lower than normal for the quarter and Allstate has reported January and February catastrophe losses that were also low," Newsome said. He added that it is possible Travelers is an outlier, but more data will be needed when more companies report results.
Another potential concern for investors is Travelers' lower net favorable reserve development for the quarter of 0.9 percentage point compared to 1.2 percentage points for the same period in 2023. Newsome noted that this could translate into lower expected earnings as analysts typically assume companies like Travelers will have sustained favorable reserve development.
By Thursday's end of trading, Travelers' stock was down 4.8% from the previous Friday while fellow property & casualty insurers The Allstate Corp. and The Progressive Corp. saw increases of 1.4% and 4.3%, respectively.
UnitedHealth Group Inc.'s and Elevance Health Inc.'s stocks traded up this week following their release of first-quarter results that showed a rise in earnings despite ongoing issues with government-subsidized health plans and losses from a cyberattack. UnitedHealth's digital health subsidiary, Change Healthcare Inc., was hit by a widely publicized first-quarter cyberattack costing about $870 million, or 74 cents a share, according to comments made by President and CFO John Rex during a Tuesday earnings call.
Despite the attack, UnitedHealth leadership pointed to revenue growth for the quarter year over year and stabilization of its medical costs. J.P. Morgan analyst Lisa Gill said in a research note that second-quarter results will be critical to affirming UnitedHealth's utilization/medical cost assumptions.
Facing similar Medicare Advantage challenges as UnitedHealth, Elevance leadership stated during a Thursday earnings call that it planned to take a disciplined approach to Medicare Advantage bids. Both UnitedHealth's and Elevance's stock values increased from the week prior, rising by 12.3% and 5.6%, respectively, by close of trading Thursday.