The Travelers Cos. Inc. and The Allstate Corp. shares finished the week ending July 21 in the green, even as both companies disclosed massive catastrophe losses for the second quarter.
Travelers reported second-quarter earnings that included $1.48 billion in catastrophe losses due to property claim services-designated weather events that happened during 88 of the 91 days in the period.
CreditSights analyst Josh Esterov said in an interview that, outside of catastrophes, "virtually every key performance indicator" for Travelers was trending in a favorable direction.
"They've got a rock solid balance sheet, and they've got good diversification across the commercial and retail lines," Esterov said. "If I'm more operationally levered to the auto and home space like an Allstate or The Progressive Corp., I'm probably more worried right now."
Heavy losses
Allstate released results for June that were also impacted by heavy catastrophe losses. The property and casualty insurer said its pretax catastrophe losses for the month amounted to about $1.01 billion.
The catastrophe losses stemmed from at least 18 events that, in total, were estimated at $1.13 billion, with roughly 60% of the losses being related to four wind and hail events. June's results brought Allstate's second-quarter catastrophe losses to $2.70 billion before tax.
Wells Fargo analyst Elyse Greenspan said the June catastrophes were the highest for the month in her model and "well above" the five-year average of $296 million. Allstate's shares managed to rally due to catastrophes coming in close to expectations and because the insurer did not see a big amount of adverse development, Greenspan said in a note.
"We believe the next catalyst for the stock will be the underlying margin the company reports in the quarter," she said.
Allstate shares were trading up 9.67% for the week around midday July 21.
Travelers recorded a net loss of $14 million for the second quarter, a sharp drop from a net income of $551 million a year ago and $975 million in the prior period. Nevertheless, its shares were trading up 4.26% around midday Friday.
Esterov said he expects second-quarter results in the property and casualty space to reflect a continuation of a lot of recent trends, mainly those involving insurers in the auto and home space "racing" to implement price increases as quickly as they can while pulling back from geographic areas with unfavorable regulatory environments.
Managed care earnings
Earnings season has also kicked off in the managed care industry.
Elevance Health Inc. reported earnings early in the week, showing second-quarter operating revenue of $43.4 billion, a rise of $4.9 billion, or 12.7%, year over year. CEO Gail Boudreaux said the growth was driven by premium rate increases in the company's Health Benefits business as well as higher premium revenue stemming from membership growth in Medicaid and Medicare.
CFO John Gallina made it clear during a conference call that elevated medical costs are now an expected part of a post-COVID-19 world, and the insurer has already included higher medical costs into its guidance and offset it by repricing.
Elevance shares were trading up 8.75% around mid-afternoon Friday.
Through Thursday, the S&P 500 was up 0.65% to 4,534.87. The S&P 500 US Insurance index was higher by 4.04% at 595.88.