The Travelers Cos. Inc. shares saw a slight bump after it released second-quarter earnings results that were better than the market anticipated.
The broader market fared well for the week ending July 22, with the S&P 500 climbing 2.55% to 3,961.63. Insurance companies underperformed the wider market as the S&P 500 Insurance index rose just 1.10% to 523.86.
Piper Sandler analyst Paul Newsome said in an interview that Travelers' results were better than expected, likely driven by commercial insurance businesses holding up well and strong investment income. Travelers' second-quarter net income fell 41% year over year, while core income declined 29% from the year-ago period.
However, the insurer's personalized business fared poorly, Newsome said, pointing to similarly weak results from The Allstate Corp.
"I think there's some understandable fears that the personalized business, particularly auto insurance, will continue to deteriorate," Newsome said.
Michael Klein, president of personal insurance at Travelers, said the company did not see a "significant difference" in auto bodily injury losses from what it expected going into the second quarter. Travelers even experienced some favorability on the frequency front, which offset some of the severity trends. Klein did concede that Travelers is being hit by the other pressures weighing on the industry as a whole, including slowdowns in auto repair and higher parts prices.
The commentary from Travelers executives likely did not allay worries that the insurer will not be able to raise fast enough to counteract inflationary trends, Newsome said.
Travelers shares ticked up 0.15% for the week.
Although there were no major named catastrophes during the second quarter, several property and casualty carriers logged heavier catastrophe losses than expected for the period, according to the Piper Sandler analyst.
Allstate recorded $1.11 billion in pretax catastrophe losses in the second quarter, including $356 million of estimated pretax catastrophe losses for June alone. Unfavorable noncatastrophe prior-year reserve reestimates totaled $408 million during the period, as inflationary trends continued to adversely impact current and prior report year claim severity and loss reserve estimates.
Allstate shares fell 5.07% on the week.
In the managed care space, Elevance Health Inc. this week announced GAAP net income of $6.79 per share for the second quarter. Adjusted net income was $8.04 per share, up 14.4% year over year.
CFRA Research analyst David Holt attributed Elevance's above consensus revenues of $38.50 billion to membership growth in both Medicaid and Medicare, a pair of acquisitions and rate increases. Higher levels of utilization from COVID-19 remain a drag on Elevance's commercial operating margin, Holt said.
Elevance lost 6% this past week.