For the second quarter of 2020, the company expects to report a net loss per diluted share of $0.16 and a core loss per diluted share of $0.20, resulting from a high level of catastrophe losses and, as expected, losses in the company’s non-fixed income investment portfolio.
The company’s estimate for catastrophe losses is $854 million pre-tax ($673 million after-tax), net of reinsurance. Catastrophe losses primarily resulted from severe storms in several regions of the United States, as well as events related to civil unrest.
The company expects to report net investment income of $268 million pre-tax ($251 million after-tax), which includes investment income from the fixed income portfolio of $511 million pre-tax ($438 million after-tax) and losses in the non-fixed income portfolio of $234 million pre-tax ($180 million after-tax). As the company discussed in its first quarter 2020 earnings disclosure, its non-fixed income returns are generally reported on a one-quarter lagged basis and directionally follow the broader equity markets. Based on its composition, the company’s non-fixed income investment portfolio declined less than the broader equity markets during the first quarter.
In terms of the company’s underlying underwriting results, COVID-19 and related economic conditions had a modest net impact in the quarter, reflecting the company’s disciplined underwriting in terms of products and classes of business written, as well as careful management of terms and conditions. Insurance losses directly attributed to the pandemic of $114 million pre-tax and a $63 million pre-tax reduction in the estimate of ultimate audit premiums receivable were approximately offset by initial estimates of favorable frequency from the shelter-in-place environment, primarily in short-tail lines (net of premium refunds), and other items.
Separately, regarding third quarter 2020 results, the company provided an estimate of its subrogation recoveries related to claims against PG&E Corporation and Pacific Gas and Electric Company (together “PG&E”) resulting from the 2017 and 2018 wildfires in California. In connection with PG&E’s emergence from bankruptcy, which occurred on July 1, 2020, the company will recognize favorable prior year reserve development related to these claims of approximately $400 million, pre-tax and net of expenses and reinsurance, in its third quarter 2020 results.
Second Quarter 2020 Conference Call
As previously announced, Travelers will review its second quarter 2020 results at 9 a.m. ET on Thursday, July 23, following the release of results earlier that morning. Investors can access the call via webcast at investor.travelers.com or by dialing 844.895.1976 within the United States and 647.689.5389 outside the United States. A slide presentation, statistical supplement and live audio broadcast will be available on the investor section of the Travelers website. A replay of the webcast will be available on the same website following the conference call.