Travelers Cos. reported an 18% decline in second-quarter operating profit as insurance claims from wind and hail storms eroded earnings, which were below analyst estimates and a catalyst for a sharp drop in the company's shares Tuesday.
Separately, the company was hit with an adverse ruling in a long-running case involving asbestos-related claims of more than $500 million tied to the insurer's coverage of Johns-Manville Corp. decades ago.
The U.S. Court of Appeals for the Second Circuit reversed a 2012 ruling by a lower court. The ruling by the federal appellate court in New York directed Travelers to make the $500 million payment, plus interest.
"We are still reviewing the decision, but this is a matter we have disclosed for more than 10 years and we have contemplated this as a potential outcome in our reserving, although we do not have a provision for interest," a Travelers' spokesman said. The company estimated the interest at approximately $75 million, before taxes.
In afternoon trading, Travelers shares were down 4.3% at $91.15 amid gains in the broader equities market. With the decline, Travelers shares are up 0.7% in 2014.
One of the country's largest property-casualty insurers, Travelers often sets the tone for industry earnings that will be announced by its peers in the coming weeks. Analysts watch closely how it is maneuvering through a competitive price environment while low interest rates continue to put pressure on...
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Click here to read the Court Decision In Re: Johns-Manville Corporation et al, decided 7/22/2014
