(Bloomberg) -- Travelers Cos.,the lone property-casualty insurer in the Dow Jones IndustrialAverage, said quarterly profit slipped 18 percent to its lowestsince 2012 as costs tied to natural disasters rose while incomefrom investments fell.

Second-quarter net income declined to $664 million, or $2.24 ashare, from $812 million, or $2.53, a year earlier, New York-basedTravelers said Thursday in a statement. Operating profit was $2.20a share, beating the $2.04 estimate of 23 analysts surveyed byBloomberg.

“Higher catastrophe losses, including the Fort McMurraywildfires” in Canada, hurt results, the insurer said in thestatement.

Global catastrophe costs have climbed across the industry thisyear, including claims from the wildfires and U.S. storms.Travelers counts the U.S. as its largest market and expanded in2013 with the purchase of Dominion of Canada GeneralInsurance. While the company typically generates more than $800million of net income a quarter, profit was just $304 million inthe last three months of 2012 when Superstorm Sandy lashed theEastern U.S.

Also, low interest rates in recent years have squeezedinvestment income from insurers’ portfolios, which are dominated bybonds. Yields of the safest debt fell further after U.K. votersdecided in June to leave the European Union. Income fromalternative holdings has also slumped. The company has posted threestraight declines in quarterly profit, pressuring Chief ExecutiveOfficer Alan Schnitzer, who took over late last year for longtimeleader Jay Fishman.

Catastrophe costs

Return on equity slipped in the second quarter to 10.9 percent,from 13.3 percent a year earlier. Travelers’ book value, a measureof assets to liabilities, rose to $85.73 a share from $82.65 at theend of March. The company repurchased $550 million of its shares inthe quarter.

Travelers posted a combined ratio of 93.1, meaning it retained6.9 cents of every premium dollar, after claims and expenses. Thatworsened from a ratio of 90.8 in the second quarter of 2015.Catastrophe costs rose to $222 million from $143 million a yearearlier.

Policy sales advanced 2.9 percent to $6.35 billion. The insurercharged domestic business insurance customers 2.1 percent more atrenewal in the three months ended June 30. That compares with a 2.4percent increase in the first quarter.

The gain from reserves widened to $288 million pretax from $207million a year earlier. Insurers regularly reassess the moneythey’ve set aside for future claims and can reduce or increase theamount based on their expectation of losses.

Private equity

Net investment income declined to $442 million, from $503 million ayear earlier. The contribution from the holdings outside of bondsfell by more than half to $38 million on lower returns from privateequity and real estate partnerships.

Travelers is headed for its eighth-straight annual advance inNew York trading, tied for the longest streak in the 30-company Dowaverage. The company climbed 3.7 percent from Dec. 31 throughWednesday, compared with the 6.7 percent gain in the Dow.

Private equity generated “a few million dollars, and we wouldhave expected about $50 million pretax,” Chief Investment OfficerBill Heyman said on an earnings conference call Thursday.

Related: Sinking yields drag investment income to 12-yearlow at P&C insurers

Low interest rates have squeezed investment income at insurers,an industry that holds trillions of dollars in assets, mostly inbonds, to back obligations to policyholders. While hedge fundsoffered the potential for better returns, those holdings havefaltered in recent periods, pushing insurers such as AmericanInternational Group Inc., MetLife Inc. and Lincoln National Corp.to shift to property bets or private equity. Travelers said realestate partnership returns were also lower in the secondquarter.

“Hedge funds were below what we expected, but positive,” Heymansaid. “And the big variable was private equity, where the portfoliowas almost flat.”

Travelers fell 1.1 percent to $115.74 as of 11:23 a.m. in NewYork trading. That narrowed its advance for the year to 2.6percent, trailing the 6.6 percent gain of the 30-company Dowaverage.

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