Travelers 3Q profit rises 7 pct; raises outlook

AP News
Posted: Oct 21, 2010 10:19 AM
Travelers 3Q profit rises 7 pct; raises outlook

Travelers Cos. on Thursday reported third-quarter earnings that easily beat analysts' expectations as the insurer wrote more policies and catastrophe claims fell.

Travelers also raised its full-year earnings outlook following the strong third-quarter results. The new guidance also topped analysts' forecasts.

Shares of the Dow Jones industrial average component rose 75 cents to $55.39 in morning trading after rising to a 52-week high of $55.70 earlier.

Earnings were lifted by a 2 percent rise in new premiums written as Travelers inked more new policies and renewal rates remained strong in its personal insurance and financial, professional and international insurance divisions.

Catastrophe claims also fell sharply during the quarter, helping improve profitability. Travelers said most claims were tied to several severe wind and hail storms during the quarter.

Travelers, based in New York, reported net income of $1 billion, or $2.11 per share, during the quarter ended Sept. 30, a 7 percent increase from the $935 million, or $1.65 per share, a year ago.

Adjusted earnings, which exclude realized investment gains and losses, fell 6 percent to $858 million, or $1.81 per share.

However results were still strong enough to easily beat analysts' forecast for earnings of $1.51 per share. Analysts do not typically include realized investment gains and losses when forecasting insurance companies earnings because they aren't considered a core part of the business.

Travelers' combined ratio, which measures how much an insurer spends on paying out claims compared with how much it takes in from writing new policies, rose to 90.6 percent from 89.7 percent during the year-ago period.

The combined ratio rose even though catastrophe claims fell because Travelers released more reserves during the third quarter in 2009, which drove the ratio lower.

Catastrophe claims excluding those covered by reinsurance fell to $117 million during the third quarter, down 26 percent from the $158 million in claims during the third quarter last year.

New written premiums rose to $5.46 billion in the third quarter from $5.34 billion during last year.

Travelers now expects adjusted earnings to range between $5.75 and $5.95 per share for the full year. That's up from a previous estimate of $5.20 to $5.45 per share and better than the $5.69 per share analysts had forecast.