DOW JONES NEWSWIRES
Travelers Cos.' (TRV) first-quarter net income fell 32% as the
commercial and personal insurance provider realized a larger amount
of investment losses.
As the insurance sector has been roiled by its exposure to the
troubled stock and debt markets, Travelers has emerged as a company
that, despite also suffering from investment and catastrophe
losses, is seen as one that can take advantage of its rivals'
weaknesses.
Fox-Pitt Kelton analyst Gary Ransom said earlier this month the
company is in a good position to deal with a weaker economy because
of its low-risk asset portfolio, reserve redundancies and continued
stock buybacks.
But the company may face a challenge, as other insurers do, from
lower employee counts at customers, which would reduce premiums for
workers' compensation coverage, or shuttered factories, which could
mean less property coverage.
Chairman and Chief Executive Jay Fishman said the results
reflected solid underwriting performance, adding that although
long-term fixed income returns were stable, total net investment
income fell because of lower short-term interest rates and negative
returns on the company's non-fixed-income portfolio.
Travelers, the second-largest U.S. commercial insurer behind
American International Group Inc. (AIG), posted net income of $662
million, or $1.11 a share, down from $967 million, or $1.54 a share
a year earlier. The results included 23 cents and 6 cents in net
realized investment losses, as well as $54 million and $62 million
in catastrophe losses, respectively. Excluding items, earnings fell
to $1.34 from $1.60.
Revenue decreased 8% to $5.74 billion.
Analysts surveyed by Thomson Reuters expected earnings of $1.31
and revenue of $6.13 billion.
The combined ratio, the percentage of each dollar the company
collects in premiums that it pays out on losses or expenses, rose
to 90.6% from 87.6% excluding items such as catastrophes.
Net premiums written rose 2.9% to $5.2 billion. Return on
equity, an important measure of profitability, slid to 10.2% from
14.4%.
Looking ahead, the company affirmed January's full-year view for
earnings of $4.50 to $4.90 a share, which was well below analysts'
estimates at the time. Analysts recently expected $5.39 a
share.
Travelers' shares closed Wednesday at $42.56 and haven't traded
premarket.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com