Travelers profit beats estimates

Property and casualty insurer Travelers Cos Inc reported a stronger-than-expected quarterly operating profit as catastrophe losses halved and underwriting gains doubled. The company, led by industry veteran Jay Fishman, has aggressively raised insurance prices in the past several quarters to combat low interest rates that have kept a lid on insurers' investment income over the past few years.
Fierce competition, along with lower catastrophe premiums stemming from fewer big natural disasters in the United States, has driven a wave of consolidation in the industry - a situation Travelers said was not a cause for concern. In the industry's biggest deal, Swiss insurer ACE Ltd said this month it would buy Travelers' arch rival Chubb Corp for $28.3 billion.
"We already compete against these two companies, more so Chubb than Ace," Travelers Chief Operating Officer Brian MacLean said on a call with analysts. "Given our business and geographic focus, we don't anticipate a lot of difference in competing against them as a single entity." The Dow-30 company, which vies with American International Group Inc for the title of the biggest US commercial property and casualty insurer, said its net income rose 19 percent to $812 million, or $2.53 per share, in the second quarter ended June 30.
That compared with a net profit of $683 million, or $1.95 per share, a year earlier. Excluding a $32 million tax benefit, Travelers earned $2.41 per share, according to calculations by Thomson Reuters I/B/E/S. Analysts on average had expected a profit of $2.12 per share.
Pretax catastrophe losses, net of reinsurance, fell to $221 million from $436 million, while underwriting gains almost doubled to $511 million. The company's combined ratio, the percentage of premium revenue an insurer has to pay out in claims, was 90.1 percent in the quarter, compared with 95.1 percent a year earlier. A ratio below 100 percent means an insurer earns more in premiums than it pays out in claims. Travelers is the first big US insurer to report quarterly results. ACE reports results later on Tuesday, while Chubb reports on Thursday. Travelers shares were up marginally at $102.78 in morning trading on the New York Stock Exchange. Up to Monday's close, the stock had fallen 3 percent this year.