Travelers Smashes Estimates, Insurance Rates Rising

Property insurer Travelers Cos Inc blew past Wall Street earnings estimates for the first quarter and raised its dividend 12 percent as natural disaster losses declined and insurance rates continued to rise after years of weakness.

The company's shares rose 3.8 percent to $61.73 in early trading Thursday, at one point touching their highest level since June 2011.

Travelers, a Dow component, said commercial insurance rates rose an average 8 percent in the quarter. On a conference call with analysts, the company indicated that strength has continued.

"We feel good about what we're seeing in the second quarter and ... feel the momentum is continuing," Chief Operating Officer Brian MacLean said.

Rates rose in other lines as well, including 4 percent in auto and 10 percent in homeowner policies. Chief Executive Jay Fishman, on the conference call, said Travelers was in some places raising deductibles and placing tighter terms on personal policies in order to improve profitability.

The company has been among the most aggressive in the industry about raising rates in recent months, after a years-long period of excess capital forced companies to compete on price. Analysts have been watching closely to see whether Travelers could maintain the momentum, which bodes well for other insurers.

Pretax catastrophe losses declined to $168 million in the first quarter from $186 million a year earlier. The year-earlier period was marked by severe winter weather in the United States and devastating earthquakes in the Asia-Pacific region.

On Thursday Travelers peer Allstate said its own catastrophe losses were $260 million in the latest quarter, mostly in March.

NET DOWN ON INVESTMENTS

Travelers reported a first-quarter net profit of $806 million, or $2.02 per share, compared with a year-earlier profit of $839 million, or $1.92 per share. Per-share earnings rose because of a decrease in share count.

Net profit fell largely because of lower net investment income, and because of a one-time tax benefit last year that boosted underwriting results.

The company also increased its reserve releases, to $200 million after tax from $155 million a year earlier. During the years of weak pricing, reserve releases were a major profit booster for insurers, though most analysts expect that well to start running dry soon.

Operating earnings came in at $2.01 per share. Analysts polled by Thomson Reuters on average had expected $1.52.

There was a broad range of estimates, and because Travelers does not give an outlook it is normal for its results to differ sharply from the Wall Street forecast. Even so, earnings were nearly 40 cents above the highest analyst estimate.

The company raised its quarterly dividend by 5 cents, to 46 cents per share. It spent $350 million on share buybacks during the quarter.

Comments

Resource Center

View All »

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Get $100 in leads with $0 down!

NetQuote's detailed, real-time leads have boosted sales for thousands of successful local agents across the...

The Growing Role of Excess & Surplus Lines in Today’s...

The excess and surplus market (E&S) provides coverage when standard insurance carriers cannot or will...

Increase Sales Conversion with this Complimentary White Paper

This whitepaper will share proven techniques - used by many of the industry's top producers...

D&O Policy Definitions: Don't Overlook These Critical Terms

Unlike other forms of insurance where standard policy language prevails, with D&O policies, even seemingly...

Environmental Risk: Lessons Learned from Willy Wonka and the Chocolate...

Whether it’s a chocolate factory or an industrial wastewater treatment facility, cleanup and impacts to...

More Data, Earlier: The Value of Incorporating Data and Analytics...

Incorporating more data earlier in claims lifecycles can help you reduce severity payments by 25%*...

How Many Of Your Clients Are At Risk Of Flood?

Every home is vulnerable to flooding. Learn four compelling reasons why discussing flood insurance with...

Gauging your Business Intelligence Analytics Capabilities and the Impact of...

Big Data, Data Lakes and Data Swamps, How to gauge your company's Big Data readiness....

Extending Contact Center Capabilities Across the Insurance Enterprise

Today advancements in technology are making a big impact on business and society. To yield...

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.