The Travelers Companies Inc. said today that that its estimate of third quarter catastrophe losses--primarily from Hurricanes Ike, Gustav and Dolly--amounts to approximately $690 million after-tax and $1.05 billion pre tax, net of reinsurance.

Travelers said Ike reflects catastrophe losses in eight states and includes estimated share of assessments from the Texas Windstorm Insurance Association.

On the investment side, the St. Paul, Minn.-based company said investment losses would amount to $115 million after-tax and $170 million pre-tax in the third quarter. This includes $44 million after-tax and $67 million pre-tax, with respect to securities issued by Lehman Brothers Holdings Inc. and its subsidiaries.

Travelers said as of Sept. 30 it is not a party to any credit default swaps and it has approximately $15 million of loans outstanding under its securities lending program for which it believes it has no exposure to loss.

On reserves, Travelers said in the third quarter it expects to report net favorable prior year reserve development of approximately $210 million after-tax and $330 million pre-tax.

The net favorable prior year reserve development is driven by better than expected loss experience, Travelers said, primarily in the commercial multi-peril and general liability product lines.

The reserve development also includes a $46 million after-tax and $70 million pre-tax increase to asbestos reserves. Travelers said it completed its annual in-depth asbestos claim review in the third quarter of 2008.

Taking all of the news together, Travelers said operating income per share would be reduced by 80-cents and net income per share would drop $1. The company said operating income differs from net income in that operating income excludes the after-tax impact of net realized investment losses.

"Our disciplined attention to risk management both operationally and in our investment activities has served us well in this active storm season and in a difficult economic environment," said Jay S. Fishman, chairman and chief executive officer of Travelers in a statement.

"Our catastrophe losses were consistent with our risk and pricing models, net realized investment losses were modest relative to our overall investment portfolio and better than expected loss experience resulted in net favorable prior year reserve development," he continued.

Whether it was reaction to the news, or the upbeat nature of the market throughout the day, Wall Street reacted by sending the company's stock up over $4 to close to $35 a share in the early afternoon. By the close of the day shares stood at $35.49 a share, up $4.99.

(This story was updated at 4:02 p.m.)

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Travelers Says Hurricane Losses Top $1Billion

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