Travelers Companies Inc.'s third-quarter net income fell by 82 percent, pushed down by investment and catastrophe losses, management said.

The St. Paul, Minn.-based insurer reported net income compared to last year dropped $984 million in the quarter to $214 million, translating into net income per share dropping $1.45 to 36 cents a share. Revenues dropped 6 percent, or $381 million, to $6.15 billion.

All of this impacted the company's combined ratio in the quarter with a 20.3 point increase to 104.7 compare to the same period last year.

For the nine-month period, Travelers' net income was down 40 percent, or $1.42 billion, to $2.12 billion. Net income per share was off $1.75 a share to $3.47. Revenues were off 4 percent, or $854 million, to $18.67 billion.

The combined ratio over the nine months compared to last year increased 6.9 points to 94.

The company revised its guidance for 2008 for full-year operating income per diluted share from a range of $5.55 to $5.85 a share to $4.90 to $5.10 a share.

Catastrophe losses, which include Hurricanes Ike, Gustav and Dolly, totaled $682 million after-tax ($1.04 billion pre-tax) in the quarter.

The company also reported net realized investment losses in the quarter of $102 million, including $44 million after-tax impairments for securities issued by bankrupt Lehman Brothers Holdings Inc.

Travelers said it is not a party to any credit default swaps and had approximately $15 million of loans outstanding under its securities lending program. It said it does not believe it has any exposure to loss in this sector.

Completion of the company's asbestos reserve review resulted in a $46 million after-tax increases in the quarter. The increase was driven "by modest changes in the company's estimates" in litigation and losses to policyholders.

Speaking during an analysts' conference call, Jay Fishman, Travelers' chairman and chief executive officer, said the catastrophe numbers were consistent with the company's risk models and pricing assumptions.

"Given our size, storm losses such as these will occur from time to time," he said.

The company continues to see new underwriting opportunities, he said, and is well capitalized for the future.

Mr. Fishman said the company remains fixed on insuring small and midmarket accounts. While it does write some large accounts, this is not a business that it is comfortable with.

"We do not dispute that other people have figured out a way to manage that [large account] business over a long period of time," he said, "but it has eluded us.

"We don't have a great focus on expanding our business orientation into the large account casualty world," Mr. Fishman added.

When asked about acquisitions, after mention by analysts that portions of American International Group are coming onto the market, he said the company does not need to make any.

The company does keep its eyes open for opportunities and would show willingness to make a deal if it was a compelling opportunity, but often the risk of a deal not working is not worth the expense, said Mr. Fishman.

"You run into trouble when you can't figure out how to get shareholder value from the deal," he said.

He added that the company wants to remain comfortable with the amount of risk it exposes itself to, saying that "prudent management of the long-term shareholder value would dictate that we shouldn't be running [Travelers] on the edge."

A Bank of America analysis said Travelers earning were in line with its estimates. It said further that the bank views "Travelers as a beneficiary of potential opportunities that may arise from difficulties at AIG. The balance sheet is also extremely conservative, with an investment portfolio consisting largely of municipal bonds, corporate debt and agency backed MBS [mortgage backed securities].

This article updated Oct.23, 9:46 a.m.

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Travelers Sees 3Q Net Income Drop 82%

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