The St. Paul Travelers Companies today reported third-quarter net income of $1 billion, compared with $162 million for the same period last year, as this year's storm-free quarter continues to provide dramatic earnings contrasts.
Morgan Stanley analyst William Wilt said the earnings were 16 cents per share ahead of his estimates and 11 cents per share ahead of analysts' consensus.
"The returns look to be high quality, with underwriting accounting for all of the upside from our estimates, and net investment income a slight miss," Mr. Wilt wrote.
In addition, the company seems to be showing reasonable premium growth compared to its peers, higher renewal prices and peer-leading unit growth in the personal auto division, he wrote.
The company listed as highlights for the quarter:
o Return on equity of 17.6 percent and operating return on equity of 17.4 percent.
o Net written premiums of $5.3 billion, a 4 percent increase from the prior year quarter.
o Net investment income of $668 million after-tax, a 7 percent increase from the prior year quarter.
o Strong combined ratios in all segments, with business insurance at 92; financial, professional and international insurance at 89; and personal insurance at 78.4.
o Net favorable prior year reserve development of $55 million after-tax, including after-tax charges of $102 million and $79 million for asbestos and environmental reserve development.
Chief Executive Officer Jay Fishman said favorable performance of all business segments, along with a lack of catastrophes, helped drive the good numbers.
"Renewal pricing continues to increase for catastrophe-prone exposures, particularly in the southeastern U.S. Elsewhere, renewal pricing is generally flat," he said.
Mr. Fishman added, "Since retentions are high across the industry, new business flow for our commercial businesses is somewhat limited and pricing remains more competitive than renewal business."
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