St. Paul Travelers Cos. Inc. said yesterday that 2006 fourth-quarter earnings rose sharply, beating analysts' expectations.
Net income increased to $1.19 billion from $179 million for the period a year earlier when the company was hurt by record catastrophe losses and charges to expand reserves for asbestos and environmental claims.
Bear Stearns analyst David Small said the so-called "beat" of analysts' forecasts resulted primarily from $157 million of reserve releases largely from personal lines and $98 million in "other income."
"Results from the underlying businesses were otherwise in line with our estimates," Mr. Small wrote.
He said the most positive news from the company for the quarter is the plan to boost its buyback program by $3 billion, bringing its total repurchase authorization to $3.9 billion, or 11 percent of outstanding shares based on yesterday's closing stock price.
The gains follow a dismal fourth quarter in 2005, when the company took a $372 million charge to boost asbestos and environmental liability reserves and suffered $435 million of catastrophe losses.
In the fourth quarter of 2006, catastrophe losses reduced operating income by about $13 million.
Mr. Small said he anticipated relative earnings stability should persist through 2007, driven by high single-digit growth in the personal lines book, as the roll-out of Quantum auto and home products.
"In our view, these benefits are likely to be offset somewhat by margin degradation in the commercial lines segments and the potential for reversal of the benign loss cost trends the company is currently experiencing," Mr. Small wrote.
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