Travelers Operating Profit Falls 24%

By Tess Stynes and Leslie Scism 

Travelers Cos. said its third-quarter operating earnings fell 24%, as premium volume hit a record but the company was up against an unusually strong year-earlier quarter.

Per-share operating earnings, excluding certain items, and net premiums written beat consensus estimates.

New York-based Travelers is one of the first big property-casualty insurers to release third-quarter earnings, and its results are watched closely as a bellwether for others that follow. Travelers, part of the Dow Jones Industrial Average, is a leading seller of insurance to U.S. businesses, and sells car and home insurance to individuals and families.

Net premiums written increased 3.2% to $6.39 billion. Analysts polled by Thomson Reuters expected net premiums written of $6.37 billion. Travelers' auto-insurance business delivered some of the company's strongest premium growth, while the business-insurance unit posted flat net written premiums.

Travelers cited hail storms in the western U.S. and flooding in the southeast as a factor in results. But it and other private-sector insurers largely were spared of major catastrophe damage when Hurricane Hermine landed in Florida but quickly weakened. The storm left extensive power outages over the Labor Day weekend on the East Coast but relatively modest claims volume.

Analysts are expected to focus more on any comments during Travelers' earnings call on Thursday regarding Hurricane Matthew, a major storm that threatened to hit Florida in early October but stayed offshore to then make landfall in South Carolina. Its damage will show up in insurers' fourth-quarter earnings. Matthew caused flooding and widespread power outages as it moved up the U.S. Atlantic Coast and took a toll on North Carolina's agricultural sector.

In the year-earlier period, catastrophe claims were at an abnormally low level, contributing to the tough comparison year-over-year.

More broadly, the insurance industry continues to face challenges from low interest rates, which depress income earned from investing customers' premium dollars until needed to pay claims. Travelers said its investment income fell 5.2%, as its investment team put maturing bonds and new money to work at lower yields.

For the latest quarter, Travelers reported that its catastrophe losses, net of reinsurance, reached $89 million, compared with $85 million a year earlier.

For the three months ended Sept. 30, Travelers posted operating earnings of $701 million, or $2.40 a share, down from $918 million, or $2.93 a share, a year earlier.

Operating earnings are a widely watched industry benchmark because they exclude realized capital gains and losses in companies' big investment portfolios. Analysts expected per-share operating profit of $2.38.

Over all, Travelers reported a profit of $716 million, or $2.45 a share, down from $928 million, or $2.97 a share, a year earlier.

Write to Tess Stynes at [e-mail] and Leslie Scism at [e-mail]

(END) Dow Jones Newswires

October 20, 2016 08:02 ET (12:02 GMT)

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