Travelers posts higher 4th-qtr profit on no catastrophe costs, higher investments

Travelers 4Q profit jumps on investments

CHARLOTTE, N.C. — Travelers Cos. said Tuesday that no new catastrophe costs and a sharp rebound in its investment portfolios boosted fourth-quarter profit by 60 percent.

The company’s conservative investment approach helped to minimize losses during the economic downturn, compared with rivals like American International Group Inc.

Investment gains easily outpaced a dip in net premiums, though Travelers said its pricing has been better than most of the sector that have been unable to raise rates.

Travelers shares rose $1.34, or 2.7 percent, to $50.23.

The commercial and property insurer, based in New York said that net income rose to $1.29 billion, or $2.36 per share, from $801 million, or $1.35 per share, a year ago.

Excluding items, operating profit totaled $2.12 cents per share — beating analysts’ average estimate of $1.49 per share, according to Thomson Reuters.

Travelers posted $6.5 billion in revenue during the fourth quarter, an increase of 11 percent from the prior year quarter.

The company’s profit reflected a 49 percent rise in investment income to $653 million, its highest level since fourth quarter 2007. That is when economists say the recession began.

A lack of disasters like hurricanes or earthquakes only boosted the insurer’s profit and put it in a strong enough cash position to snap up its own stock.

During the fourth quarter, the company repurchased 30.1 million of its common shares for $1.55 billion and Travelers paid $175 million in common stock dividends.

Travelers’ net written premiums fell 4 percent to $5.19 billion in the final three months of the year, largely because economic activity as a whole has been muffled, the company said.

Travelers, like other insurers, continues to seek customers at a time when employers have fewer workers and less valuable property to insure.

Even so, Travelers Chairman and CEO Jay Fishman told analysts on a conference call, that “retention rates remained high and the impact of renewal rate changes on renewal premiums remained positive in the quarter.”

The company’s combined ratio for the quarter fell 2.5 points to 83.4 percent. Combined ratio measures the amount of money insurers pay out in claims and expenses compared with how much they receive from writing new business. A ratio above 100 means the insurer pays out more in claims and expenses than it takes in from writing new premiums.

For the year, Travelers net income totaled $3.62 billion, or $6.33 per share, on revenue of $24.68 billion.

Travelers also provided a cautious 2010 full-year earnings outlook and said it expects operating profit to be in the range of $5.20 to $5.55 per share. Analysts had been looking for $5.56 per share.