The Travelers Cos. had its best operating income per share since the company’s initial public offering in 2002, driven by higher prices and lower expenses from tornadoes and other catastrophes.
The New York-based property casualty insurer reported that earnings were up for the first three months of 2013 compared with the same period last year. Travelers generated more revenue from premiums than last year, however, revenue overall was dragged down by a low-interest-rate environment weakening results for the company’s investment portfolio.
Travelers continues to increase prices, as do other property-casualty insurers, after a long period of falling premiums in the industry for 30 straight financial quarters between 2003 and 2011.
“Operating income of $887 million and operating return on equity of 15.8% reflect continued improvement in our underlying underwriting margins primarily due to the pricing and underwriting actions we have taken across all segments,” Travelers Chairman and CEO Jay Fishman said in a prepared statement. “Our high quality investment portfolio continued to perform well, with returns modestly declining in line with our expectations given continued low interest rates.”
Higher prices are overshadowing expected losses that the company pays in claims for its commercial insurance customers.
“We continue to be encouraged by the fact that in each of our segments renewal pricing exceeded expected loss cost trends and retentions remained stable,” Fishman said in a prepared statement. “In Business Insurance, renewal rate change of 8% was generally consistent with levels achieved over the last five quarters and new business volumes modestly improved.”
In Personal Insurance — home and auto policies — net written premiums of $1.69 billion was a decrease of 6 percent compared with last year, largely due to higher prices, higher deductibles and other measures Travelers took to improve profit, the company said. Travelers improved its underwriting, which is the process of selecting and pricing risks.
Net income for the quarter was $896 million, or $2.33 per diluted share, up from $806 million, or $2.02 per diluted share, for the same period in 2012.
Operating income for the quarter was $887 million, or $2.31 per share, compared with $801 million, or $2.01 per share, last year. Analysts polled by Thomson Reuters were expecting $2.02 per share, on average.
The company’s overall revenue was down 1 percent to $6.33 billion for the quarter compared with $6.39 billion during the same period in 2012.
Net investment income for the quarter, after taxes, was down to $542 million from $593 million last year.
Catastrophe losses for the first three months of the year were related to tornadoes and hail storms in the Southeastern U.S. Catastrophe losses for the quarter, net of reinsurance and after taxes, was $99 million compared with $168 million last year.
Travelers employs about 7,000 people in Connecticut.
Travelers’ stock was at $87, up $2.42 in pre-market trading.
Check back for updates on this article later this morning.