On Tuesday, The Travelers Cos. reported a record quarter for earnings per share, far exceeding analysts’ expectations.
The property-casualty insurer, however, announced plans to layoff 450 people this week — including 90 in Connecticut — as the company tries to make its automobile insurance segment more profitable. Travelers President Brian MacLean told analysts during a conference call that the company will reduce expenses to save $140 million before taxes, which means consolidating operations.
“The majority of the savings will be driven by staff reductions, primarily through attrition, but we will also be giving notice to approximately 450 employees this week,” MacLean said. “We expect to take a restructuring charge of about $16 million, $10 million of which is expected to be incurred in the third quarter of 2013.”
The property-casualty company said its improved net income and operating income were due to less in losses from natural disasters during the quarter compared with 2012. Travelers also toughened its underwriting, which is the company’s assessment of risks it will insure.
Net income for the quarter was $925 million, or $2.41 per share, compared with $499 million, or $1.26 per share, during the same period a year ago. The record net income topped a previous record of $2.36 set in the fourth quarter of 2009.
Operating income for the quarter was $816 million, or $2.13 per share, compared with $495 million, or $1.26 per share, during the same period last year. Analysts polled by Thomson Reuters were expecting, on average, $1.60 per share.
“We are very pleased with the pricing levels we achieved, which once again exceeded expected loss cost trends in all segments, while maintaining solid retentions,” Travelers Chairman and CEO Jay Fishman said in a prepared statement.
“Across our commercial insurance businesses, our ability to segment, price and select risk positions us well to continue to improve profitability,” Fishman said.
Travelers has increased prices on homeowners’ and auto insurance, which has improved the company’s profitability, but it has continued to have a negative affect on premiums as potential new customers balk at higher prices.
Revenue from net written premiums was down to $5.82 billion for the quarter from $5.87 billion last year. Total revenues were up, year over year, to $6.67 billion from $6.36 billion.
The company benefited from an $87 million after-tax net realized gain in U.S. Treasury futures, meaning the company ended its stake during the quarter. However, Travelers had lower net investment income during the quarter than it did a year ago. Net investment income was down to $687 million from $738 million.
Losses from catastrophes, such as tornadoes and severe thunderstorms ravaging homes and other property, were down to $340 million for the quarter from $549 million.
Travelers is headquartered in New York City. The company employs about 7,800 people in Connecticut, and more than 30,000 in the company overall.
The company’s stock price was $82.21, down $3.22 per share, at the close of markets Tuesday.