Travelers smashes estimates, insurance rates rising

HARTFORD, Conn. (Reuters)—Property insurer Travelers Cos. Inc. blew past Wall Street estimates for the first quarter and raised its dividend 12% as insurance rates continued to rise after years of weakness, and natural disaster losses declined.

Its shares rose 2.9% to $61.20 in premarket trading.

Travelers, a Dow component, said on Thursday that commercial insurance rates rose an average 8% in the quarter. Rates rose in other lines as well, including 4% in auto and 10% in homeowners policies.

The company has been among the most aggressive in the industry about raising rates in recent months, after a years-long period of excess capital forced companies to compete on price. Analysts have been watching closely to see whether it could maintain momentum, which bodes well for other insurers.

Pretax catastrophe losses also fell, to $168 million from $186 million a year earlier. The first quarter was generally a calmer quarter than the same period last year, which was marked by severe winter weather in the United States and devastating earthquakes in the Asia-Pacific region.

Travelers reported a first-quarter net profit of $806 million, or $2.02 per share, compared with a year-earlier profit of $839 million, or $1.92 per share. Its share count was roughly 10% smaller this quarter than a year ago, explaining the rising EPS despite the smaller net figure.

Net profits fell largely because of lower net investment income, and because of a one-time tax benefit last year that boosted underwriting results.

But the company also increased its reserve releases, to $200 million after-tax from $155 million a year earlier. During the years of weak pricing, reserve releases were a major profit booster for insurers, though most analysts expect that well to start running dry soon.

Operating earnings came in at $2.01 per share. Analysts polled by Thomson Reuters I/B/E/S on average had expected earnings of $1.52 per share.

There was a broad range of estimates, and because Travelers does not give an outlook it is normal for the company's actual results to differ sharply from the Wall Street forecast. Even so, the result was nearly 40 cents higher than the highest analyst estimate for the quarter.

The company also said it raised its quarterly dividend to 46 cents per share, a 5 cent increase over its last quarterly payout. It spent $350 million on share buybacks during the quarter.