Higher investment income powers Travelers profit rise

(Reuters) — Property/casualty insurer Travelers Cos. Inc. reported a better-than-expected rise in quarterly operating profit, helped by higher net investment income and a fall in disaster-related losses.

Operating earnings of $2.61 per share in the third quarter ended Sept. 30 handily beat the average analyst estimate of $2.27, according to Thomson Reuters I/B/E/S.

"Our results were driven by strong underwriting performance across all of our business segments ... and higher investment returns driven by private equity performance," Chief Executive Jay Fishman said in a statement Tuesday.

The company's business and international insurance unit posted a 10% jump in net written premiums as it managed to hold on to clients while increasing rates. The unit contributes more than half of the company's written premiums.

Travelers has been aggressively raising rates during the past two years to offset the impact of low interest rates on fixed-income investments.

The company's combined ratio, the percentage of premium revenue an insurer has to pay out in claims, rose to 90% in the quarter from 88.9%. A combined ratio of under 100 indicates an underwriting profit.

Travelers, a Dow Jones Industrial Average component, said net income rose to $919 million, or $2.69 per share, from $864 million, or $2.30 per share, a year earlier.

Revenue rose 7% to $6.89 billion.

Pretax catastrophe losses, net of reinsurance, fell to $83 million from $99 million, while net investment income rose 9.4% to $719 million.

As one of the first insurers to report results, Travelers' earnings are often seen as an industry bellwether.

The company's shares had risen about 3% percent since the start of the year to Monday's close, compared with a 1% percent drop in the Dow Jones Industrial Average Index.