Street Calls of the Week
NEW YORK - On Thursday, Travelers Companies reported third quarter earnings that significantly exceeded analyst expectations.
The company’s shares fell 3.51% in pre-market trading following the announcement.
The insurance giant posted adjusted earnings of $8.14 per share, handily beating the analyst consensus of $6.15. Revenue rose to $12.47 billion, surpassing expectations of $11.75 billion. The company’s consolidated combined ratio improved 5.9 points from the prior year quarter to an excellent 87.3%.
Travelers’ strong results were driven by lower catastrophe losses of $402 million pre-tax compared to $939 million in the prior year quarter, and a 15% increase in after-tax net investment income to $850 million. However, the company recorded a $277 million charge from its annual asbestos review, which contributed to net unfavorable prior year reserve development in its Business Insurance segment.
"We are very pleased to report another quarter of excellent results," said Alan Schnitzer, Chairman and Chief Executive Officer. "We earned core income of $1.9 billion, or $8.14 per diluted share, generating core return on equity of 22.6%."
Net written premiums increased 1% to $11.47 billion, with Business Insurance growing 3% to $5.67 billion. The company’s underlying combined ratio, which excludes catastrophes and reserve development, improved 1.7 points to an exceptional 83.9%.
During the quarter, Travelers returned nearly $900 million to shareholders, including $628 million in share repurchases. Book value per share increased 16% YoY to $141.72.
Despite the strong operational performance, investors appeared concerned about the asbestos-related charges and their potential long-term implications, contributing to the stock’s decline following the earnings release.
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