By Chelsey Dulaney And Leslie Scism
Travelers Cos. on Tuesday posted a 19% increase in profit in its
second quarter, as lower catastrophe losses helped to offset a
decline in net investment income for the property and casualty
insurer.
The better-than-expected results come as deal questions swirl
around many property-casualty insurers in the wake of ACE Ltd.'s
$28.3 billion deal to buy Chubb Corp., creating one of the biggest
property-casualty insurance companies in the world.
On a conference call peppered with questions about potential
transactions, Chief Executive Jay Fishman said Travelers is adept
at evaluating potential deals, having been built on acquisitions.
But he said the company has "a very high bar" to any deal and noted
that combining entities carries a "high degree of risk."
Mr. Fishman indicated that Travelers itself had evaluated a
possible deal with Chubb. But when asked to elaborate, he said,
"I've said everything that is appropriate to say."
Mr. Fishman also discussed succession planning on the call with
analysts, after announcing last November that he had been diagnosed
with a neuromuscular condition. Calling it a "perfectly reasonable
question," the 62-year-old said he is "very much on the job and
fully engaged."
For the period ended June 30, New York-based Travelers said net
income grew to $812 million from $683 million in the year-earlier
period.
Operating profit, a closely watched measurement that excludes
realized capital gains or losses in an investment portfolio, grew
20% to $806 million, or $2.52 a share, from $673 million, or $1.93
a share, a year ago.
Share buybacks helped boost Travelers' per-share earnings in the
quarter. Travelers said it bought back $801 million in shares
during the quarter, reducing its outstanding share count by 8.3%
over the prior year.
Revenue edged down 1.2% to $6.71 billion.
Analysts polled by Thomson Reuters forecast per-share earnings
of $2.12 and revenue of $6.26 billion.
Net written premiums were essentially flat at $6.17 billion.
Travelers sells an array of policies to companies of all sizes
and is a well-known name in car and home insurance sold to
individuals. One of the country's largest property-casualty
insurers, Travelers often sets the tone for industry earnings that
will be announced by peers in the coming weeks.
Insurers' big investment portfolios have been pressured by
competitive pricing and low interest rates.
Travelers said its net investment income fell to $632 million
from $695 million amid a tough comparison for private-equity
returns in the prior-year quarter and lower valuations for energy
investments.
The company's combined ratio improved to 90.8%--meaning it spent
90.8 cents on claims and expenses for every dollar it collected in
premiums--from 95.1% a year earlier.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com and Leslie
Scism at leslie.scism@wsj.com
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