Property and casualty insurer Travelers Cos. reported today a 21 percent drop in earnings for the second quarter due to lower investment income and declining underwriting profits.
The Minnesota-based company, which has major operations in Hartford, said this morning its net income fell to $740 million, or $1.27 per share, from $942 million, or $1.54 per share, in the year ago period.
Travelers is also revising its guidance for 2009 to a range of $4.80 to $5.05 per share, compared with prior estimates of $4.55 to $4.95.
During the second quarter the company missed analysts’ profit expectations of $1.28 cents per share, instead earning $1.25 per share in the quarter ending June 30.
Jay Fishman, chairman and CEO of Travelers Cos. said operating dynamics were “strong” for the quarter as customer retention remained at or near historic highs and the company was able to successfully achieve rate gains.
“Our performance for the quarter reflects solid underwriting and fixed income investment results, as well as the continued impact of very low short-term investment yields and a small loss on our alternative investment portfolio,” Fishman said.
Net realized investment gains fell sharply during the quarter to $8 million from $24 million in the prior year quarter. Net investment income of $547 million, compared to $624 million in the second quarter of 2008.
Net written premiums remained largely flat and catastrophe losses declined during the quarter.
Fishman said that rates changes for policyholders was positive across each of the company’s three business segments, offsetting lower coverage demands from existing policyholders due to the economic downturn.
“New business volumes were strong, particularly in business insurance,” he said. “Our operating performance enabled us once again to generate excess capital and we resumed our share repurchases in the quarter. We are pleased that the company is very well positioned to compete successfully in the current marketplace.”
During the quarter the company also repurchased 18.5 million common shares for a total cost of $750 million. During the preceding 12 months Travelers repurchased 27.4 million common shares for a total cost of $1.1 billion.
Reader response:
“This article was written in a pretty negative manner, wouldn’t you say? I think there are more positives in the TRV story than the negatives, and the HBJ doesn’t seem to shed much in a positive light. How about some strong wording around the stock repurchase of $750M, or the earnings of $700+M, or the increased full year guidance? So what if earnings were marginally lower than the prior year’s quarter? Check out how TRV’s competitors did. For a local paper, I’d think you would want to be pro local businesses.” — Joe, TravelersÂ
