MW Travelers' stock leaps toward a record as income triples, profitability improves
By Tomi Kilgore
Catastrophe losses rose more than 10% due primarily to Hurricane Helene and severe wind and hail storms in multiple states
Shares of Travelers Cos. Inc. shot further into record territory Thursday, after the insurer reported a big third-quarter earnings beat as a measure of underlying profitability saw sharp improvement.
"We are pleased to report excellent results for the quarter, with both underwriting and investment income contributing meaningfully to our strong performance," said Chief Executive Alan Schnitzer.
The stock surged 5.4% in premarket trading, enough to pace the Dow Jones Industrial Average's gainers ahead of the open, and after closing at a record $242.95 on Wednesday.
The rally marked a return to upbeat results, after back-to-back quarters in which the stock sank more than 7% the day earnings were reported.
Net income more than tripled, to $1.26 billion, or $5.42 a share, from $404 million, or $1.74 a share in the same period a year ago.
Excluding nonrecurring items, such as an investment gain, core earnings per share jumped to $5.24 from $1.95, and was well above the FactSet consensus of $3.66.
The combined ratio, a measure of profitability for insurers - lower is better - improved to 93.2% from 101.0%, much better than the FactSet consensus of 96.9%.
"Very strong underlying profitability and net favorable prior year development drove the improvement in our combined ratio," CEO Schnitzer said.
The company booked an underwriting gain of $685 million in the last quarter, helped by a favorable reserve development of $126 million, after recording an underwriting loss of $136 million a year ago amid an unfavorable reserve development of $154 million.
Net investment income jumped 17.6% to $904 million, to beat the FactSet consensus of $883.2 million, helped by higher average yields in the fixed-income portfolio and better returns on private-equity partnerships.
Total revenue grew 11.9% to $11.9 billion, above the FactSet consensus of $11.69 billion.
Net written premiums rose 7.9% to a record $11.32 billion, but that came up shy of expectations of $11.38 billion.
Among the companies business segments, net written premiums rose 9% to $5.5 billion in business insurance, increased 7% to a record $4.7 billion in personal insurance and were up 7% to a record $1.1 billion in bond and specialty insurance.
Catastrophe losses increased 10.5% to $939 million, primarily resulting from Hurricane Helene and "severe" wind and hail storms in multiple states.
Travelers said it spent $253 million during the third quarter to buy back 1.1 million shares at an average price of $222.64. As of Sept. 30, the company had $5.29 billion remaining in its stock repurchase program, which represents about 9.6% of its market capitalization of $55.38 billion at Wednesday's close.
The company also declared a regular quarterly dividend of $1.05 a share, which will be payable Dec. 31 to shareholders of record on Dec. 10.
At the stock's Wednesday's closing price, the annual dividend rate implied a dividend yield of 1.73%, which compares with the implied yield for the S&P 500 index SPX of 1.27%.
The stock has rallied 27.5% year to date through Wednesday, while the SPDR S&P Insurance ETF $(KIE.UK)$ has run up 28.7% and the S&P 500 has advanced 22.5%.
-Tomi Kilgore
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(END) Dow Jones Newswires
October 17, 2024 08:04 ET (12:04 GMT)
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