April 24, 2018 / 11:15 AM / a month ago

UPDATE 3-Higher catastrophe losses hit Travelers profit, stock off 3 pct

(Updates share price, adds context and details about business insurance results)

By Nikhil Subba and Suzanne Barlyn

April 24 (Reuters) - Insurer Travelers Cos Inc’s quarterly profit missed analysts’ estimates on Tuesday, sending its shares down 3.3 percent, due to a rise in catastrophe losses and lower investment income.

On a core basis, the New York-based company earned $2.46 per share, missing analysts’ average estimate of $2.68, according to Thomson Reuters I/B/E/S.

Travelers, a component of the Dow Jones Industrial Average that is seen as a bellwether for the insurance sector because it typically reports earlier than its competitors, said catastrophe losses, net of reinsurance, widened 2 percent to $354 million in the first quarter.

The company blamed winter storms in the eastern United States, a wind and hail storm in the southern United States and deadly January mudslides in Southern California that killed more than 20 people for the rise.

The catastrophe losses partly offset the benefits of a more favorable U.S. corporate income tax rate, which spurred a 21.3 percent drop in the insurer’s income tax expenses, and underwriting gains, which rose 22.3 percent to $258 million.

Net investment income fell 1 percent to $603 million, due to lower private equity returns compared with a year earlier, the company said.

Net written premiums rose 5 percent to $6.82 billion, due in part to rate increases. Last year, many insurers said they had planned to hike rates after suffering steep U.S. catastrophe losses due to Hurricanes Harvey, Irma and Maria, and wildfires in Southern California.

Net income rose to $669 million, or $2.42 per share, in the first quarter ended March 31 from $617 million, or $2.17 per share, a year earlier.

The company reported a combined ratio of 95.5 percent, compared with 96 percent a year earlier. A ratio below 100 percent means an insurer earns more in premiums than it pays out in claims.

Total revenue rose 5 percent to $7.29 billion.

Travelers reported $452 million in after-tax income for its business insurance unit, an increase of 2.3 percent from $442 million during the prior year quarter.

Losses in the unit’s workers’ compensation line were lower than expected, but that was offset by losses in the insurer’s commercial automobile line, which were higher than expected, the company said.

Travelers shares were down $4.50 at $132.73 on the New York Stock Exchange. (Reporting by Nikhil Subba in Bengaluru and Suzanne Barlyn in New York Editing by Sriraj Kalluvila and Scott Malone)

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