Travelers Companies Inc., one of the largest U.S. property insurers, said Thursday that a a “fine tuning” of its investment outlook gives it a bias towards the lower end of a previous forecast for operating earnings.
On April 24, the company raised its 2008 outlook for operating earnings to between $5.55 and $5.85 a share from a range of $5.45 to $5.75.
On that basis, analysts, on average, expect earnings in 2008 at $6.01 a share, according to Reuters Estimates.
Chief Financial Officer Jay Benet said at an investor presentation the company had managed to largely skirt investments that have caused other financial services companies, including some insurers, to take large write-downs.
“We take risk on the right side of the balance sheet. We don’t double up on the left side of the balance sheet,” Benet said of the company’s investment approach.
Running through a list of troublesome assets, Benet said Travelers had “negligible exposure” to subprime mortgage-backed securities and none when it came to collateralized debt obligations, auction-rate securities and asset-backed commercial paper, among others.
Chief Executive Jay Fishman said the insurer was keeping its “eyes wide open” for potential investment opportunities, but any acquisition would be measured by its ability to increase returns for shareholders.
“We know the risks, the balance sheet risk, the people risk, the culture risk (of acquisitions),” said Chief Executive Jay Fishman, adding that Travelers would only make a bid when an acquisition that had the potential to change the “shareholder value equation” for the better.
He declined to speak specifically to speculation that Travelers is in the running to buy Royal Bank of Scotland Group Plc’s insurance business.
Fishman said Travelers’ insurance business was holding up, amid market conditions he described as “softening” but not “soft.”
He added that retention of customers at its commercial accounts business was strong, with a chart showing Travelers’ rate of retention is on par with two years ago.
Fishman said that, while pricing was “deteriorating” the rates Travelers was able to charge to renew commercial policies was higher than for some peers.
Travelers shares were down 0.59 percent, or 29 cents, at $48.88 in afternoon trading on the New York Stock Exchange.
(Reporting by Lilla Zuill; editing by Jeffrey Benkoe and Andre Grenon)