Travelers Cos., the lone property/casualty insurer in the Dow Jones Industrial Average, said third-quarter profit advanced 1 percent as sales growth accelerated, and improved underwriting margins helped cushion lower investment income.
Net income climbed to $928 million from $919 million a year earlier, the New York-based company said in a statement Tuesday.
Jay Fishman, 62, is stepping down in December after leading the company as chief executive officer since its formation in 2004, turning over responsibility to Alan Schnitzer, who runs the segment that serves business and international clients. Fishman, who is fighting amyotrophic lateral sclerosis, or ALS, will stay on as chairman, helping Schnitzer at a time when low interest rates pressure investment returns and more companies push into insurance.
“Travelers is facing, with remarkable discipline, an increasingly difficult and competitive environment,” Paul Newsome, an analyst at Sandler O’Neill & Partners, said in a note Monday before results were released. “Investors might react strongly given Travelers’ current and historic leadership in the commercial insurance marketplace.”
Policy sales rose 2.6 percent to a record $6.19 billion, compared with $6.03 billion a year earlier, with gains in personal auto insurance. That compares with year-over-year increases of less than 1 percent in each of the two prior quarters.
Net investment income declined to $614 million pretax from $719 million last year. Travelers, which invests mostly in bonds, said lower interest rates pressured results. Returns from private-equity and hedge funds also slipped.
Book value, a measure of assets minus liabilities, climbed to $79 from $77.51 at the end of June.
The insurer posted a combined ratio of 86.9, meaning it retained 13.1 cents of each premium dollar after claims and expenses. That improved from a ratio of 90 in last year’s third quarter.
Travelers charged domestic business insurance customers 0.9 percent more at renewal in the three months ended Sept. 30, compared with an increase of about 1 percent in the second quarter and 2.8 percent in last year’s third period.
The gain from reserves improved to $199 million pretax from $113 million a year earlier. Insurers regularly reassess the money they’ve set aside for future claims and can reduce or increase the amount based on their expectation of losses. Costs for catastrophes were $85 million before tax, compared with $83 million a year earlier.
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