Travelers Posts 82% Drop in Third-Quarter Profit

Wed. October 22, 2008; Posted: 03:55 PM

ST. PAUL, Minn., Oct 22, 2008 (A. M. Best via COMTEX) -- TRV | Quote | Chart | News | PowerRating -- Travelers Cos. took a hit from weather-related events during the third quarter, posting an 82% drop in net income when compared with the same period last year.

Net income was $214 million for the quarter, down from $1.198 billion last year.

Third-quarter losses due to catastrophes, mainly hurricanes Ike, Gustav and Dolly, were $682 million after-tax, compared with $9 million during the third quarter last year. The company's combined ratio was 104.7 during the quarter.

Still, the losses were consistent with company models, said Jay S. Fishman, president, chairman and chief executive officer.

"With our financial strength, strong brand, continued high retention levels and the increased flow of new business opportunities we continue to experience, we are well-positioned in the marketplace," Fishman said. Travelers (NYSE: TRV | Quote | Chart | News | PowerRating) posted net investment income of $587 million during the third quarter -- down from $724 million in the third quarter, 2007.

Fishman said during a conference call the investment losses were "modest" and that he "couldn't be more pleased" with the performance of Travelers during unprecedented disorder in the financial markets. During the call, Fishman said Travelers' investment portfolio "continues to be in terrific shape" though it was not immune to market conditions.

Travelers posted $116 million in investment losses -- $102 million in after-tax impairments, including $44 million after-tax with respect to securities issued by the now-collapsed Lehman Bros. The company has curtailed securities lending, Fishman said, and is not a party to any credit default swaps.

Joseph P. Lacher Jr., executive vice president, said the insurer continues to be a "machine that cranks out results against a headwind." Retention levels for automobile and homeowners insurance remained the same over the past year, and Travelers enjoyed a 5% increase in net written premiums in personal lines.

On the afternoon of Oct. 22, shares of Travelers were selling at $37.80, up more than 4% from the previous day's close.

Travelers Group currently has a Best's Financial Strength Rating of A+ (Superior).

(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)

For full details on The Travelers Companies Inc. (TRV) click here. The Travelers Companies Inc. (TRV) has Short Term PowerRatings of 5. Details on The Travelers Companies Inc. (TRV) Short Term PowerRatings is available at This Link.

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