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Travelers Rallies as Profit Climbs, Exceeds Estimates

Travelers Cos. Chief Executive Officer Jay Fishman
Travelers Cos. Chief Executive Officer Jay Fishman is charging some customers more for coverage and changing policy terms to boost underwriting margins as low bond yields and severe weather pressure earnings. Photographer: Joshua Roberts/Bloomberg

April 23 (Bloomberg) -- Travelers Cos., the second-largest U.S. commercial insurer, led the Dow Jones Industrial Average higher after reporting first-quarter profit that beat analysts’ estimates on wider margins.

The insurer surged 3.9 percent to $87.86 at 9:43 a.m. in New York. Net income rose to $896 million, or $2.33 a share, from $806 million, or $2.02, a year earlier, New York-based Travelers said today in a statement. Operating profit, which excludes some investment results, was $2.31 a share, beating the $2.02 average estimate of 21 analysts surveyed by Bloomberg.

Chief Executive Officer Jay Fishman, 60, is charging some customers more for coverage and changing policy terms to boost underwriting margins as low bond yields and severe weather pressure earnings. The insurer earned an underwriting profit of 11.5 cents per each premium dollar in the first quarter, compared with 7.8 cents a year earlier.

“Underlying underwriting margins increased across all our business segments,” Fishman said today on a conference call with analysts. The improvement was “in large measure a result of the pricing and underwriting action we have taken over the last few years.”

The insurer also benefited from lower costs tied to natural disasters after suffering record claims from Superstorm Sandy in the fourth quarter. Catastrophes cost Travelers $65 million in the first three months of 2013 after tax and net of reinsurance, compared with $109 million a year earlier.

Net investment income fell to $542 million from $593 million a year earlier. Lower reinvestment rates on the bond portfolio and a decline in income from alternative investments, such as private equity, real estate partnerships and hedge funds, contributed to the drop.

American International Group Inc., the largest U.S. commercial insurer, is scheduled to report first-quarter results on May 2. New York-based AIG advanced 2.4 percent.

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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