Wednesday, January 27, 2010

Traveler's Beats Estimates

Travelers beat estimates on Tuesday with a Q4 profit of $1.3billion, a jump of 60% compared to the previous year. Revenue increased 11% and earnings amounted to $2.36 a share, compared to $1.35 a year earlier. Analysts were estimating a earnings per share of $1.50.

The increase in underwriting by $215million was said to be the main catalyst for the record profits. The underwriting gain of $540million was in par with Q4 2008, and the company had a combined ratio of 94.2% compared to 91% the previous year. There was also an increase in the alternative investments. Catastrophe losses were lower than expected as well which increased the bottom line.

Written premiums decreased 4% due to customers cutting back on their policies, and we should expect premium growth to remain flat or negative until the economy bounces back. Travelers is in good financial position though, with a strong balance sheet and continued positive combined ratios. Travelers is continuing with their share-repurchase program and they have raised guidance for 2010 to $5.20-$5.50 from $4.70.

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