Property and casualty insurer Travelers Cos. Inc. reported a drop in third-quarter profit on Tuesday that still beat estimates, as higher investment returns mainly from its non-fixed income portfolio softened the blow from a jump in catastrophe losses.
The company, a component of the Dow Jones Industrial Average Index, is seen as the bellwether for the insurance sector and typically reports ahead of its peers.
The company reported a core income of $655 million, or $2.60 per share, for the three months ended Sept. 30, while analysts had expected $1.67 per share, according to Refinitiv IBES data.
In the year-ago period, the New York-based insurer had reported a profit of $798 million, or $3.12 per share.
The company reported a pre-tax net investment income of $771 million, up 15 percent from last year. Low-interest rates and hot capital markets in the country helped the insurer yield higher returns from its non-fixed income investments, which offset a weak performance from its fixed-income investments.
Flash flooding and heavy rains due to Ida in late August caused damage to property and disrupted businesses. These losses are expected to take a big chunk out of insurers’ earnings, with catastrophe-risk modeling firm Risk Management Solutions Inc. estimating U.S. insurers could lose between $31 billion and $44 billion.
Travelers’ catastrophe losses, net of reinsurance, came in at $501 million, compared to $397 million a year earlier.
The company reported a combined ratio of 98.6 percent for the quarter, compared with 94.9 percent a year earlier. A ratio below 100 percent means the insurer earned more in premiums than it paid out in claims.
Total revenues rose 6 percent to $8.81 billion.
By Niket Nishant and Noor Zainab Hussain