Insurance company Travelers Companies Inc.’s (NYSE:TRV) first-quarter earnings blew Wall Street estimates out of the water and prompted the company to increase its dividend 12 percent as losses from natural disaster fell and previously-weak insurance rates continued their climb.
Travelers stock reached its highest point in nearly a year as it gained 4.8 percent to hit $62.35 a share in morning trading Thursday, before declining some to close the day up 3.75 percent at $61.70. Analysts said the results would have a positive effect on 2012 estimates. Larry Greenberg, an analyst at Janney Capital Markets unit Langen McAlenney, wrote in a note to clients that their 2012 estimate for Travelers is “very likely to increase” due to the first-quarter results. He also said he feels optimistic about property insurers as a group, and that among them Travelers is a preferred “buy.”
Travelers said commercial insurance rates were up an average 8 percent in the quarter, and in a conference call with analysts, the company’s chief operating officer Brian MacLean said they believe the trend will continue. Rates were also up in other areas, including a 4-percent gain in auto and a 10-percent increase in homeowner policies. During the conference call, Chief Executive Jay Fishman said Travelers is raising deductibles in some areas and putting stricter terms on personal policies with the aim of improving profitability.
Operating earnings were $2.01 per share. Analysts surveyed by Thomson Reuters I/B/E/S gave an average forecast of $1.52 per share. The estimates varied greatly, and since Travelers does not give an outlook, its results are normally quite different from Wall Street expectations. Regardless, the company’s earnings topped the highest analyst estimate by almost 40 cents.