Travelers Tops Q3 Estimates With $9.18 Core EPS; Early 4% Slide Reverses as Shares Turn Higher

TRV reported third-quarter core income of $9.18 per diluted share before the open on Friday, well above the $7.25 analyst consensus, on net income of $1.917 billion, or $9.04 per share. Revenue of $12.41 billion topped the $11.31 billion estimate cited by Investing.com, though consensus figures varied by provider, and was essentially flat from a year earlier.

Underwriting held up despite heavier storm costs. Catastrophe losses rose to $538 million pre-tax from $402 million, yet the combined ratio improved to 86.8% from 87.3%, with an underlying combined ratio of 84.1%. Net favorable prior-year reserve development totaled $234 million pre-tax across all three segments, a figure that already absorbs a $295 million addition to asbestos reserves. Net investment income reached a record $1.098 billion pre-tax, up 6%, consistent with reports that profit ticked up on investment gains. Net written premiums of $11.48 billion rose slightly, as gains of 3% in Business Insurance and 12% in Bond & Specialty offset a 7% decline in Personal Insurance, according to the company's release.

Travelers returned $1.769 billion to shareholders in the quarter, including $1.508 billion of buybacks, declared a $1.25 quarterly dividend, and posted a 22.1% core return on equity.

The first market reaction was negative: shares fell about 4.4% in premarket trading as attention went to the higher catastrophe losses. That move did not hold. By 11:29 ET the stock was up about 1% at $387.87, per SentiSense market data. From here, the items to watch are fourth-quarter catastrophe experience, whether asbestos needs further reserve additions, and how long Personal Insurance keeps shrinking while its margins improve.