Travelers Cos. (TRV:US) rose the most in the Dow Jones Industrial Average as profit beat analysts’ estimates and the company boosted its dividend 12 percent.
The insurer climbed 4.9 percent to $62.37 at 11:10 a.m. in New York, the biggest increase since October. First-quarter operating profit, which excludes some investment results, was $2.01 a share, according to a statement today from the company. That compares with the $1.52 average estimate (TRV:US) of 22 analysts surveyed by Bloomberg.
Chief Executive Officer Jay Fishman, 59, is raising prices for coverage after natural disasters caused record losses last year for the insurance industry and yields fell on the company’s fixed-income holdings. Travelers’ investment income has come under pressure as the Federal Reserve keeps interest rates near zero, making it harder to maintain portfolio returns as bonds mature and proceeds are reinvested.
“We’re impressed with the proof they are aggressively taking rate, and chasing away” less-profitable customers, Sanford C. Bernstein analysts led by Josh Stirling said in a note to clients today.
Travelers led other property-casualty insurers higher. Zurich-based Ace Ltd. (ACE:US) climbed 2.6 percent and Warren, New Jersey-based Chubb Corp. advanced 1.8 percent.
Policy sales climbed to $5.5 billion from $5.44 billion a year earlier. In Travelers’ largest segment, business insurance, rates climbed 8 percent for renewing customers. The dividend was raised to 46 cents a share from 41 cents, beating by 3 cents the Bloomberg Dividend Forecast.
Travelers said that it expected to book a gain of $90 million related to a lawsuit against American International Group Inc. (AIG:US) Last year, the bailed-out insurer agreed to pay $450 million to a group of rivals that had alleged AIG shortchanged industry-funded pools that provide coverage to injured workers. The settlement is being appealed by some parties, Travelers said today in a regulatory filing.
Net income slipped 3.9 percent to $806 million from a year- earlier, when the New York-based company booked a gain tied to the resolution of a tax matter. Net investment income fell 4.7 percent to $593 million from $622 million a year earlier on lower reinvestment rates in the bond portfolio.
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