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Travelers Q3 income declines YOY on unfavorable reserve development

Travelers Cos. Inc. reported third-quarter net income of $396 million, or $1.50 per share, compared to $709 million, or $2.62 per share, in the year-ago period.

Core income declined to $378 million, or $1.43 per share, from $687 million, or $2.54 per share. Travelers said core income was down primarily because of net unfavorable prior-year reserve development in the current quarter, "including the impact of an increasingly challenging tort environment."

The S&P Global Market Intelligence consensus normalized EPS estimate for the quarter was $2.35.

Total revenue rose 4% year over year to $8.01 billion, and net written premiums grew 7% to $7.57 billion.

Travelers booked a third-quarter underwriting loss of $149 million, compared to an underwriting gain of $198 million a year ago. The loss reflected $294 million of net unfavorable reserve development, compared to $14 million of favorable development in the year-ago period.

That included a $220 million increase in asbestos reserves, compared to $225 million a year ago, and the company also said general liability and commercial auto reserves developed unfavorably because of the more challenging tort environment.

Catastrophe losses, net of reinsurance, ticked down to $241 million from $264 million.

The combined ratio for the period was 101.5%, compared to 96.6% in the third quarter of 2018. On an underlying basis, the combined ratio rose to 94.1% from 93.0%. Reserve development added 4.1 percentage points to the third-quarter combined ratio, compared to a 0.2-point reduction in the year-ago period, while catastrophe losses accounted for 3.3 percentage points of the combined ratio, down from 3.8 points.

Travelers repurchased 2.5 million shares during the third quarter at an average price of $147.23 per share, for a total cost of $375 million. Capacity remaining under its existing share repurchase authorization was $2.16 billion as of Sept. 30.

The board declared a quarterly dividend of 82 cents per share, payable Dec. 31 to shareholders of record on Dec. 10.