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Q3 catastrophe losses drive decline in Travelers core, net income

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Q3 catastrophe losses drive decline in Travelers core, net income

Travelers Cos. Inc. reported third-quarter core income of $253 million, or 91 cents per share, compared with $701 million, or $2.40 per share, in the year-ago quarter.

The S&P Capital IQ consensus normalized EPS estimate for the quarter was 40 cents.

Net income for the quarter was $293 million, or $1.05 per share, down from $716 million, or $2.45 per share, in the third quarter of 2016.

The sharp declines in net and core income resulted from significantly higher catastrophe losses, the company said. Pretax catastrophe losses, net of reinsurance, totaled $700 million, or $455 million after tax, up from $89 million pretax in the year-ago period. These losses during the third quarter mainly resulted from hurricanes Harvey, Irma and Maria and wind and hail storms in the southern U.S.

Additionally, net income benefited for an increase in net realized investment gains of $61 million pretax, or $40 million after tax, in the third quarter, mainly driven by gains on the sale of equity securities, compared with $23 million pretax, or $15 million after tax, in the prior-year quarter.

The company reported an underwriting loss of $246 million, compared with an underwriting gain of $408 million in the third quarter of 2016. The third-quarter combined ratio deteriorated to 103.2% from 92.9%, resulting from higher catastrophe losses, a higher underlying combined ratio and lower net favorable prior-period reserve development.

Net investment income increased to $588 million from $582 million due to strong private equity returns.

Travelers Cos. repurchased 2.6 million shares during the third quarter at an average price of $128.11 per share for a total cost of $328 million.