The Travelers Cos. reported second-quarter earnings that were much better than last year, when tornadoes and other catastrophes pummeled property-casualty insurers, but still missed analysts' expectations.
Operating income was $495 million, or $1.26 per share, during the three-month period ending June 30, compared with an operating loss of $377 million, or 91 cents per share, during the same period a year ago. Analysts surveyed by Thomson Reuters expected, on average, $1.35 per share.
Net income was $499 million, or $1.26 per share, compared with a net loss of $377 million, or 91 cents per share.
Travelers Chairman and CEO Jay Fishman said earnings were "impacted by weather-related losses which, while much lower than in the prior year quarter, were considerably higher than we would have expected based on historical experience."
The company reported a $62 million underwriting loss for the quarter as payment for natural disasters, such as wind storms and hail, exceeded cash released from prior-year reserves. Travelers had an underwriting loss of $1.4 billion during the second quarter of 2011.
Total revenues during the quarter were relatively flat at $6.3 billion as net written premium was up 1 percent to $5.87 billion from $5.82 billion, driven partly by higher prices for insurance.
"We remain committed to our strategy of improved profitability through actively and selectively seeking rate and improvements in terms and conditions given the persistent low interest rate environment and continuing unusual weather patterns," Fishman said.
Barclays Capital analysts Jay Gelb and Sarah DeWitt said Travelers is "one of the strongest property-casualty franchises in the sector based on its high quality management, potential for strong book value growth and better-than-average underwriting performance."
Gelb and DeWitt mentioned that Travelers is more aggressive than other insurers to raise rates on commercial lines. The company increased premiums by 6 percent in auto sales through agents and 11 percent in homeowners' insurance sold through agents. Business insurance increased by 7 percent.
Shares of the company closed at $63.69, down 31 cents Thursday on the New York Stock Exchange.