January 29, 2008

Travelers 4Q profit falls 11 percent

MINNEAPOLIS - Travelers Cos., one of the nation's largest commercial insurers, said Tuesday its fourth-quarter profit fell 11 percent on lower premiums and investment income, but still beat Wall Street expectations.

However, its predicted 2008 profits fell well below analyst predictions.

For the three months ended Dec. 31, net income slipped to $1.06 billion, or $1.64 per share, from $1.19 billion, or $1.68 per share, a year ago. Excluding items, profit totaled $1.63 per share in the latest quarter, compared with $1.69 per share in the prior-year quarter.

The results topped the consensus estimate of analysts polled by Thomson Financial, who expected profit of $1.61 per share.

Net investment income dipped to $696 million from $701 million in the 2006 quarter, due to slightly lower returns in the non-fixed income portion of its portfolio. Net written premiums of $5.4 billion fell 1 percent, but were flat when adjusted for the sales of Afianzadora Insurgentes and Mendota.

The St. Paul-based company said retention rates were strong but renewal price changes were slightly weaker and new business volumes decreased amid competition.

Chairman and chief executive Jay Fishman said Travelers will use its financial and operational strength "to write attractive business opportunities while always remaining highly disciplined in our underwriting."

Travelers said its business segment had an operating profit of $729 million for the quarter, up from $703 million during the same period a year ago. That was after $3 million in losses from southern California wildfires.

Net written premiums dropped 2 percent from a year ago. The company said retention was "extremely strong" but renewal pricing was slightly lower than recent quarters, and new business volumes dropped versus a year ago.

Personal insurance had a $201 million operating profit, down from $348 million a year ago on higher weather-related losses and a lack of favorable prior-year development.

Travelers said its board approved an additional $5 billion worth of common stock repurchases, bringing the company's total remaining authorization to about $5.9 billion.

The company forecast 2008 operating profit of $5.40 to $5.75 per share, including catastrophe losses of $340 million, or 55 cents per share. That was well below Wall Street's expectation of $6.24 per share. It said its guidance included catastrophe losses of $340 million after taxes, or 55 cents per diluted share. It also expects low single digit growth in the size of its investments, and $2.7 billion in share repurchases for the year.

For all of 2007, Travelers earned $4.6 billion, or $6.86 per share, up from $4.21 billion, or $5.91 per share, the prior year. Revenue rose to $26.02 billion, from $25.09 billion a year ago.

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