Jan 21 (Reuters) - Property and casualty insurance giant Travelers beat Wall Street estimates for fourth-quarter profit on Wednesday, driven by stronger underwriting performance and higher investment returns.
Shares of Travelers jumped 1.8% after earnings report.
Insurance spending has stayed resilient despite cutbacks elsewhere, as businesses and individuals continue to seek coverage against financial risks, natural disasters and other potential losses.
Net written premiums - the total value of policies sold after accounting for reinsurance - rose 1% in the fourth quarter to $10.86 billion.
Analysts say demand has held up so far despite an industrywide rise in auto and property insurance pricing.
"The business performed exceptionally well across the board, as strong underlying profitability, net favorable prior year reserve development and a lower level of catastrophe losses drove the improvement," Travelers CEO Alan Schnitzer said in a statement.
The company posted catastrophe losses of $95 million on a pre-tax basis in the reported quarter, primarily due to winter storms in multiple states.
Catastrophe losses remain a major swing factor for U.S. insurers, typically driven by hurricanes, wildfires and other severe weather events, with the timing and severity of these events significantly affecting results.
Travelers is reducing its exposure to large property accounts where catastrophe risk is not matched by pricing, sticking to strict underwriting discipline in an environment where some competitors are still chasing volumes.
Its underlying combined ratio improved 1.8 percentage points to 82.2% in the quarter. A ratio below 100 indicates that the insurer collected more in premiums than it paid out in claims and expenses.
Meanwhile, net investment income, earned off investments in bonds and other low-risk financial assets, rose 10% after tax to $867 million.
Core income came in at $2.51 billion, or $11.13 per share, in the three months ended December 31. That compares with $2.13 billion, or $9.15 per share, a year earlier.
Analysts on average had expected $8.85 per share, according to estimates compiled by LSEG.