The Travelers Companies, Inc. reported net income of $691 million, or $2.30 per diluted share, for the quarter ended March 31, 2016, compared to $833 million, or $2.55, in the prior year quarter. Operating income in the current quarter was $698 million, or $2.33 per diluted share, compared to $827 million, or $2.53 per diluted share, in the prior year quarter. These declines were primarily due to higher catastrophe losses mainly arising out of hail storms that occurred in Texas in late March. Per diluted share amounts benefited from the impact of share repurchases.
Net income of $691 million after-tax decreased $142 million, or 17%. Within net income, operating income of $698 million after-tax decreased by $129 million, or 16%, primarily due to higher catastrophe losses, lower net favorable prior year reserve development and lower net investment income. In addition, net income was impacted by net realized investment losses of $7 million after-tax ($9 million pre-tax) in the current quarter compared to net realized investment gains of $6 million after-tax ($10 million pre-tax) in the prior year quarter.
Underwriting results
The combined ratio remained strong at 92.3%. It increased 3.4 points due to higher catastrophe losses (2.6 points) and lower net favorable prior year reserve development (1.1 points), partially offset by a lower underlying combined ratio (0.3 points).
The underlying combined ratio also remained strong at 90.0% and improved 0.3 points.
Net favorable prior year reserve development occurred in all segments. Catastrophe losses primarily resulted from wind and hail storms in Texas and several other regions of the United States, as well as winter storms in the eastern United States.
Net investment income of $544 million pre-tax ($439 million after-tax) decreased primarily due to lower returns in the fixed income portfolio driven by lower reinvestment rates, and lower returns in the non-fixed income portfolio driven by lower hedge fund returns.
The Travelers Companies, Inc. earnings per share showed an increasing trend of 1.6% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 992%.Analysts project EPS growth over the next 5 years at 2.47%. It has EPS annual growth over the past 5 fiscal years of 10.4% when sales grew 1.3. It reported 1.1% sales growth, and -9.6% EPS decline in the last quarter.
The stock is trading at $114.14, up 21.96% from 52-week low of $95.21. The stock trades down -3.5% from its peak of $118.28 and -1.28% below the consensus price target of $112.68. Its volume clocked up at 2.14 million shares which is higher than the average volume of 1.58 million shares. Its market capitalization currently stands at $33.39B.
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