Travelers posts profit surge on stronger underwriting

(Reuters) — Property and casualty insurance giant Travelers Cos. trounced Wall Street estimates for second-quarter profit on Thursday, driven by stronger underwriting and higher investment returns.

Shares of the company, whose earnings often serve as a bellwether for the sector as well as broader underwriting trends, rose 3% and it was the biggest gainer on the Dow Jones Industrial Average index.

The results highlight the appeal of businesses relatively insulated from tariff shocks at a time when shifting U.S. trade policy under President Donald Trump has been the top concern for many investors.

Despite the economic uncertainty, businesses and individuals have maintained or increased insurance coverage to protect against financial risks, natural disasters and other potential losses.

“We really haven’t seen any impact of tariffs across any of our businesses, certainly not in any meaningful way,” Travelers CEO Alan Schnitzer said.

Net written premiums, the total value of policies sold after accounting for reinsurance, rose 4% in the second quarter to $11.5 billion.

Catastrophe losses from hurricanes, wildfires and severe storms are a key swing factor for insurers, with the scale and timing of such events often sharply affecting quarterly earnings despite efforts to price in risks and share them through reinsurance.

Travelers posted catastrophe losses of $927 million on a pre-tax basis in the reported quarter, compared with $1.51 billion a year earlier.

Losses were moderate despite some hailstorms, making it one of the better quarters following a spell of elevated weather-related claims across the industry.

The underlying combined ratio came in at 84.7% in the quarter. A ratio below 100 indicates that the insurer collected more in premiums than it paid out in claims and expenses.

Travelers posted underlying underwriting income of $1.6 billion on a pre-tax basis, up 35% from a year earlier.

Stronger underwriting reflects the insurer’s ability to price risk accurately and limit losses, helping boost profits even when claims arise.

Meanwhile, net investment income, which comes from investments in bonds, stocks and other low-risk financial assets, rose 6% to $942 million.

Travelers’ adjusted profit of $6.51 per share sailed past Wall Street expectations of $3.66 per share, according to estimates compiled by LSEG.

Core income surged nearly threefold to $1.5 billion in the three months ended June 30, versus $585 million a year earlier.