(Reuters) - U.S. insurer Travelers Cos Inc's (TRV.N) quarterly profit handily beat Wall Street expectations as it charged more for insurance coverage while holding on to its customers, sending its shares up as much as 5 percent to an all-time high.
Travelers, a Dow Jones industrial average .DJI component, increased premiums across all its businesses and retained customers, in the fourth quarter, a strong signal for the insurance industry as it seeks to raise prices after years of weakness.
Chief Executive Jay Fishman said the company's business insurance and management liability businesses recorded rate increases of 8 percent with stable retentions in the quarter.
"The underlying underwriting margins improved in each of our businesses, attributable to improved non-catastrophe weather-related losses and the significant pricing gains we have been realizing," Fishman said in a statement.
Shares of the company, which has a market valuation of about $29 billion, rose as much as 5 percent to touch an all-time high of $80.00 on Tuesday morning.
The company's sustained positive pricing momentum should also provide a positive read-through to other insurers, Stifel Nicolaus analyst Meyer Shields wrote in a note to clients.
Even though net profit halved to $304 million, or 78 cents per share, due to losses from superstorm Sandy, the company was able to crush consensus estimates for the second successive quarter.
Excluding net realized investment gains and losses, Travelers earned 72 cents per share. Analysts on average expected earnings of 14 cents per share, according to Thomson Reuters I/B/E/S.
Travelers' earnings often differ substantially from Wall Street consensus as the company does not give forecasts.
"Given the continued low interest rate environment and uncertain weather patterns, we will continue to seek improved pricing," CEO Fishman said in a statement.
Net premiums written for the quarter rose 2 percent to $5.39 billion. Investment income was up 6 percent to $689 million, driven by alternative investment returns.
Catastrophe losses in the quarter included an after-tax impact of $669 million from Sandy, slightly above the pre-announced losses of about $650 million.
Sandy, which struck Northeast United States on October 29, is expected ultimately to be the second-costliest catastrophe in U.S. history, with insured loss estimates as high as $25 billion. The costliest catastrophe was Hurricane Katrina in 2005.
Travelers shares, which have risen more than 6 percent since the start of the year, were trading up 3 percent at $78.47 on the New York Stock Exchange on Tuesday afternoon.
(Reporting by Aman Shah in Bangalore; Editing by Don Sebastian)