U.S. insurer Travelers Cos Inc (TRV.N) said it would look to raise rates across all its businesses to counter perennially low interest rates and uncertain weather conditions.
Shares of Travelers rose to an all-time high of $88.57 on Tuesday morning, after the company posted a record quarterly operating profit that beat market estimates as catastrophe losses declined and the insurer was able to charge higher premiums.
Travelers, a component of the Dow Jones industrial average .DJI, was able to keep rates consistent across all its businesses and retain customers. The company has been a bellwether of insurers' ability to raise prices, after years of weakness in the market.
Customer retention and the rate at which it raised premiums in its homeowner and auto insurance businesses were steady compared with previous quarters, Travelers said in a slide presentation for analysts.
The increase in business insurance rates bodes well for peers such as Chubb Corp (CB.N), ACE Ltd ACE.N and WR Berkley Corp (WRB.N), UBS analyst Brian Meredith wrote in a note to clients.
Chubb and ACE shares were trading up about 2 percent, while WR Berkley's stock was up 1 percent in afternoon trading on the New York Stock Exchange.
"At least over the next couple of quarters, I expect the rating momentum to keep up and to continue on the pace it has," BMO Capital Markets analyst Charles Sebaski said.
"I expect Travelers to be able to continue making these kinds of (pricing) improvements year-over-year."
RECORD OPERATING PROFIT
Net profit rose 11 percent to $896 million, or $2.33 per share, in the first quarter, from $806 million, or $2.02 per share, a year earlier.
On an operating basis, Travelers earned $2.31 per share. Analysts on average were expecting the company to earn $2.02 per share, according to Thomson Reuters I/B/E/S.
Travelers' results often differ from analysts' average expectations as the company does not give a forecast.
Analysts provided operating earnings estimates of between $1.77 per share and $2.28 per share for the company, according to Thomson Reuters StarMine data.
The insurer also raised its quarterly dividend to 50 cents per share from 46 cents per share.
Pre-tax catastrophe losses, net of reinsurance, were $99 million in the quarter, down from $168 million in the year-earlier quarter.
Net investment income, on a pre-tax basis, fell about 10 percent to $670 million, mainly due to low interest rates.
Travelers shares, which have risen about 11 percent since the company last reported quarterly results, were trading up 3 percent at $86.68 on the New York Stock Exchange on Tuesday afternoon.
(Reporting by Aman Shah in Bangalore; Editing by Roshni Menon and Supriya Kurane)