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Travelers Cos. profit falls on Sandy losses

NEW YORK (MarketWatch)
Travelers Cos. said Tuesday its fourth-quarter profit fell to $304 million, or 78 cents a share, from $618 million, or $1.51 a share, in the year-ago period
Operating earnings dropped to 72 cents a share from $1.48 a share
The insurer's revenue rose 2% to $6.48 billion
Wall Street analysts expected Travelers Cos. to earn 14 cents a share, according to a survey by FactSet
Catastrophe losses in the quarter were $689 million after-tax, including losses resulting from superstorm Sandy of $669 million after-tax, compared to $68 million after-tax in the prior year quarter
Travelers Cos. is one of 30 stocks included in the Dow Jones Industrial Average

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Travelers Cos. /quotes/zigman/455344/quotes/nls/trv TRV +2.39% , one of the largest property-casualty insurers in the U.S., said its fourth-quarter profit fell 51% as the company racked up $669 million in claims costs from superstorm Sandy.

But the company's results exceeded Wall Street's muted expectations in the wake of the storm. Shares rose 2.8% to $78.45 in pre-open trading.

When all the claims are counted, Sandy may end up as the second-most expensive natural disaster for insurers in U.S. history, with an industrywide tally that could exceed $20 billion. But the pricetag from Travelers, which includes the reimbursements it expects to receive on its reinsurance program, is the latest sign that major insurers will pull through Sandy without absorbing permanent damage.

The tally from Sandy was just slightly higher than a $650 million after-tax projection Travelers put out in early December. The updated tally is likely to be seen by investors as a positive, since it suggests other insurers won't be publishing drastic re-evaluations of their costs from the storm, which hammered the Northeast in late October.

"We are pleased with our fourth quarter results, as well as our full year results, particularly in light of Storm Sandy," Chief Executive Jay Fishman said.

Earnings of $304 million, or 78 cents a share, dropped from $618 million, or $1.51, in the same period a year earlier. Operating profit, which excludes some investment results, was 72 cents a share, beating the 14 cents average estimate of analysts surveyed by Thomson Reuters.

Revenue grew 1.6% to $6.48 billion.

After-tax catastrophe losses in the latest quarter were $689 million, almost entirely stemming from superstorm Sandy, compared with $68 million in the prior year.

The company's combined ratio, or the percentage of premiums spent on claims and expenses, was 105.4%, up from 95.9% in the fourth quarter of 2011.

Net written premiums rose 2.4% to $5.39 billion, just ahead of estimates of $5.34 billion, as the company continued to raise prices, an effort it undertook partly in response to severe weather events.

Investment income rose $37 million from the prior-year quarter to $689 million, due to private equity performance in the non-fixed income portfolio