Jan. 22--Travelers Cos. Inc. reported a 17 percent drop in earnings for the fourth quarter of 2015, down from a record fourth quarter in 2014, but still ahead of analysts' expectations.
Net income was $866 million, or $2.83 per diluted share, down from $1.038 billion, or $3.11 per diluted share in the fourth quarter of 2014.
Still, operating earnings easily beat the predictions of analysts. According to Bloomberg, the average across 26 analysts was $2.66 a share, and the operating earnings was $2.90 a share. Operating earnings exclude earnings from investments. Insurers earn a significant part of their income from investing premiums until claims are made. Historically low interest rates have made investing a challenge over the past seven years.
Weak investment income in 2015 and a favorable adjustment to reserves in 2014 were factors in the drop in earnings for the fourth quarter.
Total revenues declined 2 percent to $6.67 billion for the quarter from $6.78 billion during the same period in 2014. The largest driver of revenues, net written premiums, was slightly positive, with $5.86 billion during 2015's last three months and $5.84 billion during the same period in 2014.
Travelers' combined ratio was 86.6 percent, which means it spent that proportion of premiums on claims. The lower the number, the better it is for the company, and that was slightly higher than at the end of 2014, when the combined ratio was 85 percent.
For the entire year, Travelers' combined ratio was 88.3 percent, an improvement from 2014, when it was 89 percent. Its losses on catastrophes were 30 percent lower in 2015 than in 2014.
Travelers has about 7,300 employees in Connecticut.
This was the first quarterly result earnings call for new CEO Alan Schnitzer, and Josh Stirling of Sanford C. Bernstein asked him how he'd respond to the rapid change in the field -- particularly Ace and Chubb's merger, and uncertainty about how AIG could split itself up. Schnitzer said the company believes there are opportunities in the changing competitive environment, but he said they're also focusing on macro trends like how to use big data and the evolution to driverless cars.
"As we think of everything that's got the potential to change in this marketplace, nothing's going to change overnight," he said. "And what we've got great confidence in is our positioning to manage all of them."
Schnitzer, CEO for less than three months, said he's spending lots of time on the road, and paying attention to claims, information technology and personal insurance -- parts of the business he had not managed as he made his way up the ladder.
The stock closed at $102.70 on Thursday, down 95 cents, less than 1 percent.
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