Travelers Profit $488.7 Million For Quarter

By Michael Ha

NU Online News Service, Jan. 29, 4:07 p.m.EST?Travelers Property Casualty Corp. returned toprofitability for its 2003 fourth quarter, posting a record $488.7million in net income, even after taking a non-asbestos-relatedcharge of $203.5 million.[@@]

The insurer also said its merger with The St. Paul Companies isproceeding as scheduled and that it will hold a special shareholdermeeting on March 19 to secure investors' approval.

One year ago, Travelers posted a loss of $793 million during the2002 fourth quarter, after taking a massive $1.3 billion charge toboost asbestos reserves.

The insurer's newest reserve addition didn't involve asbestosliabilities. The bulk of the charge, at $163.8 million pretax, wasassociated with Gulf Insurance, a majority-owned subsidiary thatwrites specialty insurance. Other charges involved American Equity,a runoff operation, and environmental coverages.

The Hartford, Conn.-based Travelers, which agreed last Novemberto merge with The St. Paul Companies, still reported underwritinggain of $98 million for the fourth quarter despite the charge, incontrast to underwriting loss of $1.284 billion a year ago.Consolidated combined ratio for the quarter came in at 96.2, a 70.1point improvement over 167.1 reported one year earlier.

Travelers said its net written premiums for the 2003 fourthquarter grew 11 percent to $3.389 billion after strong growth inboth commercial and personal lines.

In commercial lines, net written premiums were up $204.4million, or 11 percent, to $2.125 billion for the fourth quarter,based on higher premium rates, new business growth in targetedmarkets, and strong retention across all major business lines, thecompany said.

Personal-lines net written premiums gained $118.7 million, or 10percent, to $1.264 billion, also helped by higher rates as well asincreased business volumes and strong retention.

For full-year 2003, total net written premiums rose 10.5 percentto $13.2 billion. Full-year 2003 net income came in at $1.696billion, in contrast to a loss of $27 million for 2002.

"We did have an excellent quarter and an excellent year,achieving a level of profitability that is historically among thetop tier in our industry. We had a record operating income of $463million for the quarter and $1.675 billion for the year," TravelersChief Executive Robert Lipp said during an analyst conference calltoday.

"Operating return-on-equity, which is sort of a mantra aroundhere, was over 17 percent for the fourth quarter, and 16.6 percentfor the year, which are highs for the company," Mr. Lipp toldanalysts. This is the third quarter in a row in which Travelers hadreturn-on-equity of over 17 percent, he noted. "We are very pleasedwith our new business volumes and continue to benefit from thepositive rate environment."

Travelers' 2003 fourth-quarter net investment income, which madeup the majority of the overall quarterly profit, came in at $379million, slightly higher than $363 million reported for the 2002fourth quarter. Mr. Lipp called this result "an encouragingsign."

Mr. Lipp also commented that he is "very pleased with theprogress and how both management teams are working together" atTravelers and St. Paul. The two companies struck a deal this pastNovember to combine and create one of the largest property-casualtyinsurers in the country.

"Now, some 30-odd integration teams have been set up," Mr. Lippnoted. "We hope to conclude the merger sometime in the secondquarter.