Markets

Travelers Beat Forecasts by About $2 a Share. The Stock Fell 4% Before the Open

Travelers earned $9.18 a share in core income in the third quarter against a consensus of about $7.25, yet the shares fell about 4.4% in premarket trading on October 16. Higher catastrophe losses and a $295 million asbestos charge sat behind the headline.

On paper, Travelers delivered one of the cleanest beats of the earnings season so far. The insurer reported third-quarter core income of $1.947 billion, or $9.18 a diluted share, up from $8.14 a year earlier and well above the $7.25 consensus cited by Investing.com. Revenue of $12.41 billion also topped the $11.31 billion expected.

The shares fell anyway, down about 4.4% in premarket trading at 7:05 a.m. ET, after closing Thursday at $383.89. The reasons were in the lines below the headline. Catastrophe losses rose to $538 million before tax from $402 million a year earlier. And while reserves set aside for past years' claims proved more than enough overall — releasing $234 million — that figure was net of a $295 million addition to asbestos reserves, a decades-old liability that keeps coming back.

Growth was the other question. Net written premiums were flat at $11.48 billion, up 2% excluding the Canadian business Travelers has sold, and premiums in personal insurance fell 7%. The combined ratio, the share of premiums paid out in claims and expenses, was 86.8%, or 84.1% excluding catastrophes and reserve changes — profitable, but the market wanted evidence the business is still expanding.

One record helped: net investment income reached $1.098 billion before tax, up 6%, as higher bond yields keep lifting what insurers earn on the premiums they hold before paying claims.

The pattern is familiar from the banks earlier in the week. When a company beats by a wide margin and the stock falls, the market is usually telling you the beat came from the wrong place — here, investment income and reserve releases rather than premium growth. A premarket move is also only a first read; the opening bell often changes it.