Insurer Travelers Cos. (TRV) has seen one upside to the weak economy: All the uncertainty is driving insurance customers to seek out the strongest insurers, even if it means paying more.

Good pricing helped push the stock of Travelers up in midday trading. But in the fourth quarter, rising prices were more than offset by sharply lower investment income.

Net income at Travelers fell 24% from the year-ago quarter, to $801 million, or $1.35 a share, down from $1.06 billion, or $1.64 a share, a year earlier.

The latest results include net investment income of $438 million after tax, compared with $696 million after tax in the year-earlier quarter. Investment income was hurt by $138 million in net realized investment losses in its non-fixed income portfolio, compared with net realized gains of $6 million in the year-earlier quarter.

Operating earnings for the quarter fell to $1.58 a share from $1.63 a share a year ago, but exceeded expected earnings of $1.46 a share. Revenue decreased 6.9% to $6.02 billion, below the analyst expectation of $6.36 billion.

Generally strong underwriting results and the expectation of higher insurance prices to come helped push up Travelers' share price by 7.21% in midday trading, to $40.27. The company said its flow of new business improved in the quarter, and said it expected that trend to continue as customers seek out highly rated insurers.

CreditSights Inc. analyst Rob Haines said the quarter gave evidence that the property/casualty insurance sector is "probably the only financial sector that has started to rebound" in the current down economic cycle. But the company projected 2009 earnings that are well below analysts' estimates, seeing profit excluding investment losses of $4.50 to $4.90 a share. On average, analysts surveyed by Thomson Reuters expected $5.59 a share.

"The world feels like a riskier place" to big commercial customers, which is driving them to seek out the strongest companies for their insurance needs, even if the prices are a bit higher, said Jay Fishman, Travelers Cos. chief executive, during the company's earnings conference call Tuesday.

In some lines, customers are cutting the amount of coverage they buy, essentially self-insuring for some potential losses, but are paying more for the coverage they do buy, which should help improve underwriting results even further.

The company's combined ratio for the quarter was 85.9%, down from 88.4% a year ago. The combined ratio is the percentage of each premium dollar that is spent on claims and expenses.

Net premiums written edged up 0.4% to $5.39 billion. Return on equity, an important measure of profitability, slid to 12.8% from 16.1%.

Sandler O'Neill analyst Paul Newsome, who rates Travelers a buy, cited the company's "good underwriting results" for the quarter in a Tuesday note.

Travelers stock is down 11% so far this year, making it one of the better performing property/casualty insurers. The Dow Jones US Property & Casualty Index (DJUSIU)is down 14.2% for the year to date.

-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141; lavonne.kuykendall@dowjones.com

(Kerry E. Grace contributed to this report.)

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