Travelers, the biggest U.S. property insurer by market value, said first-quarter profits fell 32% as values on its investments sagged along with the economy.

Net income fell to $662 million, or $1.11 per share, down from the $967 million, or $1.54 per share, from the prior year’s first quarter.

“Notwithstanding difficult economic and investment environments, we delivered a net and operating return on equity of 10.2% and 12.4%, respectively, and we grew book value per share in the quarter, continuing to demonstrate our ability to achieve our long-term financial objectives,” said Jay Fishman, Travelers’ chairman and CEO, in a statement.

He added that the results reflected “a solid underwriting performance,” citing the 90.6% combined ratio. “While long-term fixed income returns were stable, total net investment income declined due to lower short-term interest rates and negative returns on our non-fixed income investment portfolio. Notwithstanding current investment market conditions, we remain pleased with the quality of our investment portfolio,” Fishman said.

He said the company remains “strong and we continue to gain momentum,” pointing to its ongoing investments in technology platforms and product enhancements.

Fishman said “the flight to quality that is occurring in our industry can be seen in our high retention rates and increased business submission flows.”

Travelers moved ahead of American International Group for market value last year. AIG has been suffering since last fall, when the U.S. government started pumping nearly $170 billion in federal aid to the insurer.

Travelers competes with AIG, as well as The Hartford and Chubb, primarily in the U.S. property insurance market.

Travelers had $5.203 billion in net written premiums, an increase from $5.188 billion in the prior year quarter. Improving rate trends continued in each business segment, although coverage demands from existing policyholders declined due to general economic conditions, officials said.

The insurer saw catastrophe losses of $54 million after-tax ($83 million pre-tax), compared to $62 million after-tax ($95 million pre-tax) in the prior year quarter.
Its net investment income of $474 million after-tax ($542 million pre-tax) declined from $650 million after-tax ($815 million pre-tax) in the prior year quarter, due to negative returns in the non-fixed income portfolio and significantly lower short-term interest rates.