(Rewrites, adds details, comments from earnings call)
By Nikhil Subba and Suzanne Barlyn
Oct 19 (Reuters) - Travelers Cos Inc's quarterly profit fell less than Wall Street expected after a severe Atlantic storm season, helping its shares up slightly on Thursday, but it warned investors of large claims likely this quarter from wildfires raging in California.
The No. 2 U.S. commercial property and casualty insurer recorded $700 million in catastrophe losses from the destruction wrought by Hurricanes Harvey and Irma, which caused a 59 percent drop in core earnings.
However, that was less than Wall Street had feared, and paying claims now may end up helping Travelers and other insurers to raise rates gradually as people and businesses renew their premiums.
"Customers are well served by stable and predictable market that keeps pace with inflation as opposed to the higher pricing swings of the past," said Travelers Chief Executive Alan Schnitzer on a conference call with analysts.
However, Schnitzer warned of significant fourth-quarter catastrophe losses from California wildfires. The company paused a share repurchase plan in September to conserve cash as it reviewed storm claims, and it is still evaluating that position in the light of wildfire claims, he said.
Shares of Travelers, a component of the Dow Jones Industrial Average, were up 0.7 percent in midday trading.
For the third quarter ended Sept. 30, Travelers' net income dropped 59 percent to $293 million.
Excluding the effect of realized investments and some other items, the company earned 91 cents per share, trumping analysts expectations of 43 cents a share, according to Thomson Reuters I/B/E/S. It benefited from a decline in income tax expense.
Net written premiums rose 4.2 percent to a record of $6.7 billion.
U.S. insurers were clobbered by unusually vicious storms during August and September, in which Hurricanes Harvey and Irma struck within less than two weeks of each other leaving billions of dollars of destruction in Texas and Florida. Hurricane Maria followed weeks later, devastating Puerto Rico.
Travelers said catastrophe losses rose 700 percent from a year ago, as Texas suffered from historic rains caused by Harvey and Irma pummeled Florida and several southern states.
As a result, Travelers' combined ratio rose to 103.2 percent from 92.9 percent a year ago. A ratio below 100 percent means an insurer earns more in premiums than it pays out in claims and expenses.
Travelers' rival American International Group reports third-quarter results on Nov. 2. (Reporting by Nikhil Subba in Bengaluru; Editing by Bernard Orr and Bill Rigby)