Tower Group's 3Q profit up 16 pct, tops Street

However, the insurer forecast weak fourth-quarter earnings.

Shares of Tower Group rose $2.67, or 13.6 percent, to $22.34 in morning trading Thursday.

For the quarter ended Sept. 30, Tower Group earned $16.7 million, or 72 cents per share, up from $14.4 million, or 62 cents per share, a year ago.

Operating income, which insurers emphasize because it excludes costs not considered reflective of business trends, was 79 cents per share.

Revenue rose 16.7 percent to $130.7 million.

Analysts surveyed by Thomson Reuters, on average, forecast earnings of 71 cents per share on revenue of $112.6 million.

Results included an uptick in net premiums earned, which grew 20.7 percent to $88.2 million. Commission and fee income was $37 million, compared with $29.3 million last year.

The company's combined ratio decreased to 81 percent from 83.4 percent a year earlier. Combined ratio measures the amount of money an insurer pays out in expenses and claims compared with revenue generate by premiums. A ratio above 100 percent means the insurer is spending more than it earns.

Like most insurers, Tower Group collects premiums from insurance policies and invests those premiums in bonds or investment partnerships. Investment income fell 15 percent to $8.2 million in the quarter.