Q4 2023 Travelers Companies Inc Earnings Call

January 19, 2024

Good morning, ladies and gentlemen. Welcome to the fourth quarter results teleconference for travel.

Host or Operator: Good morning, ladies and gentlemen. Welcome to the fourth quarter results teleconference for travel. We ask that you hold all questions until the completion of formal remarks, at which time you will be given instructions for the question and answer. As a reminder, this conference is being recorded on January 19, 2024. At this time, I would like to turn the conference over to Ms. Abbe Goldstein, Senior Vice President of Investor Relations. Ms. Goldstein, you may begin.

Good morning, ladies and gentlemen, welcome to the fourth quarter results teleconference for travelers, we ask that you hold all questions until the completion of formal remarks at which time you will be given instructions for the question and answer session.

We ask that you hold all questions until the completion of formal remarks, at which time you will be given instructions for the question and answer.

As a reminder, this conference is being recorded on January 19, 2024.

As a reminder, this conference is being recorded on January 19th 2024.

At this time, I would like to turn the conference over to Ms. Abbe Goldstein, Senior Vice President of Investor Relations. Ms. Goldstein, you may begin.

At this time I would like to turn the conference over to MS. Abbe Goldstein Senior Vice President of Investor Relations Ms. Goldstein you may begin.

Abbe F. Goldstein: Thank you. Good morning and welcome to Travelers' Discussion of our fourth quarter 2023 results.

Abbe F. Goldstein: Thank you. Good morning and welcome to Travelers' discussion of our fourth quarter 2023 results. We released our press release, financial supplement, and webcast presentation earlier this morning. All of these materials can be found on our website at travelers.com under the Investors section. Speaking today will be Alan Schnitzer, Chairman and CEO, Dan Frey, Chief Financial Officer, and our three-segment presidents, Greg Toczydlowski of Business Insurance, Jeff Klank of Bond and Specialty Insurance, and Michael Klein of Personal Insurance. They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through their prepared remarks, and then we will take your questions.

Abbe F. Goldstein: Thank you good morning, and welcome to travelers discussion of our fourth quarter 2023 results. We released our press release financial supplement and webcast presentation earlier. This morning. All of these materials can be found on our website at travelers dot com under the investors section.

Abbe F. Goldstein: We released our press release, financial supplement, and webcast presentation earlier this morning. All of these materials can be found on our website at travelers.com under the investors section.

Abbe F. Goldstein: Speaking today will be Alan Schnitzer, Chairman and CEO, Dan Frey, Chief Financial Officer, and our three segment President Greg cause loud scale business insurance, Jeff Clinker bond and specialty insurance and Michael Klein of personal insurance they.

Abbe F. Goldstein: They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks, and then we will take your questions.

Alan D. Schnitzer: He will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks, and then we will take your questions.

Speaker Change: Before I turn the call over to Alan, I'd like to draw your attention to the explanatory note included at the end of the webcast presentation. Our presentation today includes forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statement due to a variety of factors. These factors are described under forward-looking statements in our earnings press release and in our most recent 10Q and 10K filed with the SEC. We do not undertake any obligation to update forward-looking statements.

Abbe F. Goldstein: Before I turn the call over to Alan, I'd like to draw your attention to the explanatory note included at the end of the webcast presentation. Our presentation today includes forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. actual results may differ materially from those expressed or implied in the forward-looking statement due to a variety of factors. These factors are described in forward-looking statements in our earnings press release and in our most recent 10Q and 10K filed with the SEC. We do not undertake any obligation to update forward-looking statements. Also, in our remarks or responses to questions, we may mention some non-GAAP financial measures. Reconciliations are included in our recent earnings press release, financial supplement, and other materials available in the investor sections on our website.

Speaker Change: Before I turn the call over to Alan I'd like to draw your attention to the explanatory note included at the end of the webcast presentation. Our presentation. Today includes forward looking statements. The company cautions investors that any forward looking statement involves risks and uncertainties and is not a guarantee of future performance actual results may do.

Alan D. Schnitzer: For materially from those expressed or implied in the forward looking statements due to a variety of factors. These factors are described under forward looking statements in our earnings press release and in our most recent 10-Q and 10-K filed with the SEC.

Alan D. Schnitzer: Not undertake any obligation to update forward looking statements also in our remarks or responses to questions. We may mention some non-GAAP financial measures. Reconciliations are included in our recent earnings press release financial supplement and other materials available in the investors section on our website and now I'd like to turn the call.

Speaker Change: Also in our remarks or responses to questions, we may mention some non-GAAP financial measures. Reconciliations are included in our recent earnings press release, financial supplement, and other materials available in the investor sections on our website. And now I'd like to turn the call over to Alan Schnitzer. Thank you, Abby. Good morning, everyone, and thank you for joining us today. We are very pleased to report exceptional top and bottom line results for the quarter.

Alan D. Schnitzer: And now I'd like to turn the call over to Alan Schnitzer. Thank you, Abby. Good morning, everyone, and thank you for joining us today. We are very pleased to report exceptional top and bottom line results for the quarter.

Alan D. Schnitzer: Over to Alan Schnitzer.

Alan D. Schnitzer: Thank you Abby good morning, everyone and thank you for joining US today, we're very pleased to report exceptional top and bottom line results for the quarter.

Alan D. Schnitzer: Core income, earnings per share, and return on equity were all record highs.

Alan D. Schnitzer: Core income, earnings per share, and return on equity were all record highs, as proven by both underwriting and investment results. Our underwriting gains were broad-based. In each of our three segments, underlying underwriting income was higher, and prior year development was favorable.

Alan D. Schnitzer: Core income earnings per share and return on equity were all record highs.

Alan D. Schnitzer: Proven by both underwriting and investment results.

Alan D. Schnitzer: By both underwriting and investment results.

Alan D. Schnitzer: Our underwriting gains were broad-based. In each of our three segments, underlying underwriting income was higher and prior year development was favorable.

Alan D. Schnitzer: Our underwriting gains were broad based in each of our three segments underlying underwriting income was higher in <unk>.

Alan D. Schnitzer: Prior year development was favorable.

Alan D. Schnitzer: The Casterby losses were also light.

Alan D. Schnitzer: The Casterby losses were also light. Record underlying underwriting income resulted from net earned premiums of $10 billion, up more than 13% over the prior year quarter, and an underlying combined ratio which improved 5.5 points to a record 85.9%. Looking at our two commercial segments together, the aggregate BI-BSI underlying combined ratio was an excellent 85.9% for the quarter. The underlying combined ratio in personal insurance was coincidentally also 85.9%, an improvement of more than 10 points year over year. In addition, we are pleased to have delivered full-year core income of $3.1 billion, generating core return on equity of 11.5%.

Alan D. Schnitzer: Catastrophe losses were also light.

Alan D. Schnitzer: Record underlying underwriting income resulted from net earned premiums of $10 billion, up more than 13% over the prior year quarter.

Alan D. Schnitzer: Record underlying underwriting income resulted from net earned premiums of $10 billion up more than 13% over the prior year quarter.

Alan D. Schnitzer: and an underlying combined ratio which improved 5.5 points to a record 85.9%.

Alan D. Schnitzer: And an underlying combined ratio, which improved five five points to a record 85, 9%.

Alan D. Schnitzer: Looking at our two commercial segments together, the aggregate BI-BSI underlying combined ratio was an excellent 85.9% for the quarter.

Alan D. Schnitzer: Looking at our two commercial segments together.

Alan D. Schnitzer: The aggregate B I BSI underlying combined ratio was an excellent 85, 9% for the quarter.

Alan D. Schnitzer: The underlying combined ratio in personal insurance was coincidentally also 85.9%, an improvement of more than 10 points year over year.

Alan D. Schnitzer: The underlying combined ratio in personal insurance was coincidentally also 85, 9% an improvement of more than 10 points year over year.

Alan D. Schnitzer: Notwithstanding elevated industry-wide catastrophe losses earlier in the year and a personalized operating environment that while improving was difficult during the year, notwithstanding elevated industry-wide catastrophe losses earlier in the year and a personalized operating environment that while improving was difficult during the year, Turning to investments, our high-quality investment portfolio continued to perform well.

Alan D. Schnitzer: In addition, we are pleased to have delivered full-year core income of $3.1 billion, generating core return on equity of 11.5%.

Alan D. Schnitzer: In addition, we are pleased to have delivered full year core income of $3 $1 billion generating core return on equity of 11, 5%.

Alan D. Schnitzer: Notwithstanding elevated industry wide catastrophe losses earlier in the year.

Alan D. Schnitzer: And a personal lines operating environment that while improving was difficult during the year.

Alan D. Schnitzer: Generating after-tax net investment income of $645 million for the quarter and $2.4 billion for the year, driven by strong and reliable returns from our growing fixed income portfolio. Our operating results, together with our strong balance sheet, enabled us to grow adjusted book value per share by 8% during the year.

Alan D. Schnitzer: Turning to investments, our high-quality investment portfolio continued to perform well.

Turning to investments our high quality investment portfolio continued to perform well.

Alan D. Schnitzer: Generating after tax net investment income of $645 million for the quarter.

Alan D. Schnitzer: $2 $4 billion for the year, driven by strong and reliable returns from our growing fixed income portfolio.

Alan D. Schnitzer: Our operating results, together with our strong balance sheet, enable us to grow adjusted book value per share by 8% during the year.

Alan D. Schnitzer: Our operating results together with our strong balance sheet enabled us to grow adjusted book value per share by 8% during the year.

Alan D. Schnitzer: After making important investments in our business and returning nearly $2 billion of excess capital to shareholders through dividends and share repurchases,

Alan D. Schnitzer: After making important investments in our business and returning nearly $2 billion of excess capital to shareholders through dividends and share repurchases, Turning to the top line, we grew net written premiums by 13% to $10 billion in the quarter. For the year, we grew net written premiums by 14% to more than $40 billion. All three segments contributed to our top-line success. In business insurance, we grew net written premiums in the quarter by 14% to more than $5 billion. Renewal premium change remained high at 11.8%, while retention also remained high at 87%. The combination of strong pricing and retention reflects deliberate execution on our part and the discipline marketplace. The segment generated $672 million of new business in the quarter, which was $118 million, or about 20%, higher than in the prior year quarter.

Alan D. Schnitzer: After making important investments in our business and returning nearly $2 billion of excess capital to shareholders through dividends and share repurchases.

Alan D. Schnitzer: Turning to the top line, we grew net written premiums by 13% to $10 billion in the quarter.

Alan D. Schnitzer: Turning to the topline we grew net written premiums by 13% to $10 billion in the quarter.

Alan D. Schnitzer: For the year, we grew net written premiums by 14% to more than $40 billion.

Alan D. Schnitzer: All three segments contributed to our top-line success.

Alan D. Schnitzer: All three segments contributed to our top line success.

Alan D. Schnitzer: In business insurance, we grew net written premiums in the quarter by 14% to more than $5 billion.

Alan D. Schnitzer: Renewal premium change remained high at 11.8%, while retention also remained high at 87%.

Alan D. Schnitzer: Renewal premium change remained high at 11, 8% while retention also remained high at 87%.

Alan D. Schnitzer: The combination of strong pricing and retention reflects deliberate execution on our part and the discipline marketplace.

Alan D. Schnitzer: The combination of strong pricing and retention.

Alan D. Schnitzer: Flex deliberate execution on our part and a disciplined marketplace.

Alan D. Schnitzer: In bond and specialty insurance, net written premiums increased by 7% to $989 million, driven by excellent production in our surety business.

Alan D. Schnitzer: The segment generated $672 million of new business in the quarter, which was $118 million, or about 20%, higher than in the prior year quarter.

Alan D. Schnitzer: The segment generated $672 million of new business in the quarter, which was $118 million or about 20% higher than in the prior year quarter.

Alan D. Schnitzer: In bond and specialty insurance, net written premiums increased by 7% to $989 million.

Alan D. Schnitzer: In bond and specialty insurance net written premiums increased by 7% to $989 million driven by excellent production in our surety business, where net written premiums were up 9%.

Alan D. Schnitzer: Driven by excellent production in our surety business.

Alan D. Schnitzer: Net written premiums were up 9%.

Alan D. Schnitzer: Net written premiums were up 9%, and production was also strong in our management liability business. Given the attractive returns, we are very pleased with the strong production results in both of our commercial business sectors. In personal insurance, top line growth of 13% was driven by higher pricing.

Alan D. Schnitzer: Production was also strong in our management liability business.

Alan D. Schnitzer: Given the attractive returns, we are very pleased with the strong production results in both of our commercial business sectors.

Alan D. Schnitzer: Given the attractive returns we are very pleased with the strong production results in both of our commercial business segments.

Alan D. Schnitzer: In personal insurance, top line growth of 13% was driven by higher pricing.

Alan D. Schnitzer: In personal insurance topline growth of 13% was driven by higher pricing.

Alan D. Schnitzer: We know premium change was 21.2% in home and 16.7% in our auto business.

Alan D. Schnitzer: We know premium change was 21.2% in home and 16.7% in our auto business. Real premium change alone contributed more than $2 billion of written premium in this segment over the past year. With another year of strong production in each of our segments, we feel very well positioned for the new year.

Renewal premium change was 21, 2% in home and 16, 7% in our auto business.

Alan D. Schnitzer: Real premium change alone contributed more than $2 billion of written premium in this segment over the past year.

Alan D. Schnitzer: Renewal premium change alone contributed more than $2 billion of written premium in this segment over the past year.

Alan D. Schnitzer: With another year of strong production in each of our segments, we feel very well positioned for the new year.

Alan D. Schnitzer: It's another strong production with another year of strong production in each of our segments, we feel very well positioned for the new year.

Speaker Change: You'll hear more shortly from Greg, Jeff, and Michael about our segment results.

Alan D. Schnitzer: You'll hear more shortly from Greg, Jeff, and Michael about our segment results. But before I turn the call over to Dan, I'd like to take a minute and put our 2023 results into an overtime context with an update to some data we've shared previously.

Speaker Change: You'll hear more shortly from Greg, Jeff and Michael about our segment results.

Speaker Change: Before I turn the call over to Dan, I'd like to take a minute and put our 2023 results into an overtime context with an update to some data we've shared previously.

Speaker Change: Before I turn the call over to Dan I'd like to take a minute and put our 2023 results into an overtime context with an update to some data we've shared previously.

Daniel S. Frey: A half dozen or so years ago, we laid out a focused innovation strategy.

Alan D. Schnitzer: A half dozen or so years ago, we laid out a focused innovation strategy and shared that if we were successful in its execution, we would expect to grow our business at attractive returns. This was a reflection of our belief that any strategy to achieve industry-leading returns over time requires a strategy to grow over time. The data on slide 19 of the webcast presentation show the success we've achieved. Starting at the top left corner, in terms of the top line, we've grown net written premiums at a compound annual rate of 7% over the past seven years. That's two and a half times our rate of growth from 2012 to 2016.

Daniel S. Frey: Half dozen or so years ago, we laid out our focused innovation strategy and.

Daniel S. Frey: and shared that if we were successful in its execution, we would expect to grow our business at attractive returns.

Daniel S. Frey: Ensure that if we were successful in its execution, we would expect to grow our business at attractive returns.

Daniel S. Frey: A reflection of our belief that any strategy to achieve industry-leading returns over time requires a strategy to grow over time.

Daniel S. Frey: A reflection of our belief that any strategy to achieve industry, leading returns over time requires a strategy to grow over time.

Daniel S. Frey: The data on slide 19 of the webcast presentation show the success we've achieved.

Daniel S. Frey: Starting at the top left corner, in terms of the top line, we've grown net written premiums at a compound annual rate of 7% over the past seven years.

Daniel S. Frey: Starting at the top left corner in terms of the topline. We grew net written premiums at a compound annual rate of 7% over the past seven years.

Alan D. Schnitzer: The growth rate in each of the past two years was double digits, the result of a deliberate and tailored strategy. Stronger pricing where we need it. A combination of pricing and unit growth where we like the opportunity. In business insurance, we've added more than $4 billion to our top line over the past two years. The investments we've made in capabilities to enhance the franchise value that we offer to our customers and distribution partners

Daniel S. Frey: That's two and a half times our rate of growth from 2012 to 2016.

Daniel S. Frey: The growth rate in each of the past two years was double digits, the result of a deliberate and tailored strategy.

Daniel S. Frey: The growth rate in each of the past two years was double digits. The result of a deliberate and tailored strategy.

Daniel S. Frey: Stronger pricing where we need it.

Daniel S. Frey: Stronger pricing, where we need it and a combination of pricing and unit growth, where we like the opportunity.

Daniel S. Frey: A combination of pricing and unit growth where we like the opportunity.

Alan D. Schnitzer: The investments we've made in capabilities to enhance the franchise value that we offer to our customers and distribution partners have contributed to strong retention and growth in new businesses.

Daniel S. Frey: In business insurance, we've added more than $4 billion to our top line over the past two years.

Daniel S. Frey: In business insurance, we have added more than $4 billion to our top line over the past two years.

Daniel S. Frey: The investments we've made in capabilities to enhance the franchise value that we offer to our customers and distribution partners The investments we've made in capabilities to enhance the franchise value that we offer to our customers and distribution partners

Daniel S. Frey: The investments we've made in capabilities to enhance the franchise value that we offer to our customers and distribution partners.

Daniel S. Frey: have contributed to strong retentions and growth in new businesses.

Daniel S. Frey: Have contributed to strong retentions and growth in new business.

Daniel S. Frey: In bond and specialty, we've increased net written premiums over that period by about a half a billion dollars, or 14%.

Alan D. Schnitzer: In bond and specialty, we've increased net written premiums over that period by about a half a billion dollars, or 14%. More than half of that growth has come from our very profitable surety business, where our market-leading position has enabled us to benefit from increased demand for bonds with higher contract values and projects resulting from the Federal Infrastructure and Jobs Act and other federal programs. Across both of our commercial segments, since 2021, we have about doubled our E&S writings to around two and a half billion dollars. That includes organic growth from the E&S business we write in National Property, our Northfield business, and our Lloyds business, as well as the impact of more recent strategic efforts, which include our relationships with Fidelis and Corvis. The margins in our ENS business are quite attractive.

Daniel S. Frey: In bond <unk> specialty we've increased net written premiums over that period by about a half a billion dollars or 14%.

Daniel S. Frey: More than half of that growth has come from our very profitable surety business.

Daniel S. Frey: More than half of that growth has come from a very profitable surety business, where our market leading position has enabled us to benefit from increased demand for bonds with higher contract values.

Daniel S. Frey: where our market-leading position has enabled us to benefit from increased demand for bonds with higher contract values,

Daniel S. Frey: and projects resulting from the Federal Infrastructure and Jobs Act and other federal programs.

Daniel S. Frey: And projects, resulting from the federal infrastructure and jobs Act and other federal programs.

Daniel S. Frey: Across both of our commercial segments, since 2021, we have about doubled our E&S writings to around two and a half billion dollars.

Daniel S. Frey: Across both of our commercial segments. Since 2021, we have about doubled our E&S writings to around $2 5 billion.

Daniel S. Frey: That includes organic growth from the E&S business we write in National Property, our Northfield business, and our Lloyds business.

Daniel S. Frey: That includes organic growth from the E&S business, we write in national property, our north field business and our Lloyds business.

Daniel S. Frey: as well as the impact of more recent strategic efforts

Daniel S. Frey: As well as the impact of more recent strategic efforts, which include our relationships with Fidelis and corvus.

Daniel S. Frey: which include our relationships with Fidelis and Corvis.

Daniel S. Frey: The margins in our ENS business are quite attractive.

Daniel S. Frey: The margins in our E&S business are quite attractive.

Daniel S. Frey: In personal insurance where margins have not been at target levels in recent periods, there is no guarantee that you will be able to get the insurance you need.

Alan D. Schnitzer: In personal insurance, where margins have not been at target levels in recent periods, there is no guarantee that you will be able to get the insurance you need. Net written premium growth of $3.4 billion over the past two years has been almost entirely a result of price increases.

Daniel S. Frey: In personal insurance, where margins have not been at target levels. In recent periods net written premium growth of three $4 billion over the past two years has been almost entirely a result of price increases.

Daniel S. Frey: Net written premium growth of $3.4 billion over the past two years has been almost entirely a result of price increases.

Daniel S. Frey: The PI team has done an excellent job of threading the needle.

Alan D. Schnitzer: The PI team has done an excellent job of threading the needle, maintaining a strong customer base while achieving meaningful pricing gains. They've also done a great job with product management. Our advanced peril-by-peril Quantum Auto 2.0 offering now represents more than 60% of the domestic property portfolio. Adoption of our Telematics product and Teledrive among new customers has been strong. With pricing gains and enhanced product sophistication, the book should contribute to our earnings power going forward as we move toward target returns. Also important is that across all three segments, we've grown mostly in products, classes of business, and geography, and through distribution partners that we know well. That gives us a lot of confidence in the business we're adding to the book.

Daniel S. Frey: The team has done an excellent job of threading the needle.

Daniel S. Frey: Maintaining a strong customer base while achieving meaningful pricing gains.

Daniel S. Frey: Maintaining a strong customer base, while achieving meaningful pricing games.

Daniel S. Frey: They've also done a great job with product management.

Daniel S. Frey: They've also done a great job with private product management.

Daniel S. Frey: Our advanced peril-by-peril Quantum Auto 2.0 offering now represents more than 60% of the domestic property portfolio.

Daniel S. Frey: Our advanced apparel by peril quantum auto two point no offering now represents more than 60% of the domestic property portfolio.

Daniel S. Frey: An adoption of our Telematics product and Teledrive among new customers has been strong.

Daniel S. Frey: And adoption of our telematics product Intel or drive among new customers has been strong.

Daniel S. Frey: With pricing gains and enhanced product sophistication, the book should contribute to our earnings power going forward as we move toward target returns.

Daniel S. Frey: With pricing gains and enhanced product specification the books should contribute to our earnings power going forward as we move toward target returns.

Daniel S. Frey: Also important is that across all three segments, we've grown mostly in products, classes of business, and geography.

Daniel S. Frey: Also important is that across all three segments, we've grown mostly in products classes of business and geographies and through distribution partners that we know well.

Alan D. Schnitzer: Moving to the right, you can see that while we've meaningfully increased our rate of growth, we've maintained very strong and consistent underlying profitability. That demonstrates that we're not growing by underpricing the business or compromising our underwriting discipline. We've grown by investing in the products, services, and experiences that our customers want to buy and our distribution partners want to sell. We've also grown through a lot of great hustle and hard work on the part of our outstanding field organizations.

Daniel S. Frey: and through distribution partners that we know well.

Daniel S. Frey: That gives us a lot of confidence in the business we're adding to the book.

Daniel S. Frey: That gives us a lot of confidence in the business, we're adding to the books.

Daniel S. Frey: Moving to the right, you can see that while we've meaningfully increased our rate of growth, we've maintained very strong and consistent underlying profitability.

Daniel S. Frey: Moving to the right you can see that while we've meaningfully increased our rate of growth, we've maintained very strong and consistent underlying profitability.

Daniel S. Frey: That demonstrates that we're not growing by underpricing the business or compromising our underwriting discipline.

Daniel S. Frey: That demonstrates that we're not growing by underpricing, the business or compromising our underwriting discipline.

Daniel S. Frey: We've grown by investing in the products, services, and experiences that our customers want to buy and our distribution partners want to sell.

Daniel S. Frey: We've grown by investing in the products services and experiences that our customers want to buy and our distribution partners want to sell it.

Daniel S. Frey: We've also grown through a lot of great hustle and hard work on the part of our outstanding field organizations.

Daniel S. Frey: We've also grown through a lot of great Hustle and hard work on the part of our outstanding field organization.

Daniel S. Frey: One of the clear strategic objectives of our innovation strategy has been to optimize productivity and efficiency.

Alan D. Schnitzer: One of the clear strategic objectives of our innovation strategy has been to optimize productivity and efficiency.

Daniel S. Frey: One of the clear strategic objectives of our innovation strategy has been to optimize productivity and efficiency.

Daniel S. Frey: Moving to the top right of the slide, you can see that over the last seven years, we've reduced our expense ratio by 3.6 points to just over 28% for 2023.

Alan D. Schnitzer: Moving to the top right of the slide, you can see that over the last seven years, we've reduced our expense ratio by 3.6 points to just over 28% for 2023, which is more than a 10% reduction relative to our 2012 to 2016 expense ratio of around 32%. For more information, visit www.fema.gov Enhanced operating leverage gives us the flexibility to let the benefit fall to the bottom line and or invest further in our strategic priorities.

Daniel S. Frey: Moving to the top right of the slide you can see that over the last seven years, we've reduced our expense ratio by three six points to just over 28% for 2023, which.

Daniel S. Frey: which is more than a 10% reduction relative to our 2012 to 2016 expense ratio of around 32%. For more information visit www.fema.gov

Daniel S. Frey: Which is more than a 10% reduction relative to our 2012 to 2016 expense ratio of around 32%.

Daniel S. Frey: Enhanced operating leverage gives us the flexibility to let the benefit fall to the bottom line and or invest further in our strategic priorities.

Daniel S. Frey: Case in point, as you can see on slide 21, as you can see on slide 21,

Alan D. Schnitzer: Case in point, as you can see on slide 21, as you can see on slide 21,

Daniel S. Frey: Case in point as you can see on slide 21.

Daniel S. Frey: Since 2017, we have doubled our investments in strategic technology initiatives.

Alan D. Schnitzer: Since 2017, we have doubled our investments in strategic technology initiatives. Meanwhile, over that same period, we've carefully managed growth in routine but necessary technology expenditures. In other words, over a seven-year period, we simultaneously and meaningfully increased our technology spend, improved the strategic mix of that spend, and lowered our expense ratio. The upshot of what we've accomplished on the top half of slide 19 is what you see on the bottom half. On the bottom left, you can see that we've increased underlying underwriting income significantly. From 2012 to 2019, underlying underwriting income averaged 1.3 billion dollars. In 2020, we crossed the $2 billion mark.

Daniel S. Frey: Since 2017, we have doubled our investments in strategic technology initiatives.

Daniel S. Frey: Over that same period, we've carefully managed growth in routine but necessary technology expenditures.

Daniel S. Frey: Over that same period, we've carefully managed growth in routine, but necessary technology expenditures.

Daniel S. Frey: In other words, over a seven-year period, we simultaneously and meaningfully increased our technology spend, improved the strategic mix of that spend, and lowered our expense ratio.

Daniel S. Frey: In other words over a seven year period, we simultaneously and meaningfully increased our technology spend improve the strategic mix of that spend and lowered our expense ratio.

Daniel S. Frey: The upshot of what we've accomplished on the top half of slide 19 is what you see on the bottom half.

Daniel S. Frey: The upshot of what we've accomplished on the top half of Slide 19 is what you see on the bottom half.

Daniel S. Frey: On the bottom left, you can see that we've increased underlying underwriting income significantly.

Alan D. Schnitzer: In 2023 marks the first time that we've exceeded three billion dollars. We've taken our underlying underwriting income to a meaningfully higher level. We've also significantly increased our cash flow from operations to more than $7.5 billion in 2023. The fourth consecutive year, it's been more than $6 billion and more than double our average cash flow from operations in the earlier part of the last decade. Cash flow isn't a metric that we or our industry talk a lot about, but it's important. It's what gives us the ability to make important investments in our business, it's what gives us the ability to make important investments in our business,

On the bottom left you can see that we've increased underlying underwriting income significantly.

Daniel S. Frey: From 2012 to 2019, underlying underwriting income averaged 1.3 billion dollars.

Daniel S. Frey: 2012 to 2019 underlying underwriting income averaged $1 $3 billion.

Daniel S. Frey: In 2020, we crossed the $2 billion mark.

Daniel S. Frey: In 2020, we crossed the 2 billion dollar Mark in.

Daniel S. Frey: In 2023 marks the first time that we've exceeded three billion dollars.

Daniel S. Frey: In 2023 marks the first time that we've exceeded $3 billion.

Daniel S. Frey: We've taken our underlying underwriting income to a meaningfully higher level.

Daniel S. Frey: We've also significantly increased our cash flow from operations to more than $7.5 billion in 2023.

Daniel S. Frey: We've also significantly increased our cash flow from operations to more than $7 $5 billion in 2023.

Daniel S. Frey: The fourth consecutive year, it's been more than $6 billion and more than double our average cash flow from operations in the earlier part of the last decade.

Daniel S. Frey: The fourth consecutive year, it's been more than $6 billion more than double our average cash flow from operations in the earlier part of the last decade.

Daniel S. Frey: Cash flow isn't a metric that we or our industry talk a lot about, but it's important.

Daniel S. Frey: Cash flow isn't a metric that we or industry talk a lot about but it is important.

Daniel S. Frey: It's what gives us the ability to make important investments in our business, it's what gives us the ability to make important investments in our business,

Daniel S. Frey: It's what gives us the ability to make important investments in our business to return excess capital to shareholders and grow the investment portfolio.

Daniel S. Frey: Return excess capital to shareholders and grow the investment portfolio.

Alan D. Schnitzer: Return excess capital to shareholders and grow the investment portfolio.

Daniel S. Frey: We've grown our investment portfolio significantly to nearly $93 billion.

Alan D. Schnitzer: We've grown our investment portfolio significantly to nearly $93 billion. As we continue to reinvest our fixed income portfolio at higher rates,

Daniel S. Frey: We've grown our investment portfolio significantly to nearly $93 billion.

Daniel S. Frey: As we continue to reinvest our fixed income portfolio at higher rates,

Daniel S. Frey: As we continue to reinvest our fixed income portfolio at higher rates. This is a highly reliable lever of earnings and value creation.

Daniel S. Frey: This is a highly reliable lever of earnings and value creation. This is a highly reliable lever of earnings and value creation.

Alan D. Schnitzer: This is a highly reliable lever of earnings and value creation and meaningfully lowers our expense ratio. That has resulted in record levels of underlying underwriting income, cash flow, and invested assets. Ultimately, of course, one number that brings everything together is adjusted book value per share. On slide 20, you can see that we have steadily increased adjusted book value per share each year since 2006 at a compound annual rate of 7.5%.

Daniel S. Frey: To sum it up through a well executed strategy, we've more than doubled our rate of growth sustained strong underlying underwriting margins and meaningfully lowered our expense ratio.

Daniel S. Frey: and meaningfully lowered our expense ratio.

Daniel S. Frey: That has resulted in record levels of underlying underwriting income, cash flow, and invested assets.

Daniel S. Frey: This resulted in record levels of underlying underwriting income cash flow and invested assets.

Daniel S. Frey: Ultimately, of course, one number that brings everything together is adjusted book value per share.

Alan D. Schnitzer: For more information, visit www.fema.gov. The effective management of our capital complements that result. We've increased our capital base to support the profitable growth of our business, and at the same time, we've been disciplined about returning excess capital to shareholders. Over this period, we've increased our dividend at a compound annual rate of more than 8% and returned more than $40 billion to our shareholders through share repurchases at an average price of about $74 per share.

Daniel S. Frey: Ultimately of course, one number that brings everything together is adjusted book value per share.

Daniel S. Frey: On slide 20, you can see that we have steadily increased adjusted book value per share each year since 2006.

Daniel S. Frey: On Slide 20, you can see that we have steadily increased adjusted book value per share each year since 2006.

Daniel S. Frey: at a compound annual rate of 7.5%. For more information, visit www.fema.gov.

Daniel S. Frey: Compound annual rate of seven 5%.

Daniel S. Frey: The effective management of our capital complements that result.

Daniel S. Frey: The effective management of our capital complements that result, we've.

Daniel S. Frey: We've increased our capital base to support the profitable growth of our business.

Daniel S. Frey: At the same time, we've been disciplined about returning excess capital to shareholders.

Daniel S. Frey: Over this period, we've increased our dividend at a compound annual rate of more than 8%.

Over this period, we've increased our dividend at a compound annual rate of more than 8%.

Daniel S. Frey: and return more than $40 billion to our shareholders through share repurchases.

Daniel S. Frey: And returned more than $40 billion to our shareholders through share repurchases.

Daniel S. Frey: at an average price of about $74 per share.

Daniel S. Frey: At an average price of about $74 per share.

Daniel S. Frey: These results, together with our track record of strong returns and low volatility, are the results of strong returns and low volatility.

Alan D. Schnitzer: These results, together with our track record of strong returns and low volatility, demonstrate the strength of our business and the success of our overtime strategy. Looking ahead, we're very confident about how we're positioned for 2024 and beyond. The fundamentals across our business are in excellent shape. We're confident that we're focused on the right strategic priorities and that, with demonstrated success in execution, there's plenty more opportunity ahead of us.

These results together with our track record of strong returns and low volatility demonstrate the strength of our business and the success of our overtime strategy.

Daniel S. Frey: Demonstrate the strength of our business and the success of our overtime strategy.

Daniel S. Frey: Looking ahead, we're very confident about how we're positioned for 2024 and beyond.

Looking ahead, we're very confident about how we're positioned for 2024 and beyond.

Daniel S. Frey: The fundamentals across our business are in excellent shape.

Daniel S. Frey: The fundamentals across our business are in excellent shape, we're confident that we're focused on the right strategic priorities and that with demonstrated success in execution. There's plenty more opportunity ahead of us and with that I'm pleased to turn the call over to Dan.

Daniel S. Frey: We're confident that we're focused on the right strategic priorities and that with demonstrated success in execution, there's plenty more opportunity ahead of us.

Daniel S. Frey: And with that, I'm pleased to turn the call over to Dan.

Daniel S. Frey: And with that, I'm pleased to turn the call over to Dan. Thank you, Alan. Core income for the fourth quarter was $1.6 billion, and core return on equity was 24%, both all-time record quarterly results. We're pleased to have once again generated record levels of earned premium this quarter and an excellent underlying combined ratio of 85.9%, a 5.5 point improvement from last year's quarter. The combination of premium growth and underlying margin improvement led to underlying underwriting income of $1.1 billion after tax, up 511 million dollars or 89% from the prior year quarter. The underlying combined ratio improved from the prior year in all three segments.

Daniel S. Frey: Thank you, Alan.

Daniel S. Frey: Thank you Alan.

Daniel S. Frey: Core income for the fourth quarter was $1.6 billion, and core return on equity was 24%, both all-time record quarterly results.

Daniel S. Frey: Core income for the fourth quarter was $1 $6 billion and core return on equity was 24%.

Dan Frey: Both all time record quarterly results were.

Daniel S. Frey: We're pleased to have once again generated record levels of earned premium this quarter and an excellent underlying combined ratio of 85.9%, a 5.5 point improvement from last year's quarter.

Dan Frey: We're pleased to have once again generated record levels of earned premium this quarter and an excellent underlying combined ratio of 85, 9% a five five point improvement from last year's quarter.

Daniel S. Frey: The combination of premium growth and underlying margin improvement led to underlying underwriting income of $1.1 billion after tax.

Dan Frey: Combination of premium growth and underlying margin improvement led to underlying underwriting income of $1 $1 billion after tax up $511 million.

Daniel S. Frey: up 511 million dollars

Daniel S. Frey: The expense ratio for the fourth quarter improved by half a point from last year's quarter to 27.4%, once again reflecting the benefits of our focus on productivity and efficiency, coupled with strong top-line growth. The full-year expense ratio of 28.1% was our best ever. As Alan mentioned, our focus is on operating leverage, and looking ahead to 2024, we're comfortable with the annual expense ratio in the range of 28% to 28.5% for now.

Daniel S. Frey: or 89% from the prior year quarter.

Dan Frey: Or 89% from the prior year quarter.

Daniel S. Frey: The underlying combined ratio improved from the prior year in all three segments.

Dan Frey: The underlying combined ratio improved from the prior year in all three segments.

Daniel S. Frey: The expense ratio for the fourth quarter improved by half a point from last year's quarter to 27.4%.

The expense ratio for the fourth quarter improved by half a point from last year's quarter to 27, 4%.

Daniel S. Frey: Once again, reflecting the benefits of our focus on productivity and efficiency, coupled with strong top-line growth.

Dan Frey: Once again, reflecting the benefits of our focus on productivity and efficiency, coupled with strong topline growth.

Daniel S. Frey: The full year expense ratio of 28.1% was our best ever.

Dan Frey: The full year expense ratio of 28, 1% was our best ever.

Daniel S. Frey: Our fourth-quarter results include a modest $125 million of pre-tax catastrophe losses and an estimated $1.5 million in damages, with no individually significant events impacting our book of business.

Daniel S. Frey: As Alan mentioned, our focus is on operating leverage, and looking ahead to 2024, we're comfortable with the annual expense ratio in the range of 28% to 28.5% for now.

Dan Frey: As Alan mentioned, our focus is on operating leverage and looking ahead to 2024, we're comfortable with the annual expense ratio in the range of 28% to 28, 5% for now.

Daniel S. Frey: Our fourth quarter results include a modest $125 million of pre-tax catastrophe losses, and an estimated $1.5 million in damages.

Dan Frey: Our fourth quarter results include a modest $125 million of pre tax catastrophe losses.

Daniel S. Frey: with no individually significant events impacting our book of business.

Dan Frey: With no individually significant events impacting our book of business.

Daniel S. Frey: Turning to prior year reserve development, we had total net favorable development of $132 million pre-tax, with all three segments contributing.

Daniel S. Frey: Turning to prior year reserve development, we had total net favorable development of $132 million pre-tax, with all three segments contributing. Business insurance had a net favorable PYD of $56 million, driven by favorability in workers' comp that was partially offset by adverse development in umbrella and general liability.

Dan Frey: Turning to prior year Reserve development, we had total net favorable development of $132 million pretax with all three segments contributing.

Daniel S. Frey: Business insurance, net favorable PYD of $56 million, was driven by favorability in workers' comp that was partially offset by adverse development in umbrella and general liability.

Dan Frey: Business insurance net favorable <unk> of $56 million was driven by favorability in workers' comp that was partially offset by adverse development in umbrella and general liability.

Daniel S. Frey: Even after the reserve charge, the returns in both Umbrella and GL remain very attractive.

Daniel S. Frey: Even after the reserve charge, the returns in both Umbrella and GL remain very attractive. In bond and specialty, a net favorable PYD of $36 million was driven by better than expected results in both surety and management liability. Personal insurance had $40 million of net favorable PYD driven by homeowners and others. After-tax net investment income of $645 million was up 21% from the prior year quarter. Fixed maturity NII was again higher than the prior year quarter, reflecting both the benefit of higher average yields and the significant growth in our portfolio of invested assets. Returns in the non-fixed income portfolio were also higher than in the prior year quarter.

Dan Frey: Even after the reserve charge the returns in both umbrella NGL remains very attractive.

Daniel S. Frey: In bond and specialty, net favorable PYD of $36 million was driven by better than expected results in both surety and management liability.

Dan Frey: In bond and specialty net favorable <unk> of $36 million was driven by better than expected results in both surety and management liability.

Daniel S. Frey: Personal insurance had $40 million of net favorable PYD driven by homeowners and others.

Dan Frey: Personal insurance had $40 million of net favorable <unk> driven.

Driven by homeowners and other.

Daniel S. Frey: After-tax net investment income of $645 million was up 21% from the prior year quarter.

Dan Frey: After tax net investment income of $645 million was up 21% from the prior year quarter.

Daniel S. Frey: Fixed maturity NII was again higher than the prior year quarter, reflecting both the benefit of higher average yields and the significant growth in our portfolio of invested assets.

Dan Frey: Fixed maturity NII was again higher than the prior year quarter, reflecting both the benefit of higher average yields and the significant growth in our portfolio of invested assets.

Daniel S. Frey: Returns in the non-fixed income portfolio were also higher than in the prior year quarter.

Dan Frey: Returns in the non fixed income portfolio were also higher than in the prior year quarter.

Daniel S. Frey: In terms of our outlook for fixed income NII for 2024, including earnings from short-term securities, NII for 2024, including earnings from short-term securities, NII for 2024, including earnings from short-term securities, we expect approximately $2.6 billion after tax, beginning with approximately $630 million in the first quarter and growing to approximately $675 million in the fourth quarter.

Dan Frey: In terms of our outlook for fixed income NII for 2024, including earnings from short term Securities. We expect approximately $2 $6 billion after tax beginning with approximately $630 million in the first quarter and growing to approximately $675 million in the fourth quarter.

Daniel S. Frey: We expect approximately $2.6 billion after tax.

Daniel S. Frey: Beginning with approximately $630 million in the first quarter and growing to approximately $675 million in the fourth quarter.

Daniel S. Frey: Page 22 of the webcast presentation provides information about our January 1st catastrophe reinsurance renewal.

Daniel S. Frey: Page 22 of the webcast presentation provides information about our January 1st catastrophe reinsurance renewal. Our long-standing CatXOL treaty continues to provide coverage for both single cat events and the aggregation of losses from multiple cat events, and we've increased the amount of total coverage for 2024. Despite the growth in our property book, our attachment point remains steady, and the per occurrence loss deductible is unchanged at $100 million. For 2024, we have placed coverage for $3.5 billion of the $4.5 billion layer above the $3.5 billion attachment. We're pleased to have obtained extra protection in light of the recent inflationary impact on insured values.

Dan Frey: Page 22 of the webcast presentation provides information about our January one catastrophe reinsurance renewal.

Daniel S. Frey: Our long-standing CatXOL treaty continues to provide coverage for both single cat events and the aggregation of losses from multiple cat events.

Dan Frey: Our long standing cat ex ol Treaty continues to provide coverage for both single cat events and the aggregation of losses from multiple cat events.

Daniel S. Frey: and we've increased the amount of total coverage for 2024.

Dan Frey: And we've increased the amount of total coverage for 2024.

Daniel S. Frey: Despite the growth in our property book, our attachment point remains steady, and the per occurrence loss deductible is unchanged at $100 million.

Dan Frey: Despite the growth in our property book, our attachment point remains steady and the per occurrence loss deductible was unchanged at $100 million.

Good morning, ladies and gentlemen. Welcome to the fourth quarter results teleconference for travel. We ask that you hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer.

Dan Frey: Yeah.

Daniel S. Frey: For 2024, we have placed coverage for $3.5 billion of the $4.5 billion layer above the $3.5 billion attachment.

For 2024, we have placed coverage for $3 $5 billion of the $4 $5 billion layer above the $3 5 billion attachment point.

Daniel S. Frey: Contextually, we've never hit this treaty. Nonetheless, this is prudent, affordable balance sheet protection for tail events. The cost of the additional reinsurance will be largely offset by the strong renewal pricing we continue to achieve on our direct written property premium, resulting in only a de minimis impact on the underlying combined ratio.

Daniel S. Frey: We're pleased to have obtained the extra protection in light of the recent inflationary impact on insured value.

As a reminder, this conference is being recorded on January 19, 2024. At this time, I would like to turn the conference over to Ms. Abbe Goldstein, Senior Vice President of Investor Relations. Ms. Goldstein, you may begin.

Dan Frey: We're pleased to have obtained the extra protection in light of the recent inflationary impact on insured values.

Daniel S. Frey: With context, we've never hit this treaty.

Dan Frey: Context, we've never hit this treaty Nonetheless.

Daniel S. Frey: Nonetheless, this is prudent, affordable balance sheet protection for tail events.

Nonetheless, this is prudent affordable balance sheet protection for tail events.

Daniel S. Frey: On a financial modeling note, let me turn your attention to slide 23 of the webcast presentation.

Daniel S. Frey: The cost of the additional reinsurance will be largely offset by the strong renewal pricing we continue to achieve on our direct written property premium.

Dan Frey: The cost of the additional reinsurance will be largely offset by the strong renewal pricing. We continue to achieve on our direct written property premiums, resulting in only a de minimis impact on the underlying combined ratio.

Thank you. Good morning, and welcome to Travelers' discussion of our fourth quarter 2023 results. We released our press release, financial supplement, and webcast presentation earlier this morning. All of these materials can be found on our website at travelers.com under the Investors section.

Daniel S. Frey: resulting in only a de minimis impact on the underlying combined ratio.

Daniel S. Frey: On a financial modeling note, let me turn your attention to slide 23 of the webcast presentation.

Dan Frey: On a financial modeling note, let me turn your attention to slide 23 of the webcast presentation.

Daniel S. Frey: As we enter 2024, we thought it would be helpful to once again highlight the seasonality of our cat losses over the prior decade.

Daniel S. Frey: As we enter 2024, we thought it would be helpful to once again highlight the seasonality of our cat losses over the prior decade. As shown in the data, the second quarter has regularly and noticeably been our largest CAT quarter. Cat losses in the second quarter have been, on average, more than three combined ratio points higher than in any other quarter. And the second quarter has been our largest cat quarter in seven of the past 10 years. Also of interest for 2024, in light of continued strong pricing and terms in the E&S and reinsurance markets,

Abbe F. Goldstein: Speaking today will be Alan Schnitzer, Chairman and CEO, Dan Frey, Chief Financial Officer, and our three-segment presidents, Greg Toczydlowski of Business Insurance, Jeff Klank of Bond and Specialty Insurance, and Michael Klein of Personal Insurance. They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through their prepared remarks, and then we will take your questions.

Dan Frey: As we enter 2024, we thought it would be helpful to once again highlight the seasonality of our cat losses over the prior decade.

Daniel S. Frey: As shown in the data, the second quarter has regularly and noticeably been our largest CAT quarter.

Dan Frey: As shown in the data the second quarter has regularly and noticeably been our largest cat quarter.

Daniel S. Frey: Cat losses in the second quarter have been, on average, more than three combined ratio points higher than in any other quarter.

Dan Frey: Cat losses in the second quarter has been on average more than three combined ratio points higher than in any other quarter in the second quarter has been our largest cat quarter and seven of the past 10 years.

Daniel S. Frey: And the second quarter has been our largest cat quarter in seven of the past 10 years.

Abbe F. Goldstein: Before I turn the call over to Alan, I'd like to draw your attention to the explanatory note included at the end of the webcast presentation. Our presentation today includes forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. actual results may differ materially from those expressed or implied in the forward-looking statement due to a variety of factors. These factors are described in forward-looking statements in our earnings press release and in our most recent 10-Q and 10-K filed with the SEC. We do not undertake any obligation to update forward-looking statements.

Daniel S. Frey: Also of interest for 2024, in light of continued strong pricing and terms in the E&S and reinsurance markets,

Dan Frey: Also of interest for 2024 in light of continued strong pricing and terms in the E&S and reinsurance markets. We are pleased to share that we have renewed the 20% quota share with fidelis. The renewal includes the same loss ratio cap, we had for 2023.

Daniel S. Frey: We are pleased to share that we have renewed the 20% quota share with Fidelis.

Daniel S. Frey: We are pleased to share that we have renewed the 20% quota share with Fidelis. The renewal includes the same loss ratio cap we had for 2023. The written premium volume, which will again be included as part of international within the business insurance segment, is not expected to be material to this segment. However, it should have a modestly favorable impact on the underlying combined ratio for 2024 as it earns in. Turning to capital management, operating cash flows for the quarter of $2.1 billion were again very strong, and we ended the quarter withholding company liquidity of approximately $1.5 billion.

Daniel S. Frey: The renewal includes the same loss ratio cap we had for 2023.

Daniel S. Frey: The written premium volume, which will again be included as part of international within the business insurance segment, is not expected to be material to this segment.

Dan Frey: The written premium volume, which will again be included as part of international within the business insurance segment does not expect it to be material to this segment, which should have a modestly favorable impact on the underlying combined ratio for 2024 as it earns in.

Daniel S. Frey: It should have a modestly favorable impact on the underlying combined ratio for 2024 as it earns in.

Dan Frey: Yeah.

Daniel S. Frey: Turning to capital management. Operating cash flows for the quarter of $2.1 billion were again very strong, and we ended the quarter withholding company liquidity.

Dan Frey: Turning to capital management operating cash flows for the quarter of $2 $1 billion were again very strong and we ended the quarter with holding company liquidity of approximately $1 $5 billion.

Abbe F. Goldstein: Also, in our remarks or responses to questions, we may mention some non-GAAP financial measures. Reconciliations are included in our recent earnings press release, financial supplement, and other materials available in the investor sections on our website. Now, I'd like to turn the call over to Alan Schnitzer. Thank you, Abby. Good morning, everyone, and thank you for joining us today.

Daniel S. Frey: As you may have seen, S&P issued their updated capital model, and we now expect that the result of the new model will be a modest improvement in their assessment of our capital metrics. Interest rates decreased and spreads narrowed during the quarter, and as a result, our net unrealized investment loss decreased from $6.5 billion after tax at September 30th to $3.1 billion after tax at year end. As we've discussed previously, changes in unrealized investment gains and losses generally do not impact how we manage our investment portfolio. We generally hold fixed income investments to maturity, the quality of our fixed income portfolio remains very high, and changes in unrealized gains and losses have little impact on our cash flows, statutory surplus, or regulatory capital requirements.

Daniel S. Frey: of approximately $1.5 billion.

Dan Frey: As you may have seen S&P issued their updated capital model and we now expect that the results in the new model will be a modest improvement in their assessment of our capital metrics.

Daniel S. Frey: Interest rates decreased and spreads narrowed during the quarter, and as a result, our net unrealized investment loss decreased from $6.5 billion after tax at September 30th

Dan Frey: Interest rates decreased in spreads narrowed during the quarter and as a result, our net unrealized investment loss decreased from $6 $5 billion. After tax at September 30 to $3 $1 billion after tax at year end as.

Alan D. Schnitzer: We are very pleased to report exceptional top and bottom line results for the quarter. Core income, earnings per share, and return on equity were all record highs, proven by both underwriting and investment results. Our underwriting gains were broad-based. In each of our three segments, underlying underwriting income was higher, and prior year development was favorable. The Casterby losses were also light.

Daniel S. Frey: $3.1 billion after tax at year end.

Daniel S. Frey: As we've discussed previously, the changes in unrealized investment gains and losses generally do not impact how we manage our investment portfolio.

Dan Frey: As we've discussed previously the changes in unrealized investment gains and losses generally do not impact how we manage our investment portfolio. We generally hold fixed income investments to maturity the quality of our fixed income portfolio remains very high and changes in unrealized gains and losses have little impact on our cash flows statutory surplus.

Daniel S. Frey: We generally hold fixed income investments to maturity, the quality of our fixed income portfolio remains very high, and changes in unrealized gains and losses have little impact on our cash flows, statutory surplus, or regulatory capital requirements.

Alan D. Schnitzer: Record underlying underwriting income resulted from net earned premiums of $10 billion, up more than 13% over the prior year quarter, and an underlying combined ratio which improved 5.5 points to a record 85.9%. Looking at our two commercial segments together, the aggregate BI-BSI underlying combined ratio was an excellent 85.9% for the quarter. The underlying combined ratio in personal insurance was coincidentally also 85.9%, an improvement of more than 10 points year over year. In addition, we are pleased to have delivered full-year core income of $3.1 billion, generating core return on equity of 11.5%. Notwithstanding elevated industry-wide catastrophe losses earlier in the year and a personalized operating environment that, while improving, was difficult during the year, Turning to investments, our high-quality investment portfolio continued to perform well, generating after-tax net investment income of $645 million for the quarter and $2.4 billion for the year, driven by strong and reliable returns from our growing fixed income portfolio.

Dan Frey: <unk> or regulatory capital requirements.

Daniel S. Frey: Adjusted book value per share, which excludes net unrealized investment gains and losses, was $122.90 at year end, up 8% from a year ago.

Daniel S. Frey: Adjusted book value per share, which excludes net unrealized investment gains and losses, was $122.90 at year end, up 8% from a year ago. We returned $298 million of capital to our shareholders this quarter, comprising share repurchases of $66 million and dividends of $232 million. We have approximately $6 billion of capacity remaining under the share repurchase authorization from our Board of Directors. Thinking about share repurchases in 2024, while there is no change in our capital management philosophy, we will factor in the need for increased capital in light of our top-line growth, as well as the $435 million we just deployed to complete the Corvus acquisition. Currently, we expect repurchases in the first quarter of somewhere around $250 million.

Dan Frey: Adjusted book value per share, which excludes net unrealized investment gains and losses was $122 90 at year end up 8% from a year ago.

Daniel S. Frey: We returned $298 million of capital to our shareholders this quarter, comprising share repurchases of $66 million and dividends of $232 million.

We returned $298 million of capital to our shareholders this quarter comprising share repurchases of $66 million and dividends of $232 million.

Daniel S. Frey: We have approximately $6 billion of capacity remaining under the share repurchase authorization from our Board of Directors.

Dan Frey: We have approximately $6 billion of capacity remaining under the share repurchase authorization from our board of directors.

Daniel S. Frey: Thinking about share repurchases in 2024, while there is no change in our capital management philosophy, we will factor in the need for increased capital in light of our top-line growth, as well as the $435 million we just deployed to complete the Corvus acquisition.

Dan Frey: Thinking about share repurchases in 2024, while there is no change in our capital management philosophy, we will factor in the need for increased capital in light of our topline growth as well as the $435 million, we just deployed to complete the Corvus acquisition.

Daniel S. Frey: Currently, we expect repurchases in the first quarter of somewhere around $250 million.

Daniel S. Frey: Recapping our results for 2023, core income was $3.1 billion, and core ROE was 11.5%. We delivered our highest ever levels of written premium, earned premium, underlying underwriting income, and cash flow from operations. In addition, we ended the year with an all-time high in adjusted book value per share and with our largest investment portfolio ever. We've never been better positioned for the year ahead.

Dan Frey: Currently we expect repurchases in the first quarter of somewhere around $250 million.

Daniel S. Frey: Recapping our results for 2023, core income was $3.1 billion and core ROE was 11.5%.

Alan D. Schnitzer: Our operating results, together with our strong balance sheet, enabled us to grow adjusted book value per share by 8% during the year. After making important investments in our business and returning nearly $2 billion of excess capital to shareholders through dividends and share repurchases. Turning to the top line, we grew net written premiums by 13% to $10 billion in the quarter. For the year, we grew net written premiums by 14% to more than $40 billion. All three segments contributed to our top-line success. In business insurance, we grew net written premiums in the quarter by 14% to more than $5 billion. Renewal premium change remained high at 11.8%, while retention also remained high at 87%.

Dan Frey: Recapping our results for 2023 core income was $3 1 billion and core ROE was 11, 5%.

Daniel S. Frey: We delivered our highest ever levels of written premium, earned premium, underlying underwriting income, and cash flow from operations.

Dan Frey: We delivered our highest ever levels of written premium earned premium underlying underwriting income and cash flow from operations.

Daniel S. Frey: In addition, we ended the year with our all-time high in adjusted book value per share and with our largest investment portfolio ever.

Dan Frey: In addition, we ended the year with our all time high and adjusted book value per share and with our largest investment portfolio ever.

Daniel S. Frey: We've never been better positioned for the year ahead.

Dan Frey: Never been better positioned for the year ahead.

Daniel S. Frey: With that, I'll turn the call over to Greg for a discussion of business insurance.

Gregory C. Toczydlowski: With that, I'll turn the call over to Greg for a discussion of business insurance.

Dan Frey: With that I'll turn the call over to Greg for a discussion of business insurance.

Greg Toczydlowski: Thanks, Dan. Business insurance had another strong quarter, rounding on a terrific year in terms of financial results, execution in the marketplace, and progress in our strategic initiative.

Gregory C. Toczydlowski: Thanks, Dan. Business insurance had another strong quarter, rounding out a terrific year in terms of financial results, execution in the marketplace, and progress in our strategic initiatives. Last year at this time, I indicated that we were firing on all cylinders, and that certainly remains the case today. Segment income for the quarter was $957 million, our highest quarter ever and up well over $200 million from the prior year quarter, driven by higher underlying underwriting income and net investment income as well as lower catastrophe losses. The all-in combined ratio of 86.5% was a great result, and we're once again particularly pleased with our exceptional underlying combined ratio of 86.8%, an all-time best result.

Greg: Thanks, Dan business insurance had another strong quarter rounding out a terrific year in terms of financial results execution in the marketplace and progress on our strategic initiatives.

Greg Toczydlowski: Last year at this time, I indicated that we were firing on all cylinders, and that certainly remains the case today.

Greg: Last year at this time I indicated that we were firing on all cylinders and that certainly remains the case today.

Alan D. Schnitzer: The combination of strong pricing and retention reflects deliberate execution on our part and the discipline marketplace. The segment generated $672 million of new business in the quarter, which was $118 million, or about 20%, higher than in the prior year quarter. In bond and specialty insurance, net written premiums increased by 7% to $989 million. Consequently, driven by excellent production in our surety business, net written premiums were up 9%.

Greg Toczydlowski: Segment income for the quarter was $957 million, our highest quarter ever and up well over $200 million from the prior year quarter driven by higher underlying underwriting income and net investment income as well as lower catastrophe.

Segment income for the quarter was $957 million, our highest quarter ever and up well over $200 million from the prior year quarter, driven by higher underlying underwriting income and net investment income as well as lower catastrophes.

Greg Toczydlowski: The all-in combined ratio of 86.5% was a great result, and we're once again particularly pleased with our exceptional underlying combined ratio of 86.8%, an all-time best result.

Greg: The all in combined ratio of 86, 5% was a great result, and we're once again, particularly pleased with our exceptional underlying combined ratio of 86, 8% an all time best result.

Gregory C. Toczydlowski: The underlying loss ratio improved by almost two and a half points from the prior year quarter, with the drivers of the improvement including the benefit of earned pricing, a mixed shift to the property line, and an impact from non-CAT weather that was modestly favorable to both the prior year and our expectations. The expense ratio remained excellent at 28.8%. Net written premiums for the quarter were up 14% from the prior year to a fourth quarter record of $5 billion, benefiting from high retention, strong renewal premium changes, and an increase in new business levels.

Alan D. Schnitzer: Production was also strong in our management liability business. Given the attractive returns, we are very pleased with the strong production results in both of our commercial business sectors. In personal insurance, top line growth of 13% was driven by higher pricing.

Greg Toczydlowski: The underlying loss ratio improved by almost two and a half points from the prior year quarter, with the drivers of the improvement including the benefit of earned pricing, a mixed shift to the property line, and an impact from non-CAT weather that was modestly favorable to both the prior year and our expectations.

Greg: The underlying loss ratio improved by almost two five points from the prior year quarter with the drivers of the improvement, including the benefit of earned pricing.

Greg: Our mix shift to the property line.

Greg: And an impact from non cat weather that was modestly favorable to both the prior year and our expectations.

Greg Toczydlowski: The expense ratio remained excellent at 28.8%.

Greg: The expense ratio remained excellent at 28, 8%.

Greg Toczydlowski: Net written premiums for the quarter were up 14% from the prior year to a fourth quarter record of $5 billion.

Net written premiums for the quarter were up 14% from the prior year to a fourth quarter record of $5 billion.

Greg Toczydlowski: Benefiting from high retention, strong renewal premium change, and an increase in new business levels.

Alan D. Schnitzer: Before I turn the call over to Dan, I'd like to take a minute and put our 2023 results into an overtime context with an update to some data we've shared previously. A half dozen or so years ago, we laid out a focused innovation strategy and shared that if we were successful in its execution, we would expect to grow our business at attractive returns. This is a reflection of our belief that any strategy to achieve industry-leading returns over time requires a strategy to grow over time. The data on slide 19 of the webcast presentation show the success we've achieved. Starting at the top left corner, in terms of the top line, we've grown net written premiums at a compound annual rate of 7% over the past seven years. That's two and a half times our rate of growth from 2012 to 2016. The growth rate in each of the past two years has been double digits, the result of a deliberate and tailored strategy.

Benefiting from high retention strong renewal premium change and an increase in new business levels.

Greg Toczydlowski: As Alan mentioned, given the attractive margins in this segment, we're very pleased with this growth.

Gregory C. Toczydlowski: As Alan mentioned, given the attractive margins in this segment, we're very pleased with this growth. Turning to domestic production for the quarter, renewal premium change was once again historically high at 11.8%, with renewal rate change of 7.4% and continued strong growth and exposure. Renewal rate change increased from the third quarter in select and middle market, but it ticked down at the segment level, driven almost entirely by a lower mix of national property, written premium in the fourth quarter as compared to the third quarter. Retention remained excellent at 87%, and new business of $672 million was the strongest fourth quarter we've ever produced. We're thrilled with these production results and our field's superior execution in the marketplace.

Greg: As Alan mentioned, given the attractive margins in this segment, we're very pleased with this growth.

Greg Toczydlowski: Turning to domestic production for the quarter, renewal premium change was once again historically high at 11.8%, with renewal rate change of 7.4% and continued strong growth and exposure.

Turning to domestic production for the quarter.

Greg: Renewal premium change was once again historically high at 11, 8% with renewal rate change of seven 4% and continued strong growth in exposure.

Greg Toczydlowski: Renewal rate change increased from the third quarter in select and middle market, however, ticked down at the segment level, driven almost entirely by a lower mix of national property, written premium in the fourth quarter as compared to the third quarter.

Greg: Renewal rate change increased from the third quarter in select and middle market. However, ticked down at the segment level driven almost entirely by a lower mix of national property written premium in the fourth quarter as compared to the third quarter.

Greg Toczydlowski: Retention remained excellent at 87% and new business of $672 million was the strongest fourth quarter we've ever produced.

Greg: Retention remained excellent at 87% and new business of $672 million was the strongest fourth quarter, we've ever produced.

Gregory C. Toczydlowski: In terms of pricing, we're pleased to be able to sustain strong levels of renewal premium change to address the persistent environmental headwind. As for renewal rate change, during the quarter, we achieved meaningful renewal rate increases on all lines other than workers' comp. The property, umbrella, and auto lines led the way. Renewal rate change in each of the casualty lines was comparable or better than the third quarter, and given our high-quality book, as well as several years of meaningful price increases and improvements in terms and conditions, we're very pleased to continue to produce hysterically strong retention levels.

Greg Toczydlowski: We're thrilled with these production results and our field's superior execution in the marketplace.

Greg: We're thrilled with these production results and our field superior execution in the marketplace.

Greg: Stronger pricing where we need it. A combination of pricing and unit growth where we like the opportunity. In business insurance, we've added more than $4 billion to our top line over the past two years. The investments we've made in capabilities to enhance the franchise value that we offer to our customers and distribution partners have contributed to strong retention and growth in new businesses. In bond and specialty, we've increased net written premiums over that period by about a half a billion dollars, or 14%. More than half of that growth has come from our very profitable surety business, where our market-leading position has enabled us to benefit from increased demand for bonds with higher contract values and projects resulting from the Federal Infrastructure and Jobs Act and other federal programs. Across both of our commercial segments, since 2021, we have about doubled our E&S writings to around two and a half billion dollars.

Greg Toczydlowski: In terms of pricing, we're pleased to be able to sustain strong levels of renewal premium change to address the persistent environmental headwind.

In terms of pricing, we're pleased to be able to sustain strong levels of renewal premium change to address the persistent environmental headwinds.

Greg Toczydlowski: As for renewal rate change, during the quarter we achieved meaningful renewal rate increases on all lines other than workers' comp.

Greg: As for renewal rate change during the quarter, we achieved meaningful renewal rate increases on all lines other than workers' comp the.

Greg Toczydlowski: The property, umbrella, and auto lines led the way.

Greg: The property umbrella and auto lines led the way.

Greg Toczydlowski: Renewal rate change in each of the casualty lines was comparable or better than the third quarter, and given our high-quality book, as well as several years of meaningful price increases and improvements in terms and conditions, we're very pleased to continue to produce hysterically strong retention levels.

Greg: Renewal rate change in each of the casualty lines was comparable or better than the third quarter and given our high quality book as well as several.

Greg: Years of meaningful price increases and improvements in terms and conditions were very pleased to continue to produce as Stuart seeing strong retention levels.

Greg Toczydlowski: As for the individual businesses, in select, renewal premium change remains strong at 11.9%, up more than a point and a half from the third quarter, driven by renewal rate change, which increased to 4.1% for the quarter.

Gregory C. Toczydlowski: As for the individual businesses, in select, renewal premium change remains strong at 11.9%, up more than a point and a half from the third quarter, driven by renewal rate change, which increased to 4.1% for the quarter. Even with strong pricing, retention remained very strong at 85%. New business was up $49 million from the prior year quarter, driven in large part by the continued success of our BOP 2.0 product. In the middle market, renewal premium change of 10.4% and retention of 90% remained historically strong. New business of $348 million was an all-time best fourth quarter result.

Greg: As for the individual businesses in select renewal premium change remains strong at 11, 9%.

Daniel S. Frey: That includes organic growth from the E&S business we write in National Property, our Northfield business, and our Lloyds business, as well as the impact of more recent strategic efforts which include our relationships with Fidelis and Corvis. The margins in our ENS business are quite attractive. In personal insurance, where margins have not been at target levels in recent periods, there is no guarantee that you will be able to get the insurance you need.

Greg: More than a point and a half from the third quarter, driven by renewal rate change, which increased to four 1% for the quarter.

Greg Toczydlowski: Even with strong pricing, retention remained very strong at 85%.

Greg: Even with strong pricing retention remained very strong at 85%.

Greg Toczydlowski: New business was up $49 million from the prior year quarter, driven in large part by the continued success of our BOP 2.0 product.

Greg: New business was up $49 million from the prior year quarter driven in large part by the continued success of our BOP to point old product.

Greg Toczydlowski: In middle market, renewal premium change of 10.4% and retention of 90% remained historically strong.

Greg: In middle market renewal premium change of 10, 4% and retention of 90% remained historically strong.

Gregory C. Toczydlowski: As we close out 2023, let me provide a little color on full year results before turning the call over to Jeff.

Greg Toczydlowski: New business of $348 million was an all-time best fourth quarter result.

New business of $348 million was an all time best fourth quarter result.

Daniel S. Frey: Net written premium growth of $3.4 billion over the past two years has been almost entirely a result of price increases. The PI team has done an excellent job of threading the needle. Maintaining a strong customer base while achieving meaningful pricing gains. They've also done a great job with product management. Our advanced peril-by-peril Quantum Auto 2.0 offering now represents more than 60% of the domestic property portfolio. Adoption of our Telematics product and Teledrive among new customers has been strong.

Greg Toczydlowski: As we close out 2023, let me provide a little color on full year results before turning the call over to Jeff.

Greg: As we close out 2023, let me provide a little color on full year results before turning the call over to Jeff.

Jeff Klank: Segment income was nearly $2.6 billion, an exceptional result.

Gregory C. Toczydlowski: Segment income was nearly $2.6 billion, an exceptional result. The underlying combined ratio of 88.9%, the top line of $20.4 billion, renewal premium change, retention, and new business premiums were all record results. These results are a direct reflection of our successful execution of our thoughtful and deliberate strategy, and while delivering these financial and production results, we've also continued to invest in strategic capabilities that will enhance our many competitive advantages.

Segment income was nearly $2 6 billion an exceptional result, the underlying combined ratio of 88, 9% top line of $24 billion renewal.

Jeff Klank: The underlying combined ratio of 88.9%, top line of $20.4 billion, renewal premium change, retention, and new business premiums were all record results.

Greg: Renewal premium change retention and new business premiums were all record results.

Jeff Klank: These results are a direct reflection of our successful execution of our thoughtful and deliberate strategy.

Greg: These results are a direct reflection of our successful execution of our thoughtful and deliberate strategies.

Daniel S. Frey: With pricing gains and enhanced product sophistication, the book should contribute to our earnings power going forward as we move toward target returns. Also important is that across all three segments, we've grown mostly in products, classes of business, and geography, and through distribution partners that we know well. That gives us a lot of confidence in the business we're adding to the book. Moving to the right, you can see that while we've meaningfully increased our rate of growth, we've maintained very strong and consistent underlying profitability. That demonstrates that we're not growing by underpricing the business or compromising our underwriting discipline. Instead, we've grown by investing in the products, services, and experiences that our customers want to buy and our distribution partners want to sell. We've also grown through a lot of great hustle and hard work on the part of our outstanding field organizations. One of the clear strategic objectives of our innovation strategy has been to optimize productivity and efficiency.

Jeff Klank: and while delivering these financial and production results, we've also continued to invest in strategic capabilities that will enhance our many competitive advantages.

Greg: While delivering these financial and production results. We've also continued to invest in strategic capabilities that will enhance our many competitive advantages.

Gregory C. Toczydlowski: For example, during the year, we continued to advance our data and analytics capabilities by leveraging evolving technologies, including AI, and new data sources to help us manage the portfolio and equip our frontline underwriters with data and insights to better enable our risk selection, underwriting, and pricing. In addition, we continued to advance our already state-of-the-art product and service capabilities by continuing to roll out our BOP 2.0 product, which is now live in all but a Both products deliver industry-leading segmentation and user experience. In addition, we continued to make progress on developing other industry-leading user experience capabilities to make it easier and more efficient for our distribution partners and customers to do business with us.

Jeff Klank: For example, during the year, we continued to advance our data and analytics capabilities by leveraging evolving technologies, including AI, and new data sources to help us manage the portfolio and equip our frontline underwriters with data and insights to better enable our risk selection, underwriting, and pricing.

Greg: For example, during the year, we continued to advance our data and analytics capabilities by leveraging evolving technologies, including AI and new data sources to help us manage the portfolio and equip our frontline underwriters with data and insights to better enable our risk selection underwriting and pricing.

Jeff Klank: In addition, we continued to advance our already state-of-the-art product and service capabilities by continuing to roll out our BOP 2.0 product, which is now live in all but a couple of states, as well as our new commercial auto product, which is now live in 14 states.

Greg: In addition, we continued to advance our already state of the art product and service capabilities by continuing to rollout our BOP to point old products, which is now live in all but a couple of states as well as our new commercial auto product, which is now live in 14 states.

Jeff Klank: Both products deliver industry-leading segmentation and user experience.

Greg: Both products deliver industry, leading segmentation and user experiences.

Jeff Klank: In addition, we continued to make progress on developing other industry-leading user experience capabilities to make it easier and more efficient for our distribution partners and customers to do business with us.

Greg: In addition, we continued to make progress on developing other industry, leading user experience capabilities to make it easier and more efficient for our distribution partners and customers to do business with us.

No change: Moving to the top right of the slide, you can see that over the last seven years, we've reduced our expense ratio by 3.6 points to just over 28% for 2023, which is more than a 10% reduction relative to our 2012 to 2016 expense ratio of around 32%. For more information, visit www.fema.gov. Enhanced operating leverage gives us the flexibility to let the benefit fall to the bottom line or invest further in our strategic priorities. Case in point, as you can see on slide 21, as you can see on slide 21, Since 2017, we have doubled our investments in strategic technology initiatives. Over that same period, we've carefully managed growth in routine but necessary technology expenditures. In other words, over a seven-year period, we simultaneously and meaningfully increased our technology spend, improved the strategic mix of that spend, and lowered our expense ratio. The upshot of what we've accomplished on the top half of slide 19 is what you see on the bottom half.

Jeff Klank: In particular, in our middle market business, we advanced our capabilities around digitizing the underwriting transaction for our agents and brokers.

Gregory C. Toczydlowski: In particular, in our middle market business, we advanced our capabilities around digitizing the underwriting transaction for our agents and brokers. In our small commercial business, we continued to roll out our new front-end rate quote and issue interface platform to make it faster and easier for agents to write business with us while maintaining all the underwriting discipline and specialization behind the scenes. And finally, we continue to improve our operating leverage through our relentless focus on productivity and efficiency. We're proud of these extraordinary results and the best-in-class team that produced them.

Greg: In particular in our middle market business, we advanced our capabilities around digitizing the underwriting transaction for our agents and brokers.

Jeff Klank: In our small commercial business, we continued to roll out our new front-end rate quote and issue interface platform to make it faster and easier for agents to write business with us while maintaining all the underwriting discipline and specialization behind the scenes.

Greg: In our small commercial business, we continued to rollout our new front end rate quote and issue interface platform to make it faster and easier for our agents to write business with us while maintaining all of the underwriting discipline and specialization behind the scenes.

Jeff Klank: And finally, we continue to improve our operating leverage through our relentless focus on productivity and efficiency.

And finally, we continued to improve our operating leverage through our relentless focus on productivity and efficiency.

Jeff Klank: We're proud of these extraordinary results and the best-in-class team that produced.

Greg: We're proud of these extraordinary results and the best in class team that produce them.

Jeff Klank: With that, I'll turn the call over to Jeff.

Jeff Klank: With that, I'll turn the call over to Jeff. Thanks, Greg.

Greg: With that I'll turn the call over to Jeff.

Jeff Klank: Thanks, Greg.

Jeff Clinker: Thanks, Greg.

Jeff Klank: London's specialty ended a strong 2023 with a terrific quarter on both the top and bottom lines.

Jeff Klank: London's specialty ended a strong 2023 with a terrific quarter on both the top and bottom lines. Segment income was $240 million, up 9% from the prior year quarter, and it delivered very strong underlying underwriting income and an outstanding underlying combined ratio of 80.6%. Turning to the top line, we grew net written premiums by 7% in the quarter.

Jeff Clinker: Bond and specialty ended a strong 2023 with a terrific quarter on both the top and bottom lines.

Jeff Klank: Segment income was $240 million, up 9% from the prior year quarter.

Jeff Clinker: Segment income was $240 million up 9% from the prior year quarter.

Jeff Klank: delivered very strong underlying underwriting income and an outstanding underlying combined ratio of 80.6%.

Jeff Clinker: <unk> delivered very strong underlying underwriting income and an outstanding underlying combined ratio of 86%.

Jeff Klank: Turning to the top line, we grew net written premiums by 7% in the quarter.

Turning to the topline we grew net written premiums by 7% in the quarter.

Jeff Klank: In our high quality domestic management liability business, we again delivered excellent retention of 90% of our customers.

Jeff Klank: In our high quality domestic management liability business, we again delivered excellent retention of 90% of our customers, in line with the prior year quarter, while continuing to achieve positive renewal premium changes. New business was up, driven by a new domestic cyber capacity agreement with Corbett.

Jeff Clinker: And our high quality domestic management liability business, we again delivered excellent retention of 90%.

Jeff Klank: In line with the prior year quarter, while continuing to achieve positive renewal premium change.

Jeff Clinker: In line with the prior year quarter, while continuing to achieve positive renewal premium change.

No change: On the bottom left, you can see that we've increased underlying underwriting income significantly. From 2012 to 2019, underlying underwriting income averaged 1.3 billion dollars. In 2020, we crossed the $2 billion mark. And in 2023 marks the first time that we've exceeded three billion dollars.

Jeff Klank: New business was up, driven by a new domestic cyber capacity agreement with Corbett.

Jeff Clinker: New business was up driven by a new domestic cyber capacity agreement with Corvus.

Jeff Klank: Surety net written premiums increased 9%, reflecting continued strong demand for Surety bonds.

Jeff Klank: Surety net written premiums increased 9%, reflecting continued strong demand for Surety bonds. So we're pleased to have once again delivered terrific top and bottom line results this quarter. Tapping off a year during which we generated record segment income and net written premium. Finally, we're pleased that earlier this month we closed our previously announced acquisition of Corvus Insurance. Corvus is an industry-leading cyber insurance managing general underwriter powered by proprietary technology. Torvus has developed cutting-edge capabilities including digitally integrated cyber sales, underwriting, service, and support, sophisticated underwriting algorithms, and advanced vulnerability scanning. Corvus also brings deep cyber underwriting and risk management expertise, and we're pleased to welcome them to the Travelers family. This acquisition affords us the opportunity to write Corvus' profitable book of business, which will be reflected as new business in our production results over the course of 2024.

Jeff Clinker: Surety net written premiums increased 9%, reflecting continued strong demand for surety bonds.

Jeff Klank: So we're pleased to have once again delivered terrific top and bottom line results this quarter.

Jeff Clinker: So we're pleased to once again delivered terrific top and bottom line results this quarter.

Jeff Klank: Tapping off a year during which we generated record segment income and net written premium.

Jeff Clinker: Capping off a year during which we generated record segment income and net written premium.

Jeff Klank: Finally, we're pleased that earlier this month we closed our previously announced acquisition of Corvus Insurance.

No change: We've taken our underlying underwriting income to a meaningfully higher level. We've also significantly increased our cash flow from operations to more than $7.5 billion in 2023. For the fourth consecutive year, it's been more than $6 billion and more than double our average cash flow from operations in the earlier part of the last decade. Cash flow isn't a metric that we or our industry talk a lot about, but it's important.

Jeff Clinker: Finally were pleased that earlier this month, we closed our previously announced acquisition of Corvus insurance.

Jeff Klank: Corvus is an industry-leading cyber insurance managing general underwriter powered by proprietary technology.

Jeff Clinker: Corvus has an industry, leading cyber insurance managing general underwriter powered by proprietary technology.

Jeff Klank: Torvus has developed cutting-edge capabilities including digitally integrated cyber sales, underwriting, service and support,

Jeff Clinker: For visit developed cutting edge capabilities, including digitally integrated cyber sales underwriting service and support.

Jeff Klank: Sophisticated underwriting algorithms and advanced vulnerability scanning.

Jeff Clinker: Sophisticated underwriting algorithms and advanced vulnerability scanning.

Jeff Klank: Corvus also brings deep cyber underwriting and risk management expertise, and we're pleased to welcome them to the Travelers family.

Jeff Clinker: Orbis also brings deep cyber underwriting and risk management expertise and we're pleased to welcome them to the travelers family.

No change: It's what gives us the ability to make important investments in our business, return excess capital to shareholders, and grow the investment portfolio. We've grown our investment portfolio significantly to nearly $93 billion. As we continue to reinvest our fixed income portfolio at higher rates, this is a highly reliable lever of earnings and value creation. This is a highly reliable lever of earnings and value creation.

Jeff Klank: This acquisition affords us the opportunity to write Corvus' profitable book of business, which will be reflected as new business in our production results over the course of 2024.

Jeff Clinker: This acquisition affords us the opportunity to write Corvus is profitable book of business.

Jeff Clinker: Which will be reflected as new business and our production results over the course of 2024 and.

Speaker Change: And now I'll turn the call over to Michael.

Michael Klein: And now, I'll turn the call over to Michael.

Jeff Clinker: And now I will turn the call over to Michael.

Michael Klein: Thanks, Jeff, and good morning, everyone.

Michael Klein: Thanks, Jeff, and good morning, everyone. I'm pleased to share that personal insurance generated $520 million in fourth quarter segment income. A strong result and a significant improvement compared to the prior year quarter due to higher underlying underwriting income and lower catastrophe losses. The underlying combined ratio of 85.9% improved by over 10 points compared to the prior year quarter, reflecting improvements in both automobile and homeowners and others. Net written premiums grew 13%, driven by continued elevated levels of renewal premium change in both auto and home, bringing full-year net written premiums to a record of nearly $16 billion. In automobile, the fourth quarter combined ratio was 103.6%.

Thanks, Jeff and good morning, everyone.

Michael Klein: I'm pleased to share that personal insurance generated $520 million of fourth quarter segment income.

Michael Klein: I am pleased to share that personal insurance generated $520 million of fourth quarter segment income.

Michael Klein: Strong result and a significant improvement compared to the prior year quarter due to higher underlying underwriting income and lower catastrophe loss.

Michael Klein: Strong result, and a significant improvement compared to the prior year quarter due to higher underlying underwriting income and lower catastrophe losses.

No change: To sum it up, through a well-executed strategy, we've more than doubled our rate of growth. Abbe Goldstein, Strong Underlying Underwriting Margin, and meaningfully lowered our expense ratio. That has resulted in record levels of underlying underwriting income, cash flow, and invested assets. Ultimately, of course, one number that brings everything together is adjusted book value per share. On slide 20, you can see that we have steadily increased adjusted book value per share each year since 2006 at a compound annual rate of 7.5%. For more information, visit www.fema.gov.

Michael Klein: The underlying combined ratio of 85.9% improved over 10 points compared to the prior year quarter, reflecting improvements in both automobile and homeowners and others.

Michael Klein: The underlying combined ratio of 85, 9% improved over 10 points compared to the prior year quarter, reflecting.

Michael Klein: Reflecting improvements in both automobile in homeowners and other.

Michael Klein: Net written premiums grew 13%, driven by continued elevated levels of renewal premium change in both auto and home.

Michael Klein: Net written premiums grew 13% driven by continued elevated levels of renewal premium change in both auto and home.

Michael Klein: Bringing full-year net written premiums to a record of nearly $16 billion.

Michael Klein: Bringing full year net written premiums to a record of nearly $16 billion.

Michael Klein: The underlying combined ratio of 102.7% improved by nearly 8 points compared to the prior year quarter. This improvement was driven by the benefit of higher earned pricing. To a lesser extent, it also benefited from the year-over-year impact of a modest favorable re-estimation of prior quarters in the current year compared to a modest unfavorable re-estimation in the prior year quarter. For homeowners and other, the fourth quarter combined ratio of 70.8% improved by over 28 points. Reflecting catastrophe losses that were favorable to both the prior year quarter and our expectations and an improved underlying combined ratio.

Michael Klein: In automobile, the fourth quarter combined ratio was 103.6%.

Michael Klein: And automobile the fourth quarter combined ratio was 103, 6%.

Michael Klein: The underlying combined ratio of 102.7% improved nearly 8 points compared to the prior year quarter.

Michael Klein: The underlying combined ratio of 102, 7% improved nearly eight points compared to the prior year quarter.

Michael Klein: This improvement was driven by the benefit of higher earned pricing.

Michael Klein: To a lesser extent, it also benefited from the year-over-year impact of a modest favorable re-estimation of prior quarters in the current year compared to a modest unfavorable re-estimation in the prior year quarter.

Michael Klein: To a lesser extent it also benefited from the year over year impact, although modest favorable re estimation of prior quarters in the current year.

Abbe F. Goldstein: The effective management of our capital complements that result. We've increased our capital base to support the profitable growth of our business, and at the same time, we've been disciplined about returning excess capital to shareholders.

Michael Klein: Compared to a modest unfavorable re estimation in the prior year quarter.

Michael Klein: In homeowners and other, the fourth quarter combined ratio of 70.8% improved by over 28 points.

Michael Klein: In homeowners and other the fourth quarter combined ratio of 78% improved by over 28 points.

Michael Klein: Reflecting catastrophe losses that were favorable to both the prior year quarter and our expectations,

Reflecting catastrophe losses that were favorable to both the prior year quarter and our expectations.

Daniel S. Frey: Over this period, we've increased our dividend at a compound annual rate of more than 8% and returned more than $40 billion to our shareholders through share repurchases, at an average price of about $74 per share. These results, together with our track record of strong returns and low volatility, are the result of strong returns and low volatility. This demonstrates the strength of our business and the success of our overtime strategy. Looking ahead, we're very confident about how we're positioned for 2024 and beyond. The fundamentals across our business are in excellent shape. We're confident that we're focused on the right strategic priorities and that, with demonstrated success in execution, there's plenty more opportunity ahead of us. And with that, I'm pleased to turn the call over to Dan. Thank you, Alan.

Michael Klein: and an improved underlying combined ratio.

Michael Klein: And an improved underlying combined ratio.

Michael Klein: The underlying combined ratio improved 12.5 points primarily due to non-catastrophe weather-related losses that were favorable to both the prior year and our expectations.

Michael Klein: The underlying combined ratio improved 12.5 points primarily due to non-catastrophe weather-related losses that were favorable to both the prior year and our expectations and the impact of earned pricing. Turning to production, our results demonstrate our continued disciplined execution of rate and non-rate actions to improve profitability and manage growth.

Michael Klein: The underlying combined ratio improved 12, five points, primarily due to non catastrophe weather related losses that were favorable to both the prior year and our expectations.

Michael Klein: and the impact of earned pricing.

And the impact of earned pricing.

Michael Klein: Turning to production, our results demonstrate our continued disciplined execution of rate and non-rate actions to improve profitability and manage growth.

Turning to production our results demonstrate our continued disciplined execution of rate and non rate actions to improve profitability and manage growth.

Michael Klein: In domestic automobile, retention remain consistent.

Michael Klein: In domestic automobile, retention remains consistent. Renewal premium change of 16.7% remained strong and, as expected, moderated from the third quarter of 2023 as the majority of our book reached rate adequacy on a written basis. We expect renewal premium change to remain in the mid-teens through the first half of 2024 as we continue to assess the environment and seek rates on a state-by-state basis as appropriate. We're pleased to note that auto new business increased relative to the prior year quarter as we tempered our non-rate actions in states where we've achieved written rate adequacy. We will continue to evaluate our non-rate measures as more states reach adequacy throughout 2024.

Michael Klein: And domestic automobile retention remained consistent.

Michael Klein: Renewal premium change of 16.7% remained strong and, as expected, moderated from the third quarter of 2023 as the majority of our book reached rate adequacy on a written basis.

Michael Klein: Renewal premium change of 16, 7% remains strong and as expected moderated from the third quarter of 2023 as the majority of our book reached rate adequacy on a written basis.

Michael Klein: We expect renewal premium change to remain in the mid-teens through the first half of 2024 as we continue to assess the environment and seek rate on a state-by-state basis as appropriate.

Michael Klein: We expect renewal premium change to remain in the mid teens through the first half of 2024.

Michael Klein: As we continue to assess the environment and seek rate on a state by state basis as appropriate.

Michael Klein: We're pleased to note that auto new business increased relative to the prior year quarter as we tempered our non-rate actions in states where we've achieved written rate adequacy.

Michael Klein: We're pleased to note that auto new business increased relative to the prior year quarter as we tempered our non rate actions and states, where we've achieved written rate adequacy.

Dan: Core income for the fourth quarter was $1.6 billion, and core return on equity was 24%, both all-time record quarterly results. We're pleased to have once again generated record levels of earned premium this quarter and an excellent underlying combined ratio of 85.9%, a 5.5 point improvement from last year's quarter. The combination of premium growth and underlying margin improvement led to underlying underwriting income of $1.1 billion after tax, up 511 million dollars or 89% from the prior year quarter. The underlying combined ratio improved from the prior year in all three segments. The expense ratio for the fourth quarter improved by half a point from last year's quarter to 27.4%, once again reflecting the benefits of our focus on productivity and efficiency, coupled with strong top-line growth. The full-year expense ratio of 28.1% was our best ever.

Michael Klein: In homeowners and other, retention remained consistent, even as renewal premium change reached a record level at 21.2%, primarily driven by higher renewal rate changes. As we noted last quarter, we expect homeowners renewal premium change to moderate to low double digits in 2024. We will continue to seek rate increases in response to elevated loss levels. But at the same time, our automatic increase in limit factors will return to more normal levels, reflecting the progress we've made on aligning insured values with replacement costs. Our continued efforts to manage new business flow and thoughtfully deploy capacity in the face of market dislocation drove the year-over-year decline in new business and policies enforced during the quarter.

Michael Klein: We will continue to evaluate our non-rate measures as more states reach adequacy throughout 2024.

Michael Klein: We will continue to evaluate our non rate measures as more states reach adequacy throughout 2024.

Michael Klein: In homeowners and other, retention remained consistent, even as renewal premium change reached a record level at 21.2%, primarily driven by higher renewal rate change.

Michael Klein: In homeowners and other retention remain consistent even as renewal premium change reached a record level at 21, 2%, primarily driven by higher renewal rate change.

Michael Klein: As we noted last quarter, we expect homeowners renewal premium change to moderate to low double digits in 2024.

Michael Klein: We will continue to seek rate increases in response to elevated loss levels.

Michael Klein: But at the same time, our automatic increase in limit factors will return to more normal levels, reflecting the progress we've made on aligning insured values with replacement costs.

Michael Klein: But at the same time, our automatic increase and limit factors, we'll return to more normal levels, reflecting the progress we've made on aligning insured values with replacement costs.

Michael Klein: Our continued efforts to manage new business flow and thoughtfully deploy capacity in the face of market dislocation drove the year-over-year decline in homeowners' new business and policies enforced during the quarter.

Michael Klein: Our continued efforts to manage new business flow and thoughtfully deploy capacity in the face of market dislocation drove the year over year decline in homeowners, new business and policies enforced during the quarter.

Michael Klein: We anticipate this trend will continue as we take further actions to improve profitability and manage growth in property.

Michael Klein: We anticipate this trend will continue as we take further actions to improve profitability and manage growth in property. In 2023, we made notable progress on improving the underlying fundamentals of our business and are moving towards our goal of delivering target returns. While the environment remains dynamic, we're confident we're on a path to generating leading returns in personal insurance and growing profitably over time.

Michael Klein: We anticipate this trend will continue as we take further actions to improve profitability and manage growth in property.

Michael Klein: In 2023, we made notable progress on improving the underlying fundamentals of our business and are moving towards our goal of delivering target returns.

Dan: As Alan mentioned, our focus is on operating leverage, and looking ahead to 2024, we're comfortable with the annual expense ratio in the range of 28% to 28.5% for now. Our fourth-quarter results include a modest $125 million of pre-tax catastrophe losses and an estimated $1.5 million in damages, with no individually significant events impacting our book of business. Turning to prior year reserve development, we had total net favorable development of $132 million pre-tax, with all three segments contributing. Business insurance had a net favorable PYD of $56 million, driven by favorability in workers' comp that was partially offset by adverse development in umbrella and general liability. Even after the reserve charge, the returns on both Umbrella and GL remain very attractive.

Michael Klein: While the environment remains dynamic, we're confident we're on a path to generating leading returns in personal insurance and growing profitably over time.

Michael Klein: While the environment remains dynamic we're confident we're on a path to generating leading returns in personal insurance and growing profitably over time.

Speaker Change: Now I'll turn the call back over to Abby.

Abbe F. Goldstein: Now, I'll turn the call back over to Abby.

Michael Klein: Now I'll turn the call back over to Avi.

Abby: Thanks very much. We're happy to open up for your questions.

Abbe F. Goldstein: Thanks very much. We're happy to open up for your questions. At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. We ask that you limit yourself to one question and one follow-up, and any additional questions, please re-

Avi: Thanks, very much and we're happy to open up for your questions.

Abby: At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. And we ask that you limit yourself to one question and one follow-up, and any additional questions, please re-

At this time, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.

Avi: Can we ask that you limit yourself to one question and one follow up.

Avi: Any additional questions. Please re queue.

Speaker Change: Your first question comes from the line of David Motemaden from Evercore ISI. Please go ahead. Your line is open.

David Motemaden: Your first question comes from the line of David Motemaden from Evercore ISI. Please go ahead. Your line is open.

Your first question comes from the line of David <unk> from Evercore ISI. Please go ahead. Your line is open.

Avi: Yeah.

David Motemaden: Hi, thanks. Good morning. I just had a question on the business insurance underlying loss ratio and if you could size the components of the improvement between earned pricing above trend, the light non-cat weather, as well as the property mix shift.

Daniel S. Frey: Hi, thanks. Good morning. I just had a question on the business insurance underlying loss ratio and if you could size the components of the improvement between earned pricing above trend, the light non-cat weather, as well as the property mix shift. Hey David, it's Dan. So we're not going to put numbers on them, but price versus trend has been favorable throughout the last couple of years and was favorable again.

David: Hi, Thanks, good morning.

David: Had a question on business insurance underlying loss ratio and if you could size the components of the improvement between earned pricing above trend.

David: Like non cat weather as well as the property mix shifts.

David Motemaden: Hey David, it's Dan. So we're not going to put numbers on them, but price versus trend has been a favorable throughout the last couple of years and was favorable again.

David: Hey, David it's Dan So so we're not going to put put numbers on them, but price versus trend has been a been a favorable throughout throughout the last couple of years and was favorable again.

Dan: In bond and specialty, net favorable PYD of $36 million was driven by better than expected results in both surety and management liability. Personal insurance had $40 million of net favorable PYD driven by homeowners and others. After-tax net investment income of $645 million was up 21% from the prior year quarter.

Daniel S. Frey: favorable again this quarter you know a little bit of a mixed shift towards property as as Greg said and modestly favorable non-cat weather impact not not huge but you know worth a worth a mention but we're not going to put numbers on each of those.

Daniel S. Frey: favorable again this quarter, you know, a little bit of a mixed shift towards property, as Greg said, and modestly favorable non-cat weather impact, not huge but worth a mention, but we're not going to put numbers on each of those.

David: Favorable again this quarter.

David: A little bit of a mix shift towards property as Greg said and modestly favorable non cat weather impact not not huge but worth it worth.

David: Worth to mention but we're not going to put numbers on each of those.

Speaker Change: Got it, thanks.

David Motemaden: Got it, thanks.

Speaker Change: Got it thanks and then.

Dan: Fixed maturity NII was again higher than the prior year quarter, reflecting both the benefit of higher average yields and the significant growth in our portfolio of invested assets. Returns in the non-fixed income portfolio were also higher than in the prior year quarter. In terms of our outlook for fixed income NII for 2024, including earnings from short-term securities, NII for 2024, including earnings from short-term securities, NII for 2024, including earnings from short-term securities, we expect approximately $2.6 billion after tax, beginning with approximately $630 million in the first quarter and growing to approximately $675 million in the fourth quarter.

Speaker Change: I think it's been

Daniel S. Frey: I think it's been

Speaker Change: Yes, I think it has been.

Speaker Change: Five of the last seven quarters or something like that where you guys called out the general liability and umbrella as areas of reserve increases in business insurance. I'm wondering if we could get a little bit more detail about exactly what you guys are seeing and reacting to and if you think we're closer to the end of some of these true ups.

Daniel S. Frey: Five of the last seven quarters or something like that where you guys called out general liability and umbrella as areas of reserve increases in business insurance. I'm wondering if we could get a little bit more detail about exactly what you guys are seeing and reacting to and if you think we're closer to the end of some of these true ups. Sure, David. It's Dan again. So not big, big movements this quarter. Just more of the same. More of what we've sort of been talking about for the last couple of quarters, which is...

Speaker Change: Five of the last seven quarters or something like that or you guys called out the <unk>.

Speaker Change: General liability and umbrella.

Speaker Change: As areas of reserve increases in business insurance.

Speaker Change: Wondering if we could get a little bit more detail about exactly what you guys are seeing in reacting to and if you think we're closer to the end of some of these some of these true ups.

Speaker Change: Sure, David. It's Dan again. So not big, big movements this quarter. More of the same. More of what we've sort of been talking about the last couple of quarters, which is...

Speaker Change: Sure David It's Dan again, so so not not big big movements. This quarter more of the same more of what we've sort of been talking about the last couple of quarters, which is.

Daniel S. Frey: No surprises in terms of the themes of the things that we're seeing come through those numbers, but the magnitude had been a little greater than we had allowed for previously, and we're just looking at the data that comes in every quarter and trying to make sure we stay as current with it as we can, and so a modest reaction to keep up with that, but nothing really new.

Daniel S. Frey: No surprises in terms of the themes of the things that we're seeing come through those numbers, but the magnitude had been a little greater than we had allowed for previously, and we're just looking at the data that comes in every quarter and trying to make sure we stay as current with it as we can, so a modest reaction to keep up with that, but nothing really new.

Daniel S. Frey: No surprises in terms of the themes of the things that we're seeing come through come through those numbers, but the magnitude had been a little greater than we had allowed for previously and we're just looking at the data that comes in every quarter and try to make sure. We stay is current with it as we can and so modest reaction to keep up with that but nothing really new.

Dan: Page 22 of the webcast presentation provides information about our January 1st catastrophe reinsurance renewal. Our long-standing CatXOL treaty continues to provide coverage for both single cat events and the aggregation of losses from multiple cat events, and we've increased the amount of total coverage for 2024. Despite the growth in our property book, our attachment point remains steady, and the per occurrence loss deductible is unchanged at $100 million. For 2024, we have placed coverage for $3.5 billion of the $4.5 billion layer above the $3.5 billion attachment. We're pleased to have obtained the extra protection in light of the recent inflationary impact on insured values. In context, we've never hit this treaty.

Speaker Change: Your next question comes from the line of Craig Peters from Raymond James. Please go ahead. Your line is open.

Charles Gregory Peters: Your next question comes from the line of Craig Peters from Raymond James. Please go ahead. Your line is open.

Speaker Change: Your next question comes from the line of Craig Peters from Raymond James. Please go ahead. Your line is open.

Craig Peters: Well, good morning, everyone. Well, first of all, you had a great fourth quarter. So congratulations. But I wanted to focus on slide seven, the return on equity slide. And, um,

Charles Gregory Peters: Well, good morning, everyone. Well, first of all, you had a great fourth quarter. So congratulations. But I wanted to focus on slide seven, the return on equity slide. And, um, you guys have all mapped out a really pretty strong outlook, and I guess I'm trying to reconcile what looks to be a pretty good outlook with the fact that your ROE is running below where I think it should be. I feel like the ROE should be running higher.

Well good morning, everyone.

Craig Peters: Well first of all you had a great fourth quarter. So congratulations but I wanted to focus on slide seven the return on equity slide.

Craig Peters: And.

Craig Peters: You guys have all mapped out really a pretty strong outlook, and I guess I'm trying to reconcile what looks to be a pretty good outlook with the fact that your ROE is running below...

Craig Peters: You guys are all mapped out really a pretty strong outlook.

Craig Peters: Guess I'm trying to reconcile what is looks to be a very pretty good outlook with the fact that your ROE is running below.

Craig Peters: where I think it should be. I feel like the ROE should be running higher.

Where I think it should be I feel like the ROE should be running higher so.

Speaker Change: Maybe, Alan, you can provide some perspectives because I know the ROE is an important factor that you guys look at.

Daniel S. Frey: Maybe, Alan, you can provide some perspectives because I know the ROE is an important factor that you guys look at. Hey Greg, it's Dan. I'll start.

Speaker Change: Maybe maybe Alan you can provide some perspective, because I know that ROE is an important factor that you guys look at.

Dan: Nonetheless, this is prudent, affordable balance sheet protection for tail events. The cost of the additional reinsurance will be largely offset by the strong renewal pricing we continue to achieve on our direct written property premium, resulting in only a de minimis impact on the underlying combined ratio. On a financial modeling note, let me turn your attention to slide 23 of the webcast presentation. As we enter 2024, we thought it would be helpful to once again highlight the seasonality of our cat losses over the prior decade. As shown in the data, the second quarter has consistently and noticeably been our largest CAT quarter. Cat losses in the second quarter have been, on average, more than three combined ratio points higher than in any other quarter.

Speaker Change: Hey Greg, it's Dan, I'll start.

Speaker Change: Hey, Greg Greg, It's Dan I'll start.

Daniel S. Frey: So, look, 11.5 for ROE for a full year, you know, pretty good number. Another year, double digits, well above our cost of capital and the risk-free rate. Not quite where we'd like it to be, and I think the biggest contributor, and you called out... Slide 7 is, you know, that yellow bar from the contribution from underwriting really impacted, as we talked about, especially in the second quarter and the third quarter by a very elevated level of catastrophe losses for the year. That's not what we expect to be the new normal run rate. We're certainly factoring more recent CAT experience into our view of CAT expectations going forward, but we wouldn't expect it to be elevated at that level.

Daniel S. Frey: So look at 11 and a half for ROA for a full year.

Daniel S. Frey: Pretty good number on another another year of double digits, well above our cost of capital and the risk free rate not quite where we'd like it to be and I think the biggest contributor and you called out.

Daniel S. Frey: Slide 7 is, you know, that yellow bar from...

Daniel S. Frey: Slide seven is that.

Daniel S. Frey: That yellow bar from.

Daniel S. Frey: The contribution from underwriting really impacted as we talked about especially in the second quarter and the third quarter by a very elevated level of catastrophe losses.

Daniel S. Frey: The contribution from underwriting really impacted as we've talked about especially in the second quarter in the third quarter by a very elevated level of catastrophe losses for the year.

Daniel S. Frey: For the year. That's not what we expect to be the new normal run rate. We're certainly factoring more recent CAT experience into our view of CAT expectations going forward, but we wouldn't expect it to be elevated at that level.

Daniel S. Frey: That's not what we expect it to be the new normal run rate, we're certainly factoring more recent cat.

Daniel S. Frey: Cat experience into our view of cat expectations going forward, but we wouldn't expect it to be elevated at that level.

Alan D. Schnitzer: Craig, it's Alan. The other thing I would add to that is

Daniel S. Frey: Craig, it's Alan. The other thing I would add to that is

Daniel S. Frey: Greg It's Alan the only thing I would add to that is.

Alan D. Schnitzer: I won't tell you what to do, but one of the things I do every quarter is try to take a stab at normalizing these things. And so eliminate prior year development and put in, you know, for cats whatever you think is a normalized cat number, and then you get a different perspective.

Alan D. Schnitzer: I won't tell you what to do, but one of the things I do every quarter is try to take a stab at normalizing these things. And so, eliminate prior year development and put in, you know, for cats, whatever you think is a normalized cat number, and then you get a different perspective.

Alan D. Schnitzer: I will tell you what to do but one of the things I do every quarter is.

Dan: And the second quarter has been our largest cat quarter in seven of the past 10 years. Also of interest for 2024, in light of continued strong pricing and terms in the E&S and reinsurance markets, we are pleased to share that we have renewed the 20% quota share with Fidelis. The renewal includes the same loss ratio cap we had for 2023. The written premium volume, which will again be included as part of international within the business insurance segment, is not expected to be material to this segment.

Alan D. Schnitzer: Is is trying to take a stab at normalizing these things and so eliminate prior year development and put in for cats. Whatever you think is a normalized cat number.

Alan D. Schnitzer: And then you get a different perspective.

Speaker Change: © transcript Emily Beynon

Charles Gregory Peters: transcript Emily Beynon

Alan D. Schnitzer: Yeah.

Speaker Change: Right. Okay. And then, Dan, I just wanted to go back to your comments in

Charles Gregory Peters: Right. Okay. And then, Dan, I just wanted to go back to your comments earlier.

Speaker Change: Alright, Okay and then.

Speaker Change: Dan I just wanted to go back to your comments and.

Speaker Change: About share repurchases and uses of capital I know you talked about the expectation for what's going to happen in the first quarter and you talked about capital are there any other.

Speaker Change: about share repurchase and uses of capital. I know you talked about the expectation for what's gonna happen in the first quarter and you talked about capital. Are there any other...

Daniel S. Frey: about share repurchase and uses of capital. I know you talked about the expectation for what's gonna happen in the first quarter, and you talked about capital. Are there any other things you'd like to call out in terms of capital allocation outside of dividends and share repurchase?

Speaker Change:

Speaker Change: Things you'd like to call out in terms of capital allocation outside of dividends and share repurchase?

Dan: It should have a modestly favorable impact on the underlying combined ratio for 2024 as it earns in. Turning to capital management, operating cash flows for the quarter of $2.1 billion were again very strong, and we ended the quarter withholding company liquidity of approximately $1.5 billion. As you may have seen, S&P issued their updated capital model, and we now expect that the result of the new model will be a modest improvement in their assessment of our capital metrics. Interest rates decreased and spreads narrowed during the quarter, and as a result, our net unrealized investment loss decreased from $6.5 billion after tax at September 30th to $3.1 billion after tax at year end.

Speaker Change: Things you'd like to call out in terms of capital allocation outside of dividends and share repurchase.

Speaker Change: Let me start with that, then I'll see what observations Dan has on that. So I think we've said for a very long time,

Alan D. Schnitzer: Let me start with that, then I'll see what observations Dan has on that. So, I think we've said for a very long time: our first objective for every dollar of capital we generate is to invest it back in the business when we think we can do that and achieve our objectives and contribute to shareholder value. But we think we've got a long track record that demonstrates our discipline with shareholders' capital. And so we're going to invest the money back in the business when we can, and that could be keeping capital on the balance sheet to support profitable growth.

Speaker Change: Let me, let me start with that and then I'll see what observations Dan has on that so I think we've said for a very long time our.

Speaker Change: Our first objective for every dollar of capital we generate is to invest it back in the business when we think we can do that and achieve our objectives and contribute to shareholder value. But we think we've got a long track record that demonstrates our discipline with shareholders' capital. And so we're going to invest the money back in the business when we can, and that could be...

Speaker Change: Our first objective for every dollar of capital we generate is to invest back in the business. When we think we can do that and and achieve our objectives and contribute to shareholder value.

Speaker Change: But we think we've got a long track record that demonstrates our discipline with shareholders' capital.

Speaker Change: So we're going to invest the money back in the business when we can and that could be.

Speaker Change: Keeping capital on the balance sheet to support profitable growth. It could be buying things like Corbis. It could be investing in technology or people doing the things that we think we can do that are creative to our objectives.

Alan D. Schnitzer: It could be buying things like Corbis. It could be investing in technology or people doing the things that we think we can do that are creative in relation to our objectives. And when we can't do that, we're going to give the dollars back. So it's a long-winded way of saying there has been no change at all in our capital management.

Speaker Change: Keeping capital on the balance sheet to support profitable growth that could be buying things like corvid, it could be investing in technology or people doing the things that we think we can do that are accretive to our objectives.

Speaker Change: And when we can't do that, we're going to give the dollars back.

Speaker Change: And when we can't do that we're going to give the dollars back.

Speaker Change: So it's a long-winded way of saying no change at all in our capital management.

Dan: As we've discussed previously, changes in unrealized investment gains and losses generally do not impact how we manage our investment portfolio. We generally hold fixed income investments to maturity, the quality of our fixed income portfolio remains very high, and changes in unrealized gains and losses have little impact on our cash flows, statutory surplus, or regulatory capital requirements. Adjusted book value per share, which excludes net unrealized investment gains and losses, was $122.90 at year end, up 8% from a year ago.

Speaker Change: So that's a long winded way of saying no change at all in our capital management philosophy.

Speaker Change: I agree entirely. There's no hidden message in there, Greg. It's business as usual.

Daniel S. Frey: I agree entirely. There's no hidden message in there, Greg. It's business as usual.

Speaker Change: Danny I.

Danny: I agree entirely there theres no theres no hidden message in there Greg it's business as usual.

Speaker Change: Your next question comes from the line of Elyse Greenspan from Wells Fargo. Please go ahead. Your line is open.

Elyse Greenspan: Your next question comes from the line of Elyse Greenspan from Wells Fargo. Please go ahead. Your line is open.

Speaker Change: Your next question comes from the line of Elyse Greenspan from Wells Fargo. Please go ahead. Your line is open.

Elyse Greenspan: Hi, thanks. Good morning. My first question is on the Fidelis relationship. Dan, I think you called out and said you expect a modest, favorable impact in 2024.

Elyse Greenspan: Hi, thanks. Good morning. My first question is on the Fidelis relationship. Dan, I think you called out and said you expected a modest, favorable impact in 2024.

Elyse Greenspan: Hi, Thanks. Good morning. My first question is on the fidelity relationship.

Speaker Change: Yeah, and I think you called out and said you expect a modest favorable impact in 2024.

Speaker Change: Give us.

Daniel S. Frey: Give us.

Speaker Change: Just give us.

Speaker Change: Thank you so much for joining us.

Elyse Greenspan: Thank you so much for joining us.

Dan: We returned $298 million of capital to our shareholders this quarter, comprising share repurchases of $66 million and dividends of $232 million. We have approximately $6 billion of capacity remaining under the share repurchase authorization from our board of directors. Thinking about share repurchases in 2024, while there is no change in our capital management philosophy, we will factor in the need for increased capital in light of our top-line growth, as well as the $435 million we just deployed to complete the Corvus acquisition. Currently, we expect repurchases in the first quarter of somewhere around $250 million. Recapping our results for 2023, core income was $3.1 billion, and core ROE was 11.5%. We delivered our highest ever levels of written premium, earned premium, underlying underwriting income, and cash flow from operations. In addition, we ended the year with an all-time high in adjusted book value per share and with our largest investment portfolio ever. We've never been better positioned for the year ahead. With that, I'll turn the call over to Greg for a discussion of business insurance. Thanks, Dan.

Speaker Change: Of how favorable that Guild wars two.

Speaker Change: 23 margins with NBI and how we should think about

Elyse Greenspan: 23 Margin with NBI and how we should think about

Speaker Change: 23 markets with NPI and how we should think about the year over year improvement you guys are expecting in 24 versus <unk> 23.

Speaker Change: You guys are expected.

Daniel S. Frey: You guys are expected.

Speaker Change: Sure, Elyse and Stan. So, really not going to put a very fine number on it. Keep in mind now that, you know, Fidelis is now a standalone public company. They haven't reported results yet. I don't think it would be appropriate for us to give an outlook of, you know, what we felt about their profitability.

Elyse Greenspan: Sure, Elyse and Stan. So, I'm really not going to put a very fine number on it. Keep in mind now that, you know, Fidelis is now a standalone public company. They haven't reported results yet. I don't think it would be appropriate for us to give an outlook of, you know, what we feel about their profitability. But if it was a modest help in 2023, it will be a modest help. Again, in 2024, there'll be a little bigger base of earned premium as we'll have two years' worth of written impacting 2024. So it's worth calling out as a modest benefit, but not a big number. And I really don't think it would be appropriate for us to try to put a finer number on it than that.

Speaker Change: Sure Lisa stand so so really not going to put a very fine number on it keep in mind now that.

Speaker Change: Fidelis is now Standalone public company. They haven't reported results yet I don't think it would be appropriate for us to give an outlook of what we felt about about their profitability.

Speaker Change: But it was a modest help in...

Speaker Change: But it was a modest help in.

Speaker Change: 2023, it will be a modest help. Again, in 2024, there'll be a little bigger base of earned premium as we'll have two years worth of written impacting 2024. So worth calling out as a modest benefit, but not a big number. And I really don't think it would be appropriate for us to try to put a finer number on it than that.

Speaker Change: 2023, it will be a modest help again in 2024 there'll be a little bigger base of earned premium as we'll have two years' worth of Britain impacting 2024, so worth calling out as a as a modest benefit, but but not a big number and I really don't think it would be appropriate for us to try to put a finer number on it than that.

Speaker Change: Okay, thank you. Then, um,

Elyse Greenspan: Okay, thank you. Then, um,

Speaker Change: Okay. Thank you Dan.

Speaker Change: Within personal auto, what percent of your states?

Michael Klein: Within personal auto, what percent of your states still have non-on?

Speaker Change: Within personal auto what percent of your states or premium still.

Speaker Change: still have non on.

Speaker Change: Still have got weight restrictions in place.

Greg: Business insurance had another strong quarter, rounding out a terrific year in terms of financial results, execution in the marketplace, and progress in our strategic initiatives. Last year at this time, I indicated that we were firing on all cylinders, and that certainly remains the case today. Segment income for the quarter was $957 million, our highest quarter ever and up well over $200 million from the prior year quarter, driven by higher underlying underwriting income and net investment income as well as lower catastrophe losses.

Speaker Change: Elyse, I don't think we'll get more specific than the majority, but you can think of the non-rate restrictions as tracking very closely with where we see written adequacy state by state. So the majority of the premium is in states where we have relaxed some of those or tempered some of those non-rate actions because the majority of premium is in states where we've got target returns on a written basis. And again, as I indicated in the,

Michael Klein: Elyse, I don't think we'll get more specific than the majority, but you can think of the non-rate restrictions as tracking very closely with where we see written adequacy state by state. So the majority of the premium is in states where we have relaxed some of those or tempered some of those non-rate actions because the majority of the premium is in states where we've got target returns on a written basis. And again, as I indicated in my prepared remarks, we'll continue to follow that path as more states get adequate, and we'll temper actions in those states as they reach adequate.

Speaker Change: At least I don't think we will get more specific than the majority, but you can think of the non rate restrictions as tracking very closely with where we see written adequacy state by state. So the majority of the premium.

Speaker Change: He is in states, where we have room relax some of those are tempered some of those non rate actions because the majority of premium is in states, where we've got.

Speaker Change: Returns on a written basis and again as I indicated in the.

Speaker Change: In my prepared remarks, we'll continue to follow that path as more states get adequate, we'll temper actions in those states as they reach adequate.

Speaker Change: In my prepared remarks, we will continue to follow that path as more states get adequate will temper actions in those states as they reach adequacy.

Greg: The all-in combined ratio of 86.5% was a great result, and we're once again particularly pleased with our exceptional underlying combined ratio of 86.8%, an all-time best result. The underlying loss ratio improved by almost two and a half points from the prior year quarter, with the drivers of the improvement including the benefit of earned pricing, a mixed shift to the property line, and an impact from non-CAT weather that was modestly favorable to both the prior year and our expectations. The expense ratio remained excellent at 28.8%.

Speaker Change: Your next question comes from the line of Ryan Tunis from Autonomous Research. Please go ahead. Your line is open.

Ryan J. Tunis: Your next question comes from the line of Ryan Tunis from Autonomous Research. Please go ahead. Your line is open.

Speaker Change: Your next question comes from the line of Ryan Tunis from Autonomous Research. Please go ahead. Your line is open.

Ryan J. Tunis: Hey, thanks. Good morning. I guess my question is just looking at the rate slides, we saw an acceleration of pricing in middle market.

Gregory C. Toczydlowski: Hey, thanks. Good morning. I guess my question is just looking at the rate slides; we saw an acceleration of pricing in the middle market. Select, obviously, a decelerated headline, so I'm guessing that means there's deceleration in national property. Could you just, I guess, talk a little bit about the relative pricing dynamics of those three markets? Good morning, Ryan. It's Greg. Yeah, you can see if you look underneath the price, and you can see that the rate is up in both the middle market and select business. So the residual that makes up the total BI, you're correct; the preponderance of that is national property.

Ryan J. Tunis: Hey, Thanks, good morning.

Ryan J. Tunis: My question is just looking at the REIT slides we.

Ryan J. Tunis: We saw an acceleration of pricing in middle market and select obviously decelerated headlines. So I'm guessing that means there is deceleration national property could you just.

Ryan J. Tunis: Select, obviously a decelerated headline, so I'm guessing that means there's deceleration national property. Could you just, I guess, talk a little bit about the relative pricing dynamics in those three markets?

Greg: Net written premiums for the quarter were up 14% from the prior year to a fourth quarter record of $5 billion, benefiting from high retention, strong renewal premium changes, and an increase in new business levels. As Alan mentioned, given the attractive margins in this segment, we're very pleased with this growth. Turning to domestic production for the quarter, renewal premium change was once again historically high at 11.8%, with renewal rate change of 7.4% and continued strong growth and exposure. Renewal rate change increased from the third quarter in select and middle market, but it ticked down at the segment level, driven almost entirely by a lower mix of national property, written premium in the fourth quarter as compared to the third quarter.

Ryan J. Tunis: Talk a little bit about the relative pricing dynamics in those three markets.

Ryan J. Tunis: Good morning, Ryan. It's Greg. Yeah, you can see if you look at underneath the price and you can see rate is up in both the middle market and select business. So the residual that makes up the total BI, you're correct, the preponderance of that is national property. And so a couple dynamics this quarter in national property. One is when that plays out to the total buck, we did have less weight on a net written premium national property this quarter, quarter four versus quarter three and quarter two. And we did have a tech down overall in rates national property also just given where the returns are in that business and the business is performing extremely well.

Speaker Change: Good morning, Brian It's Greg.

Greg: You can see if you look at underneath the price and you can see rate is up in both the middle market in select business. So the residual that makes up the total <unk> youre correct. The preponderance of that is national property and so a couple of dynamics this quarter and national property. One is when that plays out to the total book, we did have less.

Gregory C. Toczydlowski: And so a couple of dynamics this quarter in national property. One is when that plays out to the total buck, we did have less weight on net written premium national property this quarter, quarter four versus quarter three and quarter two. And we did have a tech down overall in rates for national property also just given where the returns are in that business and the business is performing extremely well.

Greg: On a net written premium natural property this quarter quarter four versus quarter, three and quarter two.

Greg: And we did have a tick down overall in in rates National property also just given where the returns are in that business and the business is performing extremely well.

Greg: Retention remained excellent at 87%, and new business of $672 million was the strongest fourth quarter we've ever produced. We're thrilled with these production results and our field's superior execution in the marketplace. In terms of pricing, we're pleased to be able to sustain strong levels of renewal premium change to address the persistent environmental headwind. As for renewal rate change, during the quarter, we achieved meaningful renewal rate increases on all lines other than workers' comp. The property, umbrella, and car lines led the way.

Greg Toczydlowski: But make no mistake, Ryan, the overall rate change and renewal price change in the property line continues to be very strong.

Gregory C. Toczydlowski: But make no mistake, Ryan; the overall rate change and renewal price change in the property line continue to be very strong.

Greg: But make no mistake, Ryan the overall rate change and renewal price change in the property line continues to be very strong.

Ryan J. Tunis: Got it, thanks. And then just a follow-up, we're not used to seeing this type of margin expansion in business insurance.

Ryan J. Tunis: Got it, thanks. And then just a follow-up; we're not used to seeing this type of margin expansion in business insurance. I would think that would mean that it's largely attributable to short tail lines, but I guess I was also curious. Obviously, rates have been running in an excessive loss trend and with casualties as well for a while. We didn't really talk about changing loss picks or anything like that, but was there a change on the casualty side to, I guess, lost picks in the fourth quarter? Any true-up to the current year or something like that we should be aware of?

Ryan J. Tunis: Got it thanks and then.

Speaker Change: Just a follow up we're not used to seeing this type of margin expansion in business insurance.

Ryan J. Tunis: I would think that would mean that it's largely attributable to short tail lines, but I guess I was also curious, obviously, rates have been running in an excessive loss trend and casualties as well for a while.

Speaker Change: I would think that would mean that it's largely attributable to short tail lines, but.

Greg: Renewal rate change in each of the casualty lines was comparable or better than the third quarter, and given our high-quality book, as well as several years of meaningful price increases and improvements in terms and conditions, we're very pleased to continue to produce hysterically strong retention levels. As for the individual businesses, in select, renewal premium change remains strong at 11.9%, up more than a point and a half from the third quarter, driven by renewal rate change, which increased to 4.1% for the quarter. Even with strong pricing, retention remained very strong at 85%.

Speaker Change: I guess I was also curious.

Speaker Change: Obviously rates been running in excess of Australian casualties wall from while we are in.

Ryan J. Tunis: Really talked about changing loss picks or anything like that, but was there a change on the casualty side to...

Speaker Change: Really talked about changing loss picks or anything like that but was there a change on the casualty side too.

Ryan J. Tunis: Um,

Speaker Change: Okay.

Ryan J. Tunis: I guess lost picks in the fourth quarter, any true-up to the current year or something like that we should be aware of?

Daniel S. Frey: No, Ryan, it's Dan. Like, if we have an unusual item in the quarter that's sort of a non-run rate, we'll usually try and call it out for you, including, you know, some kind of year-to-date catch-up. Michael referred to it in PI Auto, but you didn't hear Greg talk about anything significant in BI because there wasn't really anything significant in BI. So we did what we always do, right? Go through all the lines. There are puts and takes across every line, looking at frequency and severity, but on the whole, no big change in our view of blended trends.

Speaker Change: I guess loss picks in the fourth quarter or any true up to the current year or something like that we should be aware of.

Ryan J. Tunis: No, Ryan, it's Dan. Like, if we have an unusual item in the quarter that's sort of non-run rate, we'll usually try and call it out for you, including, you know, some kind of year-to-date catch-up. Michael referred to it in PI Auto, but you didn't hear Greg talk about anything significant in BI because there wasn't really anything significant in BI. So we did what we always do, right? Go through all the lines.

Daniel S. Frey: No Ryan it's Dan.

Daniel S. Frey: We have an unusual item in the quarter that sort of non run rate will usually try and call. It out for you including.

Daniel S. Frey: Some kind of year to date catch up Michael referred to it in <unk>, but you didn't hear Gregg talked about anything significant NPI because there wasn't really anything significant in <unk>. So we do what we always do right go through all the lines.

Greg: New business was up $49 million from the prior year quarter, driven in large part by the continued success of our BOP 2.0 product. In the middle market, renewal premium change of 10.4% and retention of 90% remained historically strong. New business of $348 million was an all-time best fourth quarter result. As we close out 2023, let me provide a little color on full year results before turning the call over to Jeff. Segment income was nearly $2.6 billion, an exceptional result.

Ryan J. Tunis: There's puts and takes across every line, looking at frequency and severity, but on the whole, no big change in our view of blended trends.

Daniel S. Frey: There's puts and takes across every every line looking at frequency and severity, but on the whole no big change in our view of blended trend.

Speaker Change: Thank you.

Daniel S. Frey: Thank you.

Speaker Change: Your next question comes from the line of Mike Zaremski from BMO. Please go ahead. Your line is open.

Mike Zaremski: Your next question comes from the line of Mike Zaremski from BMO. Please go ahead. Your line is open.

Speaker Change: Your next question comes from the line of Mike <unk> from BMO. Please go ahead. Your line is open.

Mike Zaremski: Hey, thanks. Good morning. Happy Friday.

Mike Zaremski: Hey, thanks. Good morning. Happy Friday!

Mike: Hey, Thanks, good morning.

Mike: Happy Friday.

Mike Zaremski: First question is maybe looking for a little bit more color on some of the, you know, pleasantly surprising commentary about the general liability and umbrella returns still being, you know, very good despite, you know, but, you know, as someone else had pointed out was, you know, five of the last seven quarters adding to reserve. So, just curious, is there, you know, any more, can you elaborate on that? You know, maybe you're taking into account the, you don't typically hear that. Maybe it's the investment income that's helping or it's sold as part of a package and so the rest of the products are running at better returns or anything you could add to that?

Mike Zaremski: First question is maybe looking for a little bit more color on some of the, you know, pleasantly surprising commentary about the general liability and umbrella returns still being, you know, very good despite, you know, but, you know, as someone else had pointed out was, you know, five of the last seven quarters adding to reserve. So, just curious, is there, you know, any more, can you elaborate on that? You know, maybe you're taking into account the — you don't typically hear that. Maybe it's the investment income that's helping or it's sold as part of a package, and so the rest of the products are running at better returns or anything you could add to that.

Mike: First question is.

Mike: Maybe looking for a little bit more color.

Mike: On some of the.

Mike: Pleasantly surprising.

Commentary about the general liability and umbrella.

Returns still being.

Mike: Very good despite.

Mike: But.

Mike: What else had pointed out was five of the last seven quarters, adding to reserves. So just curious is there.

Jeff: The underlying combined ratio of 88.9%, the top line of $20.4 billion, renewal premium change, retention, and new business premiums were all record results. These results are a direct reflection of our successful execution of our thoughtful and deliberate strategy, and while delivering these financial and production results, we've also continued to invest in strategic capabilities that will enhance our many competitive advantages. For example, during the year, we continued to advance our data and analytics capabilities by leveraging evolving technologies, including AI, and new data sources to help us manage the portfolio and equip our frontline underwriters with data and insights to better enable our risk selection, underwriting, and pricing. In addition, we continued to advance our already state-of-the-art product and service capabilities by continuing to roll out our BOP 2.0 product, which is now live in all but a Both products deliver industry-leading segmentation and user experience.

Mike: Any more and can you elaborate on that maybe.

Mike: Maybe you are taking into account the.

Typically hear that maybe it's the investment income that's helping our it's sold as part of the package and so that the rest of it.

Mike: The products are are running at better returns or anything you could add to that.

Daniel S. Frey: Hey Mike, it's Dan. So we're thinking about returns, and that is our all-in view of returns, but we are specifically looking at those lines when we make that comment, although we do, to your point, also pay a lot of attention to returns on an account basis. But those comments were specific to liability and umbrella lines, and this really goes back to the comment that Alan made a couple quarters ago, which is the amounts that we're writing and the total volume of business that we're writing and the returns on an overtime basis. We still like both of those lines very much.

Mike Zaremski: Hey Mike, it's Dan. So we're thinking about the returns, and that is our all-in view of return, but we are specifically looking at those lines when we make that comment, although we do, to your point, also pay a lot of attention to returns on an account basis. But those comments were specific to liability and umbrella lines, and this really goes back to the comment that Alan made a couple quarters ago, which is this really goes back to the comment that Alan made a couple quarters ago, which is

Mike: Hey, Mike It's Dan so.

Daniel S. Frey: We're thinking about the returns and that is our all in view of return, but we are specifically looking at those lines. When we make that comment although we do to your point.

So pay a lot of attention to returns on an account basis.

Daniel S. Frey: But those those comments were specific to the liability and umbrella lines and this really goes back to the comment that Alan made a couple of quarters ago, which is the.

Mike Zaremski: The amounts that we're...

The amounts that were I'll.

Mike Zaremski: and the total volume of business that we're writing and the returns on an overtime basis, we still like both of those lines very much. Another way to think about it might be that you think about it in terms of rate adequacy and you might have an attractive rate adequacy, you might make an adjustment to it, it might be to one degree or another slightly less rate adequate nonetheless, you like the rate adequate.

Daniel S. Frey: I'll say tweaking prior year reserve development is really pretty modest in scope in the scheme of those reserves and when we look at the total volume of business that we're writing and the returns on an overtime basis, we still both like both of those lines very much another way to think about it Mike might be that you think about it in terms of rate adequacy and you might you might.

Daniel S. Frey: Another way to think about it might be that you think about it in terms of rate adequacy, and you might have an attractive rate adequacy; you might make an adjustment to it, it might be, to one degree or another, slightly less rate adequate. Nevertheless, you like the rate adequacy.

Daniel S. Frey: Have an attractive rate adequacy, you might make an adjustment to it it might be.

Jeff: In addition, we continued to make progress on developing other industry-leading user experience capabilities to make it easier and more efficient for our distribution partners and customers to do business with us. In particular, in our middle market business, we advanced our capabilities around digitizing the underwriting transaction for our agents and brokers. In our small commercial business, we continued to roll out our new front-end rate quote and issue interface platform to make it faster and easier for agents to write business with us while maintaining all the underwriting discipline and specialization behind the scenes. And finally, we continue to improve our operating leverage through our relentless focus on productivity and efficiency. We're proud of these extraordinary results and the best-in-class team that produced them.

Daniel S. Frey: To one degree or another be a slightly less rate adequate nonetheless, you'll like the rate adequacy.

Mike Zaremski: So, you know, it's in that context we say we continue to like the returns in those lines.

Daniel S. Frey: So, you know, it's in that context that we say we continue to like the returns on those lines.

Daniel S. Frey: So that's it's in that context, we say we continue to like the the returns in those lines.

Speaker Change: Okay, that's helpful. And my follow-up, you know, Alan, you continue to mention and show gauges of free cash flow. You also mentioned that, you know,

Mike Zaremski: Okay, that's helpful. And my follow-up question, you know, Alan, you continue to mention and show gauges of free cash flow. You also mentioned that, you know,

Speaker Change: Okay. That's helpful and my follow up.

Speaker Change: Alan you continue to mention <unk>.

Alan D. Schnitzer: And show gauges of a free cash flow you also mentioned that.

Alan D. Schnitzer: I still don't think it's appreciated. At least I don't appreciate it, why it's important. So maybe you can try to further elaborate on is the increase in cash flows, which I assume is correlated with your increased growth, is that actually aiding your ROE? Or why should we be focusing more on free cash flow, which has a lot of moving parts in it?

Alan D. Schnitzer: I still don't think it's appreciated. At least I don't understand why it's important. So maybe you can try to further elaborate on whether the increase in cash flows, which I assume is correlated with your increased growth, is that actually aiding your ROE? Or why should we be focusing more on free cash flow, which has a lot of moving parts in it?

Alan D. Schnitzer: It's.

Alan D. Schnitzer: I still don't think it's appreciated at least I don't appreciate it.

Alan D. Schnitzer: Why it's important.

Alan D. Schnitzer: Important so maybe you can.

Alan D. Schnitzer: Try to further elaborate on is it is the increase in cash flows, which I assume is correlated with your increased growth is that actually eating your.

Alan D. Schnitzer: E R. What are we.

Alan D. Schnitzer: How should we be focusing more on and on.

Alan D. Schnitzer: Free cash flow, which has a lot of moving parts in it.

Speaker Change: I wouldn't say it's just growth. It's a combination of what's profitable growth is what I would say about that. And as I've said, that's what gives us the flexibility to invest in all the important things we invest in, return capital to shareholders, and grow the investment portfolio. So without strong free cash flow, we couldn't do those three things, and those are key to our operating model.

Alan D. Schnitzer: I wouldn't say it's just growth. It's a combination of what's profitable growth is what I would say about that. And as I've said, that gives us the flexibility to invest in all the important things we invest in, return capital to shareholders, and grow the investment portfolio. So without strong free cash flow, we couldn't do those three things, and those are key to our operating model.

Alan D. Schnitzer: I wouldn't say, it's just growth. It's a combination of profitable growth is what I would say about that and as I've said that I mean, that's what gives us the flexibility to invest in all of the important things we invest in return capital to shareholders and grow the investment portfolio, so without without strong free cash flow, we couldnt do those three things and those are.

Jeff: With that, I'll turn the call over to Jeff. Thanks, Greg. London's specialty ended a strong 2023 with a terrific quarter on both the top and bottom lines. Segment income was $240 million, up 9% from the prior year quarter, and it delivered very strong underlying underwriting income and an outstanding underlying combined ratio of 80.6%. Turning to the top line, we grew net written premiums by 7% in the quarter. In our high quality domestic management liability business, we again delivered excellent retention of 90% of our customers. In line with the prior year quarter, while continuing to achieve positive renewal premium changes, new business was up, driven by a new domestic cyber capacity agreement with Corbett. Surety net written premiums increased 9%, reflecting continued strong demand for surety bonds.

Alan D. Schnitzer: Key to our operating model.

Speaker Change: Your next question comes from the line of Brian Meredith from UBS. Please go ahead. Your line is open.

Brian Meredith: Your next question comes from the line of Brian Meredith from UBS. Please go ahead. Your line is open.

Speaker Change: Your next question comes from the line of Brian Meredith from UBS. Please go ahead. Your line is open.

Brian Meredith: Yeah, thanks. Alan, first question, if I look at the underlying, you know, combined ratio on your business insurance, it's, I believe, the best it's ever been since the St. Paul merger and probably prior to that, just on the numbers. I guess can you kind of talk a little bit about you know is that a sustainable kind of underlying combined ratio underlying margin is there more improvement potentially can go there you know at what point do you kind of say okay you know the margins we're seeing on the business are about as good as we should should have and maybe more focus on growth and more expenses and other

Brian Meredith: Yes. Thanks, Alan first question, if I look at the underlying combined ratio in your business insurance. Its I believe the best it's ever been since the St. Paul merger and public prior to that just on the numbers.

Brian Meredith: I guess can you kind of talk a little bit about you know is that a sustainable kind of underlying combined ratio underlying margin is there more improvement potentially can go there you know at what point do you kind of say okay you know the margins we're seeing on the business are about as good as we should should have and maybe more focus on growth and more expenses and other

I guess can you kind of talk a little bit about.

Brian Meredith: Is that sustainable kind of underlying combined ratio underlying margin is there more improvement potentially can go there and at what point do you kind of say, okay. The <unk>.

Brian Meredith: Margins were seeing on that business are about as good as we should should have and maybe more focus on growth and more expenses and other things how do you balance that.

Brian Meredith: How do you balance?

Alan D. Schnitzer: How do you balance?

Speaker Change: It's a really good question, and as you can imagine, I'm going to resist the temptation to try to share too much on an outlook of that number or what we might want to do strategically. Everything you mentioned is something we can think about, and I really would like to get away from talking about the future of margins, but we've answered that question before with lost trend where it is and pricing where it is, so you can conclude that answer hasn't really changed.

Alan D. Schnitzer: It's a really good question, and as you can imagine, I'm going to resist the temptation to try to share too much on an outlook for that number or what we might want to do strategically. Everything you mentioned is something we can think about, and I really would like to get away from talking about the future of margins, but we've answered that question before with lost trend where it is and pricing where it is, so you can conclude that the answer hasn

Speaker Change: It's a really good question and as you can imagine I'm going to resist the temptation to try to share too much on it on an outlook of that number or what we might want to do strategically everything you mentioned is something we can think about and.

Speaker Change: I really would like to get away from talking about the future of margins, but.

Jeff: So we're pleased to have once again delivered terrific top and bottom line results this quarter, tapping off a year during which we generated record segment income and net written premium. Finally, we're pleased that earlier this month we closed our previously announced acquisition of Corvus Insurance. Corvus is an industry-leading cyber insurance managing general underwriter powered by proprietary technology.

Speaker Change: We've answered that question before with loss trend, where it is and pricing where it is so you can conclude that that answer hasn't really changed.

Alan D. Schnitzer: So I think I'm just going to leave it with, we really like these margins. We really like the business we're putting on the books at the margin. We're putting it on the books, and we really like the opportunity out of

Speaker Change: So I think I'm just going to leave it with, we really like these margins. We really like the business we're putting on the books at the margin. We're putting it on the books.

Speaker Change: I think I'm just going to leave it with we really like these margins, we really like the business, we're putting on the books at the margin we're putting it on the books.

Speaker Change: and we really like the opportunity out of

Speaker Change: And we really like the opportunity out of us.

Speaker Change: Brian, Greg, just one follow-up. I would note you said you could grow the business. We are growing the business 16% on a full-year basis and have strong new business. So there's a number of items that we watch and we compete in the marketplace, but growth is one of them through the lens of adequacy of our products. Yeah, and on that note, as I've shared before, it's a fool's errand in this industry to try to grow and compete on price. That's a losing proposition. We try to grow by making sure we've got the products, services, and experiences that our customers want to buy and our distribution partners want to sell.

Alan D. Schnitzer: Brian, Greg, just one follow-up. I would note you said you could grow the business. We are growing the business 16% on a full-year basis and have strong new business. So there's a number of items that we watch, and we compete in the marketplace, but growth is one of them through the lens of the adequacy of our products. Yeah, and on that note, as I've shared before, it's a fool's errand in this industry to try to grow and compete on price. That's a losing proposition. We try to grow by making sure we've got the products, services, and experiences that our customers want to buy and our distribution partners want to sell.

Speaker Change: Brian This is Greg just one follow up I would note you said, yes, you could grow the business. We are growing the business, 16% on a full year basis and have strong new business. So there's a number of items that we want to we compete in the marketplace, but growth is one of them, but through the lens of the adequacy of our products.

Jeff: Torvus has developed cutting-edge capabilities including digitally integrated cyber sales, underwriting, service, and support, sophisticated underwriting algorithms, and advanced vulnerability scanning. Corvus also brings deep cyber underwriting and risk management expertise, and we're pleased to welcome them to the Travelers family. This acquisition affords us the opportunity to write Corvus' profitable book of business, which will be reflected as new business in our production results over the course of 2024. Now, I'll turn the call over to Michael. Thanks, Jeff, and good morning, everyone. I'm pleased to share that personal insurance generated $520 million in fourth quarter segment income.

Greg: And on that note as I've shared before we it's a fool's errand in this industry to try to grow and compete on price.

Greg: That's a losing proposition we we try to grow by making sure. We've got the products services and experiences that our customers want to buy and our distribution partners want to sell.

Speaker Change: Makes sense. Thanks. And then, Michael, I'm just curious, back on personal auto, when you look at, you know, your business majority right now being called rate adequate on a written basis, what are you kind of thinking from a lost cost in place in perspective? And is that maybe why you're, you know, not stepping on growth maybe a little bit quicker right now because of uncertainty as far as the claim severity?

Michael Klein: Makes sense. Thanks. And then, Michael, I'm just curious, back on personal auto, when you look at your business majority right now being called rate adequate on a written basis, what are you kind of thinking from a lost cost in place perspective? And is that maybe why you're not stepping on growth maybe a little bit quicker right now because of uncertainty as far as claim severity?

Speaker Change: Okay makes sense, Thanks, and then Michael I am just curious back on personal auto.

When you look at your business the majority right now being call it rate adequate on a written basis.

Jeff: A strong result and a significant improvement compared to the prior year quarter due to higher underlying underwriting income and lower catastrophe losses. The underlying combined ratio of 85.9% improved by over 10 points compared to the prior year quarter, reflecting improvements in both automobile and homeowners and others. Net written premiums grew 13%, driven by continued elevated levels of renewal premium change in both auto and home, bringing full-year net written premiums to a record of nearly $16 billion. In automobile, the fourth quarter combined ratio was 103.6%.

Speaker Change: What are you kind of thinking from a loss cost inflation perspective, and is that maybe why your <unk>.

Speaker Change: <unk> growth, maybe a little bit quicker right now because of uncertainty as far as the claims severity.

Michael Klein: Sure, Brian. It's a great question. I would say that, you know, we continue to see loss trends moderate in personal auto, but they remain at elevated levels. And so, you know, I guess I would describe our outlook as cautiously optimistic, and I would just say we're staying very disciplined, as I described earlier, with state-by-state execution.

Speaker Change: Sure Brian It's a great question I would say that we continue to see loss trends moderate in personal auto.

Speaker Change: But they remain at elevated levels and so.

Speaker Change: I guess I would describe our outlook as cautiously optimistic and I would just say, we're staying very disciplined as I described earlier with state by state execution.

Michael Klein: Making sure we have our arms around written rate adequacy and then adjusting our marketplace actions in auto accordingly. And as I said, we're very pleased with the increase in new business production that we saw this quarter.

Speaker Change: Sure we have our arms around written rate adequacy, and then adjusting our marketplace actions in auto Accordingly, and as I said, we're very pleased with the increase in new business production that we saw this quarter.

Michael Klein: And as I said, we're very pleased with the increase in new business production that we saw this quarter, and policies in force stabilizing, and you know our plan is to continue down that path to achieve rate adequacy in additional states and for those non-rate actions as we go, and see what that does to the top line as we move forward.

Michael: The underlying combined ratio of 102.7% improved by nearly 8 points compared to the prior year quarter. This improvement was driven by the benefit of higher earned pricing. To a lesser extent, it also benefited from the year-over-year impact of a modest favorable re-estimation of prior quarters in the current year compared to a modest unfavorable re-estimation in the prior year quarter. For homeowners and other, the fourth quarter combined ratio of 70.8% improved by over 28 points.

Michael Klein: and policies in force stabilizing and you know our plan is to to continue down that path achieve rate adequacy in additional states and for those non-rate actions as we go and and see what that does to the top line as we move forward.

Speaker Change: And and policies in force stabilizing.

Speaker Change: Our plan is to continue down that path achieve rate adequacy in additional states and for those non rate actions as we go in.

Speaker: The per-occurrence loss deductible is unchanged at $100 million. For 2024, we have placed coverage for $3.5 billion of the $4.5 billion layer above the $3.5 billion attachment. We're pleased to have obtained the extra protection in light of the recent inflationary impact on insured value. In context, we've never hit this treaty before.

Speaker Change: And see what that does to the top line as we move forward.

Speaker Change: Your next question comes from the line of Mayor Shields from KBW. Please go ahead. Your line is open.

Meyer Shields: Your next question comes from the line of Mayor Shields from KBW. Please go ahead. Your line is open.

Speaker Change: Your next question comes from the line of Meyer Shields from K B W. Please go ahead. Your line is open.

Mayor Shields: Great. Thank you. Good morning. I was hoping for an update.

Meyer Shields: Great. Thank you. Good morning. I was hoping for an update.

Meyer Shields: Great. Thank you and good morning, I was hoping for an update on what you're seeing in workers compensation and medical inflation, we've heard some comments.

Mayor Shields: Medical Inflation.

Meyer Shields: Medical inflation, about it moving back towards normalized levels, and I'm wondering what Kyle has experienced.

Speaker: Nonetheless, this is prudent, affordable balance sheet protection for tail events. The cost of the additional reinsurance will be largely offset by the strong renewal pricing we continue to achieve on our direct written property premium, resulting in only a de minimis impact on the underlying combined ratio. On a financial modeling note, let me turn your attention to slide 23 of the webcast presentation. As we enter 2024, we thought it would be helpful to once again highlight the seasonality of our cat losses over the prior decade. As shown in the data, the second quarter has consistently and noticeably been our largest cat quarter. Cat losses in the second quarter have been, on average, more than three combined ratio points higher than in any other quarter.

Mayor Shields: about it moving back towards normalized levels and I'm wondering what Kyle has experienced.

Michael: Reflecting catastrophe losses that were favorable to both the prior year quarter and our expectations, and an improved underlying combined ratio. The underlying combined ratio improved 12.5 points primarily due to non-catastrophe weather-related losses that were favorable to both the prior year and our expectations, and the impact of earned pricing. Turning to production, our results demonstrate our continued disciplined execution of rate and non-rate actions to improve profitability and manage growth. In domestic automobile, retention remains consistent.

About it moving back towards normalized levels and I'm wondering what travelers experiences.

Mayor Shields: Hey Mayor, it's Dan. I'm so sure a couple comments on that.

Daniel S. Frey: Hey Mayor, it's Dan. I'm so sure a couple comments on that.

Speaker Change: Hey, <unk>, it's Dan.

Daniel S. Frey: Sure a couple a couple of comments on that.

Daniel S. Frey: We do see some paid medical severity that's now higher than what we saw in the very benign pandemic levels. On the flip side of that, frequency has been pretty favorable. And as you know, we've shared a number of times previously, our view in reserving and in pricing still assumes that there's going to be a return to that higher, longer-term trend.

Daniel S. Frey: We do see some paid medical severity that's now higher than what we saw at very benign pandemic levels. On the flip side of that, frequency has been pretty favorable. And as we've shared a number of times previously, our view in reserving and in pricing still assumes that there's going to be a return to that higher, longer-term trend. But when we factor all that in, in the most recent data that we're looking at, loss costs are still coming in better than we expected, and that's why you get another quarter of favorable PYD.

Daniel S. Frey: We do see some paid medical severity, that's now higher than what we saw in the <unk>.

Daniel S. Frey: Very benign pandemic levels.

Daniel S. Frey: On the flip side of that frequency has been pretty favorable.

Daniel S. Frey: And as you know we've shared.

Daniel S. Frey: A number of times previously our view in reserving and in pricing still assumes that there's going to be a return to that higher longer term longer term trend.

Daniel S. Frey: But when we factor all that in, in the most recent data that we're looking at, loss costs still coming in better than we expected, and that's why you get another quarter of favorable PYD.

Daniel S. Frey: But when we factor all that in in the in the most recent data that we're looking at loss costs are still coming in better than we expected and that's why you get another quarter of favorable PID.

Speaker: And the second quarter has been our largest cat quarter in seven of the past 10 years. Also of interest for 2024, in light of continued strong pricing in terms in the E&S and reinsurance markets, we are pleased to share that we have renewed the 20% quota share with Fidelis. Renewal includes the same loss ratio cap we had for 2023. The written premium volume, which will again be included as part of international within the business insurance segment, is not expected to be material to this segment.

Michael: Renewal premium change of 16.7% remained strong and, as expected, moderated from the third quarter of 2023 as the majority of our book reached rate adequacy on a written basis. We expect renewal premium change to remain in the mid-teens through the first half of 2024 as we continue to assess the environment and seek rates on a state-by-state basis as appropriate. We're pleased to note that auto new business increased relative to the prior year quarter as we tempered our non-rate actions in states where we've achieved written rate adequacy. We will continue to evaluate our non-rate measures as more states reach adequacy throughout 2024. In homeowners and other, retention remained consistent, even as renewal premium change reached a record level at 21.2%, primarily driven by higher renewal rate changes.

Speaker Change: Okay, fantastic. And then switching gears, when we look at the, I guess, the premium data in business insurance, it looks like exposure and other components that are not rates accelerated in select, but decelerated in middle market and property. And I was hoping you could talk us through that.

Meyer Shields: Okay, fantastic. And then switching gears, when we look at the, I guess, the premium data in business insurance, it looks like exposure and other components that are not rates accelerated in select but decelerated in middle market and property. And I was hoping you could talk us through that. Hey, Mayor. This is Greg. You have a couple of dynamics going on between those two businesses. In select, we have higher exposure in workers' comp and CMP. And for workers' comp, relative to the middle market, I think it's just a different cohort of customers. So in a wage increase environment, on a smaller customer base, you get bigger deltas.

Daniel S. Frey: Okay.

Daniel S. Frey: And then switching gears when we look at the.

Daniel S. Frey: The premium data.

Daniel S. Frey: In business insurance it looks like your exposure.

Daniel S. Frey: And other components that are not rates accelerated and select but decelerated in middle market property and I'm, hoping you could talk through that.

Speaker Change: Hey, Mayor, this is Greg. You have a couple of dynamics going on between those two businesses. In select, we have higher exposure in workers' comp and CMP. And for workers' comp, relative to middle market, I think it's just a different cohort of customers. So in a wage increase environment, on a smaller customer base, you get bigger deltas. And so that's what's driving the difference in workers' comp. CMP, similar to what Michael said, that's our business owner product with the heavy property coverage that comes with it. And so we do think of it as an automatic inflationary level underneath the CMP product, so you get a little more exposure growth there also. So those are the drivers underneath the difference between select and middle.

Daniel S. Frey: Hey, Matt. This is Greg Yeah, you have a couple of dynamics going on between those two businesses.

And in select we have higher exposure in workers comp in CMP.

Speaker: It should have a modestly favorable impact on the underlying combined ratio for 2024 as it earns in. Turning to capital management, Operating cash flows for the quarter of $2.1 billion were again very strong, and we ended the quarter with holding company liquidity of approximately 1.5 billion dollars. As you may have seen, S&P issued their updated capital model, and we now expect that the result of the new model will be a modest improvement in their assessment of our capital metrics. Interest rates decreased and spreads narrowed during the quarter, and as a result, our net unrealized investment loss decreased from $6.5 billion after tax on September 30th.

Daniel S. Frey: And for Workers' comp relative to middle market and think of it as just a different cohort of customers. So in a wage increase environment on a smaller customer base, you get bigger deltas and so that's what's driving the difference in workers comp CMP similar to what Michael said, that's our business.

Gregory C. Toczydlowski: And so that's what's driving the difference in workers' comp. CMP, similar to what Michael said, is our business owner product with the heavy property coverage that comes with it. And so we do think of it as an automatic inflationary level underneath the CMP product, so you get a little more exposure growth there also. So those are the drivers underneath the difference between select and middle.

Daniel S. Frey: Owner product with the heavy property coverage that comes with it and so we do have think of it as an automatic inflationary level underneath the CMP products. So you get a little more exposure growth. There also so those are the drivers underneath the difference between select the middle.

Michael: As we noted last quarter, we expect homeowners renewal premium changes to moderate to low double digits in 2024. We will continue to seek rate increases in response to elevated loss levels. But at the same time, our automatic increase in limit factors will return to more normal levels, reflecting the progress we've made on aligning insured values with replacement costs. Our continued efforts to manage new business flow and thoughtfully deploy capacity in the face of market dislocation drove the year-over-year decline in new business and policies enforced during the quarter.

Speaker Change: Your next question comes from the line of Alex Scott from Goldman Sachs. Please go ahead. Your line is open.

Gregory C. Toczydlowski: Your next question comes from the line of Alex Scott from Goldman Sachs. Please go ahead. Your line is open.

Speaker: $3.1 billion after tax at year end. As we've discussed previously, changes in unrealized investment gains and losses generally do not impact how we manage our investment portfolio. We generally hold fixed income investments to maturity, the quality of our fixed income portfolio remains very high, and changes and unrealized gains and losses have little impact on our cash flows, statutory surplus, or regulatory capital requirements. Adjusted book value per share, which excludes net unrealized investment gains and losses, was $122.90 at year-end, up 8% from a year ago.

Your next question comes from the line of Alex Scott from Goldman Sachs. Please go ahead. Your line is open.

Alex Scott: Hi, good morning. First one I had is on business insurance, and I was just interested in, you know, hearing a little bit about the competitive dynamic in the market. I mean,

Alex Scott: Hi, good morning. The first one I had was on business insurance, and I was just interested in, you know, hearing a little bit about the competitive dynamics in the market. I mean, You know, I look at the returns, how good the underlying loss ratios are and so forth, and the ROEs that that suggests, and yet, you know, price acceleration, and, you know, in some areas of your business, retention is actually hitting, you know, pretty darn high levels. So it all suggests a lot of discipline in the marketplace, and I just wanted to get your perspective on what it is in the environment that's causing everyone to remain so disciplined despite, you know, good underwriting and the additional contribution from non-investment agents.

Alex Scott: Hi, Good morning first of all I have is on business insurance.

Alex Scott: <unk>.

We're hearing a little bit about the competitive dynamic in the market.

Alex Scott: You know, I look at the returns, how good the underlying loss ratios are and so forth, and the ROEs that that suggests, and yet, you know, price accelerating and, you know, in some areas of your business, retention is actually hitting, you know, pretty darn high levels. So it all suggests a lot of discipline in the marketplace, and I just wanted to get your perspective on, you know, what is it in the environment that's causing everyone to remain so disciplined despite, you know, good underwriting and the additional contribution from non-investment agents?

Abby: We anticipate this trend will continue as we take further actions to improve profitability and manage growth in property. In 2023, we made notable progress on improving the underlying fundamentals of our business and are moving towards our goal of delivering target returns. While the environment remains dynamic, we're confident we're on a path to generating leading returns in personal insurance and growing profitably over time. Now, I'll turn the call back over to Abby. Thanks very much.

Alex Scott: I look at the returns are good the underlying loss ratios are and so forth.

Alex Scott: Roe's that suggests.

Alex Scott: And yet.

Alex Scott: Price accelerating in <unk>.

Alex Scott: Some areas of your business retention is actually hitting pretty darn high level. It all suggests a lot of discipline in the marketplace and I just wanted to get your perspective on what is it in the environment, that's causing everyone to remain so disciplined despite good underwriting and the additional contribution from net investment income.

Speaker: We return $298 million of capital to our shareholders this quarter, comprising share repurchases of $66 million and dividends of $232 million. We have approximately $6 billion of capacity remaining under the share repurchase authorization from our board of directors. Thinking about share repurchases in 2024, while there is no change in our capital management philosophy, we will factor in the need for increased capital in light of our top-line growth, as well as the $435 million we just deployed to complete the Corvus acquisition. Currently, we expect repurchases in the first quarter of somewhere around $250 million. Recapping our results for 2023, core income was $3.1 billion, and core ROE was 11.5%. We delivered our highest ever levels of written premium, earned premium, underlying underwriting income, and cash flow from operations. In addition, we ended the year with an all-time high in adjusted book value per share and with our largest investment portfolio ever. You've never been better positioned for the year ahead. With that, I'll turn the call over to Greg for a discussion of business insurance. Thanks, Dan.

Alex Scott: Alex, good morning. It's Alan. Let me start, and then I'll turn it over to Greg to add anything I missed. But I would say overall, you're correct. The pricing environment remains very strong and broad-based by any historical standard or on any measure. And as you said, even with another quarter of very strong pricing, retention remains at historical highs.

Alan D. Schnitzer: Alex, good morning. It's Alan. Let me start, and then I'll turn it over to Greg to add anything I missed. But I would say overall that you're correct. The pricing environment remains very strong and broad-based by any historical standard or on any measure. And, as you said, even with another quarter of very strong pricing, retention remains at historical highs.

Alex Scott: Alex Good morning, It's Alan let me start and then I'll turn it over to Greg to add anything.

Alan D. Schnitzer: I missed but.

Greg: I would say overall, you're correct the pricing environment remains very strong and broad based by any historical standard or on any any measure.

Abby: We're happy to open up for your questions. At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. And we ask that you limit yourself to one question and one follow-up, and any additional questions, please re- Your first question comes from the line of David Motemaden from Evercore ISI. Please go ahead. Your line is open. Hi, thanks. Good morning. I just had a question on the business insurance underlying loss ratio and if you could size the components of the improvement between earned pricing above trend, the light non-cat weather, as well as the property mix shift. Hey David, it's Dan.

Greg: And as you said, even with another quarter of very strong pricing retention remains at historical highs.

Greg Toczydlowski: And I would say in broad strokes, and there's really no change here from recent quarters, and in broad strokes, I think there are two trends impacting pricing. On the one hand, there's just a lot of uncertainty out there in the world, and there's some headwinds. So, you know, the reinsurance market continues to be strong. You've got inflation of various varieties. You've got a tight labor market. I think weather is probably on everybody's minds. Think about geopolitics these days. The world has never been more active than it is now, and on and on. And so I can't speak for anybody else, but we're reacting to those things in our pricing.

Alan D. Schnitzer: And I would say in broad strokes, and there's really no change here from recent quarters, and in broad strokes, I think there are two trends impacting pricing. On the one hand, there's just a lot of uncertainty out there in the world, and there are some headwinds. So, you know, the reinsurance market continues to be strong. And you've got inflation of various varieties. You've got a tight labor market. I think weather is probably on everybody's mind. Think about geopolitics these days. The world has never been more active than it is now, and on and on. And so I can't speak for anybody else, but we're reacting to those things in our pricing.

Speaker Change: And I would say in broad strokes and there's really no change here from recent quarters and in broad strokes I think there are two trends impacting pricing on the one hand, there's just a lot of uncertainty out there in the world and there is some headwinds so.

Speaker Change: The reinsurance market continues to be strong you've got inflation of various varieties you got a tight labor market I think whether it is probably on everybody's minds think about geopolitics. These days the world has never been more active than it is now in and on and on.

Dan: So we're not going to put numbers on them, but price versus trend has been favorable throughout the last couple of years and was favorable again, favorable again this quarter. You know, a little bit of a mixed shift towards property, as Greg said, and modestly favorable non-cat weather impact, not huge but you know worth a mention, but we're not going to put numbers on each of those. Got it, thanks. I think it's been five of the last seven quarters or something like that where you guys called out general liability and umbrella as areas of reserve increases in business insurance. I'm wondering if we could get a little bit more detail about exactly what you guys are seeing and reacting to and if you think we're closer to the end of some of these true ups. Sure, David. It's Dan again.

Speaker Change: And so.

Speaker Change: I can't speak for anybody else, but we're reacting to those things in our pricing.

Alan D. Schnitzer: At the same time, returns are in a much better place than they were a few years ago because we've done a pretty good job with pricing terms, conditions, and all the rest. And so the pricing you see from us, and you refer to it as a competitive marketplace, I would say that it is a marketplace that is pretty disciplined. I suspect that they're reacting to many of the things that we're reacting to.

Greg Toczydlowski: At the same time, we've had returns are in a much better place than they were a few years ago because we've done a pretty good job with pricing terms, conditions, and all the rest.

Speaker Change: At the same time, we've had.

Speaker: Business insurance had another strong quarter rounding out a terrific year in terms of financial results, execution in the marketplace, and progress in our strategic initiatives. Last year at this time, I indicated that we were firing on all cylinders, and that certainly remains the case today. Segment income for the quarter was $957 million, our highest quarter ever and up well over $200 million from the prior year quarter, driven by higher underlying underwriting income and net investment income as well as lower catastrophe losses.

Returns are in a much better place than they were a few years ago, because we've done a pretty good job with with pricing terms conditions and all the rest.

Greg Toczydlowski: And so the pricing you see from us, and you refer to it as a competitive marketplace, I would say that it is a marketplace that is pretty disciplined. I suspect reacting to many of the things that we're reacting to. Greg, anything to add? No, I think that's spot on.

Speaker Change: And so the pricing you see from US and you referred to it as a competitive marketplace I would say that.

Speaker Change: It is a marketplace that is is pretty disciplined and I suspect reacting to many of the things that we're reacting to Greg and Dennis I think that's spot on.

Gregory C. Toczydlowski: Greg, anything to add? No, I think that's spot on.

Speaker Change: Got it. Thanks. The second one I have for you is on personal auto.

Alex Scott: Got it. Thanks. The second one I have for you is on personal auto.

Speaker Change: Got it thanks, the second one I have to use on personal auto.

Speaker Change: Did you just give us maybe a high-level idea of what's going on with, you know, severity in the claims? And, you know, we can look a lot at used cars and that kind of thing, but some of the more nuanced elements around car repair and that kind of thing, any color you can provide on some of those?

Michael Klein: Did you just give us maybe a high-level idea of what's going on with, you know, severity in the claims? And, you know, we can look a lot at used cars and that kind of thing, but some of the more nuanced elements around car repair and that kind of thing, any color you can provide on some of those? Yes, sure, Alex. It's Michael. I'd maybe just give a couple more comments related to the comment I made earlier about moderating trends.

Speaker Change: Could you just give us maybe a high level idea of what's going on with.

Speaker: The all-in combined ratio of 86.5% was a great result, and we're once again particularly pleased with our exceptional underlying combined ratio of 86.8%, an all-time best result. The underlying loss ratio improved by almost 2.5 points from the prior year quarter. With the drivers of the improvement, including the benefit of earned pricing, a mixed shift to the property line, and an impact from non-capital weather that was modestly favorable to both the prior year and our expectations, the expense ratio remained excellent at 28.8%.

Severity.

Speaker Change: In the claims.

Dan: So not big, big movements this quarter. Just more of the same. More of what we've sort of been talking about the last couple of quarters, which is... No surprises in terms of the themes of the things that we're seeing come through those numbers, but the magnitude had been a little greater than we had allowed for previously, and we're just looking at the data that comes in every quarter and trying to make sure we stay as current with it as we can, and so a modest reaction to keep up with that, but nothing Please go ahead. Your line is open. Well, good morning, everyone.

Speaker Change: We can look a lot of used cars and that kind of thing, but some of the more nuanced elements around car repair and that kind of thing.

Speaker Change: Color you can provide on some of those trends.

Speaker Change: Yes, sure, Alex, it's Michael. I'd maybe just give a couple more comments relative to the comment I made earlier about moderating trends.

Speaker Change: Yeah sure Alex It's Michael maybe you can just give a couple more comments relative to the comment I made earlier about moderating trends.

Alex Scott: You're right to point to sort of vehicle severity and used car prices.

Michael Klein: You're right to point to sort of vehicle severity and used car prices. And we certainly see moderation there in the level of increase year on year. And in fact, when you look at the dynamics underneath the prior period adjustments that I described in the script, those really are driven by the physical damage coverages. Late last year, we were adding to our estimates for vehicle losses because physical damage coverages were rising more than we thought they were going to. And this year, we actually took down some of our estimates for vehicle severity on prior periods because they've been a bit more favorable than we anticipated, broadly speaking severity in auto is running you know mid to high single digits think closer to mid in the vehicle severity think closer to high in bodily injury um and and so you know that's sort of where trends are running today we we don't have a dramatic improvement in those trends Sort of factored into, you know, our comments about when we're going to get to written adequacy state by state or those types of things, but that's a little bit more detail on sort of where things are running today.

Speaker Change: <unk>.

You are right to point to sort of vehicle severity in used car prices.

Alex Scott: And we certainly see moderation there in the level of increase year on year. And in fact, when you look at the dynamics underneath the prior period adjustments that I described in the script, those really are driven by the physical damage coverages.

Speaker Change: And we certainly.

Speaker Change: See moderation there in the level of increase year on year.

Speaker Change: And in fact, when you look at the dynamics underneath.

Speaker: Net written premiums for the quarter were up 14% from the prior year to a fourth quarter record of $5 billion, benefiting from high retention, strong renewal premium changes, and an increase in new business levels. As Alan mentioned, given the attractive margins in this segment, we're very pleased with this growth. Turning to domestic production for the quarter, renewal premium change was once again historically high at 11.8%, with renewal rate change of 7.4% and continued strong growth and explosion. Renewal rate change increased from the third quarter in select and middle market, but it ticked down at the segment level, driven almost entirely by a lower mix of national property, written premium in the fourth quarter as compared to the third quarter.

Speaker Change: Prior period adjustments that I described in the script goes really are driven by the physical damage coverages.

Dan: Well, first of all, you had a great fourth quarter, so congratulations. But I wanted to focus on slide seven, the return on equity slide. And, um, you guys have all mapped out really a pretty strong outlook, and I guess I'm trying to reconcile what looks to be a pretty good outlook with the fact that your ROE is running below where I think it should be. I feel like the ROE should be running higher. Maybe, Alan, you can provide some perspective because I know the ROE is an important factor that you guys look at. Hey Greg, it's Dan. I'll start.

Alex Scott: Late last year, we were adding to our estimates for vehicle losses because physical damage coverages were rising more than we thought they were going to. And this year, we actually took down some of our estimates for vehicle severity on prior periods because they've been a bit more favorable than we anticipated.

Speaker Change: Late last year, we were adding to our estimates for vehicle losses, because physical damage coverages were rising more than we thought they were going to.

Speaker Change: And this year, we actually took down some of our estimates for vehicles severity on prior periods, because they've been a bit more favorable than we anticipated.

Alex Scott: broadly speaking severity in auto is running you know mid to high single digits think closer to mid in the vehicle severity think closer to high in bodily injury um and and so you know that's sort of where trends are running today we we don't have a dramatic improvement in those trends

Speaker Change: Broadly speaking severity in auto is running.

Speaker Change: Mid to high single digits closer to mid in the vehicles severity think closer to high in bodily injury.

Speaker Change: And so that's sort of where trends are running today, we don't have a dramatic improvement in those trends sort of factored into.

Dan: So, look, 11.5 for ROE for a full year, you know, pretty good number. Another year, double digits, well above our cost of capital and the risk-free rate. Not quite where we'd like it to be, and I think the biggest contributor, and you called out... Slide 7 is, you know, that yellow bar from... The contribution from underwriting really was affected, as we talked about, especially in the second quarter and the third quarter by a very elevated level of catastrophe losses. For the whole year.

Alex Scott: Sort of factored into, you know, our comments about when we're going to get to written adequacy state by state or those types of things, but that's a little bit more detail on sort of where things are running today.

Speaker: Retention remained excellent at 87%, and new business of $672 million was the strongest fourth quarter we've ever produced. We're thrilled with these production results and our field's superior execution in the marketplace. In terms of pricing, we're pleased to be able to sustain strong levels of renewal premium change to address the persistent environmental headwinds. As for renewal rate change, during the quarter, we achieved meaningful renewal rate increases on all lines other than workers' comp. The property, umbrella, and car lines led the way.

Our comments about when we're going to get the written adequacy state by state or those types of things, but that's a little bit more detail on sort of where things are running today.

Alex Scott: The other thing that we've mentioned a couple of quarters throughout the year is we are also monitoring the mix of losses between vehicle losses and losses that have third-party property damage and bodily injury. We've seen a bit of a mixed shift towards more bodily injury claims, which is one of the things that has us keeping our severity trend estimates at that sort of elevated level.

Michael Klein: The other thing that we've mentioned a couple of times throughout the year is that we are also monitoring the mix of losses between vehicle losses and losses that have third-party property damage and bodily injury. We've seen a bit of a mixed shift towards more bodily injury claims, which is one of the things that has us keeping our severity trend estimates at that sort of elevated level.

The other thing that we've mentioned a couple of quarters.

Speaker Change: Throughout the year as we are also monitoring the mix of losses between vehicle losses and losses that have third party property damage and bodily injury, and we've seen a bit of a mix shift towards more bodily injury claims, which is one of the things that has us keeping our our severity trend estimates out there.

Alan: That's not what we expect to be the new normal run rate. We're certainly factoring more recent CAT experience into our view of CAT expectations going forward, but we wouldn't expect it to be elevated at that level. Craig, it's Alan.

Speaker Change: That sort of elevated level.

Speaker: Renewal rate change in each of the casualty lines was comparable or better than the third quarter. And given our high-quality book, as well as several years of meaningful price increases and improvements in terms and conditions, we're very pleased to continue to produce hysterically strong retention levels. As for the individual businesses, in Select, the Renewal Premium change remained strong at 11.9%, up more than a point and a half from the third quarter, driven by the Renewal Rate change, which increased to 4.1% for the quarter. Even with strong pricing, retention remained very strong at 85%.

Speaker Change: Your next question comes from the line of Paul Newsome from Piper Sandler. Please go ahead. Your line is open.

Speaker Change: Your next question comes from

Michael Klein: Your next question comes from

Speaker Change: from Piper Sandler. Please go ahead. Your line is open.

Paul Newsome: from Piper Sandler. Please go ahead. Your line is open.

Speaker Change: Well, I want to follow directly on that, maybe similar thoughts about the home part of the business.

Paul Newsome: Well, I want to follow directly on that, maybe with similar thoughts about the home part of the business.

Alan: The other thing I would add to that is, I won't tell you what to do, but one of the things I do every quarter is try to take a stab at normalizing these things. And so, eliminate prior year development and put in, you know, for cats, whatever you think is a normalized cat number, and then you get a different perspective. transcript Emily Beynon, Right.

Paul Newsome: Well I wanted to call directly on that.

Paul Newsome: Similar thoughts about the home part of the business.

Speaker Change: Sure, just in terms of outlook for trends, Paul?

Michael Klein: Sure, just in terms of the outlook for trends, Paul?

Speaker Change: Sure just in terms of outlook for transport.

Paul: Yes, please.

Paul Newsome: Yes, please. Yeah, so, in property, again, the big driver of the improvement this quarter really was catastrophes and non-catastrophic weather. The non-cat weather and I guess the non-weather loss dynamic that I would elaborate on is that a lot of that non-CAT weather favorability and some of the non-weather loss favorability that we've commented on throughout 2023 really has been frequency driven. However, we do still see, you know, pretty healthy severity trends in the property space offsetting some of that favorable frequency. Now, again, we've had, you know, favorable results in the quarter, so the net is a good guy. But labor and some large loss pressure along with that favorable frequency are what's happening kind of underneath the loss levels in property.

Speaker Change: Yes, please yes.

Paul: Yeah, so, you know, in property, again, the big driver of the...

Speaker Change: Yes so.

In property.

Speaker Change: Again, the big driver of of the.

Paul: of the improvement this quarter really was catastrophes and non-cat weather.

Speaker Change: The improvement this quarter really was catastrophes and non cat weather.

Paul: The non-cat weather and I guess the non-weather loss dynamic that I would elaborate on is...

Speaker Change: Sure.

Speaker Change: The non cat weather and I guess, the non weather loss dynamic that I would that I would elaborate on is.

Speaker: New business was up $49 million from the prior quarter, driven in large part by the continued success of our BOP 2.0 product. In the middle market, renewal premium change of 10.4% and retention of 90% remained historically strong. New business of $348 million was an all-time best fourth quarter result. As we close out 2023, let me provide a little color on full year results before turning the call over to Jeff. Segment income was nearly $2.6 billion, an exceptional result.

Dan: Okay. And then, Dan, I just wanted to go back to your comments about share repurchase and uses of capital. I know you talked about the expectation for what's gonna happen in the first quarter, and you talked about capital. Are there any other...

Paul: A lot of that non-CAT weather favorability and some of the non-weather loss favorability that we've commented on throughout 2023 really has been frequency driven. We do still see, you know, pretty healthy severity trends in the property space offsetting some of that favorable frequency. Now, again, we've had, you know, favorable results in the quarter, so the net is a good guy. But labor and some large loss pressure along with that favorable frequency is what's happening kind of underneath the loss levels in property.

Speaker Change: A lot of that non cat weather favorability and some of the non weather loss favorability that we've commented on throughout 2023 really has been frequency driven.

Craig: Things you'd like to call out in terms of capital allocation outside of dividends and share repurchase? Let me start with that, then I'll see what observations Dan has on that. So I think we've said for a very long time: our first objective for every dollar of capital we generate is to invest it back in the business when we think we can do that and achieve our objectives and contribute to shareholder value. But we think we've got a long track record that demonstrates our discipline with shareholders' capital. And so we're going to invest the money back in the business when we can, and that could be... Keeping capital on the balance sheet to support profitable growth. Or it could be buying things like Corbis.

Speaker Change: We do still see.

Speaker Change: Pretty healthy severity trends in the property space.

Speaker Change: Offsetting some of that favorable frequency now again, we've had a favorable result in the quarter. So the net is a.

Speaker Change: It is a good guy but labor.

Speaker Change: And some large loss pressure along with that favorable frequency is what's happening kind of underneath.

Speaker: The underlying combined ratio of 88.9%, the top line of $20.4 billion, renewal premium change, retention, and new business premiums were all record results. These results are a direct reflection of our successful execution of our thoughtful and deliberate strategy. And while delivering these financial impact results, we've also continued to invest in strategic capabilities that will enhance our many competitive advantages. For example, during the year, we continued to advance our data and analytics capabilities by leveraging evolving technologies, including AI, and new data sources to help us manage the portfolio and equip our frontline underwriters with data and insights to better enable our risk selection, underwriting, and pricing. In addition, we continued to advance our already state-of-the-art product and service capabilities by continuing to roll out our BOP 2.0 product, which is now live in all but a couple of states, as well as our new commercial auto product, which is now live in 14 states. Both products deliver industry-leading segmentation and user experience.

Speaker Change: The loss levels in property.

Speaker Change: I'm just curious, for some time I think we've seen a little bit of a divergence between commercial auto and personal lines auto. Has that continued to be the case or are we seeing pretty similar claim trends?

Michael Klein: I'm just curious, for some time, I think we've seen a little bit of a divergence between commercial auto and personal lines auto. Has that continued to be the case, or are we seeing pretty similar claim trends? and across anything that drives.

Speaker Change: I'm just curious.

Speaker Change: For some time I think we've seen a little bit of a divergence between commercial auto and personal lines auto is that continued to be the case or we see pretty similar claim trends.

Speaker Change: and across anything that drives.

Speaker Change: Across.

Dan: It could be investing in technology or people doing the things that we think we can do that are creative in our objectives. And when we can't do that, we're going to give the dollars back. So it's a long-winded way of saying no change at all in our capital management. I agree entirely. There's no hidden message in there, Greg.

Speaker Change: That drives.

Speaker Change: Yes.

Speaker Change: I think broadly the claim trends are similar. I mean, we see similar threads.

Michael Klein: I think, broadly, the claim trends are similar. I mean, we see similar threads. It's obviously, I mean, the exposures are different, and the size of the vehicles is different.

Speaker Change: I think I think broadly the claim trends are.

Speaker Change: Similar I mean, we see similar threads.

Speaker Change: It's obviously, I mean, the exposures are different, the size of the vehicles are different.

Speaker Change: It's obviously mean that the exposures are different the size of the vehicles are different.

Speaker Change: Um, you know,

Michael Klein: Um, you know,

Paul.

Speaker Change: Mike, what else would you add? Limits profile is different, right? Limits profile is different. So your mix of vehicle versus bodily injury is different between, you know, business insurance and personal insurance, right, Greg? Yeah, I mean, one of the benefits, Paul, of having, you know, two large cohorts of auto business, commercial, auto and personal, our product managers and actuaries spend a lot of time together and compare the trends. And for commercial, we'll have passenger, private passenger-like vehicles, think vans of that sort. And then we'll have heavies, which aren't as relevant. But we spend a lot of time on the two cohorts that are private passenger-like. And the trends are very similar, both on a frequency and severity basis, between the two portfolios.

Michael Klein: Mike, what else would you add? The limits profile is different, right? The limits profile is different. So your mix of vehicle versus bodily injury is different between, you know, business insurance and personal insurance, right, Greg? Yeah, I mean, one of the benefits, Paul, of having, you know, two large cohorts of the auto business, commercial, and personal. Our product managers and actuaries spend a lot of time together and compare the trends. And for commercial, we'll have passenger, private passenger-like vehicles, think vans of that sort. And then we'll have heavies, which aren't as relevant, but we spend a lot of time on the two cohorts that are private passenger-like. And the trends are very similar, both on a frequency and severity basis, between the two portfolios.

Speaker Change: Michael what else would you add limits profile limits you referenced your mix of vehicle versus bodily injury is different between.

Dan: It's business as usual. Your next question comes from the line of Elyse Greenspan from Wells Fargo. Please go ahead.

Elyse Greenspan: Your line is open. Hi, thanks. Good morning. My first question is about the Fidelis relationship.

Speaker Change: Business insurance and personal insurance right, Greg, Yes, I mean, one of the benefits Paul.

Dan: Dan, I think you called out and said you expected a modest, favorable impact in 2024. Give us. Thank you so much for joining us. 23 margins with NBI and how we should think about you guys. Sure, Elyse and Stan.

Speaker Change: Two large cohorts so the auto business commercial auto personal our product managers and actuary spend a lot of time together and compare the trends and for commercial will have passenger private passenger light vehicles <unk> vans of that sort and then we'll have heavies, which aren't as relevant but we spend a lot of time on the two cohorts that are.

Speaker: In addition, we continue to make progress on developing other industry-leading user experience capabilities to make it easier and more efficient for our distribution partners and customers to do business with us. In particular, in our middle market business, we have advanced our capabilities around digitizing the underwriting transaction for our agents and brokers. In our small commercial business, we continued to roll out our new front-end rate quote and issue interface platform to make it faster and easier for agents to write business with us, while maintaining all the underwriting discipline and specialization behind the scenes. And finally, we continue to improve our operating leverage through our relentless focus on productivity and efficiency. We're proud of these extraordinary results and the best-in-class team that produced them.

Elyse Greenspan: So, I'm not really going to put a very fine number on it. But keep in mind now that, you know, Fidelis is now a standalone public company. They haven't reported results yet.

Speaker Change: Private passenger light and the trends trends are very similar bolt on a frequency and severity basis between the two portfolios.

Speaker Change: We have time for one more question and that question comes from the line of Andrew Kligerman from TD Cowan. Please go ahead. Your line is open.

Gregory C. Toczydlowski: We have time for one more question, and that question comes from the line of Andrew Kligerman from TD Cowan. Please go ahead. Your line is open.

Speaker Change: And we have time for one more question and that question comes from the line of Andrew Clark Klingerman from TD Cowen. Please go ahead. Your line is open.

Stan Smith: I don't think it would be appropriate for us to give an outlook of, you know, what we feel about their profitability. But it was a modest help in... 2023, it will be a modest help. Again, in 2024, there'll be a little bigger base of earned premium as we'll have two years' worth of written impacting 2024. So it's worth calling out as a modest benefit, but not a big number. And I really don't think it would be appropriate for us to try to put a finer number on it than that.

Andrew Kligerman: Okay, great. I made the queue. Most of my questions are answered, but in Bond and Specialty,

Speaker Change: Okay, Great I made the queue.

Speaker Change: Question most of my questions are answered.

Speaker Change: The.

Speaker Change: In bond and specialty.

Andrew Kligerman: The results looked exceptional. The results looked exceptional.

Jeff Klank: The results looked exceptional. But in the context of the renewal premium change, I'm very curious as to how pricing fared with regard to D&O and cyber in the quarter and what you're thinking in terms of those two lines going into 2024. Andrew, this is Jeff Klink. So, relative to DNO and cyber, public DNO pricing continues to be, I'd say, more pressured relative to the other liability lines.

Speaker Change: The results look exceptional.

Andrew Kligerman: But in the context of renewal premium change, I'm very curious as to how pricing fared with regard to D&O and cyber in the quarter and what you're thinking in terms of those two lines going into 2024.

Speaker Change: But in the context of renewal premium change I'm very curious as to.

Speaker Change: How pricing fared with regard to D&O and in cyber in the quarter and what Youre thinking in terms of those two lines going into 2024.

Elyse Greenspan: Okay, thank you. Then, um, within personal auto, what percent of your states still have none on?

Speaker: With that, I'll turn the call over to Jeff. Thanks, Greg. London Specialty ended a strong 2023 with a terrific quarter on both the top and bottom lines. Segment income was $240 million, up 9% from the prior year quarter, and it delivered very strong underlying underwriting income and an outstanding underlying combined ratio of 80.6%. Turning to the top line, we grew net written premiums by 7% in the quarter. In our high-quality domestic management liability business, we again delivered excellent retention of 90%, in line with the prior year quarter while continuing to achieve positive renewal premium change. New business was up, driven by a new domestic cyber capacity agreement with Corbyn, and surety net written premiums increased 9%, reflecting continued strong demand for surety bonds.

Okay.

Jeff Clinker: Yeah, Andrew This is Jeff clinic, so relative to D&O and cyber.

Andrew Kligerman: Andrew, this is Jeff Klink. So relative to DNO and cyber, public DNO pricing continues to be, I'd say, more pressured relative to the other liability lines.

Elyse Greenspan: Elyse, I don't think we'll get more specific than the majority, but you can think of the non-rate restrictions as tracking very closely with where we see written adequacy state by state. So the majority of the premium is in states where we have relaxed some of those or tempered some of those non-rate actions because the majority of the premium is in states where we've got target returns on a written basis. And again, as I indicated in my prepared remarks, we'll continue to follow that path as more states get adequate, and we'll temper actions in those states as they reach adequate. Your next question comes from the line of Ryan Tunis from Autonomous Research.

Jeff Clinker: Public D&O pricing continues to be I'd say more pressured relative to the other liability lines.

Jeff Klink: I would remind you that for public D&O and our management liability book, we're relatively underweight there. That's not been a major area of focus for us.

Jeff Klank: I would remind you that for public D&O and our management liability book, we're relatively underweight there. That's not been a major area of focus for us. On the cyber side, we continue to see modest negative pricing there, I think given some broader market perception on the returns in the line. Again, we feel really good about our execution there. We closely monitor our return profiles and are comfortable with our execution, both for those lines of business and for management liability.

Jeff Clinker: I would remind you that for public D&O and our management liability book were relatively underweight. There that's not been a major area of focus for us on the cyber side, we continue to see some modest negative pricing there I think given some broader market perception on the returns and the line.

Jeff Klink: On the cyber side, we continue to see some modest negative pricing there, I think given some broader market perception on the returns in the line. Again, we feel really good about our execution there. We closely monitor our return profiles and are comfortable with our execution, both for those lines of business and management liability.

Jeff Clinker: Again, we feel really good about our execution there we closely monitor our return profiles.

Ryan J. Tunis: Please go ahead. Your line is open. Hey, thanks. Good morning.

Ryan J. Tunis: I guess my question is just looking at the rate slides, we saw an acceleration of pricing in the middle market. Select, obviously, a decelerated headline, so I'm guessing that means there's a deceleration in national property. Could you just, I guess, talk a little bit about the relative pricing dynamics in those three markets? Good morning, Ryan. It's Greg.

And are comfortable with our execution both for those lines of business in management liability broadly.

Jeff Klink: And along the same lines in business insurance with regard to workers' comp, I was wondering if you could put some numbers around that paid medical severity higher than the benign.

Andrew Kligerman: And along the same lines in business insurance with regard to workers' comp, I was wondering if you could put some numbers around that paid for medical severity higher than the benign numbers you were seeing during the pandemic. I think that was in response to Mayor's question. And then the same question about the pricing of workers' comp. What are you thinking about going into 2024 as you proceed? Andrew, it's Dan. So I'll start and disappoint you with the word comp severity. So we're not going to put a number on it. But again,

Speaker Change: Got it.

Speaker Change: And along the same lines in business insurance with regard to workers' comp I was wondering.

If you could put some numbers around that.

Speaker Change: That paid medical severity hiring.

Speaker: So we're pleased to have once again delivered terrific top and bottom line results this quarter, tapping off a year during which we generated record segment income and net written premium. And finally, we're pleased that earlier this month, we closed our previously announced acquisition of Corvis Insurance. Corvis is an industry-leading, cyber-insurance-managing general underwriter powered by proprietary technology.

Speaker Change: The benign.

Greg: Yeah, you can see if you look underneath the price and you can see that rates are up in both the middle market and select business. So the residual that makes up the total BI, you're correct, the preponderance of that is national property. And so a couple of dynamics this quarter in national property. One is when that plays out to the total buck, we did have less weight on net written premium national property this quarter, quarter four versus quarter three and quarter two. And we did have a tech down overall in rates for national property, also just given where the returns are in that business and the business is performing extremely well. But make no mistake, Ryan; the overall rate change and renewal price change in the property line continues to be very strong. Got it, thanks.

Jeff Klink: numbers you were seeing during the pandemic. I think that was in response to Mayor's question. And then the same question along the pricing of workers' comp. What are you thinking about going into

Speaker Change: Numbers you were seeing during the pandemic I think that was in response to <unk> question and then the same question on the.

Speaker Change: The pricing.

Speaker Change: Workers comp what are you thinking about going into.

Jeff Klink: 2024

Speaker Change: 2024.

Jeff Klink: as you proceed.

Speaker Change: As you proceed.

Jeff Klink: Andrew, it's Dan. So I'll start and disappoint you on the word comp severity. So we're not going to put a number on it. But again,

Hey, Andrew it's Dan So I'll start in and disappoint you on the on the work comp severity. So we're not going to put a number on it but again.

Speaker: Forvis has developed cutting-edge capabilities including digitally integrated cyber sales, underwriting, service, and support, sophisticated underwriting algorithms, and advanced vulnerability scanning. Orvis also brings deep cyber underwriting and risk management expertise, and we're pleased to welcome them to the Traveler's family. This acquisition affords us the opportunity to write Corvus's profitable book of business, which will be reflected as new business in our production results over the course of 2024. Now, I'll turn the call over to Michael. Thanks, Jeff, and good morning, everyone. I'm pleased to share that personal insurance generated $520 million in fourth quarter segment income.

Daniel S. Frey: It's been benign. We've seen some of those numbers move up, but your starting point matters. So what you assumed medical severity was going to be inside of your overall loss pick, pick really matters in terms of whether a move up is problematic for you or not. And again, we saw more favorable reserve development.

It's been benign we've seen some of those numbers move up but but youre starting point matters. So what you assumed medical severity was going to be inside of your overall loss pick pick really matters in terms of whether a move up is problematic for you or not and again, we saw more favorable.

Greg: And then just a follow-up, we're not used to seeing this type of margin expansion in business insurance. I would think that it would be largely attributable to short tail lines, but I guess I was also curious because, obviously, rates have been running in an excessive loss trend and casualties as well for a while. We didn't really talk about changing loss picks or anything like that, but was there a change on the casualty side to... Um, I guess lost picks in the fourth quarter, any true-up to the current year or something like that we should be aware of? No, Ryan, it's Dan.

<unk> development.

Speaker Change: This quarter, and then in terms of pricing, and I'll turn it to Greg, you know, I think the returns in comp have continued to be good. So pure rate has continued to be slightly negative for us. We are getting strong exposure increases. Greg referenced in the select comments a few minutes ago. That's the poster child for where a lot of that exposure behaves like rate because it's the same worker just earning a higher wage and we're getting paid a higher price for it.

Daniel S. Frey: This quarter, and then in terms of pricing, and I'll turn it to Greg, you know, I think the returns on comp have continued to be good. So pure rate has continued to be slightly negative for us. We are getting strong exposure increases, as Greg referenced in the select comments a few minutes ago. That's the poster child for where a lot of that exposure behaves like rate because it's the same worker just earning a higher wage, and we're getting paid a higher price for it.

This quarter.

And then in terms of pricing and I'll turn it to Greg I think the returns and comps have continued to be good. So pure rate has continued to be slightly negative for us. We are getting strong exposure increases for I referenced in the select comments a few minutes ago. That's the poster child for where a lot of that exposure.

Speaker: Strong results and a significant improvement compared to the prior year quarter due to higher underlying underwriting income and lower catastrophe losses. The underlying combined ratio of 85.9% improved by over 10 points compared to the prior year quarter, reflecting improvements in both automobile and homeowners and others. Net written premiums grew 13%, driven by continued elevated levels of renewal premium change in both auto and home, bringing full-year net written premiums to a record of nearly $16 billion. In automobile, the fourth quarter combined ratio was 103.6%.

Behaves like rate because it's the same work or just earning a higher wage and we're getting paid a higher price for it.

Greg Toczydlowski: You know, the rating agencies, the bureaus are looking at their data on a lagging basis, and until returns come under some pressure in work comp, we wouldn't be surprised to see this environment stay pretty steady.

Daniel S. Frey: You know, the rating agencies, and the bureaus are looking at their data on a lag basis, and until returns come under some pressure in work comp, we wouldn't be surprised to see this environment stay pretty steady.

The rating agencies. The bureaus are looking at their data on a lagging basis and until returns come under some pressure in work comp we wouldn't be surprised to see this environment stay pretty steady.

Dan: Like, if we have an unusual item in the quarter that's sort of a non-run rate, we'll usually try and call it out for you, including, you know, some kind of year-to-date catch-up. Michael referred to it in PI Auto, but you didn't hear Greg talk about anything significant in BI because there wasn't really anything significant in BI. So we did what we always do, right? Go through all the lines.

Greg Toczydlowski: I'm open to add these.

Daniel S. Frey: I'm open to adding these.

And to add the FERC.

Speaker Change: Thank you. I will now turn the conference over to Ms. Abbe Goldstein for closing remarks.

Abbe F. Goldstein: Thank you. I will now turn the conference over to Ms. Abbe Goldstein for her closing remarks.

Thank you I will now turn the conference over to MS. Abbe Goldstein for closing remarks.

Dan: There are puts and takes across every line, looking at frequency and severity, but on the whole, no big change in our view of blended trends. Thank you. Your next question comes from the line of Mike Zaremski from BMO. Please go ahead.

Abbe F. Goldstein: Thank you everyone for joining us today. We appreciate your time. And as always, if there's any follow-up, please feel free to reach out. Have a great day.

Abbe F. Goldstein: Thank you everyone for joining us today. We appreciate your time. And, as always, if there's any follow-up, please feel free to reach out. Have a great day!

Thank you everyone for joining us today, we appreciate your time and as always if there's any follow up please feel free to reach out and have a great day.

Speaker: The underlying combined ratio of 102.7% improved by nearly 8 points compared to the prior year quarter. This improvement was driven by the benefit of higher earned pricing. To a lesser extent, it also benefited from the year-over-year impact of a modest favorable re-estimation of prior quarters in the current year compared to a modest unfavorable re-estimation in the prior year quarter. For homeowners and other, the fourth quarter combined ratio of 70.8% improved by over 28 points, reflecting catastrophe losses that were favorable to both the prior year quarter and our expectations, and an improved The underlying combined ratio improved 12.5 points, primarily due to non-catastrophe weather-related losses that were favorable to both the prior year and our expectations and the impact of earned pricing. Turning to production, our results demonstrate our continued disciplined execution of rate and non-rate actions to improve profitability and manage growth. In domestic automobiles, retention remained consistent.

Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect. Thank you for your participation and you may now disconnect. © transcript Emily Beynon © transcript Emily Beynon

Host or Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect. Thank you for your participation, and you may now disconnect. Transcript Emily Beynon Transcript Emily Beynon

This concludes today's conference call. Thank you for your participation and you may now disconnect.

Mike Zaremski: Your line is open. Hey, thanks. Good morning. Happy Friday.

Mike Zaremski: First question is maybe looking for a little bit more color on some of the, you know, pleasantly surprising commentary about the general liability and umbrella returns still being, you know, very good despite, you know, but, you know, as someone else had pointed out was, you know, five of the last seven quarters adding to reserve. So, just curious, is there, you know, any more, can you elaborate on that? You know, maybe you're taking into account the — you don't typically hear that. Maybe it's the investment income that's helping or it's sold as part of a package, and so the rest of the products are running at better returns or anything you could add to that. Hey Mike, it's Dan.

Speaker Change: Yeah.

Dan: So we're thinking about returns, and that is our all-in view of returns, but we are specifically looking at those lines when we make that comment, although we do, to your point, also pay a lot of attention to returns on an account basis. But those comments were specific to liability and umbrella lines, and this really goes back to the comment that Alan made a couple quarters ago, which is, The amounts that we're... and the total volume of business that we're writing and the returns on an overtime basis, we still like both of those lines very much. Another way to think about it might be that you think about it in terms of rate adequacy, and you might have an attractive rate adequacy; you might make an adjustment to it, it might be, to one degree or another, slightly less rate adequate. Nevertheless, you like the rate adequacy. So, you know, it's in that context that we say we continue to like the returns on those lines. Okay, that's helpful.

Speaker: Renewal premium change of 16.7% remained strong and, as expected, moderated from the third quarter of 2023, as the majority of our book reached rate adequacy on a written basis. We expect renewal premium change to remain in the mid-teens through the first half of 2024 as we continue to assess the environment and seek rates on a state-by-state basis as appropriate. We're pleased to note that auto new business increased relative to the prior year quarter as we tempered our non-rate actions in states where we've achieved written rate adequacy. We will continue to evaluate our non-rate measures as more states reach adequacy throughout 2024. In homeowners and other, retention remained consistent, even as renewal premium change reached a record level at 21.2%, primarily driven by higher renewal rate changes.

Speaker Change: Yes.

Dan: And my follow-up, you know, Alan, you continue to mention and show gauges of free cash flow. You also mentioned that, you know, I still don't think it's appreciated. At least I don't understand why it's important.

Alan: So maybe you can try to further elaborate on whether the increase in cash flows, which I assume is correlated with your increased growth, is that actually aiding your ROE? Or why should we be focusing more on free cash flow, which has a lot of moving parts in it? I wouldn't say it's just growth.

Alan: It's a combination of what's profitable growth is what I would say about that. And as I've said, that's what gives us the flexibility to invest in all the important things we invest in, return capital to shareholders, and grow the investment portfolio. So without strong free cash flow, we couldn't do those three things, and those are key to our operating model. Your next question comes from the line of Brian Meredith from UBS. Please go ahead. Your line is open. Yeah, thanks.

Speaker: As we noted last quarter, we expect homeowners renewal premium changes to moderate to low double digits in 2024. We will continue to seek rate increases in response to elevated loss levels. But at the same time, our automatic increase in limit factors will return to more normal levels, reflecting the progress we've made on aligning insured values with replacement costs. Our continued efforts to manage new business flow and thoughtfully deploy capacity in the face of market dislocation drove the year-over-year decline in new business and policies enforced during the quarter. We anticipate this trend will continue as we take further actions to improve profitability and manage growth in property. In 2023, we made notable progress on improving the underlying fundamentals of our business and are moving towards our goal of delivering target returns. While the environment remains dynamic, we're confident we're on a path to generating leading returns in personal insurance and growing profitably over time. Now, I'll turn the call back over to Abbe. Thanks very much.

Brian Meredith: Alan, first question: if I look at the underlying, you know, combined ratio on your business insurance, it's, I believe, the best it's ever been since the St. Paul merger and probably prior to that, just on the numbers. I guess can you kind of talk a little bit about you know is that a sustainable kind of underlying combined ratio underlying margin? Is there more improvement potentially that can go there? At what point do you kind of say, okay, the margins we're seeing on the business are about as good as we should should have and maybe more focus on growth and more expenses and other things. How do you balance that? It's a really good question, and as you can imagine, I'm going to resist the temptation to try to share too much on an outlook for that number or what we might want to do strategically. Everything you mentioned is something we can think about, and I really would like to get away from talking about the future of margins, but we've answered that question before with the lost trend where it is and pricing where it is, so you can conclude that the answer hasn't really changed.

Speaker: We're happy to open up for your questions. At this time, if you'd like to ask a question, please press star followed by the number one on your telephone keypad. And we ask that you limit yourself to one question and one follow-up, and any additional questions, please free. Your first question comes from the line of David Motemaden from Evercore ISI. Please go ahead; your line is open.

Brian Meredith: So I think I'm just going to leave it with, we really like these margins. We really like the business we're putting on the books at the margin. We're putting it on the books, and we really like the opportunity out of, Brian, Greg, just one follow-up.

Brian Meredith: I would note you said you could grow the business. We are growing the business 16% on a full-year basis and have strong new business. So there's a number of items that we watch, and we compete in the marketplace, but growth is one of them through the lens of the adequacy of our products. Yeah, and on that note, as I've shared before, it's a fool's errand in this industry to try to grow and compete on price. That's a losing proposition.

Brian: We try to grow by making sure we've got the products, services, and experiences that our customers want to buy and our distribution partners want to sell. Makes sense. Thanks.

Speaker: So we're not going to put numbers on them. But price versus trend has, you know, been favorable throughout the last couple years and was favorable again, uh, favorable again this quarter, a little bit of a mix shift towards property, as Greg said, and modestly favorable non-cat weather impact, not not huge but worth the mention, but we're not going to put numbers on each of those Got it. Thanks. And then, You know, I think it's been I'm wondering if we could get a little bit more detail about exactly what you guys are seeing and reacting to and if you think we're closer to the end of some of these true ups. Sure, David, it's Dan again.

Brian: And then, Michael, I'm just curious, back on personal auto, when you look at your business majority right now being called rate adequate on a written basis, what are you kind of thinking from a lost cost in place perspective? And is that maybe why you're not stepping on growth maybe a little bit quicker right now because of uncertainty as far as claim severity? Sure, Brian. It's a great question.

Michael: I would say that, you know, we continue to see loss trends moderate in personal auto, but they remain at elevated levels. And so, you know, I guess I would describe our outlook as cautiously optimistic, and I would just say we're staying very disciplined, as I described earlier, with state-by-state execution. Making sure we have our arms around written rate adequacy and then adjusting our marketplace actions in auto accordingly. And as I said, we're very pleased with the increase in new business production that we saw this quarter, and policies in force stabilizing, and you know our plan is to continue down that path to achieve rate adequacy in additional states and for those non-rate actions as we go and see what that does to the top line as we move forward Your next question comes from the line of Mayor Shields from KBW. Please go ahead.

Speaker: So not big, big movements this quarter, more of the same, more of what we've sort of been talking about the last couple of quarters, which is, No surprises in terms of the themes of the things that we're seeing come through those numbers, but the magnitude had been a little greater than we had allowed for previously, and we're just looking at the data that comes in every quarter and trying to make sure we stay as current with it as we can, Your next question comes from the line of Craig Peters from Raymond James. Please go ahead; your line is open.

Brian: Your line is open. Great. Thank you. Good morning.

Speaker: Well, good morning, everyone. Well, first of all, you had a great fourth quarter. So congratulations. But I wanted to focus on slide seven, the return on equity slide. And you guys have all mapped out a really pretty strong outlook, and I guess I'm trying to reconcile what looks to be a pretty good outlook with the fact that your ROE is running below where I think it should be. I feel like the ROE should be running higher. Maybe, Alan, you can provide some perspectives, because I know the ROE is an important factor that you guys look at. Hey Greg, it's Dan.

Dan: I was hoping for an update on Medical Inflation, about it moving back towards normalized levels, and I'm wondering what travelers experience. Hey Mayor, it's Dan.

Dan: I'm so sure a couple comments on that. We do see some paid medical severity that's now higher than what we saw in the very benign pandemic levels. On the flip side of that, frequency has been pretty favorable. And as we've shared a number of times previously, our view in reserving and in pricing still assumes that there's going to be a return to that higher, longer-term trend. But when we factor all that in, in the most recent data that we're looking at, loss costs are still coming in better than we expected, and that's why you get another quarter of favorable PYD. Okay, fantastic. And then switching gears, when we look at the, I guess, the premium data in business insurance, it looks like exposure and other components that are not rates accelerated in select but decelerated in middle market and property. And I was hoping you could talk us through that. Hey, Mayor, this is Greg.

Speaker: I'll start. So look, 11 and a half for ROE for a full year, you know, pretty good number. Another year, double digits, well above our cost of capital and the risk-free rate, but not quite where we'd like it to be. And I think the biggest contributor, and you called out slide seven, is that yellow bar from underwriting. The contribution from underwriting really was impacted, as we talked about, especially in the second quarter and the third quarter, by a very elevated level of catastrophe losses for the year. That's not what we expect to be the new normal run rate. We're certainly factoring more recent CAD experience into our view of CAD expectations going forward, but we wouldn't expect it to be elevated at that level. Craig, it's Alan.

Greg: You have a couple of dynamics going on between those two businesses. In select, we have higher exposure in workers' comp and CMP. And for workers' comp, relative to the middle market, I think it's just a different cohort of customers. So in a wage increase environment, on a smaller customer base, you get bigger deltas. And so that's what's driving the difference in workers' comp. CMP, similar to what Michael said, is our business owner product with the heavy property coverage that comes with it. And so we do think of it as an automatic inflationary level underneath the CMP product, so you get a little more exposure growth there also. So those are the drivers underneath the difference between select and middle.

Speaker: The other thing I would add to that is, um, I wouldn't tell you what to do, but one of the things I do every quarter is try to take a stab at normalizing these things. And so, eliminate prior year development and put in, you know, for cats, whatever you think is a normalized cat number, and then you get a different perspective. Right. Okay. And then, Dan, I just wanted to go back to your comments about share repurchase and uses of capital. I know you talked about the expectation for what's gonna happen in the first quarter, and you talked about capital. Are there any other things you'd like to call out in terms of capital allocation outside of dividends and share repurchase? Let me start with that, then I'll see what observations Dan has on that.

Greg: Your next question comes from the line of Alex Scott from Goldman Sachs. Please go ahead. Your line is open. Hi, good morning.

Alan: The first one I had was on business insurance, and I was just interested in, you know, hearing a little bit about the competitive dynamics in the market. I mean, You know, I look at the returns, how good the underlying loss ratios are and so forth, and the ROEs that that suggests, and yet, you know, price acceleration, and, you know, in some areas of your business, retention is actually hitting, you know, pretty darn high levels. So it all suggests a lot of discipline in the marketplace, and I just wanted to get your perspective on what it is in the environment that's causing everyone to remain so disciplined despite, you know, good underwriting and the additional contribution from non-investment agents. Alex, good morning. It's Alan.

Speaker: So I think we've said for a very long time... Our first objective for every dollar of capital we generate is to invest it back in the business when we think we can do that and achieve our objectives and contribute to shareholder value. But we think we've got a long track record that demonstrates our discipline with shareholder capital. And so we're going to invest the money back in the business when we can, and that could be keeping capital on the balance sheet to support profitable growth, it could be buying things like Corvus, it could be investing in technology or people doing the things that we think we can do that are creative and aligned with our objectives. And when we can't do that, we're going to give the dollars back.

Alan: Let me start, and then I'll turn it over to Greg to add anything I missed. But I would say overall that you're correct. The pricing environment remains very strong and broad-based by any historical standard or on any measure.

Alan: And as you said, even with another quarter of very strong pricing, retention remains at historical highs. And I would say, in broad strokes, and there's really no change here from recent quarters, and in broad strokes, I think there are two trends impacting pricing. On the one hand, there's just a lot of uncertainty out there in the world, and there's some headwinds.

Speaker: So it's a long-winded way of saying no change at all in our capital management philosophy. Your next question comes from the line of Elyse Greenspan from Wells Fargo. Please go ahead, your line is open. Hi, thanks. Good morning. My first question is about the Fidelis relationship.

Alan: So, you know, the reinsurance market continues to be strong. You've got inflation of various varieties. You've got a tight labor market. I think weather is probably on everybody's minds these days. Think about geopolitics these days.

Alan: The world has never been more active than it is now, and it will go on and on. And so I can't speak for anybody else, but we're reacting to those things in our pricing. At the same time, returns are in a much better place than they were a few years ago because we've done a pretty good job with pricing terms, conditions, and all the rest. And so the pricing you see from us, and you refer to it as a competitive marketplace, I would say that it is a marketplace that is pretty disciplined. I suspect that he's reacting to many of the things that we're reacting to. Greg, anything to add? No, I think that's spot on. Got it. Thanks. The second one I have for you is on personal auto.

Speaker: Dan, I think you called out and said you expected a modest favorable impact in 2024, give us. But I don't have a sense of how favorable that deal was. 23 margins within BI and how we should think about it. You guys are expected to be here at 11 o'clock, so I'm going to go ahead and close out the call. Thank you. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Sure, Elyse and Stan.

Michael: Did you just give us maybe a high-level idea of what's going on with, you know, severity in the claims? And, you know, we can look a lot at used cars and that kind of thing, but some of the more nuanced elements around car repair and that kind of thing, any color you can provide on some of those? Yes, sure, Alex. It's Michael.

Speaker: So, I'm not really going to put a very fine number on it. Keep in mind now that, you know, Fidelis is now a standalone public company, they haven't reported results yet; I don't think it would be appropriate for us to give an outlook on, you know, what we feel about their profitability. But it was a modest help in 2023, and it will be a modest help again in 2024; there'll be a little bigger base of earned premium as we'll have you know two years worth of written impact in 2024, so worth calling out as a modest benefit but not a big number, and I really don't think it would be appropriate for us to try to put a finer number on it than that.

Michael: I'd maybe just make a couple more comments relative to the comment I made earlier about moderating trends. You're right to point out the sort of vehicle severity and used car prices, and we certainly see moderation there in the level of increase year on year. And, in fact, when you look at the dynamics underneath the prior period adjustments that I described in the script, those really are driven by the physical damage coverages.

Michael: Late last year, we were adding to our estimates for vehicle losses because physical damage coverages were rising more than we thought they were going to. And this year, we actually took down some of our estimates for vehicle severity on prior periods because they've been a bit more favorable than we anticipated, broadly speaking severity in auto is running you know mid to high single digits think closer to mid in the vehicle severity think closer to high in bodily injury um and and so you know that's sort of where trends are running today we we don't have a dramatic improvement in those trends, Sort of factored into, you know, our comments about when we're going to get to written adequacy state by state or those types of things, but that's a little bit more detail on sort of where things are running today.

Speaker: Okay, thank you. Within personal auto, what percent of your state do you still have not? Elyse, I don't think we'll get more specific than the majority, but you can think of the non-rate restrictions as tracking very closely with where we see written adequacy state-by-state, so the majority of the premium is in states where we have relaxed some of those or tempered some of those non-rate actions because the majority of the premium is in states where we've got target returns on a written basis. And again Your next question comes from the line of Ryan Tunis from Autonomous Research.

Michael: The other thing that we've mentioned a couple of times throughout the year is that we are also monitoring the mix of losses between vehicle losses and losses that have third-party property damage and bodily injury. We've seen a bit of a mixed shift towards more bodily injury claims, which is one of the things that has us keeping our severity trend estimates at that sort of elevated level. Your next question comes from Piper Sandler. Please go ahead. Your line is open.

Speaker: Please go ahead; your line is open. Hey, thanks. Good morning.

Speaker: I guess my question is just looking at the rate slides, we saw an acceleration of pricing in the middle market. Select, obviously, a decelerated headline, so I'm guessing that means there's a deceleration in national property. Could you just, I guess, talk a little bit about the relative pricing dynamics in those three markets? Good morning, Ryan. It's Greg.

Speaker: Yeah, you can see if you look underneath the price and you can see that rates are up in both the middle market and select business. So the residual that makes up the total BI, you're correct. The preponderance of that is national property.

Paul: Well, I want to follow directly on that, maybe similar thoughts about the home part of the business. Sure, just in terms of outlook for trends, Paul? Yes, please.

Paul Smith: Yeah, so, in property, again, the big driver of the improvement this quarter really was catastrophes and non-catastrophic weather. The non-catastrophic weather, and I guess the non-catastrophic loss dynamic that I would elaborate on is... A lot of that non-CAT weather favorability and some of the non-catastrophic loss favorability that we've commented on throughout 2023 really has been frequency driven. We do still see, you know, pretty healthy severity trends in the property space offsetting some of that favorable frequency. Now, again, we've had, you know, favorable results in the quarter, so the net is a good guy. But labor and some large loss pressure along with that favorable frequency is what's happening kind of underneath the loss levels in property.

Speaker: And so a couple of dynamics this quarter in national property, one is when that plays out to the total buck. We did have less weight on a net written premium national property this quarter, quarter four versus quarter three and quarter two. And we did have a tech down overall in rates national property also, just given where the returns are in that business and the business is performing extremely well. But make no mistake, Ryan, that the overall rate change and renewal price change in the property line continues to be very strong. Got it, thanks.

Speaker: And then, just to follow up, we're not used to seeing this type of margin expansion in business insurance. I would think that it's largely attributable to short tail lines, but I guess I was also curious, obviously RAID's been running in an excessive loss training casualty for a while, but we haven't really talked about changing law specs or anything like that, but was there a change on the casualty side to, I guess, lost picks in the fourth quarter, any true-up to the current year, something like that we Ryan, it's Dan.

Paul Smith: I'm just curious, for some time, I think we've seen a little bit of a divergence between commercial auto and personal lines auto. Has that continued to be the case, or are we seeing pretty similar claim trends across anything that drives? I think broadly the claim trends are similar. I mean, we see similar threads. It's obviously, I mean, the exposures are different, the size of the vehicles is different.

Paul Smith: Um, you know, Mike, what else would you add? The limits profile is different, right? The limits profile is different. So your mix of vehicle versus bodily injury is different between, you know, business insurance and personal insurance, right, Greg? Yeah, I mean, one of the benefits, Paul, of having, you know, two large cohorts of the auto business, commercial, and personal. Our product managers and actuaries spend a lot of time together and compare the trends. And for commercial, we'll have passenger, private passenger-like vehicles, think vans of that sort. And then we'll have the heavies, which aren't as relevant.

Speaker: If we have an unusual item in the quarter, that sort of non-run rate, we'll usually try and call it out for you, including some kind of year-to-date catch-up. Michael referred to it in PI Auto, but you didn't hear Greg talk about anything significant in BI because there wasn't really anything significant in BI. So we did what we always do, right, go through all the lines. There are puts and takes across every line, looking at frequency and severity, but, you know, on the whole, no big change in our view of blended trends. Your next question comes from the line of Mike Zaremski from BMO. Please go ahead; your line is open. Hey, thanks. Good morning. Happy Friday!

Greg: But we spent a lot of time on the two cohorts that are private passenger-like, and the trends are very similar, both on a frequency and severity basis, between the two portfolios. We have time for one more question, and that question comes from the line of Andrew Kligerman from TD Cowan. Please go ahead. Your line is open. Okay, great. I made the queue.

Speaker: First question is maybe looking for a little bit more color on some of the pleasantly surprising commentary about the general liability and umbrella returns still being very good despite what someone else had pointed out was five of the last seven quarters adding to reserve. Just curious, can you elaborate on that? Maybe you're taking into account, you don't typically hear that, maybe it's the investment income that's helping or it's sold as part of a package, and so the rest of the products are running at better returns. Or anything you could add to that? Hey Mike, it's Dan.

Greg: Most of my questions are answered, but in Bond and Specialty, the results looked exceptional. The results looked exceptional. But in the context of renewal premium changes, I'm very curious as to how pricing fared with regard to D&O and cyber in the quarter and what you're thinking in terms of those two lines going into 2024. Andrew, this is Jeff Klink.

Jeff Klink: So relative to DNO and cyber, public DNO pricing continues to be, I'd say, more pressured relative to the other liability lines. I would remind you that for public D&O and our management liability book, we're relatively underweight there. That's not been a major area of focus for us. On the cyber side, we continue to see modest negative pricing there, I think given some broader market perception on the returns in the line. Again, we feel really good about our execution there. We closely monitor our return profiles and are comfortable with our execution, both for those lines of business and management liability.

Speaker: So we're thinking about returns, and that is our all-in view of returns, but we are specifically looking at those lines when we make that comment, although we do, to your point, also pay a lot of attention to returns on an account basis. But those comments were specific to the liability and umbrella lines. And this really goes back to the comment that Alan made a couple quarters ago, which is, The amounts that were... you'll like the rate at. So it's in that context that we say we continue to like the returns on those lines. Okay, that's helpful.

Speaker: And my follow-up question, you know, Alan, you continue to mention and show gauges of free cash flow. You also mentioned that, you know, I still don't think it's appreciated, at least I don't appreciate it, why it's important. So maybe you can try to further elaborate on, is the increase in cash flows, which I assume is correlated with your increased growth, is that actually aiding your ROE? Or why should we be focusing more on free cash flow, which has a lot of moving parts? I wouldn't say it's just growth; it's a combination of both profitable growth is what I would say about that. And as I've said, that gives us the flexibility to invest in all the important things we invest in, return capital to shareholders, and grow the investment portfolio. So without strong free cash flow, we couldn't do those three things, and those are key to our operating model. Your next question comes from the line of Brian Meredith from UBS. Please go ahead.

Dan: So I'll start and disappoint you on the word comp severity. So we're not going to put a number on it. But again, it's been benign. We've seen some of those numbers move up, but your starting point matters. So what you assumed medical severity was going to be inside of your overall loss pick really matters in terms of whether a move up is problematic for you or not.

Andrew Kligerman: And again, we saw more favorable reserve development this quarter. And then, in terms of pricing, and I'll turn it to Greg, you know, I think the returns on comp have continued to be good. So pure rate has continued to be slightly negative for us.

Andrew Kligerman: We are getting strong exposure increases, as Greg referenced in the select comments a few minutes ago. That's the poster child for where a lot of that exposure behaves like rate because it's the same worker just earning a higher wage, and we're getting paid a higher price for it. You know, the rating agencies, and the bureaus are looking at their data on a lag basis, and until returns come under some pressure in workers' comp, we wouldn't be surprised to see this environment stay pretty steady.

Speaker: Your line is open. Yeah, thanks. Alan, first question: If I look at the underlying, you know, combined ratio on your business insurance, it's, I believe, the best it's ever been since the St. Paul merger and probably prior to that. Just on the number, can you kind of talk a little bit about, you know, is that a sustainable kind of underlying combined ratio, underlying margin, is there more improvement potentially that can go there? You know, at what point do you kind of say, okay, you know, the margins we're seeing in the business are about as good as we should have, and maybe more focus on growth and more expenses and other... How do you balance that? It's a really good question.

Greg: I'm open to adding these. Thank you. I will now turn the conference over to Ms. Abbe Goldstein for closing remarks. Thank you, everyone, for joining us today. We appreciate your time. And, as always, if there's any follow-up, please feel free to reach out. Have a great day. This concludes today's conference call. Thank you for your participation, and you may now disconnect. transcript Emily Beynon transcript Emily Beynon

Speaker: And you can imagine, I'm going to resist the temptation to try to share too much on an outlook for that number or what we might want to do strategically. Everything you mentioned is, you know, something we can think about. And, and I really would like to get away from talking about the future of margins. But, you know, we've answered that question before with the lost trend where it is and, and pricing where it is. So you can conclude that that answer hasn't really changed.

Speaker: So I think I'm just going to leave it with, we really like these margins. We really like the business we're putting on the books at the margin. We're putting it on the books, and we really like the opportunity out of it. Brian, Greg, just one follow-up.

Speaker: I would note you said you could grow the business. We are growing the business 16% on a full-year basis and have strong new business. So there's a number of items that we watch, and we compete in the marketplace, but growth is one of them, but through the lens of the adequacy of our products. And on that note, as I've shared before, it's a fool's errand in this industry to try to grow and compete on price. That's a losing proposition.

Speaker: We try to grow by making sure we've got the products, services, and experiences that our customers want to buy and our distribution partners want to sell. That makes sense. Thanks. And then Michael, I'm just curious, back on personal auto.

Speaker: When you look at your business and the majority right now being called rate adequate on a written basis, what are you kind of thinking from a loss cost perspective? And is that maybe why you're not stepping on growth, maybe a little bit quicker right now because of uncertainty as far as claim severity? Sure, Brian, it's a great question.

Speaker: I would say that, you know, we continue to see loss trends moderate in personal auto, but they remain at elevated levels. And so, you know, I guess I would describe our outlook as cautiously optimistic. And I would just say we're staying very disciplined, as I described earlier, with state by state execution, making sure we have our arms around written rate adequacy, and then adjusting our marketplace actions in auto accordingly. And, as I said, we're very pleased with the increase in new business production that we saw this quarter, and PolitiFact 4 Stabilizing, and our plan is to continue down that path, achieve rate adequ Your next question comes from the line of Mayor Shields from KBW. Please go ahead; your line is open. Great, thank you, good morning. I was hoping for an update on... Medical inflation We've heard some about it moving back towards normalized levels, and I'm wondering what travelers experience. Hey, Mayor, it's Dan.

Speaker: So sure, a couple of comments on that. We do see some paid medical severity that's now higher than what we saw in the very benign pandemic levels. On the flip side of that, frequency has been pretty favorable. And as we've shared a number of times previously, our view in reserving and in pricing still assumes that there's going to be a return to that higher, longer-term, longer-term trend. But when we factor all that in, in the most recent data that we're looking at, loss costs are still coming in better than we expected. And that's why you get another quarter of favorable PYD.

Speaker: Okay, fantastic. And then switching gears, when we look at the, I guess, the premium data in business insurance, it looks like exposure and other components that are not rate accelerated and select but decelerated in middle market and property. And I was hoping you could talk through that. Mayor, this is Greg.

Speaker: You have a couple of dynamics going on between those two businesses. In select, we have higher exposure in workers' comp and CMP. And for workers' comp relative to the middle market, I think it's just a different cohort of customers. So in a wage increase environment, on a smaller customer base, you get bigger deltas. And so that's what's driving the difference in workers' comp. CMP, similar to what Michael said, is our business owner product with the heavy property coverage that comes with it.

Speaker: And so we do have, think of it as an automatic inflationary level underneath the CMP product. So you get a little more exposure growth there also. So those are the drivers underneath the difference between select and middle.

Speaker: Your next question comes from the line of Alex Scott from Goldman Sachs. Please go ahead, your line is open. Hi, good morning.

Speaker: The first one I had was on business insurance, and I was just interested in, you know, hearing a little bit about the competitive dynamics in the market. I mean, You know, I look at the returns, how good the underlying loss ratios are and so forth and the ROEs that that suggests, and yet, you know, price acceleration, and, you know, in some areas of your business, retention is actually hitting, you know, pretty darn high levels. So, it all suggests a lot of discipline in the marketplace, and I just wanted to get your perspective on what it is in the environment that's Alex, good morning. It's Alan.

Speaker: Let me start and then I'll turn over to Greg to add anything I missed. But I would say overall that you're correct. The pricing environment remains very strong and broad-based by any historical standard or on any measure.

Speaker: And as you said, even with another quarter, very strong pricing retention remains at historical highs. And I would say, in broad strokes, and there's really no change here from recent quarters, in broad strokes, I think there are two trends impacting pricing. On the one hand, there's just a lot of uncertainty out there in the world, and there are some headwinds. But, you know, the reinsurance market continues to be strong. You've got inflation of various varieties. You've got a tight labor market. I think weather is probably on everybody's minds these days. But think about geopolitics.

Speaker: The world has never been more active than it is now, and it will go on and on. And so, I can't speak for anybody else, but we're reacting to those things in our pricing. At the same time, we've had, you know, returns are in a much better place than they were a few years ago because we've done a pretty good job with pricing terms, conditions, and all the rest. And so the prices you see from us, and you refer to them as the competitive marketplace, I would say that it is a marketplace that is pretty disciplined. I suspect that he's reacting to many of the things that we're reacting to. Greg, anything to add? No, I think that's spot on. Got it. Thanks. The second one I have for you is on personal auto. Please give us maybe a high-level idea of what's going on with, you know, severity in the claims and, you know, we can look a lot at used cars and that kind of thing, but some of the more nuanced elements around car repair and that kind of thing. Any color you can provide on some of those?

Speaker: Yes, sure, Alex. It's Michael. I'd maybe just give a couple more comments relative to the comment I made earlier about moderating trends. You're right to point out the sort of vehicle severity and used car prices. And we certainly see moderation there in the level of increase year on year. And, in fact, when you look at the dynamics underneath the prior period adjustments that I described in the script, those really are driven by physical damage coverage.

Speaker: Late last year, we were adding to our estimates for vehicle losses because physical damage coverage was rising more than we thought they were going to. And this year, we actually took down some of our estimates for vehicle severity for prior periods because they've been a bit more favorable than we anticipated. Broadly speaking, severity in auto crashes is running, you know, mid to high single digits; think closer to mid in vehicle severity, think closer to high in bodily injury.

Speaker: And so, you know, that's sort of where trends are running today. We don't have a dramatic improvement in those trends factored into, you know, our comments about when we're going to get to written adequacy state by state or those types of things. But that's a little bit more detail on sort of where things are running today. The other thing that we've mentioned a couple of times throughout the year is that we are also monitoring the mix of losses between vehicle losses and losses that have third-party property damage and bodily injury. We've seen a bit of a mixed shift towards more bodily injury claims, which is one of the things that has us keeping our severity trend estimates at that sort of elevated level. Your next question comes from Piper Sandler. Please go ahead; your line is open.

Speaker: Well, I wanted to follow directly on that. Maybe, you know, similar thoughts about the home part of the business? Sure, just in terms of Outlook for Transpa. Yes, please.

Speaker: Yeah, so, you know, in property, again, the big driver of the improvement this quarter really was catastrophes and non-catastrophic weather. The non-CAT weather, and I guess the non-catastrophic loss dynamic that I would elaborate on is... A lot of that non-CAT weather favorability and some of the non-catastrophic loss favorability that we've commented on throughout 2023 really has been frequency driven. We do still see pretty healthy severity trends in the property space offsetting some of that favorable frequency. Now, again, we've had favorable results in the quarter, so the net is a good guy. But labor and some large loss pressure along with that favorable frequency is what's happening kind of underneath the loss levels in property. I'm just curious.

Speaker: For some time, I think we've seen a little bit of a divergence between commercial auto and personal lines auto. Has that continued to be the case? Or are we seeing pretty similar claim trends? across sort of anything that drives.

Speaker: I think broadly the claim trends are similar, I mean we see similar threads. It's obviously, I mean, the exposures are different, the size of the vehicles are different, um, you know, Mike, what else would you add? Limits profile is different, right? So your mix of vehicle versus bodily injury is different between, you know, business insurance and personal insurance, right, Greg? Yeah. I mean, one of the benefits, Paul, of having, you know, two large cohorts of the auto business, commercial, and personal, our product managers and actuaries spend a lot of time together and compare the trends. And for commercial, we'll have passenger, private passenger-like vehicles, think vans, of that sort.

Speaker: And then we'll have heavies, which aren't as relevant, but we spend a lot of time on the two cohorts that are private passenger-like, and the trends are very similar, both on a frequency and severity basis between the two portfolios. And we have time for one more question. And that question comes from the line of Andrew Kligerman from TD Cowen. Please go ahead. Your line is open. Okay, great, I made the queue.

Speaker: Question, most of my questions are answered, but, in Bond and Specialty, the results looked exceptional. But in the context of renewal premium changes, I'm very curious as to how pricing fared with regard to DNO and cyber in the quarter and what you're thinking in terms of those two lines going into 2024. Andrew, this is Jeff Klink.

Speaker: So, relative to DNO and cyber, public DNO pricing continues to be, I'd say, more pressured relative to the other liability lines. I would remind you that for public D&O in our management liability book, we're relatively underweight there. That's not been a major area of focus for us.

Speaker: On the cyber side, we continue to see some modest negative pricing there, I think, given some broader market perception on the returns in the line. Again, we feel really good about our execution there. We closely monitor our return profiles and are comfortable with our execution, both for those lines of business and management liability.

Speaker: I was wondering if you could put some numbers around that paid for medical severity higher than the benign numbers you were seeing during the pandemic. I think that was in response to Mayor's question and then the same question about the pricing of workers' comp. What are you thinking about going into 2024, as you proceed? Hey Andrew, it's Dan.

Speaker: So I'll start and disappoint you on the word comp severity, so we're not going to put a number on it, but again... It's been benign. We've seen some of those numbers move up, but your starting point matters. So, what you assumed medical severity was going to be inside of your overall loss pick really matters in terms of whether a move up is problematic for you or not, and again, we saw more favorable reserve development.

Speaker: And then in terms of pricing, and I'll turn it to Greg, you know, I think the returns in comp have continued to be good, so pure rate has continued to be slightly negative for us. We are getting strong exposure increases, Greg referenced in the select comments a few minutes ago. That's the poster child for where a lot of that exposure behaves like rate, because it's the same worker just earning a higher wage, and we're getting paid a higher price for it. You know, the rating agencies, and the bureaus are looking at their data on a lag basis, and until returns come under some pressure and work comp, we wouldn't be surprised to see this environment stay pretty steady.

Speaker: Thank you. Thank you. Thank you. I will now turn the conference over to Ms. Abbe Goldstein for her closing remarks.

Abbe F. Goldstein: Thank you everyone for joining us today. We appreciate your time. And, as always, if there's any follow-up, please feel free to reach out. Have a great day. This concludes today's conference call.

Speaker: Thank you for your participation, and you may now disconnect. Thank you for joining us. Thank you for joining us.

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