Q1 2025 Travelers Companies Inc Earnings Call

Yeah.

Operator: Good morning, ladies and gentlemen. Welcome to the first 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.

Speaker Change: Good morning, ladies and gentlemen, and welcome to the first quarter results teleconference for travelers. We ask that you hold all questions until the completion of formal remarks at which time, you'll be given instructions for the question and answer session.

Operator: As a reminder, this conference is being recorded on April 16, 2025.

As a reminder, this conference is being recorded on April 16 2025.

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

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

Speaker Change: Thank you good morning, and welcome to travelers discussion of our first quarter 'twenty 'twenty fiber adults.

Abbe Goldstein: Good morning, and welcome to Travelers' discussion of our first quarter 2025 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.

Speaker Change: Our press release financial supplement and webcast presentation earlier. This morning, all of these materials can be found on our website and travelers dot com under the investors section.

Speaker Change: Speaking today will be Alan Schnitzer, Chairman and CEO, Dan Frey, Chief Financial Officer, and our three segment President Greg Kozloski business insurance claim combined 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.

Speaker Change: Some patients as they go through prepared remarks, and then we will take your questions.

Abbe 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 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. We do not undertake any obligation to update forward-looking statements.

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 it is not a guarantee of future performance.

Speaker Change: Actual results may differ 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 S E C.

Speaker Change: Do not undertake any obligation to update forward looking statements.

Abbe 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 section on our website.

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 investors section on our website and now I'd like to turn the call over to Alan Schnitzer.

Alan Schnitzer: And now I'd like to turn the call over to Alan Schnitzer. Thank you, Abbe. Good morning, everyone, and thank you for joining us today. We are pleased to report a substantial profit for the quarter despite the devastating January California wildfires. We delivered core income of $443 million, or $1.91 per diluted share as outstanding underlying results, strong net favorable prior year reserve development, and higher investment income more than offset catastrophe losses. Over the last four quarters, thanks to strong underlying fundamentals, we generated a corporate return on equity of 14.5%. That demonstrates our ability to deliver healthy returns over time, notwithstanding elevated industry-wide catastrophe losses.

Alan Schnitzer: Thank you Abby good morning, everyone and thank you for joining us today.

Alan Schnitzer: We are pleased to report a substantial profit for the quarter. Despite the devastating January California wildfires.

Alan Schnitzer: We delivered core income of $443 million $1.91 per diluted share.

Alan Schnitzer: Outstanding underlying results strong net favorable prior year reserve development and higher investment income more than offset catastrophe losses.

Alan Schnitzer: Over the last four quarters, thanks to strong underlying fundamentals, we generated a corporate return on equity of 14, 5% that.

Alan Schnitzer: That demonstrates our ability to deliver healthy returns over time.

Alan Schnitzer: Withstanding elevated industry wide catastrophe losses.

Alan Schnitzer: Underwriting income of $1.6 billion pre-tax was up more than 30% over the prior year quarter. That was driven by strong net earned premiums of $10.7 billion. and a consolidated underlying combined ratio that improved 2.9 points to an excellent 84.8%. All three segments contributed to these underlying results with strong and higher net earned premiums and excellent underlying profitability. The underlying combined ratio in business insurance improved to an excellent 88.2%. The underlying combined ratio in our bond and specialty business was a very strong 87.3%, and the underlying combined ratio in personal insurance improved by more than 6 points to a terrific 79.9%.

Alan Schnitzer: Underlying underwriting income of $1 6 billion pretax was up more than 30% over the prior year quarter.

Alan Schnitzer: That was driven by strong net earned premiums of $10 $7 billion.

Alan Schnitzer: On a consolidated underlying combined ratio that improved two nine points to an excellent 84, 8%.

Alan Schnitzer: All three segments contributed to these underlying results were strong and higher net earned premiums and excellent underlying profitability.

Alan Schnitzer: The underlying combined ratio in business insurance improved to an excellent 88, 2%.

Alan Schnitzer: The underlying combined ratio on a bond and specialty business was a very strong 87, 3%.

Alan Schnitzer: The underlying combined ratio in personal insurance improved by more than six points to a terrific 79, 9%.

Alan Schnitzer: Yeah.

Alan Schnitzer: Consistent with the announcement we made in February, our catastrophe losses from the California wildfires were $1.7 billion pre-tax. I'm grateful to our claim team, their continued excellent work taking care of our customers and supporting the community's recovery. We've already paid out nearly three quarters of a billion dollars, including substantial advanced payments to our customers who suffered total loss. Even after that, operating cash flows for the quarter were a very strong $1.4 billion. Turning to investments, our high quality investment portfolio continue to perform well. Aftertax net investment income of $763 million for the quarter was driven by strong and reliable returns from our growing fixed income portfolio and positive returns from our thoughtfully managed alternative investment portfolio.

Alan Schnitzer: Consistent with the announcement, we made in February our catastrophe losses from the California wildfires for $1 $7 billion pre tax.

Alan Schnitzer: I'm grateful towards clean team their continued excellent work, taking care of our customers and supporting the communities recovery.

Alan Schnitzer: We've already paid out nearly three quarters of $1 billion, including substantial advanced payments to our customers who suffered total losses.

Alan Schnitzer: Even after that operating cash flows for the quarter were very strong $1 4 billion.

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

Alan Schnitzer: After tax net investment income of $763 million for the quarter was driven by strong and reliable returns from our growing fixed income portfolio.

Alan Schnitzer: Positive returns from our thoughtfully managed alternative investment portfolio.

Alan Schnitzer: Our underwriting and investment results, together with our strong balance sheet, enabled us to return nearly $600 million of excess capital to shareholders. including $358 million of share repurchase. At the same time, we continue to make important investments in our business. as we completed another quarter of successful execution on a number of important strategic initiatives. Even after this deployment of capital, adjusted book value per share increased by 11% as compared to a year ago. In recognition of our strong financial position and confidence in the outlook for our business Pleased to share that our Board of Directors declared a 5% increase in our quarterly cash dividend to $1.10 per share, marking 21 consecutive years of dividend increase.

Alan Schnitzer: Our underwriting and investment income our underwriting and investment results together with our strong balance sheet enabled us to return nearly $600 million of excess capital to shareholders, including $358 million of share repurchases.

Alan Schnitzer: At the same time, we continued to make important investments in our business.

Alan Schnitzer: As we completed another quarter of successful execution on a number of important strategic initiatives.

Alan Schnitzer: Even after this deployment of capital adjusted book value per share increased by 11% as compared to a year ago.

Alan Schnitzer: In recognition of our strong financial position and confidence in the outlook for our business.

Pleased to share that our board of directors declared a 5% increase in our quarterly cash dividend.

Alan Schnitzer: $1 10 per share, marking 21 consecutive years of dividend increases.

Alan Schnitzer: with a compound annual growth rate of 8% over that period.

Alan Schnitzer: Compound annual growth rate of 8% over that period.

Alan Schnitzer: Turning to production, excellent execution by our field organizations over top line growth. with all three of our segments contributing. During the quarter, we grew net written premiums to $10.5 billion. In business insurance, we grew net written premiums by 2% to a record $5.7 billion. After the seeded premium impact of the enhanced casualty reinsurance program that we announced last quarter. As we previewed with you, that reduced the segment's net written premium growth in the quarter by four percentage points. as a full year's worth of seeded premium was booked in the first quarter. We know premium change in this segment was double digits or high single digits in every line other than workers' comp.

Alan Schnitzer: Turning to production excellent execution by our field organization drove our top line growth.

Alan Schnitzer: With all three of our segments contributing.

Alan Schnitzer: During the quarter, we grew net written premiums to $10 $5 billion.

Alan Schnitzer: In business insurance, we grew net written premiums by 2% to a record $5 $7 billion.

Alan Schnitzer: After the ceded premium impact of the enhanced casualty reinsurance program that we announced last quarter.

Alan Schnitzer: As we previewed with you that reduced the segment's net written premium growth in the quarter by four percentage points.

Alan Schnitzer: A full year's worth of ceded premium was booked in the first quarter.

Alan Schnitzer: No premium change in this segment was double digits or high single digits and every line other than workers' comp.

Alan Schnitzer: Even with strong pricing pretty much across the board, retention improved nearly two points from the fourth quarter to 86% and was higher in every line. That dynamic of strong pricing and retention speaks to continued discipline in the marketplace. The business for this segment was a record $735 million, a reflection of the fact that our customers and distribution partners value the products and services that we offer and the experiences that we provide. In bond and specialty insurance, we grew net written premiums by 6% to a billion dollars. with excellent retention of 89% and our high quality management liability.

Alan Schnitzer: Even with strong pricing pretty much across the board retention improved nearly two points from the fourth quarter to 86% and was higher in every line.

Alan Schnitzer: That dynamic of strong pricing and retention speaks to continued discipline in the marketplace.

Alan Schnitzer: New business for this segment was a record $735 million a reflection of the fact that our customers and distribution partners value the products and services that we offer and the experiences that we provide.

Alan Schnitzer: In bond and specialty insurance, we grew net written premiums by 6% to $1 billion with excellent retention of 89% and our high quality management liability business.

Alan Schnitzer: and our industry-leading surety business, where you can get written premiums by 13%. Given the attractive returns, we are very pleased with the strong production results in both of our commercial businesses. In personal insurance, net written premiums grew 5% to $3.8 billion. driven by strong renewal premium change, particularly in our homeowners business.

Alan Schnitzer: And our industry, leading surety business, we grew net written premiums by 13%.

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

Alan Schnitzer: In personal insurance net written premiums grew 5% to $3 $8 billion driven by strong renewal premium change, particularly in our homeowners business.

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

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

Alan Schnitzer: Before I turn the call over to Dan, I'd like to comment on how Travelers is positioned for what feels like an uncertain macroeconomic road ahead. In short, we are entering 2025 in a position of strength. We are a market leader in a diversified portfolio of businesses. each with a strong value proposition to offer to our customers and distribution partners. Our underlying margins are in great shape, and in each segment, we have attractive loss ratios and expense ratios that reflect years of strategic focus on optimizing operating leverage. Our cash flow is strong and resilient. Our investment portfolio was thoughtfully managed to deliver highly reliable returns, including through periods of market stress.

Speaker Change: Before I turn the call over to Dan I'd like to comment on how travelers as position for what feels like an uncertain macroeconomic road ahead.

Speaker Change: In short, we are entering 2025 and a position of strength.

Speaker Change: We are a market leader in a diversified portfolio of businesses.

Each with a strong value proposition to offer to our customers and distribution partners.

Speaker Change: Our underlying margins are in great shape and in each segment, we have attractive loss ratios and expense ratios that reflect years of strategic focus on optimizing operating leverage.

Speaker Change: Our cash flow is strong and resilient.

Speaker Change: Our investment portfolio was thoughtfully managed to deliver highly reliable returns, including through periods of market stress.

Alan Schnitzer: And we have a fortress balance sheet featuring a strong capital base and almost no debt coming due in the next eight years. On top of all that, we have the resources and financial strength to continue making strategic investments in our business without interruption. All of which is to say... Just as we have successfully served our customers and distribution partners and created shareholder value over time. Including through periods of economic disruption, we are very well positioned to continue doing so now.

Speaker Change: And we have a fortress balance sheet, featuring a strong capital base and almost no debt coming due in the next eight years.

Speaker Change: On top of all that we have the resources and financial strength to continue making strategic investments in our business without interruption.

Speaker Change: All of which is to say.

Speaker Change: Just as we have successfully served our customers and distribution partners and created shareholder value over time <unk>.

Speaker Change: Including through periods of economic disruption, we are very well positioned to continue doing so now.

Dan Frey: And with that, I'm pleased to turn the call over to Dan. Thank you, Alan. Travelers delivered $443 million of core income in the first quarter, despite significant losses from the California wildfire. A higher level of cat losses was partially offset by a significant increase in underlying underwriting income, higher level of net favorable prior year reserve development, and higher net investment income. And as you heard from Alan, trailing 12-month core return on equity was 14.5%. Our pre-tax underlying underwriting gain of $1.6 billion was up 32% from the prior year quarter, reflecting higher levels of earned premium and an underlying combined ratio that improved by 2.9 points to 84.8%.

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

Dan Frey: Thank you Alan.

Dan Frey: Travelers delivered $443 million of core income in the first quarter, despite significant losses from the California wildfires.

Dan Frey: A higher level of cat losses was partially offset by a significant increase in underlying underwriting income higher level of net favorable prior year reserve development and higher net investment income.

And as you heard from Alan.

Trailing 12 month core return on equity was 14, 5%.

Dan Frey: Our pretax underlying underwriting gain of $1 $6 billion was up 32% from the prior year quarter.

Dan Frey: Higher levels of earned premium and an underlying combined ratio that improved by two nine points to 84, 8%.

Dan Frey: The underlying combined ratio was our second best result ever and once again featured very strong results in all three business segments. We were pleased with the first quarter expense ratio of 28.3 percent, an improvement of 40 basis points from the prior year quarter. For the full year, we remain comfortable with an expense ratio expectation of 28 to 28.5%. Our continued focus on operating leverage enables us to maintain this level of expense ratio even as we increase the amount of strategic technology spend to further strengthen our competitive advantages, positioning us for continued success well into the future.

Dan Frey: The underlying combined ratio was our second best result ever and once again featured very strong results in all three business segments.

Dan Frey: We were pleased with the first quarter expense ratio of 28, 3% an improvement of 40 basis points from the prior year quarter.

Dan Frey: For the full year, we remain comfortable with an expense ratio expectation of 28% to 28, 5%.

Dan Frey: Our continued focus on operating leverage enables us to maintain this level of expense ratio, even as we increase the amount of strategic technology spend to further strengthen our competitive advantages and positioning us for continued success well into the future.

Dan Frey: We reported net favorable prior year reserve development of $378 million pre-tax in the first quarter, with all three segments contributing. In business insurance, net favorable development of $74 million pre-tax was driven by workers' In bond and specialty, net favorable PYD of $67 million pre-tax was driven by better than expected results in management liability and surety. Personal insurance recorded net favorable PYD of $237 million pre-tax. Significant improvements in both auto and home. Catastrophe losses for the quarter totaled $2.3 billion pre-tax, driven by the California wildfires in January, for which our estimate of $1.7 billion is unchanged from the estimate we pre-announced in February.

Dan Frey: We reported net favorable prior year reserve development of $378 million pre tax in the first quarter with all three segments contributing.

Dan Frey: In business insurance net favorable development of $74 million pre tax was driven by workers' comp.

Dan Frey: In bond and specialty net favorable <unk> of $67 million pre tax was driven by better than expected results in management liability and surety.

Dan Frey: Personal insurance reported net favorable <unk> of $237 million pre tax.

Dan Frey: With significant improvements in both auto and home.

Dan Frey: Catastrophe losses for the quarter totaled $2 $3 billion pre tax driven by the California wildfires in January for <unk>.

Dan Frey: Which our estimate of $1 $7 billion is unchanged from the estimate we pre announced in February.

Dan Frey: After tax, net investment income increased 9% from the prior year quarter to $763 million. Fixed income NII was higher than in the prior year quarter and in line with our expectations. benefiting from both higher yields and a higher level of invested assets. Our outlook for fixed income NII by quarter, including earnings from short-term securities, is $725 million after tax in the second quarter. growing to approximately $755 million in the third quarter and then to around $790 million in the fourth quarter. NII from our Alternative Investment Portfolio was also positive in the quarter. Given recent movement in the equity markets, this is a good time to remind you that results for our private equities, hedge funds, and real estate partnerships are generally reported to us on a one-quarter lag.

Dan Frey: After tax net investment income increased 9% from the prior year quarter to $763 million.

Dan Frey: Fixed income NII was higher than in the prior year quarter and in line with our expectations benefiting.

Dan Frey: Benefiting from both higher yields and a higher level of invested assets.

Dan Frey: Our outlook for fixed income NII by quarter, including earnings from short term securities of $725 million after tax in the second quarter.

Dan Frey: Growing to approximately $755 million in the third quarter, and then to around $790 million in the fourth quarter.

Dan Frey: NII from our alternative investment portfolio was also positive in the quarter.

Given recent movement in the equity markets. This is a good time to remind you that results for our private equities hedge funds and real estate partnerships are generally reported to us on a one quarter lag.

Dan Frey: And while not perfectly correlated, our non-fixed income returns tend to directionally follow the broader equity market. In other words, the impact of the decline in financial markets that occurred in the first quarter will be reflected in our second quarter results. Turning to capital management, operating cash flows for the quarter of $1.4 billion were again very strong, despite the elevated payout related to the California wildfire. And we ended the quarter with holding company liquidity of approximately $1.6 billion. As interest rates decreased during the quarter, our net unrealized investment loss decreased. $3.6 billion after tax at year-end to $3.3 billion after tax on March 31st.

Dan Frey: And while not perfectly correlated or non fixed income returns tend to directionally follow the broader equity markets.

Dan Frey: In other words, the impact of the decline in financial markets that occurred in the first quarter will be reflected in our second quarter results.

Dan Frey: Turning to capital management operating cash flows for the quarter of $1 $4 billion were again very strong despite the elevated payout related to the California wildfires and we ended the quarter with holding company liquidity of approximately $1 $6 billion.

Dan Frey: As interest rates decreased during the quarter, our net unrealized investment loss decreased from $3 $6 billion. After tax at year end to $3 $3 billion after tax at March 31.

Dan Frey: Adjusted book value per share, which excludes unrealized investment gains and losses, was $138.99 at quarter end, basically unchanged from year end and up 11% from a year ago. share repurchases this quarter included $250 million of open market repurchase We had an additional $108 million of buybacks in connection with employee share-based compensation. We have approximately $4.8 billion remaining under prior board authorizations for share repurchases. Dividends were $241 million in the quarter, and as Alan mentioned earlier, our board authorized a 5 cent increase in the quarterly dividend to $1.10 per share.

Dan Frey: Adjusted book value per share, which excludes unrealized investment gains and losses was $138 99 at quarter end basically unchanged from year end and up 11% from a year ago.

Dan Frey: Share repurchases this quarter included $250 million of open market repurchases.

Dan Frey: We had an additional $108 million of buybacks in connection with employee share based compensation plans.

Dan Frey: We have approximately $4 8 billion remaining under prior board authorization for share repurchases.

Alan Schnitzer: Dividends were $241 million in the quarter and as Alan mentioned earlier, our board authorized a <unk> increase in the quarterly dividend to $1 10 per share.

Dan Frey: In summary, our first quarter results once again demonstrate the significant earnings power that results from our ability to leverage our competitive advantages to grow premiums across our well-diversified book of business while maintaining very attractive margins, along with steadily increasing net investment income from our growing investment portfolio.

Alan Schnitzer: In summary, our first quarter results once again demonstrate the significant earnings power that results from our ability to leverage our competitive advantages to grow premiums across our well diversified book of business, while maintaining very attractive margins along with steadily increasing net investment income from our growing investment pause.

Alan Schnitzer: Folio.

Greg Toczydlowski: And with that, I'll turn the call over to Greg for discussion of business insurance. Thanks, Dan. Business Insurance had a strong start to 2025 with segment income for the first quarter of $683 million. Underlying Underwriting Income, Net Prior Year Reserve Development, and Net Investment Income all improved from the first quarter of 2024. The underlying combined ratio of 88.2% was an excellent result, and a point better than the prior year quarter, driven by the benefit of earned prices. Turning to the top line, we grew net written premiums by 2% to a record quarterly high of $5.7 billion, inclusive of the four-point seeded premium impact that Alan referenced.

Alan Schnitzer: And with that I will turn the call over to Greg for a discussion of business insurance.

Greg Kozloski: Thanks, Dan business insurance had a strong start to 2025 with segment income for the first quarter of $683 million.

Greg Kozloski: Underlying underwriting income net prior year reserve development in net investment income all improved from the first quarter of 2024.

Greg Kozloski: The underlying combined ratio of 88, 2% was an excellent result, and a point better than the prior year quarter, driven by the benefit of earned pricing.

Greg Kozloski: Turning to the top line, we grew net written premiums by 2% to a record quarterly high of $5 7 billion.

Speaker Change: Inclusive of the $4 ceded premium impact that Alan referenced.

Greg Toczydlowski: As we indicated in our comments previously, we expect the change in our reinsurance program to be neutral in terms of underwriting income. Pricing remains strong, with renewal premium change of 9.2%, driven by renewal rate change of 6.4%. Retention increased to an excellent 86% and new business of $735 million was an all-time quarterly high. We're pleased with these production results and our ability to sustain strong levels of pricing and retention. That combination is a reflection of market-wide discipline in response to ongoing environmental trends and uncertainty. Renewal rate change remained high, coming in at well over 6% for the eighth quarter in a row.

Speaker Change: As we indicated in our comments previously we expect the change in our reinsurance program to be neutral in terms of underwriting income.

Speaker Change: Pricing remains strong with renewal premium change of nine 2% driven by renewal rate change of six 4%.

Speaker Change: Retention increased to an excellent 86% and new business of $735 million was an all time quarterly high.

Speaker Change: We're pleased with these production results and our ability to sustain strong levels of pricing and retention.

Speaker Change: That combination is a reflection of market wide discipline in response to ongoing environmental trends and uncertainty.

Speaker Change: Renewal rate change remained high coming in at well over 6% for the eighth quarter in a row.

Greg Toczydlowski: Small Takedown from Q4 was driven by our National Property Book, where returns are very strong after several years of compounding rate and improvements in terms and conditions. and our select and core middle market businesses, where dual rate change remains strong and in line with fourth quarter levels. From a line perspective, renewal rate change was highest in Umbrella and Auto, while CMP reached an all-time high and GL remained strong. The execution by our field organization was exceptional, achieving the highest retention levels in our best performing business and the highest levels in our other accounts. The granular execution contributes to optimizing the portfolio's return.

Speaker Change: The small ticked down from Q4 was driven by our National property book, where returns are very strong after several years of compounding rate and improvements in terms and conditions.

Speaker Change: And our select in core middle market businesses renewal rate change remained strong and in line with fourth quarter levels.

Speaker Change: From a line perspective renewal rate change was highest in umbrella and auto while CMP reached an all time high NGL remained strong.

Speaker Change: The execution by our field organization was exceptional achieving the highest retention levels in our best performing business and the highest levels in our other accounts.

Speaker Change: The granular execution contributes to optimizing the portfolio returns.

Greg Toczydlowski: This success is possible based on the robust data that we have, the advanced analytics and sophisticated tools we put in the hands of our frontline underwriters, as well as the strength of the talent that we have in the field. As for the individual businesses, in select, renewal premium change remained strong at 11.6%, up a point and a half from the first quarter of last year, while renewal rate change of 5.8% was up nearly two points from a year ago. As we expected, retention was stable at 80%, driven based on our targeted CMP risk return optimization efforts, which will begin to wind down in the third quarter.

Speaker Change: This success is possible based on the robust data that we have advanced analytics and sophisticated tools, we put in the hands of our frontline underwriters as well as the strength of the talent that we have in the field.

Speaker Change: As for the individual businesses in select renewal premium change remained strong at 11, 6%.

Speaker Change: Up a point and a half from the first quarter of last year, while renewal while renewal rate change of five 8% was up nearly two points from a year ago.

Speaker Change: As we expected retention was stable at 80% driven based on our targeted CMP risk return optimization efforts, which will begin to wind down in the third quarter.

Greg Toczydlowski: New business of $159 million was a quarterly wreck. Overall, we feel terrific about how we're strategically managing the mix of business to drive long-term profitable growth in select. Our distribution partners have embraced the industry-leading experience and segmentation benefits we're getting from our BOP 2.0 and new commercial autopilot. In middle market, renewal premium change was in line with the fourth quarter at close to 10% with strong renewal rate change of 7.5%. The rate increases remain broad-based as we achieve positive rate change on more than three quarters of our middle market accounts. Retention of our high-quality book remained historically high at 89% and increased a point from the fourth quarter, while new business of $434 million was an all-time quarterly high.

Speaker Change: New business of $159 million was a quarterly record.

Speaker Change: Overall, we feel terrific about how we're strategically managing the mix of business to drive long term profitable growth and select.

Speaker Change: Our distribution partners have embraced the industry, leading experience and segmentation benefits, we're getting from our BOP to point out and new commercial auto products.

Speaker Change: In middle market renewal premium change was in line with the fourth quarter at close to 10%.

Speaker Change: With strong renewal rate change of seven 5%.

Speaker Change: The rate increases remained broad based as we achieved positive rate change of more than three quarters of our middle market accounts.

Speaker Change: Retention of our high quality book remained historically high at 89% and increased one point from the fourth quarter, while new business of $434 million was an all time quarterly high.

Greg Toczydlowski: To sum up, business insurance had a great start to the year.

Speaker Change: To sum up business insurance had a great start to the year, we continue to grow our high quality book, while investing in capabilities that position us well for long term success.

Greg Toczydlowski: We continue to grow our high-quality book while investing in capabilities that position us well for long-term success.

Jeffrey Klenk: With that, I'll turn the call over to Jeff. Thanks, Greg. Founded Specialty started the year with another strong quarter on both the top and bottom lines. We generated segment income of $220 million, an excellent combined ratio of 82.5%, and a strong 87.3% underlying combined ratio in the quarter. Turning to the top line, we're pleased that we grew net written premiums by 6% in the quarter. In our high quality domestic management liability business, we delivered excellent retention of 89%. Renewal premium change remained positive and generally consistent with the fourth quarter. As expected, new business was lower than the first quarter of 2024.

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

Jeff: Thanks, Greg.

Jeff: Funded specialty started the year with another strong quarter on both the top and bottom lines.

Jeff: We generated segment income of $220 million, an excellent combined ratio of 82, 5%.

Jeff: Drawn 87, 3% underlying combined ratio in the quarter.

Jeff: Turning to the top line. We're pleased that we grew net written premiums by 6% in the quarter.

Jeff: And our high quality domestic management liability business, we delivered excellent retention of 89%.

Jeff: Renewal premium change remained positive and generally consistent with the fourth quarter.

Jeff: As expected new business was lower than the first quarter of 2024 as a reminder, corvus production was reflected as new business in the prior year quarter and now is mostly renewal premiums.

Jeffrey Klenk: As a reminder, Corvus production was reflected as new business in the prior year quarter and now is mostly renewal premium. Comparison to prior year, new business levels will be similarly impacted for the next few quarters.

Jeff: Comparison to prior year, new business levels will be similarly impacted for the next few quarters.

Jeffrey Klenk: Turning to our market-leading surety business. Groonet Written Premiums by an excellent 13% from the prior year quarter. This growth reflects a robust construction environment, continued strong demand for our surety products and services, and outstanding execution by our team in growing our high credit quality portfolio. So we're pleased to have once again delivered strong top and bottom line results this quarter while continuing to make significant strategic investments in our business.

Jeff: Turning to our market, leading surety business.

Jeff: We grew net written premiums by an excellent 13% from the prior year quarter.

Jeff: This growth reflects a robust construction environment continued strong demand for our surety products and services and outstanding execution by our team in growing our high credit quality portfolio.

Jeff: So we're pleased to have once again delivered strong top and bottom line results this quarter, while continuing to make significant strategic investments in our business with some notable achievements to name just a few.

Jeffrey Klenk: with some notable achievements. To name just a few. We released our first product on our new management liability technology platform. modernized accountants professional liability product and rate plan with enhanced digital capabilities and a significantly streamlined workflow. Capitalizing on the Corvus acquisition for the benefit of our admitted cyber customers, we launched an improved cyber risk policy holder portal with enhanced valuated services. And we're leveraging our industry leading data advantage and deploying multiple artificial intelligence models to drive underwriting enhancement. Including as just one example, automating the process for certain employment practices liability renewal. Looking ahead, we're planning additional capability and product releases during the year that will further extend our competitive advantage.

Jeff: We released our first product on our new management liability technology platform.

Jeff: A modernized accounts professional liability product and rate plan with enhanced digital capabilities and a significantly streamlined workflow.

Jeff: Capitalizing on the Corvus acquisition for the benefit of our admitted cyber customers, we launched an improved cyber risk policy holder portal with enhanced value added services.

Jeff: And we're leveraging our industry, leading data advantage in deploying multiple artificial intelligence models to drive underwriting enhancements, including as just one example, automating the process for certain employment practices liability renewals.

Jeff: Looking ahead, we're planning additional capability and product releases during the year that will further extend our competitive advantages.

Michael Phillips: And with that, I'll turn the call over to Mike. Thanks, Jeff. Good morning, everyone. In personal insurance, the first quarter segment loss of $374 million and combined ratio of 115.2% reflect the impact of the California wildfires, a significant event for us and the industry. Strong underlying underwriting income and favorable prior year development partially offset catastrophe losses in the corridor. The underlying combined ratio of 79.9%, a record quarterly result for the segment, continues to reflect the actions we've taken to improve the underlying fundamentals of our business in both automobile and homeowners and other. Net written premiums grew 5% in the quarter driven by higher renewal premium.

Michael Klein: And with that I'll turn the call over to Michael.

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

Michael Klein: In personal insurance, the first quarter segment loss of $374 million in combined ratio of 115, 2% reflects the impact of the California wildfires, a significant event for us in the industry.

Michael Klein: Strong underlying underwriting income and favorable prior year development, partially offset catastrophe losses in the quarter.

Michael Klein: The underlying combined ratio of 79, 9% a record quarterly result for the segment continues to reflect the actions we've taken to improve the underlying fundamentals of our business and both automobile and homeowners and other.

Michael Klein: Net written premiums grew 5% in the quarter driven by higher renewal premium change.

Michael Phillips: In automobile, the first quarter combined ratio was 83.4% and included a 6 point benefit from favorable prior year development. The underlying combined ratio of 87.5% improved 7.4 points compared to the first quarter of the prior year. This improvement was driven by lower losses resulting from both favorable frequency across all coverages and sustained moderation of severity trends, as well as the benefit of higher-earned pricing. As a brief reminder, the first quarter is historically our seasonally lowest combined ratio of the year in auto. In homeowners and other, the first quarter combined ratio of 145.5% includes the impact of the California wildfires.

Michael Klein: And automobile the first quarter combined ratio was 83, 4% and included a six point benefit from favorable prior year development.

Michael Klein: The underlying combined ratio of 87, 5% improved seven four points compared to the first quarter of the prior year.

Michael Klein: This improvement was driven by lower losses, resulting from both favorable frequency across all coverages and sustained moderation of severity trends as well as the benefit of higher end pricing.

Michael Klein: As a brief reminder, the first quarter is historically, our seasonally lowest combined ratio of the year in auto.

Michael Klein: In homeowners and other the first quarter combined ratio of 145, 5% includes the impact of the California wildfires.

Michael Phillips: The underlying combined ratio of 72.6% improved five points compared to the first quarter of 2024. Driven by the continued benefit of earned pricing. and lower non-weather losses compared to the prior year. Our production results reflect our efforts to position our portfolio for long-term profitable growth. In domestic automobile, retention of 82% remained consistent with recent periods. Renewal premium change continues to moderate as intended, reflecting improved profitability and our focus on returning to profitable growth in auto. We're pleased to note that auto new business premium increased relative to the prior year quarter driven by states that are not constrained by our property action.

Michael Klein: The underlying combined ratio of 72, 6% improved five points compared to the first quarter of 2024, driven by the continued benefit of earned pricing.

Michael Klein: And lower non weather losses compared to the prior year.

Michael Klein: Our production results reflect our efforts to position our portfolio for long term profitable growth.

Michael Klein: And domestic automobile retention of 82% remained consistent with recent periods.

Michael Klein: Renewal premium change continues to moderate as intended reflecting improved profitability and our focus on returning to profitable growth in auto.

Michael Klein: We're pleased to note that auto new business premium increased relative to the prior year quarter, driven by states that are not constrained by our property actions.

Michael Phillips: In domestic homeowners and other, renewal premium change increased to 19.6% as a result of our actions to align insured values with rising replacement costs while we continue to achieve strong rate increases. The decline in homeowners policies in force continues to be driven by our deliberate efforts to improve profitability and reduce exposures in high cat-risk geographies. While those same actions continue to constrain our ability to grow auto PIF in the near term, we believe the trade-off makes sense for the long-term performance of our diversified personal lines portfolio.

Michael Klein: And domestic homeowners and other renewal premium change increased to 19, 6% as a result of our actions to align insured values with rising replacement costs, while we continued to achieve strong rate increases.

Michael Klein: The decline in homeowners policies in force continues to be driven by our deliberate efforts to improve profitability and reduce exposures in high cat risk geographies.

Michael Klein: While those same actions continue to constrain our ability to grow <unk> in the near term, we believe that tradeoff makes sense for the long term performance of our diversified personal lines portfolio.

Michael Phillips: Before I wrap up, I'd like to thank our team and our distribution partners for their hard work and dedication in serving our customers. With their partnership and support, we remain confident in our ability to deliver value to our clients and to build a larger, more profitable business over time.

Michael Klein: Before I wrap up I'd like to thank our team and our distribution partners for their hard work and dedication in serving our customers.

Michael Klein: With their partnership and support we remain confident in our ability to deliver value to our clients and to build a larger and more profitable business over time.

Abbe Goldstein: And with that, I'll turn the call back over to Abbe.

Speaker Change: And with that I'll turn the call back over to Abbie. Thanks, Michael we were ready to open up for Q&A.

Operator: Thanks, Michael. We are ready to open up for Q&A. Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in I would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Speaker Change: I would like to withdraw your question simply press Star one again.

David Motemaden: We'll go first to David Motemaden at Evercore. Thanks. Good morning. Alan, you made some comments just on the macro environment. remarks.

Speaker Change: We'll go first to David <unk> at Evercore.

Speaker Change: Okay.

Speaker Change: Thanks, Good morning.

Speaker Change: Alan you made some comments just on the macro environment at the end of your prepared remarks I'm wondering if you could just talk about how you're thinking through the impacts of the tariffs across your businesses, both personal and commercial lines.

Alan Schnitzer: I'm wondering if you could just talk about how you're thinking through the impacts of the tariffs across And more importantly, how you're thinking about. Sure, David, good morning. Thanks for the question. You know, just in terms of background, and at a high level, I'd say as far as the direct impacts go, we think it's pretty manageable for us. It's just a fraction of auto and property losses that are physical damage related, and only a fraction of those are from materials that would be impacted by the tariffs. The most significant impact for us is likely to be a one-time impact to physical damage repair costs.

Speaker Change: And more importantly, how youre thinking about responding in the marketplace.

Speaker Change: Sure David Good morning, Thanks for the question.

Speaker Change: Just in terms of background and at a high level I would say as far as the direct impacts go we think it's pretty manageable for us.

Speaker Change: It's just a fraction of auto and property losses that are physical damage related and only a fraction of those are for materials that would be impacted by the tariffs.

Speaker Change: The most significant impact for us is likely to be a one time impact of physical damage repair costs for us that most notably impacts private passenger auto from there.

David Motemaden: For us, that most notably impacts private passenger auto. From there, the impacts diminish pretty significantly. And just to give you a sense of the magnitude, David, assuming the tariffs, as they've been announced, remain in place and are largely passed through, and I think there's a question about that, we'd expect, you know, around a mid-single-digit increase to PI auto severity. Again, that's a one-time impact, you know, not a slope impact. Having said that, we would actually expect the actual impact to be somewhat less. So first, we think participants in the value chain will likely seek to mitigate the impact through some combination of advanced inventory buildup, substitution of goods, reorganization of the supply chain, lower tariff pass-through rates, things like that.

Speaker Change: The impacts diminish pretty significantly.

Speaker Change: And just to give you a sense of the magnitude David assuming the tariffs as they as they've been announced.

Speaker Change: Remain in place and are largely pass through and I think there's a question about that wed expect somewhere around a mid single digit increase to Pi auto severity again, that's a onetime impact not a not a slope impact.

Speaker Change: Having said that we would actually expect the actual impact would be somewhat less. So first we think participants in the value chain will likely seek to mitigate the impact through some combination of advanced inventory buildup substitution of goods a.

Speaker Change: Our reorganization supply chain lower tariff pass through rates things like that.

Alan Schnitzer: And second, the actual impacts could be mitigated by other factors, for example, extended lives of cars on the road.

Speaker Change: And second the actual impacts could be mitigated by other factors for example extended lives of cars on the road.

Speaker Change: Also just looking at our margins now the auto margins as you can see her in a pretty good place and if the recent favorable loss trends persist and we'll see whether they do or not but if recent favorable trends persist we may be able to absorb whatever the impact is inside of the loss picks. So I would say for now we're prepared to walk.

Speaker Change: <unk> react to the extent that we need to and however, the loss trends evolved we've got the tools and the capabilities to see it pretty quickly and well reflected in our pricing models.

Speaker Change: Understood Thanks for that and.

David Motemaden: Thanks for that.

Alan Schnitzer: And maybe just switching gears. Sorry to be super short term here, but when I think about the 2%, is it right to think about just adding back that four points of reinsurance draft? and sort of that's like a sort of like a run rate level before I think about David, let me start and I'll turn it over to you, Greg. So as for a starting point, we would, you definitely would add back to four to get to a level. There's always other things in the quarter that are going to impact premium from one period to another.

Speaker Change: Maybe just switching gears.

Speaker Change: So the growth in the quarter within business insurance or to be Super short term here, but when I think about the 2%.

Speaker Change: Is it right to think about just adding back that four points of reinsurance drag.

Speaker Change: And sort of that's like a sort of like a run rate level before I think about different moving pieces.

Speaker Change: As we head into the second quarter, such as mix and price.

Speaker Change: David Let me start and I'll turn it over to you Greg. So so as first starting point, we would definitely would add back to afford it to get to a level. There's always other things in the quarter that are going to impact.

Speaker Change: Premium from one period to another.

Alan Schnitzer: You know, there's production booking, for example, there's endorsements, cancellations, all those sorts of things. So that would have an impact. I would tell you to look at the strength of the production in the quarter. I mean, you can look at retention, price, all very strong levels.

Speaker Change: There is.

Speaker Change: Production booking for example, there's endorsements cancellations all those sorts of things.

Speaker Change: So that would have an impact I would I would tell you to look at the strength of the production in the quarter. I mean, you can look at retention pricing. This all very strong levels.

Speaker Change: That said thank you.

Speaker Change: Thank you.

Speaker Change: We'll go next to Gregory Peters at Raymond James.

Gregory Peters: We'll go next to Gregory Peters at Raymond.

Gregory Peters: Good morning, everyone. I think it was Dan, in the comments around the expense ratio, you mentioned increased tech spend. One of your peers had an investor day and spoke. at length about what they're doing on the tech side of the business. I went back to your fourth quarter presentation where you gave a slide on your technology investments, the routine and necessary versus the strategic. I'm under the impression that a portion of your tech spend is just maintenance on legacy systems. Can you talk about, you know, what you're doing on the tech spend area in response to this?

Gregory Peters: Good morning, everyone.

Dan Frey: But I think it is Dan.

Dan Frey: All the comments around the expense ratio you mentioned increased tech spend.

Dan Frey: One of your peers.

Dan Frey: <unk> had an investor day and spoke.

Dan Frey: At length about what Theyre doing on the tech side of the business I went back to your fourth quarter presentation, where you gave.

Dan Frey: A slide on your technology investments with the routine and necessary versus the strategic.

Speaker Change: I'm under the impression that a portion of your tech spend is.

Speaker Change: Maintenance on legacy systems should we can you talk about what youre doing on the tech spend area.

Speaker Change: In response to this is the strategic just to all new initiatives or is that partly.

Gregory Peters: And is the strategic just all new initiatives, or is that partly rehab of legacy systems?

Speaker Change: Our rehab of our legacy systems.

Gregory Peters: Yeah, well, first of all, Greg, thank you. Good morning. I love that you're focusing on that slide, as we think it tells a great story. I mean, you can see over the period in that slide, you know, that we've done a great job of maintaining the routine but necessary expenditures. And yes, that is, you know, everything from licensing fees to patching systems, all the things you have to do, whether you like it or not, routine and necessary, I think, sums it up. And if you look over that period, we have increased the mix of our strategic spend from, I think, at the beginning, the first year in that period, I think it's something like a third, and I think, you know, last year was approaching a half.

Speaker Change: Yes, well first of all great. Thank you good morning, I love that you're focusing on that slag is we think it tells a great story I mean, you can see over the period in that slide.

Speaker Change: We've done a great job of of maintaining the routine but necessary expenditures and yes that is.

Speaker Change: Everything from licensing fees to patching systems all of the things you have to do whether you like it or not routine, but necessary I think sums it up and.

Speaker Change: And if you look over that period, we have increased the mix of our strategic spanned from I think at the beginning of the first year in that period I think it's something like a third and I think last year was approaching half.

Gregory Peters: And so it's, I mean, that certainly would be new expenses, but it would also be the carryover expenses of things that we've started in prior years that we continue to invest in. So all in all, you know, we are spending considerably more, over a billion and a half dollars a year. Our strategic mix is much more favorable now. And we've done all that inside an expense ratio that we've reduced meaningfully over the period. So, you know, we think we're investing in the right things and doing it pretty effectively.

Speaker Change: So.

Speaker Change: I mean that certainly would be new expenses, but it would also be the carryover expenses are things that we started in prior years that we continue to invest in so all in all we are we are spending considerably more over $1 billion $5 a year. Our strategic mix is is much more favorable now.

Speaker Change: And we've done all of that inside a an expense ratio that we've reduced meaningfully over the period. So we think we're investing in the right things and doing it pretty effectively.

Gregory Peters: Oh, thanks for the color on my follow up question. And I don't I don't get too hung up on our quarterly number, but the PYD for the first quarter seemed a little bit better than expected. And I know you already addressed the tariff component inside your lost costs, but I'm just curious. Has there been any change in your perspectives on what your underlying lost cost trends are across your book? And then maybe speak specifically to the development again in the auto business, which clearly was a little stronger than I expected.

Speaker Change: Alright, thanks for the color on my follow up question.

Speaker Change: And I don't I don't get too hung up on our quarterly number but the <unk> for the first quarter seemed a little bit better than expected.

Speaker Change: And I know you already address the tariff component inside your loss costs, but I'm just curious.

Speaker Change: Has there been any change in your perspectives on what your underlying loss cost trends are across your book and then maybe speak specifically to the development again in the auto business, which clearly was.

Speaker Change: Stronger than I expected at least.

Dan Frey: Hey Greg, it's Dan. So, I'll start with the PYD auto piece just to give you a little bit of color there. So, you know, better than we had allowed for and in auto you're really talking about better than expected frequency and severity in both the physical damage coverage and bodily injury. So, sort of good across the board. Just to go back to the loss trend question, you know, we've sort of tried to get away from giving a specific trend number but I think it's fair to say that trend in the quarter at least behaved pretty much as we would have expected it to and so that's why you hear both Michael and Greg talking about the benefit of earned price and how that shows through and improved margins because the loss trend really was about as expected.

Speaker Change: Hey, Greg it's Dan So I'll start with the <unk> just to give you a little bit of color there. So.

Speaker Change: Better than we had allowed for an auto you're really talking about.

Speaker Change: Better than expected frequency and severity in both the physical damage coverage and.

Speaker Change: And bodily injury, so sort of sort of good across across the board.

Speaker Change: Just to go back to the.

Speaker Change: The loss trend question, you know, we've sort of tried to get away from giving a specific trend number but I think it's fair to say that trend in the quarter at least behaved pretty much as we would have expected it to and so that's why you hear both Michael and Greg talking about the benefit of earned pricing how that shows through in improved margins because the loss trend really was about us.

Speaker Change: Expected.

Gregory Peters: Got it. Thanks for the answers. Thanks, Greg.

Speaker Change: Got it thanks for the answers.

Speaker Change: Thanks, Greg.

Speaker Change: Okay.

Brian Meredith: We'll move next to Brian Meredith at UBS. Yeah, thanks. A couple of them here quickly. Dan, I'm just curious, when we think about the deductible on your CAT program, is it fair to just assume whatever the CAT losses were in the quarter and the remainder to $4 billion is kind of what you've got less in your deductible? Or should we think about it a different way? Yeah, Brian, so the one thing to keep in mind is, as we said, in the describing that program at the end of the year, which is not a change from the way it had worked in previous years, the first 100 million of any event is for is for our account.

Speaker Change: We'll move next to Brian Meredith at UBS.

Speaker Change: Yes, Thanks, a couple of them here quickly.

Speaker Change: Curious when we think about the deductible on your Cat program is it fair to just assume whenever the cat losses were in the quarter.

Speaker Change: The remainder.

Speaker Change: Two 4 billion is kind of what you've got lessen your deductible or should we think about a different way.

Speaker Change: Yes, Brian So the one thing to keep in mind is as we said in the describing that program at the end of the year, which is not a change from the way. It had worked in previous years. The first $100 million of any event is for is for our account. So you really would look at the items that we put in the 10-Q table a significant catch because that journey.

Dan Frey: So you really would look at the items that we put in the 10 Q table of significant cats, because that's anything over 100 million, take 100 million off of those. And that's what goes towards the 4 billion that's, you know, Basically, that's directionally how it works.

Speaker Change: <unk> over 100 million circa $100 million off of those and Thats what goes towards the $4 billion.

Speaker Change: Basically thats directionally, how it works.

Brian Meredith: Thanks for that clarification.

Speaker Change: Perfect. Thanks for that clarification and then my second question I'm just curious maybe this is for Jeff.

Jeffrey Klenk: And then my second question, I'm just curious, maybe this is for Jeff, surety bond growth, you know, given what we're seeing, you know, potential for economic activity, as well as just some of the, you know, reductions in kind of government spending. Do you think that will have any impact on surety business here going forward? Or is this just not a big government component to it? No, there's definitely a government component to a lot of the large projects, Brian, so that's a fair question. We're watching that closely. We're working with our contractors. There's a lot of planning that they do, long-term planning that they're focused on, so we're definitely hearing that from them.

Speaker Change: Alrighty bond growth.

Speaker Change: Given what we're seeing potential for economic activity as well as to some of the reductions in government spending do you think that will have an impact on surety business here going forward or is this just not a big government component to it.

Speaker Change: No. There's there's definitely a government component to a lot of the large projects Brian. So that's a fair question, we're watching that closely we're working with our contractors, there's a lot of.

Speaker Change: Planning that they do long term planning that theyre focused on so we're definitely hearing that from them.

Jeffrey Klenk: All of that said, we've had some nice, strong growth. We expect the infrastructure investments and bond demand to continue, and as I've mentioned to you before, we have a really high credit quality book of contractors on the surety side, and so we feel good about our position as we move forward.

Speaker Change: All of that said, we've had some nice strong growth, we expect the infrastructure investments.

Speaker Change: Bond demand to continue.

Speaker Change: But as.

Speaker Change: And as I've mentioned to you before we have a really high credit quality book of contractors on the surety side and so we've we feel good about our position as we move forward.

Brian Meredith: Great, thank you.

Speaker Change: Great. Thank you.

Speaker Change: Okay.

Meyer Shields: We'll take our next question from Meyer Shields at KBW. Thanks.

Speaker Change: We will take our next question from Meyer Shields at K B W.

Speaker Change: Thanks, a lot.

Meyer Shields: I don't know if it's too early to ask this question, but do you have a sense as to how your insureds are responding to the potential uncertainty in the economy? Good morning, Mayor. We're also looking at tonight. I'm not sure if you mean too early in the morning or too early. I do think it's it's it's too early for for us to see that. And I also, you know, as I as I really think about that question, I think it's too early to really know what it is we're all responding to. I mean, there's obviously a lot of change, you know, back and forth.

Speaker Change: Too early to ask this question, but do you have a sense as to how your insureds are responding to the potential uncertainty in the economy.

Speaker Change: Yeah.

Speaker Change: Good morning Mayor at we're also looking at it I'm not sure. If you mean too early in the morning or too early.

Speaker Change: I do think it's too early for us to see that.

Speaker Change: And I also.

Speaker Change: As I really think about that question I think it's too early to really know what it is we're all responding to I mean, there's obviously.

Speaker Change: A lot of change back and forth. So I'm not sure people really know what they're responding to yet.

Meyer Shields: So I'm not sure people really know what they're responding to yet. Right.

Speaker Change: Alright that was kind of asking whether that level of uncertainty itself produces a result, maybe just because of caution, but I completely take your point on the timing.

Meyer Shields: I was kind of asking whether that level of uncertainty itself produces a result, maybe just because of caution, but I completely take your point on the timing.

Meyer Shields: Second question, I guess for Michael, the two-pronged question, how quickly do you think travelers can respond if there is an inflection and loss cost compared to maybe the most recent interruption? And is there any reason to switch the book more towards six-month policies because we keep on seeing these fluctuations or these inflections and loss? Yeah, thanks, Meyer. Um, I think as Alan mentioned, you know, we see the changes in our loss costs relatively quickly, we incorporate those into our experience relatively quickly. As a little bit of a technical point, right, what you're what you're doing as you factor those increased costs into your experience is including them in the historical experience that you had.

Speaker Change: Question I guess for Michael.

Speaker Change: Two part question.

Speaker Change: How quickly do you think travelers can respond if there is an inflection in loss costs compared to maybe the most recent interruption and is there any reason to switch the book more towards six month policies, because we keep on seeing these fluctuation or these inflections in loss trend.

Speaker Change: Yes.

Meyer: Yes, Thanks Meyer.

Alan Schnitzer: I think as Alan mentioned, we see the changes in our loss cost relatively quickly we incorporate those into our experienced relatively quickly.

Speaker Change: As a little bit of a technical point right what youre, what Youre doing is you factor those increased cost into your experience is including them in the historical experience that you had so one of the things that impacts how quickly you can respond and how Goodyear experience was as you factor those things in but I don't see it.

Michael Phillips: So one of the things that impacts how quickly you can respond is how good your experience was, as you factor those things in. But I don't see a challenge with our ability to recognize and factor those costs into our outlook, you know, as quickly as we see them. To the second part of your question in terms of six month policies, we did make a change in the last year or two in terms of monoline auto policies, being predominantly written on a six month basis at new business. So that is working its way into the portfolio, I wouldn't say it's dramatically changed the makeup of the portfolio between six month and annual.

Speaker Change: <unk> with our ability to recognize and factor those costs into our outlook.

Speaker Change: As quickly as we see them to the second part of your question in terms of six month policies. We did make a change in the last year or two in terms of mono line auto policies being predominantly written on a six month basis.

Speaker Change: At new business. So that is working its way into the portfolio I wouldn't say, it's dramatically changed the makeup of the portfolio between six month and annual.

Michael Phillips: But directionally, we are moving a little bit towards a higher percentage of six month policies and the portfolio portfolio as a result. Okay, great. Thank you. Thanks, Brian.

Speaker Change: But directionally, we are moving a little bit towards a higher percentage of six month policies in the port.

Speaker Change: Folio as a result.

Speaker Change: Okay.

Speaker Change: Okay, great. Thank you.

Speaker Change: Thanks, Matt.

Alex Scott: We'll move next to Alex Scott at Barclays. Hi, good morning. First, what I have for you is on the international insurance business. I noticed, you know, net premium written continues to be up more significantly year over year and just interested in, you know, where you're seeing the growth opportunities there.

Speaker Change: We'll move next to Alex Scott at Barclays.

Alex Scott: Hi, Good morning, first one I have is on the international insurance business I noticed.

Speaker Change: Premium written continues to be up more significantly year over year.

Speaker Change: Just didn't know where youre seeing the growth opportunities there.

Greg Toczydlowski: Alex, this is Greg. What you're seeing there, if you're looking at the international within the BI segment, there's two primary drivers of that. One is the Fidelis relationship continues to be very strong. That's one of them. And the other one is Lloyds can bounce around and be a little bit lumpy from quarter to quarter, and we had a strong quarter this month. So that's what's driving those items. Okay, that's helpful.

Speaker Change: Hey, Alex this is Greg what Youre seeing there if you're looking at the Internet International within the <unk> segment. There are two primary drivers of that one is the fidelity relationship continues to be very strong that's one of them and the other one is lloyd's can bounce around and be a little bit lumpy from quarter to quarter, and we had a strong quarter. This month, so thats whats <unk>.

Speaker Change: And those items.

Alex Scott: Okay. That's helpful.

Alex Scott: And then maybe along the same lines, and just trying to understand premiums, you know, notice middle market was down a little bit year over year. You know, I'd kind of been thinking that that's an area where pricing staying, you know, pretty attractive relative to loss cost trend. I mean, hard to tell whether that's just the casualty reinsurance impact, and the allocation middle market. But could you help me think through that and just relative attractiveness of that market? Yeah, Alex, and you nailed it. You know, we feel terrific about the returns we're producing across the portfolio and specifically in middle market and the growth we're getting there.

Speaker Change: And then maybe along the same lines and just trying to understand premiums.

Speaker Change: Noticed middle market was down a little bit year over year.

Speaker Change: I had been thinking that that's an area where pricing staying pretty attractive relative to loss cost trend.

Speaker Change: It's hard to tell whether that's just the casualty reinsurance impact.

Speaker Change: The allocation middle market, but could.

Speaker Change: Could you help me think through that.

Speaker Change: Relative attractiveness of that market.

Speaker Change: Yeah, Alex and you nailed it we feel terrific about the returns we're producing across the portfolio and specifically in middle market and the growth. We're getting there. What you just mentioned is the primary driver of the casualty AG Treaty that we called out do you think about middle market. It has a much higher amount of umbrella and excess casualty products much more.

Greg Toczydlowski: What you just mentioned is the primary driver of the Casualty Ag Treaty that we called out. If you think about middle market, it has a much higher amount of umbrella and excess casualty products, much more casualty based than you would see, particularly relative to select. So it's going to feel disproportionately that impact in that business.

Speaker Change: Casualty base than you would see particularly relative to select so it's going to field disproportionately that impact in that business.

Greg Toczydlowski: Hey, Alex, I don't mean to suggest for a second that we're immune from what's going on in the economy and economic activity. But again, I would point you back to the production statistics. I mean, a middle market had very strong retention pricing in new business. I would just point you back there just for a sense of the health of the growth. Yep, that's all helpful.

Speaker Change: Alex I don't I mean, I don't mean to suggest for a second that we're immune from whats going on in the economy and economic activity, but I again, I would point you back to the production statistics EMEA middle market had very strong retention pricing and new business.

Speaker Change: I would just point you back there for just for a sense of the health of the growth.

Speaker Change: Yep, that's all helpful. Thank you.

Alex Scott: Thank you.

Wes Carmichael: Our next question comes from Wes Carmichael at Autonomous Research.

Our next question comes from Wes Carmichael at Autonomous research.

Wes Carmichael: Hey, Good morning, My first question on business insurance with the $74 million of favorable favorable development at <unk>.

Wes Carmichael: Good morning. My first question on business insurance with the $74 million of favorable development. You called out workers comp as the primary driver, but could you share any color on the gross development from comp and if there are any Yeah, so it's Dan. So really, what we try to do a pretty good job of calling out, you know, the things that moved in and were noteworthy in any way in this quarter. So usually, that means we're talking about more than one or two things. But this quarter, it really did happen to be driven, driven by comp.

Speaker Change: That workers comp is the primary driver, but could you share any color on the gross development from comp and if there are any netting offsets to that.

Dan Frey: Yes, so it's Dan so really what we've tried to do a pretty good job of calling out the things that moved in and were noteworthy in any way in this quarter. So usually that means we're talking about more than one or two things, but this quarter. It really did happen to be driven driven by comp it's not to say that there weren't other lines that moved there are always other puts and takes in any give.

Dan Frey: It's not to say that there weren't other lines that moved, there are always other puts and takes in any given line in any given quarter, just nothing that moved big enough to call out one way or the other.

Dan Frey: In line in any given quarter, just nothing that move big enough to call out one way or the other.

Speaker Change: Now that's helpful. Dan and then maybe just back on the macro and capital management, but curious how management's thinking about buybacks from here and perhaps some heightened macro uncertainty and maybe if there is a bit of pressure on the stock just from broader stock market pressure generally is that is that an opportunity to lean into buybacks or might you want to be more measured in a period of heightened uncertainty.

Dan Frey: Yeah, so, you know, we really We have the same philosophy of capital management, first of all, so so no change in the way we think about that. Remember, we entered, you know, 2025 in a in a pretty strong capital position, given how strong the finish to the 2024 year was, you know, we talked about buyback activity in the first quarter, I'd say that was probably dialed back a little bit from what we might have otherwise have done given the significance of the California wildfires and the fact that they occurred so early in the quarter. I feel like, you know, we're going to maintain a very healthy capital position.

Dan Frey: Yes, so we really.

Dan Frey: We have the same philosophy of capital management first also so no change in the way we think about that remember we entered two.

Dan Frey: 2025, and a pretty strong capital position given how strong the finish to the 2024 year was we talked about buyback activity in the first quarter I'd say that was probably dialed back a little bit from what we might have otherwise have done given.

Dan Frey: The significance of the California, wildfires and the fact that they occurred so so early in the quarter.

Dan Frey: I feel like we're going to maintain a very healthy capital position. Our history is we're going to continue to generate more capital than we need to run the business and can deploy at attractive returns and so I'd expect us not in any particular month or any particular quarter, but I'd expect us to continue to.

Dan Frey: Our history is we're going to continue to generate more capital than we need to run the business and can deploy at attractive returns. And so I'd expect us, you know, not in any particular month or any particular quarter, but I'd expect us to continue to be doing buybacks. And we don't really try to sort of lean in or lean out depending on short term fluctuations in the stock price. We're really just right sizing capital over time.

Dan Frey: To be doing buybacks, and we don't really try to sort of lean in or lean out depending on short term fluctuations in the stock price were really just right sizing capital overtime.

Dan Frey: Thank you.

Robert Cox: Next, we'll go to Robert Cox at Goldman. Hey, thanks for taking my question. First question, appreciate the thoughts on the impacts of tariffs. I was curious if you also see tariffs eventually impacting the liability costs within your claims over time?

Speaker Change: Next we'll go to Robert Cox at Goldman Sachs.

Robert Cox: Hey, Thanks for taking my question.

Speaker Change: First question.

Speaker Change: I appreciate the thoughts on the impacts of tariffs I was curious if you also see tariffs eventually impacting the liability.

Speaker Change: Costs.

Speaker Change: Within your claims over time.

Alan Schnitzer: Yeah, good morning. I would say that for now, we see that as pretty negligible. I mean, you just look at the mix of the cost drivers and the liability lines, and just not a lot of it is subject to tariffs. And I don't mean to suggest that it's a zero impact, but we think the likely outcome is pretty negligible.

Speaker Change: Yes, good morning.

Speaker Change: I would say that for now we see that as pretty negligible. I mean, you just look at the mix of the cost drivers in the liability lines and just not a lot of it is subject to tariffs I don't mean to suggest that it's a zero impact, but but we think the likely outcome. This is pretty negligible.

Speaker Change: Yes.

Robert Cox: Okay, thank you.

Okay. Thank you and then as a follow up I just wanted to ask on the business insurance underlying loss ratio. How the pressure that you guys have kind of been seeing in the industry has been seeing for last couple of years in casualty is trending there.

Dan Frey: And then as a follow-up, I just wanted to ask on the business insurance underlying loss ratio, how the pressure that you guys have kind of been seeing in the industry has been seeing for the last couple of years and casualty is trending there. You know, maybe more specifically, the other liability occurrence loss ratios, are they still kind of going up year over year? I know you guys added to the conservatism in those picks last year. And also, is there any, you know, kind of one-time items, like non-cat weather this quarter?

Speaker Change: Maybe more specifically the other liability occurrence loss ratios are they still kind of going up year over year. I know you guys added to the conservatism in those picks last year and also is there any kind of one time items like non cat weather this quarter.

Dan Frey: Sure, Rob, it's Dan. So so no, no one time call outs. Again, that's something we try to be pretty careful on if there is one and really didn't hear anything from Greg, Michael or Jeff about reasons to adjust the sort of quote unquote jump off point for this quarter. In terms of the casualty lines and the way we're thinking about those lost picks. Yeah, you're right to remember that last year, we talked about, you know, adding a bit more in the IVNR for those lines, given the uncertainty in the line, we've carried that into 2025.

Speaker Change: Sure Rob it's Dan So so no no one time callouts again, thats something we tried to be pretty careful on if there is one and really didn't hear anything from Greg Michel or Jeff about reasons to adjust the sort of quote unquote jump off point for this quarter in terms of the casualty.

Speaker Change: Lines and the way, we're thinking about those loss picks, yes, youre right to remember that last year, we talked about.

Speaker Change: Adding a bit more in the IBM <unk>.

Speaker Change: For those lines given the uncertainty in the line we've carried that into 2025.

Dan Frey: So I wouldn't put a fine point and quantify it. But, you know, we've carried that sort of philosophy into the way we're thinking about making our lost picks this year.

Speaker Change: So I wouldn't put a fine point and quantify it but we've carried that sort of philosophy into the way, we're thinking about making our loss picks this year.

Michael Zaremski: Thanks.

Speaker Change: Thanks.

Michael Zaremski: Thank you.

Speaker Change: Thank you.

Michael Zaremski: Our next question comes from Michael Zaremski at BMO Capital Markets. Thanks, good morning. First question on home insurance, just wanted to unpack more.

Speaker Change: Our next question comes from Michael Zaremski at BMO capital markets.

Michael Zaremski: Hey, Thanks, good morning.

Speaker Change: First question.

Speaker Change: On home insurance just wanted to.

Michael Phillips: And Michael, I appreciate your comments in the prepared remarks, but unpack kind of the reacceleration we've seen in pricing. Do you feel this is more traveler specific? You know, as you continue to kind of reshape your, you know, geographic footprint? Or, or is this more of kind of a industry wide you feel in terms of reacting to what you said was also higher replacement costs and what we can see is persistently higher catastrophe levels. And just also curious, does your pricing power, does that include changes in deductibles or terms and conditions? Thanks. Sure, thanks, Michael.

Speaker Change: Unpack more and Michael I appreciate your comments.

Speaker Change: In the prepared remarks, but unpack kind of the re acceleration we've seen in pricing do you feel this is more.

Speaker Change: Travelers specific.

Speaker Change: You know as you continue to kind of.

Speaker Change: Reshape your.

Speaker Change: Geographic footprint or is this more of kind of.

Speaker Change: Industry wide you feel in terms of reacting to what you said was also higher replacement costs and while we can see is persistently higher catastrophe.

Speaker Change: Catastrophe levels and just also curious does your pricing power does that increase include changes in deductibles or terms and conditions.

Speaker Change: Sure. Thanks, Michael So.

Michael Phillips: So I would say the change from Q4 to Q1 really is about increasing insured limits to keep up with replacement costs. And we think that's really in response to broad industry trends, right? Continued increases in labor and materials, particularly things like roofing costs, roofing labor are big drivers of that. So we think that's really sort of a broad-based industry and economic trend that we're responding to. And again, the delta from the sort of mid to low teens to the high teens from Q4 to Q1 really is driven by that limit change. As I mentioned, we continue to seek and obtain significant rate in property underneath that, and those two come together to form that RPC number.

Speaker Change: I would say the the.

Speaker Change: The change from Q4 to Q1 really is about increasing insured limits to keep up with replacement costs.

Speaker Change: And we think that's really in response to broad industry trends right continued increases in.

Speaker Change: Labor and materials, particularly things like roofing costs roofing labor are big drivers of that.

Speaker Change: So we think that's really sort of a broad based.

Speaker Change: Industry and economic trends that we're responding to and again the delta from the sort of mid to low teens to the high teens from Q4 to Q1 really is driven by that limit change as I mentioned, we continue to seek and obtain significant rate in property underneath that and those two come together to form.

Speaker Change: That that RPC number.

Speaker Change: Okay.

Michael Phillips: Got it.

Speaker Change: Got it.

Michael Phillips: My follow-up is switching gears to social inflation. When we look at statutory data on an industry-wide basis, which I appreciate is a bit backward-looking, it appears that social inflation levels are rising. Would you agree with that viewpoint? Or are you all seeing that maybe the trend line has stabilized? And obviously, we appreciate that Travelers has been very proactive. taking more conservative, you know, views on, on, you know, your reserves and, and etc. But just curious on an industry wide basis, if you if travelers has a view, whether kind of social inflation continues to, to kind of gear a bit higher, thanks.

Speaker Change: My follow up is switching gears to social inflation.

Speaker Change: When we look at statutory statutory data on an industrywide basis, which I appreciate it's a bit backward looking.

Speaker Change: Here's that social inflation levels are rising.

Speaker Change: Would you agree with that viewpoint or or or are you all seeing that maybe the trend line has stabilized and now obviously, we appreciate that the travelers has been very proactive in.

Speaker Change: Taking a more conservative.

Speaker Change: Views on.

Speaker Change: On your reserves and.

Speaker Change: And et cetera, but just curious on an industry wide basis of U S. Travelers has a view.

Speaker Change: Whether kind of social inflation continues to to kind of gear up at higher thanks.

Michael Phillips: I would say social inflation is unfortunately alive and well and continues to impact the industry and including us. We see that. I would also say we've anticipated that. So the levels of social inflation we're seeing are generally consistent with our expectations. Thank you for the question.

Speaker Change: Yeah, I would say social inflation is unfortunately alive, and well and continues to impact the industry, including US we see that I would also say we've anticipated that so the levels of social inflation, we're seeing are generally consistent with our expectations.

Speaker Change: Thank you for the question.

Elyse Greenspan: We'll move next to Elyse Greenspan with Wells Fargo. Hi, thanks. Good morning.

Speaker Change: We'll move next to Elyse Greenspan with Wells Fargo.

Elyse Greenspan: Hi, Thanks, Good morning, My first question.

Michael Phillips: My first question, within personal lines, are there any kind of, you know, I think you called out lower non-weather losses in a home, any kind of one-off items that you would, you know, put numbers on within the underlying combined ratios in auto and home in the quarter? Thanks, Elyse. It's Michael. I don't think really beyond what I called out. Again, just to reiterate, right, on auto, we said improved frequency across multiple coverages. And we talked about sustained moderation and severity trends.

Elyse Greenspan: Within personal lines are there any kind of.

Elyse Greenspan: Thank you called out lower non weather losses in in home any kind of one off items that you would put numbers on within the underlying combined ratios in auto and home in the quarter.

Elyse Greenspan: Yeah.

Elyse Greenspan: Thanks, Elyse, it's Michael I don't think really beyond what I called out again, just to reiterate right on auto we said improved frequency.

Elyse Greenspan: Across multiple coverages and we talked about sustained moderation in severity trends.

Michael Phillips: The one thing I would say in auto, again, just to reiterate is, is Q1 is typically our lowest combined racial quarter in that line. So if you think of that as a one off, that's just I think, an important reminder. Other than that, you know, I think we had, you know, another mild winter in 2025. We had a mild winter in 2024. So that's, again, just something to keep in mind as you as you look forward. The last thing I would point out on auto is renewal premium change has been declining on a written basis.

Elyse Greenspan: One thing I would say in auto again, just to reiterate as Q1 is typically our lowest combined ratio quarter in that line. So if you think of that as a one off that's just I think an important reminder.

Elyse Greenspan: Other than that I think we had another mild winter in 2025, we had a mild winter in 2024. So that's again just something to keep in mind is as you.

Elyse Greenspan: As you look forward.

Elyse Greenspan: Last thing I would point out on auto is.

Elyse Greenspan: Renewal premium change has been declining on a written basis.

Michael Phillips: That will drive lower earned impact from lower earned favorable impact from pricing as we look forward, which again, you can just see as you look in the rear view mirror at those RPC numbers, there won't be as much favorable earned effective pricing in the go forward quarters. As respects property, again, I pointed to a favorable non weather experience. That's something we've been talking about. It's something we continue to see particularly favorable frequency in non weather, water and fire loss experience.

Elyse Greenspan: That will drive lower earned impact from lower earned favorable impact from pricing as we look forward, which again you can just see as you look in the rearview mirror at those RPC numbers, there won't be as much favorable.

Elyse Greenspan: Effective pricing in the go forward quarters.

Elyse Greenspan: As respects property again, I pointed to a favorable.

Elyse Greenspan: Non weather experience that.

Elyse Greenspan: That's something we've been talking about it's something we continue to see particularly favorable frequency in non weather water and fire loss experience.

Elyse Greenspan: Yes.

Michael Phillips: Thanks. And then my follow up, you know, sticking, I guess, with personal auto on the impact of tariffs. I know in response to an earlier question, right, you guys mentioned, you know, one of the offsets as an advanced, you know, build up in advance of these tariffs. And you guys, I think, said, you know, mid single digit impact on trend. So if you think about timing, just given, right, that there is, you know, obviously going to be a build up of parts and it takes time for there to be an impact. Do you think you'll start to see the impact of the tariffs and that higher loss trend in May and June?

Elyse Greenspan: And then my follow up sticking.

Elyse Greenspan: Sticking I guess with personal auto on the impact of tariffs.

I know in response to an earlier question you guys mentioned one of the offsets as it advance buildup in advance of these tariffs.

Elyse Greenspan: And you guys I think said you know mid single digit impact on trend.

Elyse Greenspan: Do you think about timing.

Elyse Greenspan: Just given that there is obviously going to be a buildup of parts and it takes time for there to be an impact do you think youll start to see the impact of the tariffs and that higher loss trend in May and June So I would like in Q2. So how do you think about just like the quarterly cadence.

Michael Phillips: So like in the Q2, or how do you think about just like the quarterly cadence, you know, of the impact on your personal auto margin? Yeah, at least two things. One, I just want to be really clear on this. It's not a change in trend. It's a one-time change in the severity. So I think it's just an important clarification.

Elyse Greenspan: The impact on your personal auto margin from the tariffs.

Elyse Greenspan: At least two things one I just wanted to be really clear on this it's not a change in trend. It's a one time change in the severity side I think it's just an important clarification and two it's hard for us to really know when this would take effect with that.

Michael Phillips: And two, it's hard for us to really know when this would take effect, but the May-June timeframe seems a little short, so probably a little later in the year, sometime in the back half of the year, but I'm not sure I'd call it more finally than that. Thank you.

Elyse Greenspan: May June timeframe seems a little short so it probably a little later in the year. Some time in the back half of the year, but I'm not sure I'd call it more finely than that.

Elyse Greenspan: Yeah.

Elyse Greenspan: Thank you.

Elyse Greenspan: Thank you.

Andrew Anderson: We'll move next to Andrew Anderson at Jeffrey's. Hey, good morning. Just on the auto business, I think you mentioned it was constrained a little bit by some actions on the property side.

Elyse Greenspan: We'll move next to Andrew Anderson at Jefferies.

Andrew Anderson: Hey, good morning.

Speaker Change: Just on the auto business I think you mentioned it was constrained a little bit by some actions on the property side could you maybe level set for us how much of the auto book is open for new business and how much of the homeowners book is open for new business.

Andrew Anderson: Could you maybe level set for us how much of the auto book is open for new business and how much of the homeowners book is open for new business? Um, sure, maybe I'll just step back and give a little broader context in addition. So, uh... I would say that we are open for new business in most geographies across the country. And then within that, we have some very specific constraints. On the auto side, we're open for new business in virtually every state. Again, we have a more limited appetite in a couple of key geographies there related to whether or not we think we have rate adequacy.

Andrew Anderson: Yes.

Andrew Anderson: Sure, maybe I'll, just step back and give a little broader context. In addition, so.

Andrew Anderson: I would say that we are open for new business in most geographies across the country.

Andrew Anderson: And then within that we have some very specific constraints on the auto side. We're open for new business in virtually every state again, we have a more limited appetite and in a couple of key geographies there.

Andrew Anderson: Related to whether or not we think we have rate adequacy, but at this point, we're talking less than a handful of states, where we have those challenges.

Andrew Anderson: But at this point, we're talking less than a handful of states where we have those challenges. The property answer is a little more complicated, because in property, we've really got three primary issues that we're working through in terms of managing and thoughtfully deploying our property capacity. First is overall profitability. And as we've talked about, property is a little bit behind auto in terms of reaching target margins on a state-by-state basis, and so we're managing that. Second is catastrophe exposure. And then third is local market concentration of exposure. And so predominantly in property, the places that we are not open for new business fall into those last two categories.

Andrew Anderson: The property answer is a little more complicated because then property. We've really got three primary issues that we're working through in terms of managing and thoughtfully deploying our property capacity. The first is overall profitability and as we've talked about property is a little bit behind auto in terms of reaching target.

Andrew Anderson: <unk> on a state by state basis, and so we're managing that second is catastrophe exposure.

Andrew Anderson: And then third is local market concentration of exposure and so predominantly in property. The places that we are not open for new business.

Andrew Anderson: Fall into those last two categories.

Andrew Anderson: You know, we have some specific local geographies where we've got outsized market share that we're working to manage down. And then we've got our, you know, sort of continued optimization of risk and reward as respects catastrophe losses. So that's the color behind it. But I would say, you know, the places that were literally closed for new business are pretty limited. But that that more broadly, it's a matter of of monitoring and thoughtfully deploying the property capacity in many of those markets.

Andrew Anderson: We have some specific local geographies, where we've got outsized market share that we're working to manage down and then we've got our sort of.

Andrew Anderson: Continued optimization of risk and reward as respects.

Andrew Anderson: Catastrophe losses.

Andrew Anderson: So that's the color behind it but I would say the places that we're literally closed for new business are pretty limited.

Andrew Anderson: But that that more broadly it's a matter of Av.

Andrew Anderson: Our monitoring and thoughtfully deploying the property capacity in many of those markets.

Andrew Anderson: Thank you. And then just on workers comp, it looks like it was down 7% year over year. I wouldn't think that's impacted by the casualty reinsurance program. But could you maybe just talk about the pricing that you're seeing there and maybe growth in that market? Thank you.

Speaker Change: Thank you and then just on workers' comp it looks like it was down 7% year over year I wouldn't think that's impacted by the casualty reinsurance program, but could you maybe just talk about the pricing that youre seeing there and maybe growth in that market.

Speaker Change: Yes, Andrew. This is this is Greg yeah, we continue to see pricing that's down in the workers comp side of the business. So that's what's driving that.

Speaker Change: Fluctuations from quarter to quarter of course like audit premium.

Speaker Change: And audit premium I, just want to comment on audit premium that goes into net written premium is the change in audit premium than we had historically high levels last year, while we still have strong levels of audit premium that change also factored into that.

Speaker Change: Thank you.

Speaker Change: Okay.

Kaveh Montazeri: We'll move next to Kaveh Montazeri at Deutsche Bank. Morning. A follow-up on personal insurance policies in force.

Speaker Change: Well move next to cause any montazeri at Deutsche Bank.

Speaker Change: Good morning, a follow up on personal insurance.

Speaker Change: Policies in force.

Kaveh Montazeri: Unknown Speaker . Situation in California, I guess a bit of a headwind when it comes to growth. Are you seeing any other geographies for homeowners that maybe could help you offset that? Maybe a geography where you're not really big, thinking maybe we're seeing Florida is improving a bit, albeit from a low base. Are you seeing any offsets that could maybe allow you to grow a pith in homeowners? Yeah, thanks. Thanks for the question. I would say, you know, to take that question and link it back to my response to the previous one. California certainly is a distinct example of where we're constraining property capacity, but it's not the only one.

Speaker Change:

Speaker Change: Situation in California, I guess a bit of a headwind when it comes to growth.

Are you seeing any other geographies for homeowners that maybe could help you offset that maybe the Joshua if youre not really big thinking, maybe we seeing florida, improving a bit, albeit from a low base.

Speaker Change: Are you seeing any offsets that could maybe allow you to grow pithy in homeowners.

Speaker Change: Yeah. Thanks, Thanks for the question I would say.

Speaker Change: To take that question and link it back to my response to the previous one California is certainly is a.

Speaker Change: Distinct example of where we are constraining property capacity, but it's not the only one we have a number of states, particularly in the south and in the Midwest, where we're constraining property capacity for the reasons that I mentioned and again most of the time that's limiting growth.

Kaveh Montazeri: We have a number of states, particularly in the south and in the Midwest, where we're constraining property capacity, for the reasons that I mentioned. And again, most of the time, that's limiting growth. But in some of those cases, it's non-renewing business in areas where we've got too much concentration. That said, to your point, there are places where we're open for business in both property and auto. And I think that you see that contributing to the new business growth in auto this quarter, because we are seeing new business growth in those places. It is important to remember, I think, when you think about our line of business growth and production, that we're essentially 50-50 property and auto.

But in some of those cases, it's non renewing business in areas, where we've got too much concentration.

Speaker Change: That said to your point there are places, where we're open for business in both property and auto and I think that you see that contributing to the new business growth in auto this quarter.

Speaker Change: Because we are seeing new business growth in those places.

Speaker Change: It is important to remember I think when you think about our line of business growth and production that we're essentially 50 50 property and auto.

Kaveh Montazeri: And so we're different from most participants in the industry. Our actions in property, given that mix of business and given our tendency to package auto and property, does mean that our property actions are going to have an impact on our ability to grow auto. But really, at the end of the day, we focus on each state individually, looking at the auto and property opportunities and the opportunity to best manage the portfolio. And we are working to take advantage of those places where we don't have the constraints to help support auto and overall portfolio growth.

Speaker Change: And so we're different from most participants in the industry our actions in property given that mix of business and given our tendency to package auto and property does mean that our property actions are going to have an impact.

Speaker Change: On our ability to grow auto.

Speaker Change: But really at the end of the day, we focus on each state individually, you're looking at the auto and property opportunities and the opportunity to best manage the portfolio and we are working to take advantage of those places where we don't have the constraints.

Speaker Change: To help support our auto and overall portfolio growth.

Kaveh Montazeri: Thank you.

Speaker Change: Thank you and my follow up is on the reserve releases and workers comp could.

Kaveh Montazeri: And my follow up is on the reserve releases in Walker's comp. Could you guys give us an update on what you're seeing in terms of medical claims inflation versus your own assumptions? Sure, so that's continued to behave pretty well for us, and we've made the comment a bunch of times, but it's worth reiterating that the long-tail nature of comp just means you can't afford to get behind on the assumptions that you're making. So even though we've seen... Medical Costs, Inflation come in benign to what we had allowed for, we've been pretty reluctant to make a fundamental change to our longer-term view that we're baking into our pricing assumptions and our reserving actions.

Speaker Change: Could you guys give us an update on what youre seeing in terms of medical claims inflation versus your own assumptions.

Speaker Change: Sure So thats continued to behave.

Speaker Change: Pretty pretty well for us and we've made the comment a bunch of times, but it's worth it's worth reiterating that.

Speaker Change: The long tail nature of comp just means you can't afford to get behind on the assumptions that you're making so even though we've seen.

Speaker Change: Medical cost inflation.

Speaker Change: Come in benign to what we had allowed for we've been pretty reluctant to make a fundamental change to our longer term view that we're baking into our pricing assumptions in our in our reserving actions. So another quarter, where you saw some good news in and medical severity.

Kaveh Montazeri: So another quarter where you saw some good news in medical severity, and again, our view is we continue to assume that that is going to return to some higher normal by historical standard level of inflation on a go-forward basis.

Speaker Change: And again, our view is we continue to assume that that is going to return to some higher normal by historical standard.

Speaker Change: Level of inflation on a go forward basis.

Speaker Change: Thank you.

Speaker Change: Yes.

Bob Hwang: We'll take our next question from Bob Hwang at Morgan Stanley. Good morning. I think a lot of the questions I have were asked, but maybe one on commercial auto. I know that you talked about auto PYD as a whole. But if we look at statutory disclosures on commercial auto, as well as like a variety of other data, for example, your 10-Q claims and claims-adjusted expenses data and things of that nature. Industry seems to be facing continued headwind from litigation costs and reserve challenges, but it seems like you're holding up fairly okay. Just curious about how you think about commercial auto for the industry, but also as well as for yourself going forward.

Speaker Change: We will take our next question from Bob Huang at Morgan Stanley.

Speaker Change: Okay.

Bob Huang: Good morning, I think a lot of the questions I have are asked but maybe one on commercial auto.

Bob Huang: I know that you talked about <unk> as a whole, but if we look at statutory disclosures on commercial auto.

Speaker Change: As well as Europe.

Speaker Change: Like a variety of other data for example, your 10-Q claims and claims adjustment expenses data and things of that nature.

Speaker Change: Industry seems to be facing continued headwinds from litigation costs and reserve challenges, but it seems like youre holding up fairly okay. Just curious how you think about commercial auto for the industry, but also as it was for yourself going forward.

Bob Hwang: Yeah, maybe some commentaries around that.

Speaker Change: Maybe some commentary around that.

Dan Frey: Yeah, Bob, it's Dan. So I'll focus on on us rather than the industry. No, commercial auto, you know, was a challenge when we started talking about social inflation back in 2018 2019. We really, we really haven't called had much mention of commercial auto in the last couple of years really because I think we've reached a point where we we started to make sure that we were reviewing and assessing the data as it came in, informed by what we went through in 2018 and 2019. And as a result, to your observation, you know, we really haven't had to do much in the way of changing those estimates in the last couple years.

Speaker Change: Yes, Bob its Dan So I'll focus on on us rather than the industry commercial auto was a challenge when we started talking about social inflation back in 2018 2019.

Speaker Change: We really we really havent.

Speaker Change: Called had much mention of commercial auto in the last couple of years really because I think we've reached a point where we.

Speaker Change: We started to make sure that we were <unk>.

Speaker Change: Reviewing and assessing the data as it came in informed by what we went through in 2018 in 2019 and as a result to your observation, we really haven't had to do much in the way of changing those estimates in the last couple of years as to whether or not the industry is in a good place from a reserving perspective.

Dan Frey: As to whether or not the industry is in a good place from a reserving perspective, I'm not sure. One thing, you know, that we are sure about the industry in commercial auto is it continues to need price because returns on that line still aren't where we'd like them to be. But as you heard Greg say again today, we continue to get price there, but feel good about where we are on the balance sheet. And just that we have a new commercial auto product that is out in the market and we feel terrific about it.

Speaker Change: I'm not sure why.

Speaker Change: One thing that we are sure about the industry and commercial auto is it continues to need price because returns on that line is still aren't where we'd like them to be but as you heard Greg say again today, we continue to get price there, but feel good about where we are on the balance sheet. Just have we have a new commercial auto product that is out in the market and we feel terrific about it.

Speaker Change: Yes.

Unknown Executive: Excellent, thanks.

Speaker Change: Excellent. Thanks, I got all my questions have kind of a long winded the tech question.

Unknown Executive: I got a, my next lines are kind of a long winded tech question. So if you think about the capabilities you've mentioned, right, enhanced digital capabilities, streamlined work workflow, cyber risk policies, How much of the capabilities are contingent on in-house software development? How much of it is based on third-party capabilities? I guess the way I'm thinking about it is that if we go back to how much we think about maintenance tech versus new technology spent, like, does that ratio eventually change to the point where you don't have to spend as much on maintenance technology going forward?

Speaker Change: So if you think about the capabilities you have mentioned right enhanced digital capabilities streamline work workflow cyber risk policies.

Speaker Change: How much of the capabilities are contingent on in house software development, how much of it is.

Speaker Change: Based on third party capabilities.

Speaker Change: I guess the way I'm thinking about it but if we go back to how much do you think about maintenance pack versus new technology spent like does that.

Speaker Change: <unk> eventually changed to the point, where you don't have to spend as much on maintenance technology going forward just kind of curious on your tech strategy thoughts there if that makes sense at all.

Unknown Executive: I'm just kind of curious on your tech strategy thoughts there, if that makes sense at all. I think your premise is right. I'm not going to quantify how much is in which bucket. I will say that anytime we're investing in a capability, we analyze whether there's a proprietary benefit to us developing it and owning it. And when there is a proprietary benefit, we do that. When there's not a proprietary benefit, we're happy to source it from third parties. So I do think the trend you're describing probably is a fair one. And we'll continue to drive the favorable mix of our investment spend.

Speaker Change: Yes.

Speaker Change: Bob I think your I think your premise is right I'm not I'm not going to quantify how much is in is in which bucket I will say that anytime we're investing any capability, we analyze whether theres a proprietary benefit to us developing it and owning it and when the rest of proprietary benefit we do that when there's.

Speaker Change: <unk> not a proprietary benefit we're happy to source it from from third parties. So I do think that trend youre, describing probably is a fair one and will will you will continue to drive the favorable mix of our investment spending.

Unknown Executive: Excellent. Thank you.

Speaker Change: Excellent. Thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

Mark Hughes: And we'll take our last question today from Mark Hughes at True. Yeah, thank you very much. The change in reinsurance, is it possible to break that up by line of business? Was that was that all in GL? Marcus, Dan, it's mostly GL, but we described it sort of broadly as as the casualty lines. And so I think we're going to not probably get more specific, but it would help us with things like your core GL umbrella claims, things like that. Thank you very much. Thank you.

Speaker Change: And we'll take our last question today from Mark Hughes at Trs.

Speaker Change: Yes, thank you very much.

Mark Hughes: The change in reinsurance is it possible to break that out by line of business with them was that all in GL.

Mark Hughes: Mark It's Dan, it's mostly GL, but we described as sort of broadly as the casualty lines and so I think we're going to not probably get more specific but it would help us with things like your core GL umbrella claims things like that.

Mark Hughes: Okay.

Mark Hughes: Understood. Thank you very much thank.

Mark Hughes: Thank you.

Mark Hughes: Okay.

Abbe Goldstein: And that does conclude the Q&A session. I'll turn the conference back over to Abbe Goldstein for closing remarks. Thanks everyone for joining us today. And as always, if there's any follow up, please get in touch with Investor Relations. Have a good day. And this concludes today's conference call. Thank you for your participation.

Mark Hughes: And that does conclude the Q&A session I will turn the conference back over to Abbe Goldstein for closing remarks.

Abbe Goldstein: Thanks, everyone for joining us today and as always if there's any follow up please get in touch with Investor Relations have a good day.

Abbe Goldstein: And this concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: You may now disconnect.

Abbe Goldstein: Okay.