Q2 2025 Travelers Companies Inc Earnings Call
Ladies and gentlemen, welcome to the second quarter results. Teleconference for travelers.
Speaker Change: We ask that you hold all questions until the completion of the formal remarks at which time you will be given instructions for the question and answer session. As a reminder, this conference is being recorded on July 17th 2025. At this time, I would like to turn the conference over to Miss Abby Goldstein senior vice, president of investor relations. Miss Goldstein, you may begin.
Abby Goldstein: Thank you. Good morning and welcome to Travelers discussion of our second 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: Speaking to today will be Alan Schnitzer, chairman and CEO Dan Frey CFO. And our 3 segments presidents Greg teslows, give business insurance, Jeff Clank, of bond, and Specialty insurance, and Michael Klein of personal insurance.
Speaker Change: They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks and then we will take your questions.
Speaker Change: Before I turn the call over to Alan, I'd like to draw your attention to the explanatory note. Included at the end of the webcast presentation, our presentation today includes forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties, and is not a guarantee of future performance.
Speaker Change: Actual results May differ materially from those expressed or implied in the forward-looking statements due to a variety of factors.
Speaker Change: These factors are described under forward-looking statements in our earnings press release. And in our most recent 10, q and 10K filed with the SEC, we do not undertake any obligation to update forward-looking statements.
Speaker Change: Also in our remarks or responses to questions, we may mention some non-gaap Financial measures, reconciliations are included in our recent earnings, press release, financial supplement, and other materials available in the investor section, on our website. And now I'd like to turn the call over to Alan Schnitzer.
Alan Schnitzer: Thank you, Abby. Good morning, everyone. And thank you for joining us today.
Alan Schnitzer: We are pleased to report exceptional second quarter results, driven by excellent underwriting and investment performance.
Speaker Change: We are in core income of 1.5 billion dollars or $6.51 per diluted share.
Speaker Change: Return on equity, for the quarter was 18.8%, bringing our core return on equity for the trailing 12 months to 17.1%.
Speaker Change: Underwriting income, reflects Strong, net, and premiums, and a reported combined ratio that improved, almost 10 points to 90.3%.
Speaker Change: The Improvement in the combined ratio benefited from strength across the board.
Speaker Change: underlying underwriting income of 1.6 billion. Pre-tax was up, 35% over the prior year quarter.
Driven by 7% growth in net earned premiums to 10.9 billion and an underlying combined ratio that improved 3 points to an excellent 84.7%.
Speaker Change: All 3 segments contributed to these terrific results with strong, net, and premiums, and excellent reported and underlying profitability.
Speaker Change: The underlying combined ratio and business insurance improved by almost 1 point to an excellent 88.3%.
The underlying combined ratio in our bond. And Specialty business was a very strong 87.8%.
Speaker Change: And the underlying combined ratio in personal insurance improved by 7 points to a terrific 79.3%.
Speaker Change: Our high-quality Investment Portfolio. Also, continue to perform well generating after tax, net investment, income of 774 million for the quarter.
Driven by reliable returns from our growing fixed income portfolio.
Speaker Change: Our underwriting and investment results together with our strong balance sheet, enabled us to return, more than 800 million of capital to shareholders during the quarter.
Speaker Change: Including 557 million of share repurchases.
Speaker Change: At the same time we continue to make strategic investments in our business.
Even after this deployment of capital adjusted book value per share was up by more than 14% as compared to a year ago.
Speaker Change: Turning to the Top Line through skilled execution. By our field organization, we grew net written premiums to 11 and a half billion dollars in the quarter with growth in all 3 segments.
In business insurance, we grew net written premiums by 5% to 5.8 billion dollars.
Speaker Change: And our small commercial select business.
Speaker Change: Those 2 markets make up 70% of the net written premiums in business insurance.
Speaker Change: Given the high quality of the book. We were very pleased with strong retention of 85% in the segment.
New business was a record 744 million, a reflection of the relationships, we've built with customers and distribution partners.
Speaker Change: By delivering valued products services and experiences.
Speaker Change: In bond and Specialty insurance. We greet written premiums by 4%, to 1.1 billion, with retention of 87%, and our high quality management liability business.
Speaker Change: In our industry-leading security business. We were net written premiums by 5%. From a particularly strong result in the prior year quarter.
In personal insurance, we were net premiums by 3% to 4.7 billion dollars driven by strong renewal premium change in our homeowners business.
Speaker Change: you'll have more shortly from Greg, Jeff, and Michael about our segment results,
Speaker Change: In may, we announced an agreement to sell most of our Canadian business, to dfinity for 2.4 billion or 1.8 times a book value excluding excess local capital.
Speaker Change: As we noted at the time, the transaction does not include our Premier shity business.
Speaker Change: We also shared that we expect allocate about 700 million of the net. Cash proceeds for additional share repurchases in 2026.
Speaker Change: And that we expect the transaction to be slightly accreted to earnings per share in each of the next several years.
Speaker Change: What was a relatively small transaction for us? It's no worthy in reflecting an important point.
Speaker Change: We are Relentless in our commitment to discipline, Capital, allocation and value creation.
Speaker Change: Taking a step back. The Canadian Marketplace has evolved over the last decade or so and a few significant ways.
Speaker Change: First a small number of insurers have built significant scale and Market influence.
Speaker Change: In part through vertical integration with distribution.
There were no compelling inorganic opportunities for us to close the market share Gap.
Speaker Change: And we didn't see vertical integration as a realistic opportunity for us.
Speaker Change: Also, the regulatory environment has become more challenging.
Speaker Change: While we were confident that we could continue to manage successfully in Canada, the outlook for our Canadian business relative to our other businesses.
Speaker Change: combined with the very attractive offer, from a strategic buyer made reallocating the capital to the better decision
Discipline, Capital Management isn't only about deciding how to deploy the marginal dollar.
Speaker Change: It's also about continually and rigorously reassessing the capital. We have already deployed
Speaker Change: and whether it's still delivering the best long-term value.
I want to thank our outstanding team in Canada and recognize the value. They've created over many years.
Speaker Change: I'm confident that they and our Canadian customers and Brokers will benefit from being part of the country of 1 of the country's leading and fully integrated property cache of the insurance.
Speaker Change: I also want to reaffirm our commitment to our ongoing International businesses.
Speaker Change: This deal is not part of a broader Geographic repositioning. It's simply a smart transaction.
Speaker Change: Transaction that speaks volumes about the way we think about our business.
Speaker Change: At Travelers were optimizers relentlessly focused on ensuring that both our capital and our attention are invested where we can generate attractive returns profitable growth, and the greatest long-term value for our shareholders.
Speaker Change: To sum things up our results, for the first half of the Year reflect exceptional underwriting performance.
Record operating cash flow and steadily Rising investment returns and our growing fixed income portfolio.
Speaker Change: We're building on the strong momentum to continue discipline, execution of our proven strategy.
With our Diversified business operating from a position of strength.
Our outlook for continued premium growth and attractive underwriting margins.
Speaker Change: Orderly conditions generally in our Target markets.
Speaker Change: And a positive trajectory for investment income.
Dan: We remain highly confident in the outlook for our business. And with that, I'm pleased to turn the call over to Dan
Dan: Thank you, Allan.
Dan: We're very pleased with our financial results. This quarter both overall and by segment,
We generated higher earned premiums and meaningfully improved, both the reported and underlying combined ratios compared to the prior year quarter.
Dan: At 84.7% the underlying combined ratio marked, its third consecutive quarter below 85.
Dan: The combination of higher premiums and the excellent underlying combined ratio led to our fourth consecutive quarter with after tax underlying underwriting income of more than a billion dollars.
Dan: Up 339 million or 36% from the prior year quarter.
Dan: The expense ratio for the second quarter was 28.6%.
In line with our expectations.
That brings the year to date expense ratio to 28.4%.
And we continue to expect a full year expense ratio of 28 to 28.5%
Dan: As we've discussed previously, the second quarter is historically our most active cat period.
Dan: This year. However,
Our pre-tax cat losses of 927 million or 8 and a half combined ratio points. While significant, we're nearly 4 Points less than the second quarter cat plan. We shared with you during our year-end earnings, call in January,
Dan: Turning to Prior year Reserve development.
We had total net, favorable development of 315 million pre-tax.
Dan: In business insurance. Net favorable PID of 79 million. Pre-tax was driven by better than expected loss experience in workers comp.
Dan: Partially offset by Reserve additions and our runoff book related to environmental abuse and other longtail exposures with no single adjustment being particularly noteworthy.
Dan: In bond and Specialty net. Favorable pyd was 81 million pre-tax with favorability and Fidelity and shity
Personal Insurance had net, favorable pyd of 155 million pre-tax.
Driven by recent accident years in both auto and home.
Dan: After tax, net investment income of 774 million increased by 6% from the prior year quarter.
Dan: As expected fixed maturity nii was again higher than the prior year quarter reflecting both the benefit of higher invested assets and higher average yields.
Dan: Returns in the non-fixed, income portfolio were positive but not as strong as in the prior year quarter.
Notably for the first time, total invested assets surpassed 100 billion dollars. Excluding the net unrealized loss.
Dan: our outlook for fixed income nii including earnings from short-term Securities has increased from the Outlook, we provided a quarter ago,
we now expect approximately 770 million after tax in the third quarter in 805 million after tax in the fourth quarter.
Dan: New money rates as of June 30th are more than 100 basis points above the yield embedded in the portfolio.
Fixed income knee, should continue to increase Beyond 2025 as the portfolio continues to grow and gradually turns over with higher yields replacing maturing yields.
Turning to Capital Management operating cash flows. For the quarter of 2.3 billion were again very strong.
Dan: And we ended the quarter with holding company liquidity of approximately 2 billion dollars.
Dan: This marks our 21st consecutive quarter with operating cash, flows of more than 1 billion dollars.
Dan: Totaling more than 40 billion dollars over that time frame.
Dan: Interest rates decreased during the quarter. And as a result, our net unrealized investment loss decreased from 3.3 billion after tax at March 31st to 3 billion dollars after tax at June 30th.
Adjusted book value per share, which excludes net unrealized investment gains and losses was 144.57 a quarter end up 4% from year end and up 14% from a year ago.
Dan: We returned 809 million of capital, to our shareholders this quarter.
Comprising, share repurchases of 557 million in dividends of 252 million.
Dan: And we have approximately 4.3 billion dollars of capacity remaining under the share repurchase authorization from our board of directors.
turning to reinsurance page 18 of the webcast presentation shows a summary of our July 1st, reinsurance placements,
Dan: We renewed our Northeast property, CAD xol treaty, which continues to provide 1 billion dollars of occurrence coverage above the attachment point of 2.75 billion.
We also replaced, our personal insurance Coastal, hurricane cat, xol treaty. With an all perils Countrywide, Personal Insurance treaty that provides 50% occurrence coverage for the 1 billion dollar layer above an attachment point of 1 billion,
Dan: you may recall that last year's treaty had an attachment point of 2 billion dollars.
Dan: While in a model year, we wouldn't expect this to have much of an impact given the prospect of continued. Whether volatility we were pleased to obtain broader coverage at a reasonable cost.
Dan: These segments.
The quarter. Also featured. Excellent underwriting profitability, both on an underlying and as reported basis and Rising net investment income.
Dan: These strong fundamentals, delivered core return on Equity of 18.8% for the quarter and 17.1% on a trailing 12-month basis.
Dan: And position us very well to continue, delivering strong returns in the future.
And now for a discussion of results in business insurance, I'll turn the call over to Greg.
Greg: Thanks, Dan.
Insurance had a very strong second quarter, delivering segment, income of 813 million.
Greg: Up 5% from the prior year, quarter driven by higher net, earned premiums. And the combined ratio that improved 2 and a half points from the prior year quarter to a terrific 93.6%.
Greg: the Improvement was broad-based reflecting higher underlying underwriting income higher favorable prior year Reserve development higher, net investment income and lower catastrophes
Greg: We're extremely pleased with our underlying combined ratio of 88.3%, which improved from the prior year, by almost a point driven by the benefit of earned pricing.
Greg: Moving to the Top Line, our net written premiums increased 5% to an all-time quarterly high of 5.8 billion dollars. Led by strong growth of 10% in our core Middle Market business.
Greg: This was partially offset by a 3% decline in net, written premiums in National Property and other reflecting our disciplined underwriting.
Greg: As for production across the segment, pricing remains strong. With renewal premium change of nearly 8% driven by renewal rate change of 5.3%.
Greg: Renewal rate change in renewal premium, change, in every line, other than CMP and property were about the same or higher compared to the first quarter.
Renewal premium change in both umbrella and auto were both well into double digits.
Greg: Renewal premium change in CMP was a little lower but remained in the double digits.
The decline in renewal premium change. In property, was driven by based on National Property, reflecting the outlook for continued attractive returns. After several years of compounding price increases and improvements in terms and conditions.
Greg: Renewal premium change in the property line outside of National Property was down some but remains solid.
Retention across the segments, remained. Excellent at 85%.
Greg: Retention in Middle Market was strong while retention in our National Property. Business was a bit lower. As we seated some large accounts to the subscription Market on terms and pricing that we weren't willing to accept.
Greg: Lastly, new business of 744 million was a new quarterly record.
Greg: we're pleased with these production results and particularly our field segmented execution,
Greg: our proven strategy focuses on managing our business. In a granular manner balancing retaining our high-quality of book of business while obtaining appropriate pricing.
Greg: Our rate and retention results. This quarter reflect excellent execution, aligning rate, terms in conditions with environmental trends for each line.
Greg: While our continued High retention levels are an indication of a rational Marketplace. We believe our execution is differentiating.
Greg: it's the best people in the business powered by the best analytics and tools at the point of sale that delivered these segmented production results, ultimately producing these strong returns across bi
Greg: As for the individual businesses in select renewal premium change remains strong at nearly 11%.
Marking the seventh quarter in a row of double digit. Renewal premium change.
Greg: Renewal rate change of 5.3%, was in line with the prior year level.
As we expected retention was stable at 80% reflecting, our targeted CMP risk. Return optimization efforts which we will begin to wind down next quarter.
new business of 148 million continues to benefit from our industry-leading product offerings, including Bop 2.0 and our new commercial Auto product, which is now live in 42 States,
Greg: And our core Middle Market business. Renewal premium change also remains strong at almost 9%.
Excellent at 89%.
Greg: New business of 430. Million was the second quarter record.
Greg: To sum up business insurance, had another outstanding quarter. We continue to grow our quality book of business while investing in differentiating capabilities that position us for long-term profitable growth.
With that, I'll turn the call over to Jeff.
Thanks Greg.
Jeff: Bonded specialty posted another very strong quarter on both the top and bottom lines.
We generated segment income of 244 million and an outstanding combined ratio of 80.3% in the quarter.
Jeff: The underlying combined ratio was strong at 87.8%.
Jeff: Up modestly driven by the impact of earned pricing on our management liability business.
Turning to the Top Line, we're pleased that we grew net written premiums by 4% in the quarter.
Jeff: in our high-quality domestic management liability business, renewal premium change improved to 3.2%
Jeff: While retention remains strong at 87%.
These results, reflect our intentional and segmented initiatives to improve pricing given the loss environment.
Jeff: As expected, new business was lower than the second quarter of 2024.
As a reminder.
Jeff: Court is production was reflected as new business in the prior year quarter and is now mostly reflected as renewal premium.
Jeff: Comparisons to Prior year, new business levels will be similarly impacted for the remainder of the year.
Turning to our Market leading shy business.
Jeff: We grew net written premiums by 5% from a very strong level in the prior year quarter.
Jeff: Reflecting continued robust demand for our assurity products and services.
Jeff: so we're pleased to have once again delivered, strong top, and bottom line results, this quarter
Jeff: Driven by our continued underwriting and risk management diligence.
Jeff: Excellent execution by our field organization.
Jeff: And the benefits of our value added approach and Market, leading competitive advantages.
Michael: And with that, I'll turn the call over to Michael.
Michael: Thanks, Jeff and good morning, everyone.
Michael: I'm very pleased to share that Personal Insurance delivered, segment, income of 534 million for the second quarter of 2025.
Significantly improved underlying underwriting income in favorable prior year development contributed to this. Excellent bottom line result.
The combined ratio of 88.4% improved 20 points relative to the prior year quarter driven by a decrease in catastrophe, losses of nearly 14 points.
Michael: And a 7-point Improvement in the underlying combined ratio.
The underlying combined ratio of 79.3%, reflects the benefit of the actions, we've taken to improve the fundamentals of our business in both Auto and homeowners.
Michael: Net, written premiums grew, 3% in the quarter driven by higher renewal premium change in homeowners.
Michael: In automobile the second quarter, combined ratio was 85.3% and included a 5-point benefit from favorable prior year development.
Michael: The underlying combined ratio of 89% improved 6.2 points, compared to the second quarter of the prior year.
Michael: This Improvement was driven by favorable loss experience across both bodily injury and vehicle coverages and to a lesser extent the benefit of higher earning pricing.
Michael: In homeowners and other the second quarter combined ratio of 91.3% was a significant Improvement compared to the prior year, reflecting lower catastrophes, and strong underlying underwriting income.
the underlying combined ratio of 70.3% improved over 7 points compared to the second quarter of 2024,
This year-over-year Improvement was driven by both favorable non-catastrophe, weather losses and the continued benefit of earned pricing.
Michael: Turning to production our results. Reflect further progress toward positioning our Diversified portfolio to deliver long-term profitable growth.
Michael: In domestic automobile retention of 82%, remain consistent with recent periods.
Michael: Renewal premium change continues to moderate as intended reflecting improved profitability and our focus on returning to profitable growth in auto.
Michael: We're pleased to note that auto new business premium, increased 12%.
Michael: In addition, for the first time in more than a year, we wrote more new business policies than in the prior year quarter.
Michael: The new business momentum was primarily driven by our continued efforts to improve Auto growth.
Michael: The relaxing of some of our property restrictions also contributed to the new business momentum in auto.
Michael: In domestic homeowners and other retention, remained relatively consistent.
Michael: Replacement costs and secure rate increases in geographies where we have the need.
Michael: The decline in homeowners policies and force continues to be a result of our deliberate actions, to manage exposures in High cat risk geographies.
Michael: We're pleased with the progress we've made.
Michael: While we will maintain restrictions on property capacity where we can't achieve appropriate risk reward, we expect to relax many of our rate and non-right actions in most markets by the end of 2025.
Michael: To sum it up. This was a great quarter. We delivered strong segment income as our team continued, to improve the fundamentals of our business. While further positioning our portfolio for long-term profitable growth,
With that, I'll turn the call back over to Abby.
Abby Goldstein: Great. Thanks, Michael. Um, we are ready to open up for Q&A.
Thank you. In order to ask a question. Press star, then the number 1 on your telephone keypad. We respectfully ask that you limit your questions to 1 question and 1 follow-up. We will pause for just a moment to compile the Q&A roster.
And our first question comes from the line of Gregory Peters with Raymond James. Please go ahead.
Speaker Change: Uh, good morning everyone. Uh, so, um, I, I think for the first question, I'll, um, zero in on, uh, business insurance and pricing.
Speaker Change: Um, and looking at the renewal premium change, both in uh, business insurance X national accounts and select accounts in Middle Market.
Speaker Change: Feel like, uh, pricing is holding up pretty good. Maybe there's some pockets of weakness that you're seeing or some pressure. But, um, Greg in your comments, you talked about in the large National, um, account Market, um, losing some accounts to the subscription, uh, Market. I, when you talk about the, the pricing environment, how much of the select or Middle Market business has exposure to potential subscription market price competition and, you know, and just some additional color on where you're seeing pricing pressure in your middle markets business,
Speaker Change: Yeah, good morning Greg. Um, yeah, first of all, it wasn't casualty. It was National Property that I I referenced and so. Yeah. Typically you would see, you know, a shared in layered. A large property schedule will be built in into a tower and we're definitely seeing that some of the softer element of of the property business, uh, in those larger schedules. Um, that would leak a little bit into the top end of Middle Market, but not much and not be relevant for select.
Speaker Change: hey hey Greg just to just to come back and and paint a picture here and and I think Greg laid out a lot of detail in his answer but
Speaker Change: just to just to, you know,
Speaker Change: Create the context again and as he shared price and National Property was was lower workers, comp pricing was about the same, but price change in every other line, including the component of property, that's outside of the National Property business was actually quite strong. And in that context, I would also point to retention which we've always shared as a, real indicator of of Market stability. So, you know, we we are, we are quite comfortable with the very, very strong execution.
Oh absolutely. Uh, that's apparent in slide. 7 on your uh, Roe slide. Um, can I pivot to uh, the personal lines business? Um, and I think, uh, Michael you said in your comments, um, uh, you're going to relax some restrictions by the end of the year. Um, Can Can you sort of foreshadow? What what that looks like in terms of Premium production or how that might affect, uh, either your renewal uh, your well your retention rates, or your policy count growth?
Sure, Greg. Thanks. Thanks for the question. I think, you know, the, the reason I made the the comments around the, the plans to relax, some of our restrictions in property by year, end was just to give you a little bit of a feel for the progress that we're making. As I mentioned, we're pleased with our progress there.
Speaker Change: And we continue to see progress in our ability to improve profitability and manage volatility in the property line.
Speaker Change: The other reason I mentioned it is as we've talked about in the past, those property actions have been a headwind to Auto production.
Speaker Change: And so, while most of our progress, this quarter in Auto really was a direct result of our efforts to grow Auto.
Some of the states. We've begun to relax have also shown signs of progress.
Speaker Change: The point there. On the property side is, we've got a game plan in terms of the places we need to reduce exposure to manage volatility. We've got a game plan in terms of pricing, in terms of conditions, we need to make changes to, to improve profitability. And we're making good progress and executing that plan. And most of those actions should be completed by the end of 2025.
Speaker Change: Our next question comes from the line of David Moe motivating with evercore. Please go ahead.
Speaker Change: Hey, good morning. Um Alan I had a follow-up question, just on the the property side. So here, you allowed and clear, renewal premium change in property outside of National Property was down a little bit, but I guess, obviously positive still, um, How concerned are you about the durability of that? And, and if some of that, um, you know, if some of that, uh, weakness that you're seeing in large account, national account property starts to trickle down more into Middle Market. And even even further down
Yeah, David I I I think I think it's sort of missing the force for the trees. I mean, the, the overall landscape is is very positive. And
Really consistent. What with, what we're seeing in terms of returns now?
Speaker Change: You know, we we, we would expect the, you know, the the overall property Market to sort of, move in in a Direction. But historically, the the property outside of national property has just performed differently as, as you'd expect.
Speaker Change: Got it, thank you. And and then maybe, um, just to follow up question for for Greg. Um, so on the the business insurance underlying loss ratio, very strong at the 584. Um, I I think a, you know, in 2q last year, there was about a point of uh, light non-cat weather. Um, any of that, uh, happen again this year, um, in in second quarter that may have flattered the results a little bit or is this, is this sort of a cleaner number?
Speaker Change: Hey David, it's Dan. I'll take that. So so you're right in remembering that we did point out a little bit of favorability in last year's quarter we saw a little bit of favorability again in this year's quarter
Speaker Change: You know, I don't know if it's a new normal, but we've now seen several quarters where we've had a little bit of a little bit of favorability there again. It wasn't a, it wasn't a big component last year.
Speaker Change: So, yes, we see, you know, a little bit of favorability again this year, but plus, or minus a point, the combined ratio is still outstanding in business insurance.
Speaker Change: Our next question comes from the line of
Speaker Change: Brian Meredith with UPS, please go ahead.
Yeah. Thanks a couple. Just back on the underlying uh call lost ratios in in in bi. Um, how do you think about kind of the effect of tort inflation and and kind of what that's doing with your underlying kind of loss picks? You know? I I appreciate you're seeing Improvement but I would have thought just what we're hearing about all the you know problems with torque inflation out there. You know, you may not see that much of improvement underlying loss traces at this point because of some conservatism there.
Speaker Change: yeah, Brian I you know, the
Speaker Change: The tour inflation is is Alive. And Well hasn't hasn't gone anywhere and continues to to show up in in the numbers. I would say you know we've got an expectation for it, we're pricing for it, it appears the whole Market's pricing for it. If you look, if you look at what pricing is doing and so you know, all the social inflation we see is inside the, the numbers that you're looking at.
Brian: Great. So, so your your pricing for it is not having much effective margins. Okay. Um, second 1, Michael, I'm just just curious. Um, I appreciate the comments about what's going on with personal Auto. Do you expect kind of retention to kind of trend back towards called the mid 80s? It's kind of I think we're partial Auto has been. Is that, is that kind of where we should think about things heading?
Brian: Yeah, Brian I think it's I think it's a great question. Um,
Speaker Change: Certainly, you're you're right to recall that has historically and auto. We we would have run more say in 84 retention versus an 82. Uh, I would tell you that, you know, coming into 2025 our expectation was we would have seen retention recover as pricing, moderated
Speaker Change: Clearly, you haven't seen that in the numbers. Um, I think that's reflective of the overall competitive environment in auto.
Speaker Change: Run rate of of retention in auto.
Speaker Change: Appreciate it. Thank you.
Speaker Change: Our next question comes from the line of Myer Shields with KBW.
Myer Shields: Um, thanks so 2 questions. First, Michael, if I can follow up on that. Um, if you're growing on a new, well let me ask you a different point. How confident are you that there's no maybe telematics related adverse selection if you're growing a new business but retention hasn't yet come back to where you expected.
Michael: Um, I think it's a good question. My right? I I would tell you that, you know, underneath the production levels that were generating, uh, you know, we look at we look at retained business. We look at new business. We look at the profile underneath it. We don't see any signs of adverse selection in our profile metrics for either the business, we're retaining or or or the new business we're writing. So we really don't see any evidence of that.
Speaker Change: Okay. Excellent. And then, I guess drawing and on the commercial side, is there any sense that when lines of business soften in sort of the current cycle? And I know it's very line of business specific because it seems to be, uh, softening faster than we've seen after past hard markets. I know right now we're focused on property and, you know, a couple of years ago, but I'm wondering whether there's a theme there of this sort of Rapid softening that we hadn't seen.
Speaker Change: I'm not, I'm not sure, I get the question Meer, but I'm, I don't, I don't think so. What, what's your hypothesis that it's that it's softening faster because of what?
Speaker Change: So I'm not sure what the because of it would be, but in the past you'd have like very sudden and abrupt rate increases when the market got hard and then it would slowly soften. And the problem was that it softened for too many years at a moderate level. And I'm wondering whether for the lines of business, nursing softening now, uh, whether it's emerging faster than it had in the past, I have no good, uh, suggestion in terms of why that would be happening. I'm just wondering if it's happening.
Speaker Change: May I, I think the bigger Trends here, if you look back over a very long period of time, the the amplitude of the pricing cycle, I, I think is, is shrinking, you know, we the, the last time we made a bottom, we didn't really go below zero, and, and price has been positive for years now, in in most lines.
Speaker Change: Um, the the other Dynamic you see really is dispersion of pricing by line as a function of of rate adequacy in return.
Speaker Change: And so that, that's really what I think we're seeing. I think it's, it's less of some Market dynamic, in big shifts up or down. I think it's pretty rational relative to what we're seeing in terms of returns.
Speaker Change: Okay, perfect. That's very helpful, appreciate it.
Robert Cox: Our next question comes from the line of Robert Cox with Goldman Sachs. Please go ahead.
Robert Cox: Hey, thanks. Uh, for the first question, I just wanted to revisit the Tariff discussion that you all provided us with helpful thoughts on last quarter.
Robert Cox: How are you considering tariffs uh, within the pricing and margins today?
yeah, we we really haven't seen
Robert Cox: tariffs.
Robert Cox: Not certainly not in any any meaningful way and and you know we do have some expectation that there could be an impact. I think we said last quarter that we expect it in the back half of this year, to the extent. We do expect, it will put it into our, you know, our our lost picks and that'll make its way through to our pricing indications.
Robert Cox: But so far no impact really.
Speaker Change: Okay, great. Um, and then a question on distribution, uh, just curious how you you all are thinking about this continued consolidation of insurance brokers and, and how that might impact Travelers. Um, you know, you guys obviously, have some great relationships. Is that a Tailwind?
Speaker Change: Yeah, you know, this is this is now become a pretty long-term Trend and you know, we've been evaluating it really probably over more than a decade now and I think for the most part, it has been a tailwind and no reason to expect that that that wouldn't continue. We've got great relationships with those on the acquiring side so we tend to be a a net beneficiary of that process.
Alex Scott: Our next question comes from the line of Alex Scott with Barclays. Please go ahead.
Alex Scott: Morning. Uh,
Alex Scott: First 1 I have is, is just on sort of casualty versus property and and makeshift I you know, I think for the whole industry, you know, some of the growth in property over the last couple years has been pretty helpful for underlying margins, at least may maybe even overall margins. Um,
Speaker Change: Just given what's going on with property and that being a little bit more pressured in terms of price, would you expect any reversal on that any any help? You can provide us and just making sure we're capturing that Dynamic over the next 12 months.
Yeah Alex. It's Dan. So it you know we give you a recorder written premium by product and business insurance and and we did make the comment, maybe a year maybe a year and a half ago or so. But when property was growing faster than the rest of the book largely because of the significant price increases that were occurring, but we were also taking some new business that that had a modest benefit to margin, uh in mix.
Speaker Change: And maybe a quarter or 2 ago. We got a a question of you know, has that sort of gone away as the level of price increase in National Property has moderated to which the answer was? Yes. And if you look at
Property growth. Now it is no longer outside relative to.
Speaker Change: Business insurance overall. So, the short answer is it, it doesn't have much of an impact in terms of mixed change. It was never big enough that we actually called it down any meaningful way, but it was a slight good guy, uh, maybe a year and a half ago, and that's sort of gone away, but that's inside of the terrific results. We just posted this quarter.
Speaker Change: Got it helpful. Uh, second 1, I have is a workers comp.
I was just interested. If you're seeing any impact from, you know, some of the heightened claim environment in California, I think related to cumulative trauma claims and so forth. And, um, you know, and also, maybe just broadly. If, if some of the medical cost pressures that we're hearing some of the health insurance talking about or or finding their way into workers comp loss cost Trend at all.
Speaker Change: Hey Alex. Yeah, this is Greg. Um, regarding cumulative trauma that you clearly were, were seeing that in California and it's not a new quarterly Trend, it's something we've been seeing for a few years now. Um, we've been very responsive with underwriting and, and claim strategies to make sure we're we're managing that Dynamic. I think if you look at the overall rate indications of the bureau, in the state that are of just been approved of the cumulative, trauma is is definitely a dynamic underneath that. So I I think it's just a good example where again you know our evidence-based culture and our our collaboration has us in a really well positioned position right now.
Speaker Change: Alex, the thing, I'd add generally on on workers comp is lost. Trend continues to come in favorable to our expectations. Um, and and
Speaker Change: um,
Speaker Change: Consistent with, you know, the trends we've been seeing, you know really over a couple of years.
Speaker Change: Our next question.
Speaker Change: Of West, Carmichael, with autonomous research, please go ahead.
Carmichael: Hey, good morning. Uh, just wanted to come back to business insurance and in particular Middle Market, pretty strong, premium growth there at 10% in the quarter. Seems like no rate changes, pretty stable. But I just want to get any additional color on if you think, you can sustain that type of Premium growth rate Middle Market or maybe with striving the relatively stronger growth there in your view,
Speaker Change: Yeah, good morning, Wes. Yeah, we're we're not going to give you an Outlook in terms of where, you know, middle market price is going to go up, just give you some color underneath that. And, um, you pointed out the the 2, well, the 3 Dynamic, we have strong rate. Exposure change, that's driving. Good premium change. Um, and then retention continues to be near historical highs on that business which I think just demonstrates, you know, the strong value that we're bringing out into the marketplace and and new business. Our our Underwriters have been incredibly active in the marketplace and you put those 3 um into action in the quarter and you get a terrific number like 10%
Speaker Change: Thanks, fair enough. And and maybe just coming back on on social inflation and loss cost. Um, for travelers is this is pronounced in middle and small accounts as it is for for National. And and I guess if there is a discrepancy, is there any way to think about it in terms of rule of thumb and differences in loss cost trend?
Speaker Change: You see, it may be a little bit more pronounced in in larger business where there are, you know, larger limits involved and it's more potentially attractive Target for the plantus bar.
Speaker Change: Um,
Speaker Change: but we pretty well, see it across the entire book.
Speaker Change: Our next question comes from the line of Ryan Tunis with Cantor Fitzgerald. Please go ahead.
Hey, thanks. Good morning. Um, I just first, first question, just trying to think about
Um, is it kind of safe to say that that tells the whole story is there? Or is there something else you you point to underneath it that, you know, that might say something else.
Speaker Change: Hey hey Ryan this is Greg. Yeah clearly when you look at the exposure uh Trend in in business insurance it's aligned with economic activity and that shouldn't be surprising where inflation Trends have been coming down. Also so I think it's more linear with the longer term, you know, economy than than anything short term right now.
Speaker Change: and then, I guess just 1 for Dan, um,
Speaker Change: On the sale of the the Canada business should we think about that as having any type of proforma impact on the combined expense ratio of the underlying loss? Um I guess any of those figures.
Speaker Change: Yeah, not not much of an impact Ryan. So, for 2 Reasons, 1 is just a very small component of the overall
Speaker Change: mix of our business.
Speaker Change: um, so you know the the inclusion or exclusion of those results is we don't expect to have a significant impact on on margin really 1 way or the other, which is 1 of the reasons that you know, we said when we announced the deal, we expected to have
Speaker Change: A favorable but modestly favorable uh impact on EPS going forward.
Speaker Change: Our next question comes from the line of Elise, Greenspan with Wills Fargo, please go ahead.
Elise Greenspan: Hi, thanks. Um, good morning, I guess. My first question is going to be a follow-up to some of the Canadian sale. Um, you know, you guys, um, marked part of the, you know, proceeds right to be used for buyback but that leaves some extra Capital. So is that being, um, you know, set aside for for growth or for m&a and irregardless of whether you picked the m&a bucket maybe Allen you can just, you know, kind of give us you know a current update on just you know, views, um surrounding m&a.
Elise Greenspan: Good morning Lisa. So you can you can just think about that Capital as being reallocated to our other Capital needs of supporting our business, supporting our growth supporting other Capital objectives that we have. Um it's not it's not really big enough to change our
Elise Greenspan: our view towards m&a, 1 way or the other frankly. So I don't think it makes m&a either more or less likely but we continue to be very active in looking for things that would meet our objectives and as we've been pretty consistent about for a long time.
We we would be interested in in opportunities that would improve our return profile. Uh, improve volatility or provide us with other strategic capabilities. So there's really, really no change to our m&a strategy approach.
Speaker Change: Thanks. Um, and then my follow-up um you know, is kind of coming back um to just you know, medical inflation. Um you know, are there any considerations from the obb legislation and then you know, obviously you know, we've seen um you know, combined with just the fact that we've seen some, you know, companies. Sorry point to higher utilization stemming, you know, from some changes in in Medicaid availability.
Speaker Change: We we really haven't seen any nor would we expect any?
Any significant or even meaningful impact from from Medicaid at all, typically workers comp claims tend to come from people that are employed and aren't aren't on Medicaid. So, so that wouldn't be an issue and even if you had somebody who, um, was was both employed and on Medicaid, they almost always default to workers comp anyway, because it's, uh, it's a, a, a, a better, better Healthcare alternative for him. So there's really nothing in obb or in the Medicaid World. Generally, that we think is impacting workers comp.
Speaker Change: And and the 1 thing, I'll add at least there was a change to the Medicare fee schedule, but that was within expectations and historical Norms. So no surprises for that either.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of cave, mazari with Deutsche Bank. Please go ahead.
Speaker Change: Thank you. Uh, my first question is on the um, elevator amount of a share repurchases in the quarter.
Speaker Change: Um, was that mainly linked to a market volatility in in April and the proceeds that you had some, some Canada or should we think of that level, as being kind of a a new Baseline going forward?
Speaker Change: Hey, it's it's Dan. So a couple of things on that. So, so 1, um, we don't have proceeds from the Canada transaction. We said we'd expect that transaction to close in the early part of 2026. So that's when you'd see
Speaker Change: The incremental 700 million um for share repurchases, sort of start to become available.
Speaker Change: Really forecast, a level of of Sherry purchases what we're doing is is Right sizing capital. And so also related to the first part of the first part of your question. Um, we're really not Market timing, um, in terms of, you know what the stock price is at any given moment. We have a long-term view of
Speaker Change: Stock price intrinsic value likely growth in Book value and our view of what stock price is likely to be. And is when we reach a point where we have excess Capital um because we continue to generate excess Capital as Alan just said we'll look for opportunities to deploy it either to grow the business or organically to look for inorganic opportunities, make new strategic Investments.
Speaker Change: When we've exhausted all those opportunities.
Speaker Change: It's not our Capital, its investors and we're going to return it to shareholders but but that's really what we're doing and we're not leaning in or leaning out based on stock price at any particular moment. Uh as long as we're comfortable that
Speaker Change: The value relative to our view of long term is still there.
Speaker Change: Okay. And then if I could pivot to a personal lines, um,
Speaker Change: She didn't mention, uh, relaxing some restrictions on the, on the property side and and you did say, it's going to be it's going to have an impact on rate and non-right actions uh, by year end but does that also include relaxing. The ratio of how much business you ride in property versus Auto. I think you did mention in the past that you would like them to move in line just to keep a pretty good balance in your portfolio between the 2.
Speaker Change: Is that changing as well? Would you be more likely to write more Auto even if you can write as much on the property side or that's no change to that view?
Yeah. So this is Michael. Thanks for the question. I think, when we've talked about Shifting the mix of business in the past and the mix of the portfolio in the past, our Focus really has been shifting, it more toward Auto,
Speaker Change: uh, to get the portfolio Back in Balance between Auto and property. Uh, when you look at the pif changes over time, you see progress in that regard, right? The
Speaker Change: uh, well, while we do still see a reduction in Auto pith, it's about 25% of the reduction in property, so that demonstrates progress in mixing toward property, um, as we
Speaker Change: Sorry at mixing towards Auto. Um, as we relax the restrictions in property, our goal would be to deploy that property capacity and support of writing package business.
Uh, which is our, which is our primary strategy in in personal insurance. And so we would expect the um, the relaxing of some of the property restrictions to bring with it both property and auto opportunities as we look forward.
Speaker Change: We have time for 1, more question and that question comes from the line of the Graham Gandhi with HSBC. Please go ahead.
Speaker Change: Hi morning, everybody. Um, my question relates to uh, cyber if uh, you guys are seeing any signs of moderation in the rate reductions for cyber and whether any of the recent losses
Speaker Change: Might help to understand the sentiment, uh, for the better.
Speaker Change: Say that um, cyber remains a competitive uh price environment from a market perspective.
Speaker Change: Um, as I pointed out in my prepared, remarks inside our management liability business, we've been taking some segmented and disciplined focus on a couple of specific lines of business. Cyber is 1 of those that that we believe the loss environment is not fully reflected in the, the pricing in the marketplace. And so, um, that that's our perspective on it, um, what it means for the future of that market, I wouldn't forecast.
I can't thank you. And my follow-up is, um, related to, uh, the investment book. So in terms of the ratings, mix for the Investment Portfolio. I see, um, a notable, uh, downward movement from the AAA bucket to AAA. I'm assuming that uh, would have been driven by the Moody's action on the US. Uh, could you confirm it? That was indeed the case and what does that do to your Capital model? Uh, and and the capital requirements on your internal model.
Speaker Change: Yeah, it's Dan so, so that's correct. That's that's the driver both, uh, both levels of credit quality. Still super strong. Um, were were very comfortable with the overall mix of the portfolio and the overall credit rating of the portfolio. We're well within our internal guidelines. Um, and really don't don't view the
Um, creditors necessarily any less likely to be collected than they than they were previously. Um, so it's moved down, 1 Notch, you're correct. That's the driver and not really a level of concern for us.
Thank you.
Speaker Change: I will now turn the call back over to Miss Abby Goldstein for closing remarks.
Abby Goldstein: Thanks very much. We appreciate everyone joining us today. And as always, if there's any follow-up, uh, please reach out to investor relations, uh, have a good day.
Thank you again for joining us today. This does conclude today's presentation. You may now disconnect