TRAVELERS COMPANIES, INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Catastrophe Response: Addressed devastation from hurricanes Helene and Milton, deploying claim professionals, mobile offices, and cross-trained colleagues. On track to resolve 90% of natural catastrophe claims within 30 days.
• Financial Results: Generated outstanding top and bottom line results. Core income over $1.2 billion, core return on equity 16.6%. Underlying underwriting income $1.5 billion pre-tax, up 73% year-over-year. Record net earned premiums $10.7 billion, up 10%, underlying combined ratio 85.6%.
• Investments: High-quality investment portfolio performed well. After-tax net investment income up 16% to $742 million. Expected after-tax net investment income for fourth quarter ~$700 million, and ~$2.9 billion in 2025.
• Capital Management: Returned $496 million of excess capital to shareholders, with ~$5.3 billion capacity remaining under share repurchase authorization.

Segment Performance

• Business Insurance: Underlying combined ratio improved nearly 2 points to an excellent 87.9%. Net written premiums grew 9% to over $5.5 billion. Renewal premium change was historically high at 10.5%, retention at 86%.
• Bond & Specialty Insurance: Delivered a very strong underlying combined ratio of 85.6%. Net written premiums grew 7% to a record $1.1 billion. High-quality domestic management liability business had 90% retention, surety business grew net written premiums by 7%.
• Personal Insurance: Underlying combined ratio improved 11.5 points to an exceptional 82.7%. Net written premiums grew 7%. Year-to-date underlying combined ratio in auto was 93.7%, with seasonality noted, and in home/other, underlying combined ratio improved significantly.

Guidance

• Investment Income: Expect after-tax net investment income of approximately $700 million for the fourth quarter of 2024 and ~$2.9 billion in 2025, with first quarter 2025 expected to be ~$700 million and fourth quarter 2025 ~$760 million.
• Capital Allocation: First priority is to invest capital back in the business to create shareholder value, whether through organic growth, talent/capability investments, or inorganic means; otherwise, return to shareholders.

Risks

• Economic and Geopolitical Uncertainties: Headwinds such as inflation, political/regulatory environment, and geopolitical risks that could impact pricing and market reactions.
• Catastrophe Impact: Potential volatility and impact of catastrophes on loss costs and capital deployment.

Question and Answer

Q: Gregor Peters asked about when BI renewal premium change might moderate and sustainability of rate environment.

A: Alan Schnitzer stated they don't project, but noted uncertainties like inflation and geopolitics; David Motemaden asked about rate environment sustainability and impact of hurricanes on property; Alan Schnitzer responded on positive and strong renewal price change but not specific projections.

Q: David Motemaden followed up on BI renewal rate change acceleration and property pricing; Alan Schnitzer discussed rationality of property pricing reflecting returns.

Q: Michael Zaremski asked about one-time items in BI underlying loss ratio; Dan Frey responded it was clean. Follow-up on personal lines deductible changes; Michael Klein discussed meaningful changes in cat-exposed geographies.

Q: Rob Cox asked about Select new business growth and retention; Gregory Toczydlowski discussed optimizing book of business due to weather events.

Q: Elyse Greenspan asked about reserving action in BI and personal auto margin sustainability; Dan Frey and Michael Klein responded on no reserving action and rate adequacy in auto.

Q: Brian Meredith asked about workers' comp pricing outlook; Gregory Toczydlowski discussed continuation of current pricing levels.

Q: Joshua Shanker asked about favorable development in personal lines and sustainability; Dan Frey and Michael Klein responded on prior year reserve development not tied to trend and thorough review of data.

Q: Michael Phillips asked about BI casualty renewal price changes and concerns; Alan Schnitzer responded no increased concern, and Jeff Klenk discussed management liability loss trends.