The Travelers Companies, Inc. Q3 FY2025 earnings call

• Financial Results: Earned core income of $1.9 billion or $8.14 per diluted share, with a return on equity of 22.6% for the quarter. Underwriting income of $1.4 billion pretax more than doubled, driven by lower catastrophe losses and improved underlying combined ratio. Investment income was $850 million, up 15%.
• Capital Management: Returned nearly $900 million to shareholders, including $628 million in share repurchases. Adjusted book value per share was up 15% compared to a year ago.
• Strategic Investments: Have invested $13 billion in technology since 2016, and have excess capital and liquidity due to strong results, anticipating higher share repurchases in the next couple of quarters.

Business Insurance: Net written premiums increased to $5.7 billion, with a segment income of $907 million and an underlying combined ratio of 88.3% (twelfth consecutive quarter below 90%). Bond and Specialty Insurance: Net written premiums were $1.1 billion, with a segment income of $250 million and a combined ratio of 81.6%. Personal Insurance: Net written premiums were $4.7 billion, with a segment income of $807 million, a combined ratio of 81.3%, and an underlying combined ratio of 77.7%.

• Anticipates higher level of share repurchase over the next couple of quarters.
• For 2026, expects an expense ratio of around 28% and fixed income net investment income of more than $3.3 billion, with quarterly figures starting at around $810 million in Q1 and growing to around $885 million in Q4.

• Economic, political, and geopolitical uncertainties.
• Loss environment risks including weather volatility and social inflation on casualty lines.
• Potential impact of tariffs on personal auto margins.

Q: Good morning, everyone. Boy, you're producing great bottom line results. Kind of surprising the stock's down as much as it is on the open. I think it's probably a reflection of the top line. And I know you spoke in detail about the different headwinds that you're facing, whether it's in business insurance, the property, Corvus and Bond and Specialty, or the underwriting actions in personal insurance that have affected your top line. When you go beyond the balance of this year and you start thinking at 26%, 27%, what does the Travelers business model look like in terms of top line growth on a consolidated basis? And how are you thinking about them?

A: Hey, good morning, Greg. It's Alan. Thanks for the thoughts and the question. So we're not going to give outlook on the top line, as you can imagine. But clearly, we understand that in order to meet our objective of delivering industry-leading return on equity over time, we need to grow over time. So it's a priority for us. And if you look back over the last couple of years, we've been very successful with that. In our, you know, we, as you noted by segment, we've talked about what's driving the results this quarter. But I guess what I would say is we are very confident that we've got the right value proposition. We're investing in the right capabilities to make sure we're positioned to grow this business. So we feel very good about the execution in the quarter. We feel very good about what we've accomplished in recent periods, and we feel very good about the outlook.

Q: The other I seem to ask this like every other quarter on the technology front, but you keep bringing it up, talked about the digital initiative you have going on in business insurance. Talk about some of the stuff going on in personal insurance. I think one of your peers came out earlier in the third quarter and talked about the potential of artificial intelligence to deliver human resource savings and headcount reductions over time of maybe up to 20%. I'm just curious if we can just go back to, I know you've got best use case on technology and AI, but go back to how you're thinking about this in the three to five-year period in terms of what it might mean to your expense ratio?

A: Yes. So Greg, I'll tell you, we are very bullish on AI, and we're leaning into it. You know, we're spending, you know, more than a billion dollars a year on technology. A lot of that is focused on AI. We expect significant benefits from it. And I think we've got a long track record, as I said in my prepared remarks, of identifying the right strategic initiatives and driving value from them. We're not going to tell you what our plan is for the expense ratio beyond next year, but I'll also tell you that more than our focus is on the expense ratio, it's on creating operating leverage. And that's what gives us the flexibility to deploy those gains however we want to deploy them. And so maybe it'll be efficiency, maybe it'll be productivity, but we are very bullish about the opportunity for investments that we have underway. We're very bullish about the data we have to fuel the AI. And think that it'll make a big difference in the years to come.