The Travelers Companies, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Overall Performance: The company reported excellent fourth - quarter and full - year results. Underwriting and investment performance was strong. For the quarter, core income was $2.5 billion or $11.13 per diluted share, generating core return on equity of 29.6%. Underwriting income pretax increased 21% compared to the prior year quarter. Investment portfolio performed well, generating after - tax net investment income of $867 million for the quarter, up 10%. Returned $1.9 billion of capital to shareholders during the quarter, including $1.7 billion of share repurchases. Adjusted book value per share was up 14% compared to a year ago.
• Segment - specific Execution: Business Insurance had strong net written premiums growth, excellent retention, and positive renewal premium change. Bond and Specialty grew net written premiums, with strong performance in management liability and surety businesses. Personal Insurance had strong results in auto and homeowners & other, with portfolio repositioning and AI - enabled underwriting improvements.
• Innovation and Technology: Over the past decade, the company has grown top line at a compound annual rate of 7% while improving underlying profitability. Now leveraging AI, with thousands of engineers, data scientists, and analysts building AI solutions. Dozens of scale generative AI tools in production, millions of transactions automated. Partnership with Anthropic to enhance AI assistance. Claim organization has over half of claims eligible for straight - through processing, and natural language generative AI voice agent launched for claim reporting.
• 2025 Achievements: Handled 1.5 million claims, paid out more than $23 billion in claim payments, and met the objective of closing 90% of catastrophe - related claims within thirty days.

Segment Performance

• Business Insurance: Fourth - quarter segment income was nearly $1.3 billion, up over $100 million from the prior year quarter. The all - in combined ratio was 84.4%, with an underlying combined ratio of 87%. Net written premiums reached an all - time fourth - quarter high of more than $5.5 billion. Excluding the property line, domestic net written premiums were up 4%. Renewal premium change was just over 6%, retention was excellent at 85%, and new business was $675 million, up 6% from the prior year quarter. Full - year segment income was nearly $3.7 billion, underlying combined ratio was 88%, and top line was $22.7 billion.
• Bond and Specialty: Fourth - quarter segment income was $236 million, with an excellent combined ratio of 83% and an underlying combined ratio of 85.7%. Net written premiums grew by 4% to $1.1 billion. In the domestic management liability business, renewal premium change was 2.8% and retention was strong at 87%. The surety business saw net written premiums increase from the prior year quarter. Full - year performance was strong, with management liability business navigating soft market conditions and leveraging advanced analytics, and surety business driving growth through industry - leading expertise.
• Personal Insurance: Fourth - quarter segment income was more than a billion dollars, with a combined ratio of 74%. Full - year segment income was over $2 billion, and combined ratio was 89.5%. Fourth - quarter net written premiums were comparable to the prior year, with strong renewal premium change in homeowners and higher auto new business premiums. Full - year net written premium increased 2% to a record $17.4 billion. Auto business had an underlying combined ratio improvement, and homeowners & other business saw combined ratio improvement. The portfolio was repositioned to optimize risk - return profile, and AI was leveraged to enhance renewal underwriting process.

Guidance

• Income and Return on Equity: Fourth - quarter core income was $2.5 billion and core return on equity was 29.6%. Full - year core income was $6.3 billion or $27.59 per diluted share, generating core return on equity of 19.4%.
• Investment Income: After - tax net investment income for the quarter was $867 million, up 10%. Expect approximately $3.3 billion after - tax fixed income net investment income in 2026, starting with about $800 million in the first quarter and growing to about $870 million in the fourth quarter.
• Expense Ratio: Full - year expense ratio was 28.5% and expect it to be right around 28.5% in 2026.
• Reinsurance: January 1 catastrophe reinsurance renewal had CAT XOL treaty with unchanged per occurrence loss deductible and attachment point dropped to $3 billion from $4 billion in 2025. Enhanced casualty reinsurance program renewed. Renewed 20% quota share with Fidelis.
• Capital Management: Returned $1.9 billion of capital to shareholders in the quarter. Expect share repurchases of around $1.8 billion in Q1 2026. Considering annual debt issuance to maintain more consistent debt capital ratio.

Risks

• Regulatory Environment: AI - related technology applications may be affected by regulatory changes, which could delay the expected benefits from technology spend.
• Property Market Dynamics: Pricing dynamics in the national property market, especially in large accounts, pose challenges in terms of rate adequacy and terms and conditions.
• Catastrophe Loss Uncertainty: Uncertainty in catastrophe losses can impact the combined ratio and capital management.
• Competition: Intense competition in the personal auto insurance space may affect market share and profitability.
• Tort Environment: The tort environment can influence casualty loss trends, potentially leading to higher loss costs.

Q: Gregory Peters asked about the technology - related expense ratio structure change and regulatory considerations affecting the expected benefits from technology spend.

A: Alan Schnitzer said in terms of expense, they manage it and have flexibility to optimize operating leverage. Regarding regulatory environment, it's constructive and they work with policymakers.

Q: Ryan Tunis inquired about the one - point deceleration in renewal premium change ex property in business insurance and rate adequacy in national property headed into 2026.

A: Alan Schnitzer said it was a bit of both exposure and rate. Dan Frey added that exposure was down and it's a matter of math between rate and RPC. Alan Schnitzer also said the pricing dynamic in national property was reflective of business profitability.

Q: David Motemaden asked about capital return, debt load management, and buybacks throughout the rest of 2026.

A: Dan Frey said they can't give much guidance on second, third, and fourth quarters of 2026 buybacks as it's impacted by usual factors. Alan Schnitzer added that the first objective for capital is to invest back into the business.

Q: Michael Zaremski asked about organic headcount growth or shrinkage and pricing trend in non - workers' comp casualty commercial lines.

A: Alan Schnitzer said they wouldn't project headcount beyond claim organization example. Greg Toczydlowski said umbrella had double - digit renewal premium change and GL was in mid - single digits in renewal premium change.

Q: Katie asked about the durability of underlying underwriting results in 2026 and reserve development.

A: Alan Schnitzer said they are confident due to larger and more profitable company and strong business put on book. Dan Frey said in casualty space, there's an uncertainty provision in loss picks and casualty loss generally performed as expected.

Q: Meyer Shields asked about the seasonal impact of lowering catastrophe reinsurance attachment point on first - quarter combined ratio components.

A: Dan Frey said he didn't think there would be much impact due to reinsurance program changes in aggregate.

Q: Brian Meredith asked about personal auto insurance competitive dynamics and tort environment impact on casualty trend.

A: Michael Klein said they have competitive advantages in independent agent channel, digitization, and package value proposition. Alan Schnitzer said the tort environment was challenging but some states were reacting and there were disclosure requirements related to litigation financing.