The operator introduces the third quarter results teleconference for Travelers and reminds participants to hold questions until the end. Ms. Abbe Goldstein, Senior Vice President of Investor Relations, will lead the discussion with Chairman and CEO Alan Schnitzer, CFO Dan Frey, and segment presidents Greg Toczydlowski, Jeff Klenk, and Michael Klein. The presentation includes forward-looking statements and caution is advised due to potential risks and uncertainties.

In the second paragraph, Alan Schnitzer discusses the company's non-GAAP financial measures and provides context for their recent earnings. He then highlights the strong underlying underwriting results and net investment income, but mentions the impact of elevated catastrophe losses and unfavorable prior year reserve developments. Schnitzer is pleased with the underlying fundamentals of the business, with record net earned premiums and an excellent consolidated underlying combined ratio. The commercial segments continue to deliver strong results, while the personal insurance segment is also improving.

The company's investments generated a strong after-tax net income of $640 million, thanks to a growing fixed income portfolio and solid returns from the non-fixed income portfolio. Net written premiums increased by 14% to a record $10.5 billion, with business insurance seeing a 16% growth and strong renewal rates. In the bond and specialty insurance segment, net written premiums reached a record $1 billion and retention for management liability and surety business remained high. Personal insurance also saw strong growth, driven by higher pricing. The company's production results were strong across all segments, positioning them well for the future.

The company is confident and well-positioned for the upcoming year, with expanding margins in their business insurance segment and strong pricing. They benefit from a low unemployment rate and wage inflation, leading to premium growth and attractive returns. They plan to continue pursuing price increases in order to achieve their return objectives. Their bond and specialty business has reached a milestone of $1 billion in net written premiums and their personal insurance business is seeing improved margins and additional price increases. The company's investment portfolio is also well-positioned with high interest rates.

The company has seen significant growth in their investment portfolio and expects continued growth in the future. They are investing in technology and have strong partnerships with distribution partners. The company remains confident in their outlook and is committed to creating shareholder value and taking care of their customers. In the third quarter, core income was $454 million and core return on equity was 6.9%, but was impacted by heavy cat activity.

The company is pleased to report record levels of earned premium and an improved combined ratio for the quarter. They also saw a strong underwriting gain and expense ratio, thanks to their focus on productivity and efficiency. However, they did experience $850 million in pre-tax catastrophe losses and $154 million in net unfavorable prior year reserve development. In business insurance, there were charges in their run-off business and increased reserves for abuse and molestation claims. Outside of run-off, there was favorable development in workers' comp but unfavorable development in commercial auto. Bond and specialty had favorable development in surety and management liability, while personal insurance had favorable development in homeowners and other. Net investment income was also up 27% from the previous year.

The company saw an increase in fixed maturity NII due to higher average yields and a growing portfolio of invested assets. Returns in the non-fixed income portfolio were also higher. The company is raising its outlook for fixed income NII for the fourth quarter and 2024. Operating cash flows for the quarter were a record high and all capital ratios met or exceeded target levels. The company's net unrealized investment loss increased due to rising interest rates and spreads. Adjusted book value per share also increased. The company returned $333 million to shareholders through share repurchases and dividends.

The company has $6.1 billion remaining for share repurchases and expects lower repurchases in the fourth quarter due to elevated catastrophe losses. However, they have seen double-digit premium growth and an improved outlook for fixed income NII. The business insurance segment had a strong third quarter with a record high combined ratio and a 16% increase in net written premiums. Renewal premium change accelerated and all lines except workers' comp saw higher renewal rate change.

The company is happy with their production results and retention levels, and they have seen an increase in new business. They are also pleased with the performance of their investments, particularly in their BOP 2.0 and commercial auto products. In the middle markets, renewal premium change and retention remained strong, and they are happy with the quality of submissions from their distribution partners. They continue to focus on risk selection, underwriting, and pricing. Overall, the business insurance segment had a successful quarter, and the company is investing in long term profitable growth. In the bond and specialty segment, they had great results in both top and bottom line.

In the third quarter, the company saw record segment income of $265 million, with a combined ratio of 80.7%. Net written premiums also reached a record high of over $1 billion, driven by strong demand for surety bonds and positive renewal premium change. The personal insurance segment, however, experienced a loss of $193 million due to elevated catastrophe losses from severe weather events. Despite this, the underlying combined ratio improved by 5.1 points and net written premiums grew by 14%. The automobile combined ratio for the quarter was 103.5%.

In the third quarter of 2023, the company's underlying combined ratio improved due to earned pricing and non-rate actions. In the auto sector, the trend of earned pricing and moderating vehicle repair and replacement trends are leading to positive results. However, the fourth quarter is historically more challenging due to winter weather and holiday driving. In the home owners and other sector, the combined ratio increased due to catastrophe losses, but the underlying combined ratio improved due to earned pricing, re-estimation of prior quarters, and a lower expense ratio. The company's disciplined market execution is reflected in their strong renewal premium change for home owners policies, but policies in force have not grown due to balancing rate adequacy, catastrophe risk, and regulatory risk. The company expects renewal premium change to remain elevated but moderate in 2024.

The paragraph discusses the increase in renewal premium change for domestic automobile policies and the decline in policies in force, as well as the efforts to manage growth and improve profitability. The company's team is praised for their response to the dynamic environment and their investments in capabilities for the future. The question posed by an analyst focuses on the company's longer term target for their underlying combined ratio and how it relates to the accelerating renewal rate trend, inflation expectations, and insurance-to-value initiatives.

The speaker agrees that they will not disclose their targets or objectives as it is sensitive information. They mention that renewal premium change is at record levels and there hasn't been much change in loss activity. They also mention that margins are expanding. When asked for more details on the underlying loss ratio, they decline to give a breakdown but state that there has been a benefit from earned pricing.

The speaker discusses the various factors that can affect a company's performance in a quarter, such as weather, base year, mix changes, and variability. They also mention that there were some good and bad results, but nothing significant. The speaker then answers a question about reserve development in their ongoing business, stating that workers' comp was favorable and commercial auto had some adverse development. They do not provide specific numbers but mention that they are constantly monitoring and adjusting reserves based on data.

Elyse Greenspan asks about any changes to the reinsurance program for 2024 that could have led to higher cats this year. Dan Frey explains that the changes made in the past year would not have had much of a difference, and that they will continue to evaluate their position and what's available in the marketplace. He also mentions their strong risk selection and preference for keeping more net than their peers. The next question comes from Ryan Tunis about home owners insurance and Michael responds that it may need more rate due to cat trends, but there could be a deceleration in premium growth due to automatic increases in limits.

The speaker explains that the increase in limits for home owners insurance policies has been a major factor in the growth of renewal premiums, but this trend is expected to decrease in the future. The company will continue to seek higher rates and implement non-rate actions to improve profitability in the property line.

The speaker asks about the retention of business insurance, noting that it has remained strong despite multiple rate increases. The response is that the company intentionally focuses on retaining high-quality business and that the market is currently rational. The next question is about adverse development in commercial auto and the company explains that this is due to recent data on claims, particularly bodily injury claims.

The company has been making modest changes to their data over the last few quarters, but recent data has shown larger changes than expected. This is due to a slower closing of claims in commercial auto, particularly in the bodily injury side. In personal auto, the company has seen a decrease in retention, but this is likely due to industry-wide pressures. The company is also driving rates through the book, which indicates a rational market. They have not yet reached written rate adequacy, but expect to in the coming quarters.

The speaker discusses their improved outlook for the quarter, citing record levels of RPC achieved and stabilized loss trends. They also mention that written rate adequacy still depends on factors such as price, loss trends, regulatory processes, and actual loss experience. The management liability business saw some favorable current year development, but it is not a significant amount. In business insurance, exposure growth remains healthy, but the speaker does not give specific details on the drivers of this growth.

During a webcast, Alan Schnitzer explains that the exposure growth in the economy is expected to slow down due to a moderate economy. He also mentions that they are encouraged by the strong audit premium in their core middle market business. In response to a question about written margins, Dan Frey clarifies that they are referring to the underlying combined ratio, excluding catastrophe losses and prior year reserve development.

The speaker discusses changes in prior year development and how it impacts their view of current year loss and go-forward loss. They also mention a topping off of the asbestos and environmental reserve and state that they are looking at all factors, including PYD, when determining loss trend. The speaker also addresses a decline in workers' comp premiums and states that there were no one-time items causing this, but it may be due to market conditions and rate compression. They also mention their thoughts on this line of business for 2024.

The speaker, Greg Toczydlowski, responds to a question about the slight decrease in net written premium for the quarter. He explains that this is due to rate pressure in the workers' comp line, but overall, the company is still performing well in this area. Another speaker, Alan Schnitzer, adds that they are pleased with the results of the workers' comp line and the outlook for the future. The questioner also asks about the underlying loss ratio for BI, and another speaker, Dan Frey, explains that there were some favorable and unfavorable factors that offset each other, resulting in a modest unfavorable impact. The next question comes from Paul Newsome.

The speaker is asking for help in understanding the increase in cat losses. They mention that inflation may be pushing losses that would not have been considered cat losses in the past into the cat designation. The speaker also acknowledges that there has been an uptick in catastrophe activity and attributes it to a combination of factors, including more frequent storms, population movement, and inflation.

In response to a question about the impact of cat designation on the combined ratio, Dan Frey explains that this quarter's higher number of severe convective storms did not result in any close calls that would have affected the underlying result. In a separate question about personal auto, Michael Klein mentions that there was not a significant impact from current year reserves on the underlying result, and that frequency and severity trends are in line with expectations.

During a conference call, Michael Ward asks about the impact of growth on PI margins and if volatility in non-cat property would affect the company's growth appetite. Dan Frey responds that they are aware of the amount of property they are putting on the books and how it affects their total exposures. He also mentions that property tends to have a lower underlying loss ratio compared to other lines of business. Michael Klein adds that their property growth is driven by rate and exposure change, and they are being selective with new business. Alan Schnitzer notes strong retention. In response to a question about rising G&A expenses, Jeff Klenk explains that they are making strategic investments for future success.

The speaker discusses two main areas of focus for their company: employees and technology investments. They also mention a favorable development trend in workers' compensation reserves and clarify that it is due to the duration of the liability and not increased aggressiveness. The next question asks about comments from larger reinsurance companies on U.S. casualty, specifically regarding social inflation trends.

Alan Schnitzer and Michael Klein of the insurance industry discuss the issue of rising severity in general liability and commercial lines. They believe this is a significant issue and have been addressing it since 2018. They have taken price increases in response and are closely monitoring the situation. In terms of auto insurance, the improvement seen is due to a combination of earned pricing and moderating external trends such as severity and repair costs.

The speaker discusses the improvement in loss cost trends in the physical damage space and attributes it to earned pricing and moderating trends. They also mention the proposed regulatory reforms in California and express optimism about the potential for positive changes. In response to a question about tech investments, the speaker states that details are not yet available but they are focused on key technological aspects.

Alan Schnitzer, CEO of the company, responded to a question about the company's investments in IT capabilities. He mentioned three main areas of focus: extending their risk expertise, providing great experiences to customers and employees, and optimizing productivity and efficiency. These investments include digitizing the value chain, improving customer journeys, and using advanced analytics and automation. He also mentioned that they have discussed these plans extensively and would be happy to share more details in a separate meeting. When asked about the impact of workers' compensation on the company's loss ratio, Schnitzer declined to provide specific numbers but stated that it is included in the overall number they have historically discussed.

The speaker, Abbe Goldstein, thanks everyone for joining the call and invites them to reach out to Investor Relations for any follow-up. The operator then concludes the call and thanks everyone for participating.

This summary was generated with AI and may contain some inaccuracies.