The operator introduces the Second Quarter Results Teleconference for Travelers and reminds participants to hold questions until the end. Ms. Abbe Goldstein, Senior Vice President of Investor Relations, then begins the discussion, followed by Alan Schnitzer, Chairman and CEO, Dan Frey, Chief Financial Officer, and three segment presidents. They will refer to the webcast presentation and discuss financial results and the current market environment. The presentation includes a caution about forward-looking statements and a note to refer to the company's earnings press release and SEC filings for more information.

In the second paragraph of the article, the speaker mentions that they may discuss non-GAAP financial measures in their remarks and responses to questions. These reconciliations can be found in their recent earnings press release and other materials on their website. The speaker then introduces Alan Schnitzer, who discusses the company's strong bottom line results for the quarter. This was driven by record net earned premiums and an improved underlying combined ratio. The company's commercial segments saw strong growth in net written premiums, with excellent production results.

The company saw strong growth in renewal premiums and retention, indicating successful execution and a disciplined marketplace. New business also increased to a record high, driven by customer and partner satisfaction. In the Bond & Specialty insurance segment, net written premiums grew due to high retention in management liability and strong production in surety. E&S writings reached a record level and net written premiums grew by 16%. Personal Insurance also saw strong growth in net written premiums, driven by continued pricing increases. The investment portfolio performed well, generating high net investment income due to strong cash flow. This quarter marks the seventh consecutive quarter of generating over $1 billion in operating cash flow, which supports strategic investments and growth.

Since 2016, the company has made significant investments in technology, returned excess capital to shareholders, and grown their investment portfolio. This has led to attractive returns and growth in adjusted book value per share. Their strong underwriting and competitive advantages have allowed for profitable organic growth. This has resulted in a high return on equity and consistent growth in adjusted book value per share. The company is confident in their future opportunities, with strong results in premium growth, bottom line, operating cash flow, and investment returns.

The company delivered strong financial results in the last 12 months, with a 13.6% core return on equity and a record level of earned premium. The underlying combined ratio improved by 340 basis points, leading to a significant increase in underwriting gains. The expense ratio remained in line with expectations and the company expects it to be between 28% to 28.5% for the full year. The industry experienced a high number of catastrophic events in the second quarter, resulting in $1.5 billion in pre-tax losses for the company. However, there was also $230 million in net favorable prior year reserve development, with better than expected loss experience in workers' comp offset by strengthening in general liability for young accident years.

The company has been proactive in addressing rising settlement costs and adjusting their view of loss development factors. They have seen good returns in the Umbrella line for impacted accident years and have enhanced their risk selection, pricing, and claim strategies. Court backlogs from COVID shutdowns are largely resolved, reducing uncertainty. In Bond & Specialty, net favorable PYD was $24 million pre-tax. Personal Insurance had significant net favorable PYD of $172 million pre-tax. Net investment income increased by 22% from the prior year quarter, with fixed maturity NII and returns in the non-fixed income portfolio both up. The company expects fixed income NII to continue to increase in the third and fourth quarters.

In the second quarter, the company's fixed income NII continued to improve and is expected to keep growing as the portfolio turns over. The company also had strong operating cash flows and a healthy liquidity position. Despite a modest increase in net unrealized investment loss, adjusted book value per share increased by 3% from the previous quarter. The company returned $498 million to shareholders through share repurchases and dividends. The reinsurance placements were also successful, with increased coverage for Northeast property and Personal Insurance hurricane CAT. Despite $1.5 billion in pre-tax cat losses, the company still delivered strong results, showcasing the strength and diversity of their business.

The underlying underwriting income has become a significant contributor to the company's earnings. In the second quarter of 2024, the underlying underwriting income increased by 32% compared to the same period in 2023. This has allowed the company to continue generating industry-leading returns with low volatility. The Business Insurance segment had a strong quarter with a 60% increase in segment income, driven by prior year reserve development, higher net investment income, and higher underlying underwriting income. The segment also saw an all-time high in net written premiums, driven by strong pricing and new business growth.

The company is pleased with the strong levels of renewal premium change, which was double digits for the fifth quarter in a row. This strong pricing was seen in all lines except for workers' comp. The company's field organization executed well and balanced the return profile and environmental trends for each line. Sequential rate movement from the first quarter showed increases in CMP, auto, umbrella, and workers' comp. Retention was improved or flat in all lines except for property, where some large accounts were traded away to the subscription market. In the individual businesses, renewal premium change was high at 12.3%, with a renewal rate change of 5.3%. Retention remained healthy but slightly decreased as the company optimized their risk return profile in certain geographies and classes. New business also saw an 8% increase from the previous year. In the middle market, renewal premium change remained strong at almost 10%.

The paragraph discusses the strong performance of Bond & Specialty in the second quarter, with a renewal rate change of 7% and a retention rate of 89%. The segment also saw a record high of $383 million in new business. The company's investments in tools and capabilities have been well received by their team and distribution partners, leading to their position as the top choice for customers and an essential partner for agents and brokers. The segment generated $170 million in segment income and a combined ratio of 87.7%, with an underlying combined ratio of 86.1%. The underlying loss ratio improved significantly, while the expense ratio was slightly elevated due to the Corvus acquisition. Net written premiums also grew by 8% to a record high.

In the high-quality domestic management liability business, the company saw a retention rate of 90% and positive renewal premium change. They also experienced growth in new business and net written premiums in their surety business. In Personal Insurance, the company saw an improved bottom line result due to strong underwriting and favorable reserve development, despite elevated industry-wide catastrophe losses. They also saw growth in net written premiums due to strong pricing increases in both auto and home. The auto business showed improved profitability and a lower underlying combined ratio due to higher earned pricing and lower losses from physical damage coverages. Roughly 2.5 points of the improvement in the quarter is considered non-recurring.

In the second quarter, the combined ratio for homeowners and other insurance improved by 16 points due to a lower underlying combined ratio and higher favorable prior year development. Catastrophe losses were similar to the previous year, but had a smaller impact due to price increases. The company's cat losses were consistent with their market share and their average annual cat losses remain below their market share. The underlying combined ratio improved by 7.6 points due to lower fire and non-weather water losses and earned pricing. The company continues to balance profitability and growth across their portfolio and saw strong retention in domestic automobile. Renewal premium change is expected to gradually decline and new business premiums were slightly lower compared to the previous year.

The Personal Insurance segment has seen improved profitability as a result of efforts to manage auto profitability and cross-line impact. Renewal premium change has increased and retention remains strong. New business and policies enforced have declined due to efforts to thoughtfully deploy capacity. In the Business Insurance segment, there have been $250 million in recent accident year umbrella charges, following $100 million last quarter. The company is confident that the changes made this quarter will put this issue behind them.

The company is being proactive and decisive in reacting to changes in expected claims costs. They are allowing for longer development factors and have taken actions through 2023. The underlying loss ratio in Business Insurance improved year-over-year, but there were no major changes to loss trend. The changes in prior year development had some impact on the umbrella line, but the overall movement in BI's underlying loss ratio was not significant. There is still some benefit from earned pricing.

Greg Toczydlowski, speaking on a conference call, noted that property losses were favorable and there were no significant movements in the quarter. Elyse Greenspan asked about the deceleration of BI pricing trends, which was due to National Property. Dan Frey provided more information on the umbrella increase, stating that it was spread across the 2021, 2022, and 2023 accident years and attributed to higher attorney rep rates, severity, and jury awards.

The company is reacting to unexpected data and adjusting their development factors for the future. The court backlogs caused by COVID-19 have been resolved. The changes to reinsurance are not expected to have a significant impact on the combined ratio. The company's competitive positioning is highlighted on Slide 8 of their PowerPoint presentation. There have been some surprising movements in the year-to-date top line results.

In this paragraph, Dan Frey and Greg Toczydlowski discuss the growth of national accounts and selective middle market in the company's business insurance sector. They note that while national accounts may have more variability due to their relatively small size and large individual accounts, they are pleased with the profitability of this segment. They also mention some refinements in underwriting for small commercial and strong margins in middle market. Overall, they are happy with the 7% growth in the total business and attribute any variations to factors such as booking lags and reinsurance processing.

The speaker points out that the year-to-date number is a better indicator of the top line of the business. The question then shifts to the Personal Insurance segment and the speaker addresses the challenges in the auto product and the competitive positioning in the marketplace. The speaker acknowledges the success of a peer in gaining market share, but notes that they are not the only outlier. The speaker explains that their success is hampered by certain geographies and their strategy of being a package writer of personal lines business.

The company's competitor is experiencing growth in auto insurance, but they are not heavily involved in personal lines business. This allows them to avoid challenges in high-risk property geographies where carriers insist on also writing auto insurance. The company is pleased with their auto new business growth in areas where they are not affected by these factors. Overall, the company's Personal Insurance business model has some significant benefits, and they are working to address the impact it has had on growth. The company's cat losses have been a topic of discussion.

In this paragraph, the speaker discusses changes in the reinsurance market and how they may affect the company's absorption of catastrophic events. They clarify that the company is not holding onto more reinsurance and that the attachment points have gone up due to growth in the premium base and insured values. The speaker also addresses competitor behavior in the personal auto line, mentioning that renewal premium changes and price changes are working their way into books of business across the industry. They also note that there is less rate filing activity this year compared to last year.

The speaker discusses the decline in policy counts in the homeowners insurance sector, attributing it primarily to a reduction in new business. This decline is more significant in states with high catastrophe risk. Some non-renewal activity is also taking place, but it is limited and primarily focused on removing high-risk policies from the portfolio.

The speaker discusses non-renewals and new business reductions as part of efforts to improve profitability. They also address the company's cat program and being a net underwriter. A question is asked about the cause of losses in Umbrella and a previous experience with similar losses.

The speaker, Alan Schnitzer, responds to a question about whether the small middle market and lower writing limits of the business will experience inflationary impacts faster. He explains that it is not primarily an issue with auto insurance, but a combination of economic and social inflation driving claim activity into the Umbrella line. He also mentions the company's culture, data, and analytics as factors that allow them to see and react to this early, giving them a competitive advantage. Schnitzer also notes that the returns in these years are still attractive and the company is closely monitoring the situation.

During a conference call, an analyst asked about lower retention in select accounts and elevated cats (catastrophes) in commercial lines. The CEO and CFO of the insurance company responded, stating that they are not seeing disproportionate cats in any of their business units and are simply optimizing their book of business to improve risk return profiles. They also mentioned that they are continuing to monitor workers' comp loss trends, which have been favorable in terms of frequency and severity. They did not see any adverse impacts from recent legislation in Florida regarding Medicare reimbursement rates for doctors.

In this paragraph, Dan Frey and Brian Meredith discuss the impact of state changes on pricing and the growth of E&S capabilities at Travelers. Alan Schnitzer explains that while Travelers is predominantly a standard lines writer, they have had substantial E&S capabilities for a long time and have recently leaned into it as they see attractive opportunities. The acquisitions of Fidelis and Corvus have also contributed to this growth.

The speaker is unsure of the impact of the Supreme Court overturning the Chevron doctrine on exposure for various casualty lines. They believe it may have a positive effect, but it is too early to tell. They also mention that non-catastrophe weather and catastrophe losses may be inversely related or unrelated, depending on the quarter.

The speaker discusses the underlying result for the quarter, which was impacted by fire and non-weather water losses. They mention that non-cat weather had an inverse relationship with catastrophes this quarter. The speaker also talks about managing weather as one but notes that some events may be reported differently by other companies. When asked about the competitive environment in commercial lines, the speaker declines to give an outlook on pricing but mentions that they expect renewal price change to remain positive and strong, particularly in the casualty line.

The speaker is addressing the uncertainty in the casualty lines and expects more to come from the industry. They mention positive and strong performance, driven by casualty. The speaker also discusses the company's consistent underlying underwriting income and how top line growth has translated into a bigger base of reliable income. They mention reaching $2 billion in after-tax underlying underwriting income in 2020 and $3 billion in 2023, with a 30% increase in the first half of the year.

The Travelers franchise has experienced significant growth in underlying earnings power in recent years. Underwriting income has been a reliable contributor to the bottom line, particularly in the workers comp business, which continues to be attractive and profitable. The company is confident in its balance sheet position and does not anticipate any major changes in frequency or severity of claims.

The speaker discusses the ongoing reserve position of the workers' comp book, stating that they have had favorable development in the line for many quarters. They feel positive about the balance sheet reserves and are respectful of frequency and severity trends. They also mention that New Jersey homeowners pricing has been challenging due to rate increases.

The speaker discusses the reason for shrinking their business in New Jersey, citing the challenging loss environment and regulatory challenges as the main drivers. They express a desire to write more business in the state if they could get approval for the necessary rates, but the current regulatory dysfunction is a significant obstacle. The Q&A session ends and the speaker thanks the participants for joining.

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