TRV - Earnings call transcript Q2 2018 | The Travelers Companies, Inc.

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Operator

Good morning, ladies and gentlemen. Welcome to the Second Quarter Results Teleconference for Travelers. We ask that you hold all questions until the completion of the formal remarks at which time you’ll be given instructions for the question-and-answer session.

As a reminder, this conference is being recorded today, July 19, 2018. At this time, I would now like to turn the conference over to Ms. President Relations. Vice Senior Goldstein, of Investor Abbe Ms. Goldstein, begin. you may

Abbe Goldstein

our morning, welcome you. all discussion supplements seen this of released Thank webcast of release, Travelers’ presentation and have Hopefully, our and morning. results. to Good earlier financial XXXX second you press quarter

under these travelers.com can site materials section. of found on Investors All Web our be at the

Bond Presidents, today & Tom Officer; and Financial will Benet, Jay Chief Insurance; Michael and be Speaking Insurance; Business three Specialty Alan Greg segment Klein CEO; Kunkel of Schnitzer, of Chairman and Toczydlowski our of the results then Personal and market Insurance. the to they discuss will They as the remarks prepared we They will will of go financial our webcast through presentation take business and questions. environment. refer current

over your to call included I’d I the note explanatory turn attention the the to draw end at of webcast. the like Alan, to Before

now We section call like questions, financial the in release, our may included we mention filed obligation to and The expressed today may forward-looking to not and press statement earnings These other uncertainties financial And risks includes available to statements undertake statements the factors. recent a responses of and to Reconciliations under our SEC. and not forward-looking presentation variety described future are with Our I’d Actual Alan. recent update the in cautions of are statements. forward-looking any over some any on factors our the implied those our materials in Web most investors site. involves materially from guarantee supplement XX-Q our do earnings performance. is or forward-looking statements. press remarks in that and company Also a measures. differ in in due non-GAAP release Investors turn to or XX-K forward-looking results

Alan Schnitzer

$XXX income Good equity second an losses storms. and we X.X%. These active this were tornado/hail million quarter PCS losses context, million million everyone were Core $XXX by more X.X%. it, of Catastrophe threshold $XX to us you, that cat put losses ROE core don’t This net of To a you for Thank them generating arose have joining quarter of some favorable about million a season. return million you report of and reported point on out was today. finer results our that’s to To hit defined thank morning qualify would around impacted income from give Abbe. morning, than of nine significantly on expectation. as expected. we catastrophes $XX we our $XXX as

events we recent PCS million historical were our that expected. about only more hurricanes, our we well this series of that, nor'easter, from exceeded losses losses wildfires quarters and and of makes that the the pre-tax said have all-in, catastrophe for. than and expectation; variability That’s $XX price So within tornado/hail, anticipate experience Having would normal have mudslides.

a unusual in that seen includes decade. like the last haven’t string We circumstances. also It some

For landfall season. category example, were time U.S. last has was made California one first year than more the in mainland the and for on historic the wildfires hurricane one

want don’t over take from we overreact to approach balanced it want something period a under-react. unpredictable when time, to to conclusions And inherently over takes value we to time. relatively weather, shareholder than creating as of what as developing anymore of place short terms In we comes a

and inform attention in to modeling on latest in actuarial our of impact weather the the our underwriting has and leading we’ll use continue always, expertise to business pricing As our full our decisions. weather

consolidated other we is or significantly. losses, a the is detail for activity large point weather in will believe on a results going that shortly. that by Insurance large Business Greg loss so important the we and ratio. weather, include normal losses, business expectations data and more exceeded number We expectations to our What’s large the our underlying of combined no you share sometime small this fire results Whether this related, over to commercial and a primarily doubt manage have to addition In on that variability success can that vary in time. there’s the trend its are analytics from actual with expertise evaluate see and nearly

the underlying Bond impressive produced businesses strong We’re with the underlying confident mentioned. premium. the a perform of in combined improved auto Insurance, points about and continue benefitted Personal underwriting a an X XX.X%, result underlying our In the business. of result Business execution ratio Insurance, pricing well. Insurance improvement and do. prior I that, that & solid combined combined another record activity a the of year. just as On loss an prior in Specialty in strong large the combined quarter the of ratio light X.X of we underlying taken actions the year. earned was In particularly ratio XX.X% consistent we’ve from ratio from underlying successful with results XX.X% Underneath underwriting basis, The our of was to

basis quarter improved we year-to-date consolidated and to to improve from benefit strategic continue Our basis investments points the as ratio XX points basis, discipline expense in by workflow productivity. in and a XX technology expense and on

invested rates from was were level our and income the of up, short-term terms for higher driven results we pleased by higher fixed investment our a assets. of that portfolio In income quarter,

to premiums continued business of segments $X.X each Turning very to we production, record with the X% successful pleased contributing. a execution increased marketplace. by our billion written were Net our in with

of degree high positive from forward we renewal change. premium reflects As this results we in to higher of levels a would to quarter recent premium quarters, benefit Once large saw growth and going again, levels premium. retention and earned underwriting expect

the past speaks we’re that business As quality the out pointed in the I of to writing.

reached explained large for making to that highest fall level top to healthy in success new that, In designed early level strategic of investments some the us. addition while retention create Business we’re renewal XXXX our line last we levels. of a at remained Day are business X.X in Investor part contributed at opportunities The premium its In quarter. initiatives of to historically high points, the since those change Insurance,

in new rate Excluding points you X.X last higher than change retention, to little for business increase our Auto renewal quarter period sufficient to made from a injury net and XXXX the In part Insurance, an same a increase time digits. of which X% that premium value considerably workers’ would premium rate change we renewal business point we at the led were to business higher wrote Surety the we in Personal insurance less positive bodily Bond time a double domestic We management record late as cover liability to first point business was we compared economic year. during including volume that during unexpected keep was that & and in to a be PI able not rate the the were grew up was contributor if severity. comp, the Specialty XXXX, Insurance, premium. to of charging achieve adequacy. written of In period business nonetheless know,

it Michael in have losses on quarter. We the color at large fact that. provide To and do level. to segment production Greg, unfortunately the weather sum in up, will been detail more able Tom

our a the continue changing advantages new decades looking well rapidly developing over we’ve in continue define has marketplace. it in and our said, forward, to underlying As We a results That strength doesn’t But us of quarter that to success the to us at is in our underwriting full looking the competitive the clearly business. capabilities of serve see I world. our in that part and developed reflection we’re lead and attention. enable and in that to

that, We to efficiency. balance over have with to Combining to for productivity and I’ll industry agents strategy, in that invest management continue expertise, our our our capital to brokers customers, sheet, and and superior strong risk the experience remain and And lead franchise by positioned will extending well time. and turn it enhancing improving over we results and Jay. deliver leading talent continue with our

Jay Benet

Thanks, quarter X.X%, ROE million in year from and X.X%. prior from million, down the $XXX Alan. was income core Core was down $XXX

PYD cats compared and Higher commercial rather in and $XXX large year our and XX.X% resulted of $XX primarily modestly that few our losses related in million. operating performance; charge to the from compared indicated, X.X in Alan year of pre-tax the increase they in XX.X% an million quarter. PYD were driven for the $XX prior were related. also lower, of was accounted $XXX a fire a lower these by $XXX quarter $XXX prior million not million consolidated to increase ratio, pre-tax million to versus incremental point catastrophe losses, X.X As combined changes million pre-tax fundamentals

in points, by improvements a BI’s PYD primarily in only which entirely combined fire consolidated set losses the point of excludes X.X XX.X% demonstrating Bonds Specialty, combined was point as related and increase our almost by ratio steady both underlying that and impacts remains diversified ratio Our of one-tenth businesses. changing PI resulted of cats underlying X.X and the respectively, & value of the from offset of X.X

tax $XX underwriting Pre-tax Bonds of tax Specialty. by prior all million increases by corporate Our $XXX lower pre-tax million income. $XXX million in results exempt NII income due versus details strong, increased the PI year net segment the increased of quarter our while to quarter income in remains the million $XXX provide million Michael investment current & $XXX $XXX and investment for both driven million Tom shortly. and underlying in gain Greg, to after-tax will from more the U.S. rate

increased first As rates more prior of income of compared fixed we as the well NII year their each looking compared $XX income due core And in $XX income assets increase as to to invested third income in tax quarters NII delivering by although for premiums. quarter rate Non-fixed of fourth net pre-tax not as million income corporate well increased the corresponding perform quarter pre-tax overall, million an million quarter, to after-tax lower particularly million the by income forward resulted $XX will as for by short-term After-tax million NII driven environment the increase fixed recent benefitted and and written $XXX this prior approximately quarters U.S. the the expect well million of million favorable by NII. interest continues remainder to XXXX. with in year by rate. to in from $XX XXXX in $XX the average growth that $XX fixed

pre-tax domestic favorable driven environmental on a by net primarily million offset including current for expected workers’ $XX than and years expected XXXX of prior, development increase in experience and loss quarter experience a comp reserve liability by to development was better basis, higher XX general than Turning reserves. million partially in BI’s accident in

end by over recent by domestic driven recent small to million and target personal in loss up of equity. million P Specialty’s unrealized auto. favorable at changes we regulatory run net investment of or all remained our many gains Year-to-date, on gains for the investment in had and you a impacted the our was $XX strong. Schedule no current value little net decrease which with This net $XX.XX net after-tax all high manage at the very, first and our changes accident fixed or at $XX.XX unrealized liquidity quarter. impact fixed increased the ended Bonds driven have our favorably that not has the per in excludes across unrealized higher gains higher manner capital remains book flows losses of our development. end of in or management beginning that’s the product of periods. than end years or of reserve X% to income per I’d investments small were or share levels. the & better value and in unrealized $XX and benefitted the with the We is share, the Importantly, on losses GL all to in net consistent the the in the favorable of years shareholders’ of unrealized which investment to the at liability resulted impact and and of in gains year X% billion the interest across development company now year. business. unrealized $XXX generally behind the $X.X investment trend loss developed development of of $X.X of losses cash second of had time the billion holding of income investment capital. a portfolio remind moved year loss quarter unfavorable at $XXX at rate After-tax statutory beginning which accident driver $X.X U.S. do year The book billion current and a a of first combined from lines were subs, end than last the position for and basis all lines maturity, help years X% were aggregate beginning all the in NII quarter million aggregate quarter relatively Operating the very the quality $XX.XX of very million We the product than Adjusted all quarter. the PI our ratios

consistent our We capital continue almost million of Year-to-date, repurchases. we to to $X.XX capital our of returned over shareholders capital $XXX million. excess capital through quarter returned share excess strategy ongoing of with and dividends million $XXX this and dividends our generate of repurchases $XXX comprising management to and share shareholders we billion

webcast the reinsurance our the brief over the and overall reinsurance I’d microphone Greg, program. update of component Page a catastrophe our protection provide turning point Before significant you of program, to on XX to

has lines The expired is that the $XXX on reinsurance we be and/or cat Point of by attachment earthquake, May. million May the limit Treaty to certain The by Northeast in take environment the specified with bond with losses agreement did through cat A year, limit same while the consistent will new Long prior hurricane, $XXX While point million million storm advantage structure current our Cat III limit business increase Excess-of-Loss nor’easter, annually. reinsurance new reducing amount. for agreement replaced maximum of generally our Property pricing XXX XXXX. of property Re XX winter agreement our the severe and of reset coverage provides thunderstorm

of which now a $XXX million So XX Excess-of-Loss of full single $XXX of million our is a more billion. we filed $X.XX $X.X May available XX-K. our description reach includes an in the coverage Aggregate also from Cat multiple of maximum which losses billion our description through earlier arising that in from $X.X Treaty second A XX-Q effective reach occurrences is coverage XXXX, excess a and property certain billion. until after which limit of covered of million quarter our today of of our in Northeast Cat $XXX covers complete Excess-of-Loss accumulation X, Property cat covered And we occurrence Treaty reinsurance such part July Gen and losses renewed provides losses included

over So to Greg. with that, the let turn me microphone now

Greg Toczydlowski

underlying movements of results. seeing ratio on the period-to-period ratio for not and higher was loss of and Thanks, as well points adjustments, trends I’ll usual a of reviewed $XXX other the XX.X% year acclaims view prior A Insurance impacted these we combined non-cat as also quarter year small was by produced loss underlying particular correlation business amounts Jay. number small mostly driven underlying of losses, and activity things income weather, and ratio in non-cat the points Business for compared than segment the X.X a normal million underlying including trends make mentioned. claims The Alan this of mix. combined XX.X% that of couple base net impact quarter. earned property number to one of of as We pricing fire looking Jay The any by every with a large variability.

First, the versus of loss for some we’ve discussing impacts pricing been time trends now. earned

We’re trends earned the pricing now levels loss at of quarter. of where a about the point higher covered

growing investments the while business. we thoughtfully focused Secondly, on remain prudently ongoing strategic making and expenses managing

the Our for Texas X.X assessment Pool expense to point ratio a Windstorm adjusted improved Hurricane the industry-wide when by for quarter about Harvey. related from

premiums up by production the $X.X the X% I’ll due that in the net net quarter to billion, on X% with domestic Notably, results Middle results strong production written line, up International X% premiums quarter over excluding to Market Turning prior businesses. for our rates. virtually the moment. across a strong touch foreign up were all top driven X% written was currency written year in were changes net premiums the of up of at impact

was renewal remains X.X Turning points achieved premium to and retention strong change at renewal we domestic rate change X.X of XX%. points, while production,

million X% of up $XXX from year business was a New ago.

Outside pricing we associated remaining the accelerate comp, continued with highest of rate to be in to production industry across comp quarter. continues results increases with gains broadly of the achieve level profitability. portfolio. these continue considering pleased line We’re strong Auto workers’ while to pressure the particularly the rate property with the in renewal

class-by-class continue We thoughtful where the our and with towards and best execute on new to account-by-account our retaining pricing attractive improving business basis pricing opportunities. strategy balance it’s needed business, pursuing

our reflect in Our execution successful for the deliberate continued the results marketplace. quarter and

In businesses. renewal premium change XX%. was remained individual X.X% the at to Turning while Select, retention strong

technology New the in we business initiatives. as was workflow over quarter leverage XX% continue investments and to prior year our up

the with X.X and Market, more from change renewal the pleased renewal at year by returns from rate retention in strategic X with than X.X XX%. up Middle our high premium historically X.X, points while and first In was of We’re business quarter up point direction. this a change in ago remains

million strong, the premium business quarter. were from New up prior year of X% $XXX

are pleased our As business. we having couldn’t on be Alan with the impact strategic more the initiatives mentioned,

Specialty continue build about from So all-in Tom and With about segment, our we’re for great over to talk to the to the feel how turn I’ll it positioned for & that, initiatives in Insurance. the Bonds we marketplace strategic momentum future.

Tom Kunkel

Thanks, prior a ratio segment earned due expense premiums. of and income up earned strong results million primarily $XXX the million, higher premiums. from higher points was also strong also year quarter the level due the & at in prior The XX.X%, operating improvements development year level X.X very combined very Greg. were favorable higher Bond underlying to ratio than reflecting of of XX lower the to prior with Specialty’s quarter year

by for in and grow initiatives the X%, these impacts higher product, bonded our premiums quarter sizes growth written net strategic across public driven sectors. businesses. and lines increasing profitable in and of were of These reflect the to reflect modestly to case spending, As marketing surety also distribution top contract average the the broad results particular line, up

driven international UK in primarily our business. was by growth Our management liability

management in percentage pursuing to Turning domestic continue business, execute to retain high liability we to a portfolio our given substantial new we production the of achieving of our quality attractive business. are while returns level strategy our

again from the of year. increased pleased the strong, X.X a from and in XX% last of year of XX% new was quarter. at change business So up quarter for are premium that record that we the Renewal prior second retention quarter points came

execution So the Bonds competitive great returns & the growth the and Specialty future. Insurance. Michael strong I’ll discuss to results about for our market feel our that in position marketplace, and now were we in to and continue excellent opportunities advantages are Personal And turn over it to present

Michael Klein

morning, good and everyone. Tom, Thanks,

The Insurance elevated losses Alan second in reflect Jay. and by quarter of an mentioned catastrophe results Personal level already

with the we’re disappointed we’re performance of quarter, business. and the loss agency homeowners underlying pleased While very for our the both with resulting auto agency net

agency of hail X to ratio of full segment $XX rate delivering are and overall, for a XX.X% of back amount loss Stepping combined combined basis points combined was agency underlying underlying quarter very with point we’re result year a over on as from the year’s losses. to underlying and ratio track total the XX volume a the And the loss growth much nearly second business to Catastrophe likely homeowners, of million we’re an The to ratio. year combined XXX.X% to for of with X The of quarter. the both for XXX.X quarter at Greg pleased see event that deliver combined auto XX.X%, activity mentioned. last reported X we being Personal income losses also The down of the the more improved with impact in In and returns. the this X part as second ratio the steadily auto a modest ratio the ratio XX.X confirm improved most the X% Normal of nearly exceeding prior and profitability both us. cat slightly underlying for long-term pleased earned assessment more continue year year’s we earlier. improved, described XX. included year quarter and premium includes from of was look intended, points Insurance the up trend the remain last of X business the catastrophe and a of combined down were this was to the prior included result XXX.X points favorable expectations of which agency from auto, losses related prior what loss with for prior point million less development and [ph] the attractive year-to-date accounted higher to XX.X compared the described. points the of above homeowners May nearly Texas X results about a development The ratio levels Alan combined environment. to time. stable total most late $XX seasonality combined of but Northeast that than volume target combined wind quarterly points above to overall trajectory of on and the June ratio for returns also below In will of business due in but Windstorm Jay with for quarter the catastrophe Colorado losses in quarter reserve growing elevated significant favorable quarter in year our ratios late storm the

losses the hailstorms. and quarter, analysis the expectations, exceeded results. the is the of the regarding primary warranted impact driver few the severity elevated quarters these of frequency, of nature tornados catastrophe their events, series and including are characteristic location losses our which that the of of of now cat losses localized In Given is have and comments magnitude in what is a a here these

recent our quarters, and at underwriting and As mentioned, look we’re experience into we as our it factoring Alan decisions. this pricing quarter over

higher we over periods and will expect you outlook, the to than premium in our be 'XX. comparable next quarters note changes in As XXXX renewal slightly the for four homeowners

top price by as auto increases stayed line, policies agency in X% primarily the force broadly driven grew of the by volume again once flat. to premiums Turning

achieve change in pleased of see holding We’re we premium to excess as to continue trends. retention steady renewal loss

increases Although X% down and homeowners is by premium quarter from for the other, accelerated of and third XXXX. trending fourth pace agency in in premium force numbers quarter. a increases Retention Quantum steady second and policies continued of during of the with renewal very four price change. the we The in the peaks growth another both with the rollout held to X.X at quarters XX%. of In reached slightly Home states design the continued strong

Another launch next six will states month.

the customers. we’ve continue by that contribute stated be will Abbe. agents As of and well I’ll this back use and we in received to past, product momentum to being the sustainable call its new the that, turn are and ease over encouraged sophistication our And to introduction with flexibility, of

Abbe Goldstein

ready take And we’re Michael. questions. to your Thanks,

Operator

[Operator Instructions].

of question the Jay go from Gelb first Your comes Barclays. line from ahead. Please

Jay Gelb

My first investment you. Thank question is portfolio. the on

major of on you Given just municipal in might to Travelers update the fixed us income I investments the your corporations, reducing rate hoping in its terms effect fixed portfolio? for views tax was of the can allocation whether consider lower income

Alan Schnitzer

question. Good ask answer Rowland going morning, It’s to to Alan. Jay. Dave that I’m

David Rowland

Sure. Thanks, Alan.

a We overall. have change our reason not to strategy really seen

find attractive more to on where curve the a We risk municipals basis. after-tax adjusted return value points at on continue are to us relative

so the continue And in to and so future. do to plan we buy municipals

Jay Gelb

next my then And & asbestos and you. thank recent is on the exposure Johnson talc. news question Johnson their with Okay, around emerging

$X.X to legal a judgment billion had asbestos. against Just tied last them they week

as can relates broad was might to issue talc I and that whether Travelers your it J&J wondering exposure thoughts on you have So give there. Thanks. and if

Alan Schnitzer

Thanks for question. Jay. Sure, the

thought all We As be of to issues on follow individual news of That all list maybe as in into and the But say in you appropriate. our talc the issue emerging even reserve. every issue public relates long any wouldn’t it our the we’re goes domain just can don’t reflected for – is virtually issue, issues that other that that always insurers. we’re other public not has a the the of imagine following and been will or time. in and news virtually domain aware is to on we not comment process any all

So I I’ll that think there. leave

Jay Gelb

Thanks. it. appreciate I

Alan Schnitzer

Thank you.

Operator

Binner the Your ahead. of Please next from FBR. Randy question from Riley go line comes B.

Randy Binner

on had a quarter. question Hi. just I good in was line, top the which

I I that economic script. of it activity growth is think from some is And if premium like remarks the or what capturing if you’re better share better in understand just net competitors? on opening of feel comments market kind if But a this reflection your better there? were the latter, elaborate on you there a it’s and dynamic to written just

Alan Schnitzer

Yes, place. it business-by-business Randy, of question sort you at across look think it’s a because got I to almost the broad

on in You can quarter definitely see and that do nothing going the a that we look this numbers than really recent and unusual exposure periods it’s at healthier underneath. there’s clip at

So that we driving do that growth. But business activity. the in we think strategic are attribute to economic premium others there are things going on

still Middle see risk early been Greg to talking a reasonably Market in good and numbers create you days designs has of in All top to that with things no in and his And value I’d it’s Day lot change but for say Tom’s And reflected underway. strategic in offer Investor opportunities you the that’s at business, about agents, time traction the are that Insurance. proposition appetite, the some us and the doing team things for spent but the brokers we’ve Business to customers. business just no change same we there. So our thing line new approach

really a Are these contributing really fall I we in think it, think talked and at changes healthy it I making last to difference. production them and healthy earned seismic that’s share, of market about is results. Day most also but Investor the doubt premium he I think

Randy Binner

you’re is this season. gains. But are there Business – in – you guess away these more is – a there it lines large a the up slide in about? in competitor very things. the particular I’m I follow focused Slide Is large X on, thinking market the really market answer. seems And like it’s it develops where there an I over earnings appreciate deck. we’ll there? all But how and is things these the a just are combination from of mix backing another out in you’re and And talked Is who Insurance even it see or that of is key

Alan Schnitzer

Randy, I said dollars. think it’s change at premium written of in when prepared there’s quarter-to-quarter, example, something look from that’s an the just in for let which my even I mix. coming we part And that a retained reiterate that is remarks large me

So that’s expiring a higher retention an on rate. and equivalent base of rate premium

change and retained appetite, execution account-by-account thing field to view and we and to so a there. of really in change And business There rate that’s a just and hustle positive very organization solid the no in of by putting we really that quality the terrific that approach in there’s risk of activity function fact some a and whether of is got some the again we’ve in that basis. we we’re that that think on exposure on. again basis a that’s a great basis at no economic point the think of And analytics as our But price X.X speaks points or sale. new of lot data reflection again a do a

top about line, in great on it free in firing cylinders. think and all of I marketplace terms what we’re Randy, production So the we doing

Randy Binner

All right, you. great. Thank

Alan Schnitzer

you. Thank

Operator

from the comes Greenspan Please Your question ahead. next go Elyse from Fargo. of line Wells

Elyse Greenspan

to for impacted inflation. comment? than at lead expand and could your Hi. the in you XX-Q international potentially outlook imposition expected that into over Good guys could barriers Alan, upon lines for what What you if potential you that of how other in of your translates first and timeframe businesses? outlook margin see trade the being morning. levels to your pointed the question, higher tariffs My potentially

Alan Schnitzer

the question. for point go it trade presumably things, loss inputs that the generally by it’s Obviously, about news conversation completely a out. about are Thanks cost. is we tariffs that to and cost loss way, in appropriate Elyse. the impact morning, as of Tariffs think lot the way the impact would Good in into

that that look we react as at short-term could generally things think I and we affecting to. would lines

could what there, look happen. but just There’s we’re no There’s watching expectations here of of So we a at don’t it. rhetoric we’re out outsized lot anticipating so sort it.

think you a activity as those largely short we important are positively on as side the have on much or of inflation react economic for and are negatively anybody which the we takeaways it. do lines things. term leverage has to affect view tariffs to can And likely think can what I us to and

So think tariffs least. that’s I way about at the

Elyse Greenspan

question, obviously Okay. you quarter. change next lot of just together up we Thank And a expect the will to slowdown commercial, maybe line, see quarter, here? bit progressing how you how if rating continue about from last sequentially, expect out on quarter-over-quarter so you in how comp the the numbers And we and second you of a then points into little environment basis than you. saw about comment from those rate was property my as renewal by the XX X.X% rate Can just here all back also and then be do a X.X%? than see quarter that about XXXX think coming getting auto we do and but higher do number you getting

Alan Schnitzer

about to that’s all are pretty as at to held shown some hasn’t Retention XXXX, on feel so sensitive retention. make pricing good before continues But we to steady up. back long mid change granular we’d we course year has we do The We competitively actually we’re in sacrificing were of good got you going and gains of way more There’s trend a see strategies. more than to a texture going stress we observations than Elyse, always, I’ll for haven’t. though. where XX-Q get beginning at like the the some where over outlook our we probably that. not high-XXs, we’re of breadth not price much that. the renewal to the a give We in widen. go thing. rate we Retention the getting think any feel probably

feel we pretty so about And it. good

for not I remind you, headline number. are a not – We we’re always as executing

a at We’re return a our executing one account portfolio. and account to on time achieve targeted on that

we all-in-all, that. So good pretty feel about

respond to up to happy and you follow have. there a it if leave I’ll maybe So

Elyse Greenspan

comment one that No, getting rate? correctly that’s at those the did hear prices level just of the helpful of or In are highest I trend insinuating guys it’s lines clarification. that you Business but earned is point just Insurance, covering

Alan Schnitzer

BI all earned was that comment that trend. is is about for Greg’s this what covering and loss is think pricing I of

of bunch quite a written really the outpacing to a had that row favorable. in a Obviously loss basis pricing the in that we’ve been ratio. is more underlying we’ve the because probably first And be contributor has quarters where mentioned quarter so trend a told This combined impact you written while is an earned would we basis haven��t that’s on small. And not basis. a

Elyse Greenspan

very great. that’s Thank Okay, you much.

Alan Schnitzer

you. Thank

Operator

line comes from Your Kai Pan next ahead. Stanley. go from Please question Morgan the of

Kai Pan

combined good BI points morning. under deterioration question Thank ratio you underlying basis year-over-year. My on XX is and first the

million about you million a of If from Wind like losses commercial X.X $X pool, well $XX large as that’s out the the points. as take of assessment fire sort Texas of

you’re I last losses you non-cat level a flat this you as both just well to I remember quarter effectively wondered as quarter’s second year can basically of weather quantify average. had year-over-year. quarter losses. second historical So relatively elevated weather last higher year your non-cat

Greg Toczydlowski

the is Hi, to could give Greg. on pieces there so Kai. tried all the math we This you that. do Yes, you

the the over just points. ratios were basis said the to losses got we points basis On XX XXX running that combined large [indiscernible] the

expect gap And that variability the of the is margin we quarter-to-quarter. normal so the from would that’s remainder in

give you forward. So we the on going all tried pieces to project so could that you that

Alan Schnitzer

tally our the as to can good smaller move mentioned and small predictable. Greg impact. do move kind bunch you weather quarter. and not a we whatever, try going it’s sense to to Kai, or you give a So, lot – sort in of of those the or base little every section positives And that things those outlook we bit there’s And year thing. a things negatives in obviously of But are up in items net obviously a them there’s it’s of and a whether that. around that estimation but They’re as best

Kai Pan

loss that your normalized quarter weather suggest the higher than So or outlook is levels? larger second non-cat

Alan Schnitzer

Kai? again, that Say

Kai Pan

means half actually have which So weather assuming non-cat more losses year second the normalized a non-cat your outlook said the losses? second quarter higher this

Alan Schnitzer

Kai, Business relative If asking, I Insurance non-cat weather right, what expectations? our you’re to question talking are you the – was in that’s if quarter-over-quarter understand

Kai Pan

expectations. your to Relative

Alan Schnitzer

favorable this Insurance slightly was quarter. in It Business

Jay Benet

Jay. this losses. we’re just non-cat the not referring What Kai, to is is

one about for vary being normal all is from I’m talking quarter-to-quarter, sorry, said return of – will just to of view other non-cat non-variability that we losses We’re but loss them, these whatever things activity.

So we weren’t trying the to out just non-cats. spike

Kai Pan

sort just or loss your is to cost figure pricing. earned the of is Okay. out I trend want above randomness

Alan Schnitzer

of in There’s a change fundamental quarter. our to which trend things the going always normal of no variability. view in for be variety there’s loss It’s

Kai Pan

Okay, is inflation. you. follow-up My question thank on the

And trend tariff as Aside as higher settlement about events cost also reserve litigations your forward? do from cost. pricing how impacts we’ve think forward? have that seen well loss And you discount as in going going well as you

Alan Schnitzer

surprises read on comment might comment and focus. liability, why about our Kai you there’s in reflected to and you Tom but read reserves you the on be your our invite see certainly and us. quarter because all we But to it I’ll But course management trends see that imagine relates Tom the as and nothing our that’s book that that I pricing will that own I in that don’t about --? of tell the

Tom Kunkel

recent again we out read expenses. that and book what own read of nothing liability ordinary periods actually it management we to legal have when our to but you our the is compared In comes

inflation that experienced we’ve periods. outside in recent what have definitely So we but normal there, in not experienced seeing of is we’re anything that

Alan Schnitzer

zero, that And our Kai that’s right. view say not trend to of is

there going in pricing. of potential everything everything in it’s those aware think to aware and sorts impact reflected has least profitability at of we’re on of the going that out things on and of out our – view We’re our there we

Kai Pan

Great. Thank much. so you

Alan Schnitzer

you. Thank

Operator

go Your Please Amit ahead. next comes from Research. question from the of Buckingham line Kumar

Amit Kumar

Thanks and good morning. One or two questions.

just confused back Kai’s I’m the going here bit question. answer First to a of all, to maybe

So ex the BI including line and the XX-Q underlying in margin if are in you said suggesting in was not? the improvement improvement – noise you underlying out was adjustment, there adjustment it margin that fire or QX that [indiscernible] with we and what

Alan Schnitzer

what not No, that’s we’re saying.

underlying ratio If example, unfavorably and the Greg the combined underlying ones in observation period-over-period eliminate, was mentioned combined of you fire the and the there impacted take prepared losses, ratios. the factors a are for his that number remarks you significant

guys net of all was but things some the So the of were good things; net those some those were guys, quarter-over-quarter negative. a bad

Amit Kumar

Okay. I’ll I second into the that. maybe question to tie that guess

that of bit loss of about look and the ratio you segments, going impact If sort some underlying about comp and going underlined talk you how the can trends broader and more talked what’s front forward? does on a also the discussion pricing on, at that you

Alan Schnitzer

I make always in about way always there’s in things underlying But and is are to things fundamental takes weather the change the trend. follow-up one that Let is from process. are or this. the to going you quarter that just change clear want – my our that on question. move me your what things change just or there going variations to Those a going are quickly are I’m underlying be we’re no to going expectations because base year to view prior of answer puts There your sure just Greg always our the is are to or all telling that mentioned, in other.

So to you. that’s give the color trying I was

Amit Kumar

at the So which the in discussion did in all was acceleration in up we’ll follow the were cost so expect faster be drop pace and should and volatility hence just saying QX I guidance in between thought gap questions, pricing XXXX. that a and the is to improvement you question? Can muddle QX will the that up and margin what this that in I [indiscernible] versus result second an we XXXX process? or and loss and the fair Is

Alan Schnitzer

and what to in in XX-Q, XXXX. underlying going you the in underlying the to underwriting give the period compared do we is view same combined our margin outlook on you So ratio a look if

to in are in this quarter where you take putting So a periods that corresponding can saw what is the view assuming we we part half of had second is look large A things activity, normalized that that that. loss adverse we for levels. at significant small XXXX aside, going adverse weather our of will the more had and those 'XX return forward we

Amit Kumar

enough. Fair

Alan Schnitzer

and -- to talk that about Happy to you make offline sure that

Amit Kumar

Yes, that’s fine.

follow I you’re think for I saying.

Q the the underlying language what focus factor of volatility is when additional trends. and comparing there’s [ph] results. extreme from the parsing on into this it I then should there answer for But reported in maybe is that an looking understand one think your fair? which Is to always I

Alan Schnitzer

Yes.

view they net there’s in net number best are they of and the in small the out they a do of take math, to losses XX-Q and – but going our you the things ways to. are there but this that giving to quarter outlook change large can those what you net We’re things

Amit Kumar

I will here. Okay. question time for I’ve stop Thanks up taken so my answers. the

Alan Schnitzer

Thanks, Amit.

Operator

Your question ahead. Please from James. Peters comes Raymond next of Greg go from line the

Greg Peters

stabilizes now and on pricing going these is that it perhaps us don’t PYD fair you for PYD Jay, you or of and up morning. but results this use Good the quarter’s maybe essentially can trend your to BI, of in one get been couple hung before, have has is at forward covering provided a levels that earned update PYD? some opportunity I of views too and to on the extrapolate to want trend answers I appreciate down years

Jay Benet

have seeing, reserve very whatever estimates our don’t of my diligent pricing PYD. view we we thorough quarter future review feel had data we’re going to do sure on think something a sense a response not current in changes a that great in view very basis. make all whatever all that I we’re is never of and factored the very, is Every we’re about of that into into to whatever but factored a and have going be trends to our the reserves only trends seeing those you’re seeing,

predictions to the as future So make we of no whatsoever PYD.

that less at and history periods periods. some considerable other back we in looking see of can had you in amounts PYD have PYD Now

reserving. in change about change the way There’s the about think business. in the fluctuated. way it no no So has we think we There’s

you think happen can make what So might conclusions draw to own as your but future we no the predictions. I in

represent adjust comes the to need And estimate. best new management’s what right. view Our the we get we They reserves future, is it. up in information

Greg Peters

A wanted talked marketplace. tech I’ve seems before I about the this can – but only agent wondering and lines not update the question, us realize there seems My – agents. focused you’ve on in you Okay. past noise to innovation I lot and perspectives loyalty personal asked tremendous shot. but a this insurance but organic second independent to if give business? also you of there’s it is it in disintermediation of about of channel, I tech And in just operations was direct a lot insured around around the the your guys

Alan Schnitzer

Sure, Greg.

right. exactly You’re

active important as doing very for on. innovation and view that industry. that a important have agenda it’s We strategic we’re going We we and a the think work of very for part us this

obviously it us; the think we’re but we’re We’ll small independent really, see or to premium knew and we commercial insurance, claim you whether think do how accounts and And think using There sources industry. long be capabilities and I that not don’t see claim trend in really that would and the in dollars value on in last for So top data very and is it. entire hard engaging that basis going chain, see We is and will direct of part distribution needed agent Simply future. innovation it marketing to cost. moment not something new beyond goes our between. about for commercial stuff, but technology whether we everything settlement focused to about that. we foreseeable I was miss that tech, on it in do are hundreds because drone have advance Business say to our we going micro. insured invest think to an and been We Yes, a in reduce see on we’re collection important going leveraging a way highly of we’ll I of the where to so opportunities channel we’re broker capabilities. think time it goes of we distribution leveraging it’s an at company there work. it’s think fast anywhere. just related about that artificial And It’s At it. important bought it’s where we that’s with And it’s whether across aggressively distribution that’s and distribution. the we think of as opportunities goes to intelligence, and year from as a advancing

Greg Peters

you Thank answers. for your

Alan Schnitzer

Thank you.

Operator

of Goldman from Your Please the comes question next line Kinar Yaron ahead. from go Sachs.

Yaron Kinar

everybody. morning, Good

possibly for answer a maybe it clarification and the being negative going consistent next better year as Elyse’s margins the being the then commentary to at look on inflation inflation or the Q incorporate the around if around in Does unit But your margins in of at commentary the Insurance. look stable maybe First, commentary I commentary the in a around year, up? business missed to apologize answer. business Business and this even I your with inflation risk question I I unit

Alan Schnitzer

incorporate wage you to does of The trends has Clearly results of a a and severity a yes. loss in view heavily view view which answer remind is that toward inflation of that of in turn our view our just margins inflation. it. has I’ll are most leveraged medical

on and components It surprised. course, view it we our social than it whether cost. the So we whether as impacts lines to. that we’re stuff of be of of we very view inflation, think, to sort impact the it lost and or is, short-term could leveraged medical of of but of inflation But basis have it’s aligning type wages highly We do to whatever our not very, it’s of and that look we potential be outlook it CPI typical reflected or tariffs a in our whether think can the is react worse or margins. it’s kind a CPI individual granular we at could in

process in at a incorporated we sophisticated looking it’s So our view. pretty of have it and

Yaron Kinar

can you income wouldn’t helpful. That’s premium relative of increases duration growth – I why to back million that $XX again going I a to help out go number and sorry, year to XXXX Maybe quarter. you’re higher for over four turn in the what $XX investment was me million accelerating, years it with in per I’m was Q understand to guiding be ahead. where it. think Got to a second, the net can And if

Jay Benet

to looks time being at period really actual associated a available time. will be interest in determined where in stage opportunities and And might it’s driven that particular general. have curve our that view by be are that’s you like but interest question that’s maturing of good and a to the securities and be. this by as the maturing that it best actual rates what’s and with It’s yield the are then investment reinvestment the the But what assumptions realize at rate going rates to what

Yaron Kinar

Okay, the I color. appreciate Thank you.

Operator

Your the next question Sarah ahead. of comes from from Please DeWitt line JPMorgan. go

Sarah DeWitt

Hi. Good morning.

weather, seen you’ve as weather-related losses elevated the cats several pointed last quarters and out. that On for and the losses the you’ve non-cat weather includes

what call it? pricing you and at do So this new the for point start normal

Alan Schnitzer

slightly the just better so weather view, in you a over And XXXX look patterns? is think you cycle I on back to take a was what XXXX was to at, back Yes, you than better question do so XXXX that to on few at than was go XXXX to changes longer-term it we if weather was expected. worst period, expected. we expected; we plan. year XXXX, than about Then XXXX

So my good time over back point some is periods. have you periods you bad and look have you some and

we not six what’s and now been at overreact four look going we it, period so And to to quarter react we’re a to but to it. will

first thing and we will the our models do actuarial we’ll update for actuarial the activity. weather is So

rolling did alone nothing world our our view will change that of the else. So models through if just we

to activities periods As ongoing process here an trying how compared thought we process to decide activity wouldn’t weigh catastrophes And are to lessons like we longer overreact our weather there recent you this. around to we any quarters time to Again, six weather. that. that’s from always look at and looking at of and as four more learned at always recent always are periods, lessons and part weather learned look then have and

it before. account. stride. that it. models. at a year at and into seen look we not fundamental because our say a it this would we We in We seen so into change So But it take we’ve we’ve look take put We or

Sarah DeWitt

now Okay, X% being achieved up you Business just for are Thank your then returns, higher with line all is you will Insurance targeted loss following else to on in sufficient trend, pricing, or achieve in earned you. that versus And the equal? push still now prices that rates the quarter the great.

Alan Schnitzer

accounts of it and the We really on for rate rate keep always those in We execute. and will we’re business got try our going push that’s those and need book accounts lines to of those that lots we in accounts. are way where to we adequate hard

get where account some always, And out to will we lot of there’s portion book together. and say As of a needs individual there would the number. there I say our rate we aggregate rate look of and to there. of is aggregate that those working will at continue sort account that things an up try are decisions a to

investment So work are lag a on way basis. that’s net pricing picking its Interest is better. rates It will up, into income.

benefit tax the got You’ve of reform.

expense claims other that the levers selection, things like handling all and impact profitability; got You’ve initiatives. mix,

those that of all our levers goes all managing return to we’re sure executing we’re into objectives. that of the So towards always make and hopper

Sarah DeWitt

you. Thank Okay, great.

Alan Schnitzer

you. Thank

Operator

Shanker ahead. of Your Josh next Deutsche Please from question the comes from line go Bank.

Josh Shanker

back. questions the coming Hi, there. long both I’ll so there’s a my think give don’t in one you upfront you

is say just I we just pricing that trying earned versus of the Maybe XX-Q, second And loss and cost trend for and thing in granular loss say think the the to than two guidance Is versus when now one losses weather that were how want that’s you’ve to that expense you you in talking I’m more about but BI non-cat about out things. I’m year. wondering the those premium if loss somewhere way, get don’t and have If understand want better. of about guess. about covering net is of conservative probably I that to of a the improving premium that. that net would rate. the in fire I say between to margins less innovations trend been and trend trend? whatnot break cost X.X%, just the is understand renewal So – I’m much how the question, I’m I we save talking that decision you trend wondering cost wrong I than much

Alan Schnitzer

let first. take second me one Yes, the

loss I the So is of of It’s we – – and think get that mix exposure narrow map economic earned improving behaves think versus a appropriate very, I very things and selection focused we in on margin. covering we other rate again that significant And mean it initiatives, economic claims just of out, again that all expense loss like again all like you what and rate. exposure, but ignores like there. handling all maybe very list rate things and that’s it’s mentioned into it’s the you’re just impact this trend. the leaving then go by that trend. the have ignores that don’t we component the and cost Josh, portion all which And the and behaves And

factors X.X look impact So in other you that margin. about can’t at that the isolation without thinking all

the losses levels. to a But right. in the It what very of large small adverse number, improvement identify is as significant of weather In part and returning that was last the normal a year to more But terms small is normal reflects in and outlook, of the know large losses. is level return everything we XX-Q, significantly we terms in outlook. weather of the everything

Josh Shanker

very you much. Thank Okay.

Alan Schnitzer

Thanks, Josh.

Operator

of Your UBS. Meredith Please next from question comes Brian from line the ahead. go

Brian Meredith

now I’m us thoughts quick agency Two reduce we’ve that the in insurance? some think competitive rate. in curious, companies give Are right environment Thanks. seeing you ones auto a just major some could seen here. I system? on you Michael, personal

Michael Klein

the all is say environment certainly in competitive. Brian. I Yes, consistently markets Thanks, of our would

this you that around XXXX. are as in positive. continuing talked past point do and At high one Those for in increases not pull were that of so rate filings the rate particular the carriers we rate as carrier analysis to we’ve to our this at We announcements probably you’re increases. we’re about one year quite most have do remains to file reductions. referring we taking least When seen Industry seeing, certainly carrier what they reductions. taking see that’s in far

very of that more environment around X trend I loss loss data I with all a the described consistent think industry that’s earlier. and

that think perspective. our up I all from lines

Brian Meredith

that environment about then and moving some you at of interest it effect? when that Great. higher an impact and and bit still thoughts of point too definitely did And you about the quick profitability for just this one interest little now could Alan, Is rate models that through up pricing think is have your up. pricing. kind flowing follow rates right mentioned a on I kind your on to or by have account early think

Alan Schnitzer

an they outlook a basis. models It’s our do but and there. at it pricing think know or model update our aware put in have on We inflation we and view and to hard we on of everything in or it, regular any element of pretty basis that look reflect isolate about we a one are

you’re about If interest rates -- talking

Brian Meredith

Interest rates.

Alan Schnitzer

You think would income turn on Benet portfolio over. as need lag you income explained in say flow about Jay basis net about through the portfolio just I has that to fixed because a to particular. our will investment think that the fact

by So will of impact favorable the of muted – the be fact. rates interest that impact

Brian Meredith

longer at talking lines I’m in look than you some the -- is your that particularly but more pricing of Right, typically and decisions commercial factor

Alan Schnitzer

again? Say that

Brian Meredith

more I’m model pricing? we Are that an in impact rate be of respect pricing as having lines rate may to interest like at and a activity what and your decisions looks putting thinking commercial assumptions. kind with the point far in where as on

Jay Benet

the Jay. look is a pricing looking Within We take to product as This the we towards our at future flows. curve. how with view associated in the are cash current comes models along flows the we’ve cash rate invested past, regard at being with it rate said the yield to not Brian. the in account an a interest when embedded environment Hi, portfolio into things and product

views updated would interest the So be pricing themselves models based on current rates. of

expectations? in X% at one when of look treasury at is is when The the what things XX-year XX-year However, products is isolation, that, you done is the treasury And for are the X%. Alan having to have it’s that versus your at not return as said change return expectations talking about.

not impact to on point-for-point, and immediately thoughtful pricing. a in dollar-for-dollar the it’s very just goes a approach that it So it. It’s has

Brian Meredith

Thanks Great. answers. your for

Abbe Goldstein

have And for time more we Thanks. just one question.

Operator

question go of Jay ahead. Bank the from of comes last America from Merrill Please Lynch. The Cohen line

Jay Cohen

Thank you.

quarter? do Just view non-fixed than the one normally final better as worse in yield, or for little expect, a The line income you question. that you

Jay Benet

we as a if It’s that basis just a second estate a is with it’s recent performing quarter-to-quarter think well quarters. we much basis you like did about very real doing, combination And partnerships But it at estate on as the in the it’s performing plan in owned. quarter. performance When private how we and its real long-term think on prior well. I or is portfolio of think look not year basis, equity you’ll see and mostly quarter it you got line and know, some a as

be going it. fluctuation in we to some there’s the So performance But liked the portfolio. of

Jay Cohen

off normally not what But you far expect? from

Jay Benet

expect. what would Actually, probably we than better normally it’s a little

Jay Cohen

helpful. That’s Okay. Thanks.

Abbe Goldstein

all you joining for Thank Great. us.

Operator

today’s concludes This conference call.

You now disconnect. may

The Travelers Companies, Inc. (TRV) 19 Jul 182018 Q2 Earnings call transcript