TRV - Earnings call transcript Q4 2018 | The Travelers Companies, Inc.

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Operator

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

As a reminder, this conference is being recorded on January 22, 2019. At this time, I would 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 fourth you press quarter

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

Specialty of the current our Klein Toczydlowski today take Insurance, Michael of our Personal refer as three and results will Insurance. They Frey, remarks, environment. Dan through CFO; discuss They Kunkel us joining to the will be financial and and Speaking is go Tom webcast Presidents: we who presentation Alan of Greg remotely will they CEO; questions. business Bond and Insurance; will the Schnitzer, & Chairman of and morning; market prepared Business segment this then

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

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

Alan Schnitzer

Abbe. morning, you thank everyone, us today. you, Thank Good and for joining

on grew we pleased results, back shareholders profitability our and look excess returns, and are care we delivered we improved significant great that taking returning of business, to As capital while XXXX, customers. and strong underlying investment underwriting our

from geared toward creating efficiency. Our strategic improving opportunities ongoing productivity benefited and results line initiatives top and

our course level of a Of income Fourth catastrophe $XXX net per XX.X%. were also million diluted of $X.XX or results a impacted generated high by by quarter core share on of equity return $X.XX equity diluted Core both were income impacted return million was of after-tax losses. core CAT income million and $XXX almost share Net XX%. per or $XXX and on was losses.

income generate to full-year of profitability core $X.X to increased Our this that equity XX.X%. generating on fact speaks CAT of after-tax franchise. to the in billion $X.X losses profit we core earnings power The with level return billion, were of XX% by our and able

Our for the XX.X%, higher full-year we’re consolidated first Commercial since Greg we've severity. the the underlying more the detail auto commercial address has impact challenge after our will the injury and data some been bodily a what recent for fourth and quarter improved to driven loss deterioration. auto quarter worth of combined in ratio even and further a the most by seen of reflects industry how us for time responding. for level of estimates of on line, XXXX, quarter the lowest

more decade. than full-year, billion and contributed the a earned initiatives and than highest gain in billion, of more efficiency underlying an after-tax premium $XX of $X.X the record productivity For a to underwriting

during in year. XX% reform. of also underwriting tax contributed investment the The Our successful benefit X% grow and strategy. our adjusted strategy These consistent sheet billion gain investment management with share balance for the year our capital After-tax than of long-standing strong excess more with to consistent and for to us enable capital up our value net results. to returning investment was shareholders, together after reflects results by XX% also income income the book $X.X per the quarter

very with contributing with to production, each for our in pleased business we increase written the segments the our market performance of Turning a net in remain quarter. to premium X%

record quarter For market In net million X% we retention retention high nearly positive and reached grew business, year our business eligible rollout renewal by agent freeing business All insurance a a spend more during written XX%. fourth record now partners. with our and in $XXX local up billion. accounts in premiums by business in time quarter to driven commercial historically Net completed centers, We X% the of premium flowing or our our change. broker the underwriters our new are middle renewals high premiums $XX.X year. the to of written by business these centers and the increased to

and $X Personal retention the our $X businesses execution both environment, improved record impressive that a in homeowners business insurance, X% highest nearly return Liability, was accounts years the the agency auto point rate of net and strong its Insurance, including new renewal to change team over We premiums all last more X% For premium for of exposure, in Renewal decade. delivered schedule. in to quarter, businesses. by our Today, book we ago, commercial X% production throughout for net had up growth Thanks with expectations. was the ahead achieved half achieved business and and of year increased a agency a quarter there got level full-year. year, an business by than compared auto both in In pure same in with steady and contributing. was Two we lines. a premium the In premium the business and Specialty we In XXXX, continued Domestic business meets written in period strong written business, our billion in at profitability change our challenges. Management management billion in positive surety new XXXX. Bond it's the & liability quarter

across about Tom, underwriting excellent year will from another wrap We achieved it and Michael results. an on equity. of a To That segment management successful to despite of diverse return and to and our employees. and losses, reward up, strategy, active risk of businesses, our the approach elevated speaks catastrophe XX,XXX also XX% investment hear dedication to execution It our more commitment speaks we shortly of capital management. portfolio our and Greg,

well with I'm the for pleased to that With meaningful innovation remain a to set ambitious very capital, advantages to along we competitive our And over and to turn the high apart shareholder team, talented deliver with that, and an leading very us Dan. results continue time. respect over agenda, positioned shareholders call value

Dan Frey

time. fourth Underlying measures of planning million in million, down half and prior a underlying $XXX improved primarily for quarter year development. about by resulted the was actions that $XXX fourth result from X.X as last last the prior lower results prior impacts year fourth quarter a strong quarter points that and The elevated point favorable combined year were reserve higher CATs Recall XX.X%, taken from losses of and income ROE quarter. from of Core ratio ratio Alan. down quarter PYD, decrease you, from the a year's both tax combined consolidated from XX%, a was the which of at was as in by of excludes level underlying catastrophe year's XX.X%. the Thank core level

driven in shortly XXXX. quarter the primarily I million from of quarter from related to of million of the results include year in CAT net third was million $XXX from hurricanes wildfires $XXX and pre-tax PYD Michael more $XXX California million the losses hurricane by prior year's $XXX quarter losses, fourth November million detail October. pre-tax, included which fourth $XXX in CAT of development $XXX for provide the Our Last million quarter favorable million, the current $XXX from favorable in quarter. down will

to NII to domestic average per prior Our to offset small compared related XXXX, increases on PYD address reserve favorable written liability. is years. by the premiums. largely the Specialty by average net net largest partially portfolio lesser year Pre-tax theme pre-tax from several the years will income Specialty, and will corporate the $XXX $XXX our we pre-tax offset will favorable by our quarter. in fixed more year were in by as elevated rate pre-tax million three XXXX quarter assets million General decrease we Greg in investment unfavorable increased was changes Insurance, XXXX quarter increase increase income in underwriting portfolio in increased income workers general of an income the in in $XX the Bond in $XX from NII underlying which unfavorable by results in of personal in lower insurance net increased In accident segments projected periods performance In and quarter in in loss in recent higher. There expect as no $XX In quarter. recent loss fourth the book. prior lower unfavorable corresponding book. fourth insurance strong be his development to yield the environment million the rate. a number level increases both by in impact & returns growth the were Bond X% claims million in XX% income business performed development experienced Liability quarter average benefited & income experience benefiting invested from reflected $XXX to return runoff management to After-tax accident compared favorable liability the the years pre-tax years to with Insurance, was accident In to experienced net by commercial Commercial auto million of a prior quarter million of remain from broad prior fixed book. older interest PYD auto severity the very from auto and continued attractive, in partially and and quarter extent were compared business comments. resulting Fixed comp, million better-than-expected driven fourth from in the across the by assets of the quarter of Personal approximately non-fixed invested $XXX better-than-expected from resulting year both in as All offset that income a was in units. in which year tax gain better-than-expected PYD Business development $XXX million XX% the $XX U.S million fixed NII we by the After-tax improved

asbestos favorably despite combined environmental, in quarter the all year January developed early development full-year, auto aggregate of all lines in and $XXX was accident show accident change webcast all the auto our million and a second the prior expected commercial and the commercial of Schedule filed as year When accident product XXXX. XXXX for that years For the changes years P is had and information aggregate third X Page product we across minor to result about auto charge, across our or net renewal. unfavorable the provides in Treaty pre-tax. favorable quarter, XX asbestos adverse commercial CAT lines development in the excluding the in reserve all except

Our and from the aggregation line XOL provide the corporate treaty aggregate to on treaty events. single coverage terms for of continues losses with CAT in events renewed and multiple both CAT expiring CAT

updated view actual you industry losses expectations. more our and reflect years elevated we experienced years. the catastrophe to recent have of in actuarial level give weight know, all models when of our In As to an recent the of determining years normal to has response, results recent

we’ve of $XXX or a above coverage million a losses losses provides which of in aggregate $X.X billion. of this catastrophe further on $XXX Slide recognition result, an described and also reasonable higher treaty events This added a occurrence somewhat cap. uncertainty of we of and for million million part North America Hurricane at and protection aggregate retention appropriate XOL have level designated models. we In for an earthquake $X XX. incur underwriting providing new per PCS of losses a ongoing weather of as treaty pricing treaty activity As qualifying more recent million believe have new recognized $XXX XXXX, events in of price. addresses level our aggregate expected We

the about effect of any net recoveries catastrophe of terms are recoveries the In underlying that a will on excluded point underlying the combined ratio, accounting, results, recorded this the year treaty second which any ratio total impact our likely expect $X.X combined combined the half ratio net on benefit premiums majority be would more and because minimal the be of will the ratio expect premiums. on early also in on on Since a part underlying of the from half will total but full-year losses, attachment pronounced the billion, likely of XXXX in we point from to the accordingly loss there be combined impact impact in seated likely is impact the earned full-year the an we XXXX. due a

Of by experience. we the total be effect on level combined our course ratio the impacted PCS will actual XXXX events for of

beginning to flows the decreased target capital the again accordingly ratios Turning better narrowed at $XXX quarter $XXX for holding $XX.XX value the fourth this levels quarter, management. our X% repurchases XX capital and share, and and $XXX capital shareholders with September quarter million all Operating of investment the were which of from we per or very our investment returned Interest We excludes unrealized than liquidity as after-tax million approximately higher million of comprising $XXX strong, than of and of Adjusted million $XXX quarter billion. share year-end. at of at to the of with loss cash book ended net unrealized gains dividends were at $XXX company rates year. to year-end, $X.X modestly losses during million million. our after-tax

level than share variety repurchases. returned of dividend a shareholders that $X.X Consistent with our into capital of takes consideration we year, the management to more of our For capital capital factors. and return billion through strategy

planning we in purposes. discussion level that, two a with to in earnings the For generated premium increased example, for of of the that will support recall capital contributions billion years, amount the I insurance. over the for turn And the nearly of and $X.X growth contribution the have pension we to microphone of you'll September of over a and tax million $XXX plan Greg business made last

Gregory Toczydlowski

Dan. Thanks,

the a after-tax auto about $XXX $XXX Insurance bringing $XXX from year net of combined year were incorporates pre-tax million that about injury strong overall on both Earnings for year the recent more that the for approximately Business amount, XXXX. the was the adverse in The segment points for a ratio year billion, full-year year. Dan the Of expense product profitability the resulted The than impacted auto impact X.X of positively million reduced charge quarter XXXX quarter, Earnings accident Earnings $XX X.X on the over XXXX. and corresponding line pre-tax three half the impacts a adjustments quarters reduced a the were a our income, were as as fourth growth prior were points the the for X% combined million for to our pre-tax year Alan quarter development. that combined earned first well impacted and as on basis segment combined remaining underlying quarter, related comp, ratio to loss higher of workers' catastrophe $X.XX of the total or for of full-year. the favorable approximately the increase and $XXX and year. higher represents down ratio. premium for The mentioned, and in business X.X bodily relatively losses from produced commercial that the reestimations increased quarter million activity. impacts both points little the the million from little than For ratio quarter more leverage a by ratio the levels and point included on fourth segment has biggest case $XXX quarter and the high reserve volumes the million negatively by in about operating a prior

our recent commercial environment and saw in more involvement the auto we've in reacted quarter, pricing, during that across anticipated loss you, with Book of higher through recent our actions. different Auto overall data than and various But an discussed pattern. of attorney We commercial book. of a broadly view of changed Commercial in the reserving auto losses, we’ve rate a our increase claim underwriting emerge development portion the the lengthening had to years As we

forward experiencing As plan consequence, factors severity to experiencing we be push injury Because anticipated. will rate. than we are we're the action of primary level environmental, going for a bodily a of believe our higher more we're

account extensive provide As we coverages. of an of in is is years, generally the basis with we've by combination account part over customers. account getting of the important data the past, capabilities we most portfolio. comp, been on liability that some of but them general to of our is and auto will need of use more for remember the analytics property, an our mentioned auto workers profitability the couple product line other solution we typically It it. where rate the last as to line as a Accordingly, insurance overall improve business part auto profitability and/or and We

segment coming the was activity by points premium the to Turning back underlying of to higher The results, prior in coming businesses by with from coming half with quarter volumes. the was points favorable activity. about remaining a higher domestic for loss X.X in driven X.X X.X than ratio points our half the XX.X% point due non-weather the international and dollars about higher from points offset from contributor of half than year. improved the in auto. for year, other quarter by partially higher last combined is lower the The ratio improvement Lloyd's, the loss loss to from The expense that variability expense largest that ratio X

would more run for combined are level. pointed a the have view large included better there expenses expense ran losses underlying a from fluctuations of year, always, a indication we we point which XX.X as about so normal rate. which in over our the ratio, in full-year As ratio quarter-to-quarter, what as a All

bringing almost $XX for $XXX production, in line higher X% the quarter net written than full-year was million total top in premium billion, the or to X%, growth to Turning XXXX.

with from with continued the priorities. pleased are and initiatives our right feedback remain We that partners focused were with our the agent we our on strategic progress broker and encouraged

domestic a of terms reflection of In rate with of retention X.X% change XX%, renewal the production, strong at remained X.X%, while our premium of we change renewal quality in the achieved quarter of book. high

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

pleased needed towards where return improving at and level balance thoughtful to to executing production our pursuing opportunities. a our strategy marketplace continue business attractive granular meet with in are it's operate business, these best a objective our with and We retaining of results pricing new

individual rate bit, while and renewal Select, strong remained a Turning retention renewal XX%. ticked to businesses, premium the up change in at

New we the as change year investments business was historically remained XX%. rate while initiatives. workflow quarter up change In over X.X%, quarter XX% our at technology prior in renewal X.X% was to continue leverage renewal middle last high market, consistent with and with retention at premium

As Alan fourth for the quarter. record said, a

this the going terrific are intended up, In year investments we centers marketplace feel forward. business having our how the that where and are New about the pleased from our was both the business new a of business, and business our initiatives prior line million over accounts in commercial $XXX were premiums from decade. activity $XXX quote business top quarter. position a the down premiums in a sum the and bit execution strong in opportunities. we highest about our XX% of out, center creating up business were quarter, confident new up To attractive now rolled are full-year fully business while are our level Submission million And at the level prior year impact. core strategic for

underlying few outlook and ratio be I we the on XX-K combined talk results, not our want to to since RPC filing will a comment weeks. Specialty call & about for turn over the I our to Bond Before for Tom

and with RPC at positive levels remain the expect We consistent XXXX. broadly XXXX will in

year. than assumes and lower the normal be combined the Underneath turn that, call improvements the for through large outlook, in XXXX quarters combined levels. which the primarily I return will losses Tom. With over to will that ratio full-year second the expect underlying line property ratio full-year We that in XXXX, lower of to more we in the expect fourth come the underlying to

Thomas Kunkel

impact The was doubled returns due and quarter from another & of favorable delivered underlying and premiums single very that underwriting the driven income loss a written income year our and quarter $XXX net be of targeting Domestic surety Liability reflects X%, primarily while volumes. an the prior quality to Management Bond up for rate higher prior growth. Greg. excellent business business, quarter quarter. business to of high quarter up continues Thanks, underlying year year XX.X%. from Management production in development. slightly retaining by underlying our combined level our opportunities. Net higher a strong improvement prior prior and in and in higher Segment the attractive business focus strong Liability ratio of were on pursuing needed, our million the Specialty surety year income strong were growth solid business nearly new the In was The

remained very for XX% So we are strong the pleased points. retention premium change at that renewal the X.X of quarter with

solid of the was competitive marketplace and up $XX X% our million business from reflect results prior execution. quarter. New advantages year extensive These

in are and customer robust analytics. specialty We relationships and invest and with technology competitive to strategic footprint. got and expertise, leading our franchise And national have in data leading we advantages. across platforms extensive We've extend products, will further long-term markets marketing talent product, while industry broker continue advanced exceptional capabilities a specialized we and a agent our that

results Specialty Bond So & were excellent.

great about feel our to the the our competitive future. and continue for market strong growth, opportunities that returns positions We present and advantages

to consistent. to and for positive expect the segment, underlying we compared and be Management In for to as our remain combined terms broadly ratio XXXX, XXXX Domestic Liability of outlook consistent our business RPC the broadly

discuss inherent in over production, the And written in no to higher disclosure. Michael net was For our it expect XXXX. be turn will Due longer be lumpiness surety I'll premium net including forward, surety we it Surety, going outlook we XXXX written now, to in Insurance. to slightly than premium Personal to

Michael Klein

by year the the favorable development. points. quarter, combined of quarter improved ratio $XX year Thanks, million, Tom, combined and The XXX.X% segment for income good over ratio was higher of Insurance prior X.X Lower and $XX prior results, Personal morning, driven catastrophes million an In and improved net lower improvement everyone. auto our was reserve

$XXX million fourth factors referenced X%, a quarter also X% by the and premium I Net was For for growth respectively. and full-year, combined and driven are segment income better than the prior the written of quarter. full-year ratio the same the XXX.X% year, for of

contributed premium Our growth to XX.X%, by with us exceeding full-year. basis These margins of favorable expense improvement re-estimation including achieve points combined full-year factors hurricane from down helped point and that in year XX loss adjustments the would Automobile to reserve for higher a improve the Agency Harvey. in we ratio. of another partially quarter a loss catastrophes quarter a net further X.X due prior frequency the benefited the continue catastrophes. have ratio also favorable offset from quarter development, year Underlying by prior year our higher a delivered loss ratio from earned a impressive ratio expected. the than lower to remaining combined in primarily prior pricing quarter, quarter benefit included better-than-expected. driven resulted trend better The that also Recall underlying

points combined On X.X Camp combined in significant by despite quarter was continue renewal wildfires as basis. elevation quarter for full-year ratio underlying In basis, of the were The this improved XX seek in of X high fourth better ratio. driven by more approximately points non-weather-related year losses, driven losses, improvements, by was Agency very or on of elevated quarter. continued X.X and of full-year XXXX and which again reflects underlying points well an the of assumption overall higher prior in the consecutive non-catastrophe the improve we this our we combined and ratio XXX.X% within to moderate Woolsey the we than and results. an levels Our year, to will higher points loss target prior pressure XXX.X% was with XX.X%, of catastrophes; both second noted Other, three weather California which combined pricing manage made earlier our and and of The combined and persist, we some returns The we exposure accounted to underlying year than loss the ratio line Homeowners and activity. combined catastrophe Automobile non-weather ratio than ratio XXXX and the year than profitability. given in higher prior the underwriting this of premium continue XX.X% Agency catastrophe that and full-year changes XX.X% XX balance experience, and these hurricane Consistent points, this Michael. non-catastrophe for growth to actions comments light recent implement an granular In loss

nearly momentum. a quarter. automobile a a our up and Turning and X.X% agency objectives production, while from than was year retention our point Renewal our change consistent XX%, quarterly premium to at the change moderate new year-ago. was prior higher remained solid with In to Agency premium renewal X% X.X%, of we with continue business Homeowners Other, remain pleased

in strong delivered in policies In XX% in increase and X% retention new we and addition, business. of XX% force, a growth

Homeowners be Turning to and positive positive, for XXXX. higher premium changes Other to our Agency to full-year lower compared we renewal renewal changes compared while XXXX, XXXX, be for to expect and outlook should for agency automobile premium but

year. outlook In Dan XX-K, expectations quarter-to-quarter the treaty texture will of provide our the section as and with undertaking aggregate in earlier. of Automobile, underlying underlying the likely we some Agency underlying in ratio catastrophe includes vary expect position the Personal in ratio mentioned of the turn comparisons Abbe. This impact the broadly combined grow We the combined profitably an the and opportunity our opportunities Agency combined back consistent to and explore actions improved be full-year business, Homeowners innovative quarterly continuing compared will segment, in ratio throughout Homeowners, are the in ever-changing call auto will pleased for in Insurance while the for light marketplace. I that, underneath new reinsurance that outlook With the to invest to capabilities the to Other, and with segment over we're All XXXX. results and we in our

Abbe Goldstein

And ready Michael. that, Q&A. you, we’re to Thank with for open-up

Operator

our question Jay And line from Instructions] comes [Operator Barclays. Thank first from you. of the Gelb

line Your open. is

Jay Gelb

Thank you.

I some still you XXXX the feel California the wanted more major here exposure theirs of the on addressed industry? to give you for type public that touch whether us Can given you exposure XXXX is to and how be perspective wildfires. First to annual on your based policy solution needs compare

Alan Schnitzer

to want start? you Michael, Yes.

Michael Klein

mean, may response. a talk detail with give will actions into bit we’d we little the of exposure of the view I granular Yes, little I in just view of Jay pricing mean a a what sort and and more when underneath you start underwriting be about

we look California two the environment discussion debate and the at a pretty of So and broad about years clearly public. losses the is pretty wildfire, in significant think, as it's I row

In our at response, we a of handful things. terms look of

wildfire XXXX We've look for California. view And and underwriting homeowners to we new of for in in new further that action with we’re had department our the We've example to underwriting example a and space some terms effect business business First, taken to appetite the taken business about new significant again We that this in our to inspections further some business implement and also underwriting appetite. Department appetite. our defensible filing instill begin portfolio. Insurance will address at later XXXX restrict as action increase conditions with further the California action also begun procedures to California State tighten have take more an of we already to marketplace in in in our action. and on also in discussions the nonrenewal implemented of the of around quarter prices appetite discussed on in and new that to sort exposures underwriting underwriting will the restrict

of our response bit gives particular homeowners little to you wildfires in underneath the book. that a texture in So

Jay Gelb

you. in buybacks on share question was That’s pace quarter. helpful. of My the Thank second the

if So average quarters, over $XXX I past million fourth quarterly back was higher than around the the look which six much million, the the in buyback $XXX is quarter.

some quarter when out account going factors pace buybacks project the to that trying just we losses, lower I'm other CAT elevated in or was buybacks should So, to there's due of we into the years take if on figure fourth ahead? if

Dan Frey

that. take will I Dan. it's Jay, Yes,

fourth approach consistent back underlying pension buybacks core in wildfires, XXXX more look as it related to level and and at generated on true is did returned to as this billion the plan probably the through California bit pull a the capital end billion of whole, we the of at given third of you $XXX any management dividend an share and would So at magnitude it way a share you about really our to remember of -- million time income, than as more a a we we think $X.X if repurchase. a one we and little no worth made at the buybacks look quarter. quarters we But little look uncertainty the bit difficult would It's it the $X.X you additional change of to philosophy. be over in quarter and suggested contribution

So really no change there.

like the we We have for are accordingly. support we going level at projected to of the plan business, capital forward cash we the of levels react look earnings things pension what that think to needs and and our going need

So going outcome shares be those what objective itself. really of in is of not we things in and an to buyback an

Jay Gelb

Thank sense. you. of lot a Makes

Operator

of question next from line comes the from Elyse Wells Our Fargo.

line Your is open.

Elyse Greenspan

Hi. My XXXX. underlying Good question the insurance, going to outlook for the first morning. just margin business

your through in some the above with level of to prepared of guys from if pointed of remarks, cover offset you there large go additional partially about So back you point that reinsurance purchasing. aggregate coming X normal that are 'XX guys losses I an

margin specific that’s year. within overall, the details the set assuming accident booking that up year business as XXXX? XX how or worse we basis I’m insurance improvement ended think auto are compared not better into can you you if this you gets Now the as I to know outlook, business you And margin in commercial about when guys coming guys sure points go then

Alan Schnitzer

Elyse, morning. good It's Alan.

So Greg start can let me jump and in. you

cause too volatility. try So, qualitative. that keep we it try these lot period-to-period of We lot of to a quantitative on from There's estimates, are a to lot to things and not going judgments outlooks. get a of

CAT is margins. one in give said on losses the that a Commercial otherwise the new Treaty order expect And Auto improvement did normal large try underlying that We not small. a is level. -- point do the to impact outlook we significant address more and we point of over would but of to of property to you out magnitude Greg reflected overall direction. the expect that, BI in return to Having essentially So for the relatively time,

think in way of think you to sort I gives So the broad strokes that underlying outlook. about the

Elyse Greenspan

Okay, this then XXXX. guys on outlook, to second question the my great. And pointed -- stable fairly in in change pricing premium of terms you thinking renewal about

the can seeing then picking of seeing CAT the we us uptick exposure, fourth on how when the did that other we of about will potentially price that annualize components? would kind one be quarter, think really as in you to XXXX? maybe for some needed started price give little XXXX you market you’re versus we a different in the anything or push bit to in that when of color you price saw think of the see rates following in way annualize that’s in losses, up So go And the different record the

Alan Schnitzer

activity, reinsurance we Elyse, together know pricing see that CAT all the over and You between how time one renewals, out. plays will

good. that context I rate. going change, are pretty will be changes pretty the in would Greg get -- the good outlook changes would that that anymore shared. not historical section stable rate what Overall, of allocation we've on of plus to relatively outlook is seen about granular XX-K you in look at of price price have a exposure just X we between that say and in of change back if BI history in X and the the And We that points be than

we about overall. pretty that so good feel And

Elyse Greenspan

the Appreciate you. color. Thank Okay.

Alan Schnitzer

you. Thank

Operator

question Credit of next comes from Zaremski Our the Mike line Suisse. from

line Your open. is

Michael Zaremski

Hey, thanks.

-- ratio say terms to year expense could story. the this the and improvement up early to regards picked will in in Would of trend? question innings -- the seems have multiyear half this It second kind this you improvement? First is in a the of its be is this of be

Alan Schnitzer

management the Well, is efficiency do. goes and both the thoughtful us and we of and ongoing definitely that entire company everything disciplined productivity across what’s for as effort, a strategic

activity in So you will us see regard. that more from

In while that incremental see expense objective us think to that us, sense a initiatives how but that operating through the our we for lot into it to those in create compromising line We’ve to come our not is it bottom you can we in numbers, ratio. helpful saying going to the terms that's or savings the a very leverage to that important of here ratio. can or in and the gives strategic of may price and without in it's it really lower a of into expense may flexibility. been let objective. We put decide can take reinvest We return form the fall

So it's for definitely across ongoing us the company. an objective

a rate think to and sense run gave know, you of BI for don’t you -- I a is Greg want Dan? I what

Dan Frey

and if It the look pretty where couple full-year Yes, for a ratio, years. that's we’re of forward. going good expense over you heading the probably quite enterprise improved has the at I'd a similarly say indication of last bit

I a we're more that reached think level we’ve happy with.

ratio to but dramatic levels and focus to expect decrease productivity I Alan we on continue see the continued the efficiency, now. level As from at expense we’re of wouldn't will said, in a

Michael Zaremski

expected margins then is comp remain as costs question pricing, follow-up And regards in a you comp? we that about comp healthy. maybe on to worker's more last in XXXX loss less also trends my headwind to become of were does us work could Thanks. think If progresses? And great. Okay, or update

Alan Schnitzer

completely has the of been some it's line where been. under pressure, comp profitability workers' of given Yes, but rational pricing the

then breakout going give is in good. with segment, got selections, pressure and line. the speaking, continued outlook shared We loss you no profitability are it shared comes your time over in time go frequency there's line. we selections commentary you're the -- into you for to we are us reported activity comp move say for expect and We’ve anything that to we loss to severity by in but us are causes that requires generally and quarter And off change We would continues decide that to loss the picks that last to at from seeing look on we seeing not and that And if those data and pricing ratios. comp compare anything what again, to are workers' those you -- over as which trend we're are And last be quarter, data would off move the in what you our we we reiterate not picks. that.

Michael Zaremski

Thank you.

Operator

Kai of the comes Our Stanley. Morgan next from question from Pan line

Your line is open.

Kai Pan

reinsurance new of first and good question aggregate you Thank program. morning. My these on sort

program your these retroactively? in 'XX, applied would if much how loss So CAT is to be XXXX

Alan Schnitzer

Yes, Kai.

years over have So years, treaty back would what in of the we modeling full not looked look of two under seen the last like each a last given we'd of recovery at a level particular number surprisingly things two going the in and CATs, probably years. elevated the

Kai Pan

be is forward? basis so assume XX CAT lower cover, your -- that XX normalized be -- going safe to like loss aggregate Is it point basis core given will higher your points loss ratio would but

Alan Schnitzer

wouldn’t that I say exact offset. an it's Yes,

the had haven't. in underlying impact which year on normal to in, I to combined back last think ratio as overall normal pretty the we to a combined minimis all the a expectation CATs of seven back my CAT definitely if get years point it's about de know us mitigating on we go if on half you a ratio the you comments, with factor the

Kai Pan

if the be CATs other are normal we In your normal, in word, will lighter combined Okay. lost than you -- ratio see coming worse year? the than actually the

Alan Schnitzer

a recovery, ratio combined and we worse would The because be exceeded have no correct. premiums had would way

Kai Pan

Okay, gave personal just homeowners guidance Michael margin as well second on the And like question was great. in both auto prior as book. underlying side. guidance you line your actually you that improvements with XXXX XXXX My better for XXXX. are business pretty for XXXX were growth? -- expected, in or improved new for the reinvesting in Is than previously guide because in consistent XXXX, much

Michael Klein

Michael. Kai. Sure, It's

little so of a bit -- it's it's actually right. think I both,

than the in actual to update the so of and the broadly compared If better we you auto auto, results expected consistent just reflects came think about the outlook outlook.

as Dan the the periods weight outlook. property on we the that experience been recent bit we've a weather mentioned. loss a Again, it's non-weather of On more put continue and to change side, and non-catastrophe fact talking more little and about catastrophes talking in about

so new particular, in partly of impact a line. property that the as the drag accounting which the just impacts consistent as property reflection talked ag broadly Dan about CAT for treaty, a the well of underlying And is outlook as and, the on is of

are those So kind the of pieces.

Kai Pan

Well, much. thank great. Okay, you so

Alan Schnitzer

Thank you.

Operator

Kumar the question Research. of next Amit Buckingham from line from Our comes

line open. Your is

Amit Kumar

the Thanks just lot a Maybe Klein. think out and was guess, needed trajectory I of just their loss and has was back, on been quick Allen's trend Michael there for you Number of the done ahead seems and Auto if maybe update couple the like the work filings? rate questions opening us environment to of Maybe I it here go expectations. good comment morning. got in Personal a cost of remarks, that one, which we

Michael Klein

Amit. Sure,

increased frequency, We think severity I trend to damage, So about, many significant change and continued most see loss observe talked fairly of cost particularly in the collision with and sort it consistent physical and we Alan's again, as have we outlook I'd cost trend right? in bodily repair and vehicles, it bit a all cost loss of so has our those on of it's trend we've would've consistent what with combine lost earlier cost been commentary of less a a trend that around our together dynamics we the talked you some what see when quarter say with estimated we comments and think we see view see pick, has consistent been with relatively little Again, There there. trend variation environment. results a loss ago. put about don't in on injury pressure about I we've

again, was but our in positive, for remain XXXX will for terms in than XXXX. forward, RPC outlook In is going price of lower outlook auto it that change be RPC

Amit Kumar

broadly lift opportunity, how you as should The think press question on handicap I other we And this helpful. has this release had I the maybe so talk drivers. curious on of And I Thanks. should million -- only was forward? lift. or was sort about $X.X could outsiders That’s just Okay. we if going

Alan Schnitzer

near-term, economy. lift claim an in in the to for numbers perspective us the it's for it participate bring but it's for for to move It's to opportunity meaningfully we're an a from with offering our We leading excited benefit them. capabilities the wouldn't on work and Amit, partner changing excited to them. Yes. exciting expect them and to a we great service think economic

Amit Kumar

road? any TNCs on thoughts the another And expanding down into

Alan Schnitzer

anything have moment. I announce don’t don't at the to we --

about innovation an thinking we always there and economy think for in about and as us participate opportunities are in evolving continue whether means are We what we changing insurance will to to do that the world.

Amit Kumar

it. good for luck and answers here. the Got stop for will future. the I Thanks

Alan Schnitzer

you. Thank

Abbe Goldstein

Thanks.

Operator

the line from of comes question next Meredith Our Brian UBS. from

Your line is open.

Brian Meredith

Yes, thanks. of for quick couple you. A questions here

CAT loads a about kind Is way about the assume it First, going of to CAT think to think going treaty kind you guys? this that a for back forward, of so a that or talking simple way Tom to the just was it? about. good Is $X.X CAT we kind of billion load

Dan Frey

Dan. it's Brian,

won't give So earnings that we don’t so and into of earnings. I components go on give guidance the we the specific guidance say will pieces

bit over a historically in for overall specific in comments, periods recent basis. of disclose the we exposure take mentioned each reasons. of on growth given go of time a and is to would time in catastrophes from in on our what CAT. uptick dollar avoid I'm been up to need that bit proxy going it that and had my two into in premium those little should time us our We as You But a backwards level two, number. in we to business, think seen sort see of more of expected trending that premiums will terms of view One looking weight gives number an about the probably the level we��ve the a volume could

Brian Meredith

I’m Great. loss business, I’m when any Select had you're have curious, you. underlying growth my in business just new question, on that business good guys new strong second pressure that growth, seeing And type does growth? then just commercial. of ratios your Got you really small your curious,

Gregory Toczydlowski

new business technology management investment Greg. a business. year-over-year. quite you that growth the the the the in growth. Select of We business feel across We've product is been This Select XX% in about workflow the all spending Brian. see in the and Hey, terrific can Yes, bit of

in the see really can looks XX, range. book strong of the the retentions quality You XX that good, really

deterioration we underlying in haven't based seen So new meaningful any the that on business.

Brian Meredith

Great.

the it's XX see that impact, you So don’t commercial? in auto small in like that year really get you'll

Gregory Toczydlowski

just the you much auto you and have as the because comp, have and the GL property, Not difficulty]. [technical

Brian Meredith

you. Makes sense. Thank

Operator

the Our Tunis of next from question from comes line Ryan Autonomous.

is line Your open.

Ryan Tunis

morning. Good Thanks. Great.

question for Alan. First just

load at some in only ratio factor kind CAT XX%, but a at are in level in business elevated like like and It underlying Looking here a normalized you of at range. X loss at running we large X.X of feels feel then doesn’t curious normal ROE. to a a where a throw the That kind combined XX.X ratio a of we which point activity, insurance, margin. level -- combined there's this is bit rate on if hold underwriting the sense you double-digit urgency place about little you'd be is looking I’m line, thinking around should X% a be like more the of Thanks. increases.

Alan Schnitzer

pressure BI, not Lloyd. Yes, there's -- come we those clearly pockets -- -- about outside Ryan, Greg commercial get the States and about of but to largest we've into but you, of losses, right. talked the going with the calculating We United talked auto, mentioned from I and that today been headwinds the in large some I’m returns some piece

X and in of expect the points of to get are we that continue improvement So there would time, which over some aspects we rate.

of So auto, income the losses trend that NII margin the dynamic. the good. U.S., well. there about the in commercial pure talk turns are helps rate outside volume just that's heard over. those leverage, been in rates terms opportunities earnings as us of expense large where fixed outside are helps are Again, us Again, And bond they you’ve the portfolio pretty dollars BI

feeling given a to do, you are today. we the of math where -- they’re and could some that company treasury businesses. do of opportunities Again, company, digits if step underlying a particularly not if take we us, badly whole get going a the and having in returns double you trending. year bad we're low but look put CATs, wherever that a of and So is for prior in feel and on this development as out got basis this all Ryan, forward where would is as size somewhere and about the with think back where doesn't normal take one see and you XX-year portfolio the at you And you at is well altogether diversified the of return benefits you

sense about always here. of we no So a around question There's urgency feel that.

that We are we’re optimizers with to and perfect, we’re is here a not are it. who no sense of everything there heart at the going of to optimize at all But problems. work that urgency there's sense

Gregory Toczydlowski

Ryan, This keep line. math, you generated net one depending that different would is that investment is in on the thing those mind target, is what combined do on ratio when do based Greg, we add. I product have income

property. line rate ratio the So think workers to or largest comp combined have could relative we shorter higher we where a run a tail like

math. So that mind in keep you I that when would you just to ask also do

Ryan Tunis

auto that I to trend why business is, follow-up this the Liability translate line. elevated commercial involvement, but what’s not me the my to with get then is Other as And increase completely clear the an wouldn’t lawyer Understood. and more

and general auto do So comfort just we things or you’re shouldn’t curious specific gives more to is be seeing you auto guys what broadly in seen liability.

Dan Frey

Yes.

Ryan, So, the And just through thinking watch certainly our on we lines you that walk carefully. it. and

and have umbrella a very, too. Management Liability claims. those So very in excess levels put would representation you’ve this of in second, group for I got GL We large already high

already pre-active again RD percentage a that's So there. high

are of speculate as there, bit to it claims just rep, seem to attorney a case -- the is small more more but the the On and when be it business of as you've we little smaller a the bar, side, very portfolio not the got GL attractive we make much opportunity seeing active plaintiffs probably that's auto as we harder cases. are, doesn't for quite of in the many

seen the in So really not have it's theme when now. CMP, we again in This to but a lesser the than hanging lines, well liability does component we cross When as auto. words just other you pressure. fruit the see least small degree -- liability of get -- at for into just

Ryan Tunis

you. Thank

Operator

Meyer Our KBW. next from line the from of Shields question comes

is open. line Your

Meyer Shields

elevated the right? I point beating Hi. Pardon the the discuss losses. completely a on when I probably of loss ratio me, but commercial on here, one core guess, impact Do treaty that dead from separate you property is horse that’s have large from the

Alan Schnitzer

Yes, two separate totally topics.

Meyer Shields

compared XX would to basis XXXX. is That’s Okay. increase point that’s that fair? mentioned, XXXX And the that otherwise, what second, you not to compared be

Alan Schnitzer

been, is XXXX to correct. would what have otherwise compared It

Meyer Shields

Okay, great. Thank much. you so

Operator

Larry next the comes Janney of Scott. Montgomery from Our Greenberg question from line

Your line open. is

Larry Greenberg

Hi. Good morning. Thank you.

some if the fourth wondering there's the of that first have equity or opportunity? anything widening as about place Just given quarter, in fourth some markets in just income, reallocations say income to on that the you in quarter, took what fixed non-fixed of And income the given might some volatility given markets then, investment the view in quarter. volatility done any asset spread and

William Heyman

Bill Hi, Heyman. Larry. It's

of judgment to about With order. regard X.XX in assuming about increased credit year, to take good, you a been. we our our up know changed is treasury X.XX the which historically reverse to The me dropped the is end say the the -- question, XX-year on of at second you from strategy, as Let haven't the back quarter at opportunity, yield as it respect we has the spreads X.XX. end really its

been that's widening. spread partly So for by compensated

seeing situations returns will developments I by notoriously years. been we with equity, In quarter We well we've taken in and the that throw similar for what think perfectly So far we good there. in order make portfolio of comfortable but out equity we're have alone XXXX, are generally like pretty private public pessimistic. where we occasionally internal been up fourth the wouldn’t agree seen too developments markets projections that the what followed we've inaccurate. of still

your as is good ours. as guess So probably

Larry Greenberg

Thank you.

Operator

We question. have one for time more

Sachs. Kinar question will next from Yaron the of Your from line come Goldman

line open. is Your

Yaron Kinar

to one for in. sneak Thanks allowing

the As non-CAT, back 'XX. I business of said a we underlying you that and in ratio large about you had combined point so to losses there, think go insurance X%

gives adjust like flat number same I for it's driving deterioration in that look had year if roughly worse. you commercial that was XXXX bit that that combined Maybe numbers seems about talk maybe the at this you I think confidence you what slightly then little what I look to is year-over-year. if the there Can will and lead was underlying ratio, a of 'XX, auto, the so better. it

Gregory Toczydlowski

large normalize price and that’s over we and Hey, expectations Yaron, as our trying losses, possible best this are you’re point. managed XXXX. were comments the That and expectations roughly business and I also the normal job in how is to one, Greg. correct do that over one our disclosed we in our we of we Number my XXXX prepared was for

Yaron Kinar

favorable I had my The underlying difference the those, full based more some The between point ratio business. full-year some and half full-year that's than prepared comments Lloyd's And that 'XX. driven a and XX you than Then a maybe 'XX the little combined disclosed as auto half a points year expense on we where of and I some the driving point little bit driving there. then international mentioned can businesses predominantly to offset see a more point again basis is a the also that. difference above in activity an

So those there. all to the get are pieces that

Gregory Toczydlowski

from, expect ratio would expense that be you if in coming you expect ratio. terms? for current improved maybe the loss same be still where the not given the overall Can underlying you about 'XX some may So to magnitude improvement 'XX. improvement talk combined Can the in

Alan Schnitzer

of that basically It's large point losses. one

Yaron Kinar

Okay.

decrease by fair? by development Okay. the the increase the prior maybe and much development. that not that It And was driven on Is comments quick in year so an adverse a year really in one development a maybe sounds slowdown gross scripted that development, favorable development. from favorable then in prior

Gregory Toczydlowski

almost I will start prior There no is The trend year just trend prior implied that there me queue question development. Let a and in it. is development. in

making Our feel end and best returns with adjustments to go management's reevaluating do we process come that, like the we need up obligation through to. estimate then every at our of where quarters we and every of quarter and we the

So year adjustments a just best period, estimates. net prior development in of any those to given for of the is level any

Alan Schnitzer

because echo step than more Not little you’re a $XX you seeing balance look prior always of full-year, the lines look that in loss And of development, which at think there why are to net development we’re characterized careful is right favorable as around both scheme expense billion prior prior would favorable of back are sheet, loss I Yes, reserve that the that billion. business pre-tax development. side the I pretty sheet net and unfavorable $X.X you balance reserves the net and year reserve big reserve year if of of the accident go ways. if years in adjustment at and

pretty we them. but losses, update going refine every estimating and are good So are at we to quarter

Yaron Kinar

so Got it. Thank much. you

Operator

back turn now remarks. will Ms. Goldstein over closing the to I for call

Abbe Goldstein

always us out if follow-up reach joining us a day. questions, for Thanks. And good any please all you in investor and to have Thank have you relationships today.

Operator

This concludes today’s conference call.

may now You disconnect.

The Travelers Companies, Inc. (TRV) 22 Jan 192018 Q4 Earnings call transcript