The Travelers Companies, Inc. Price & Performance (TRV)

Our presentation today includes forward looking statements. Company cautions investors that any forward looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors. These factors are described under forward looking statements in our earnings press release and in our most recent 10 Q and 10 ks filed with the SEC. We do not undertake any obligation to update forward looking statements. Also in our remarks or responses to questions, we may mention some non GAAP financial measures. Reconciliations are included in our recent earnings press release, financial supplement and other materials available in the Investors section on our website. And now I'd like to turn the call over to Alan Schencer. Thank you, Abby. Good morning, everyone, and thank you for joining us today. We are pleased to report a substantial profit for the quarter, despite the devastating January California wildfires. We delivered core income of $443,000,000 or $1.91 per diluted share as outstanding underlying results strong net favorable prior year reserve development and higher investment income more than offset catastrophe losses. Over the last four quarters, to strong underlying fundamentals, we generated a core return on equity of 14.5%.

That demonstrates our ability to deliver healthy returns over time notwithstanding elevated industry wide catastrophe losses. Underlying underwriting income of $1,600,000,000 pretax was up more than 30% over the prior year quarter. That was driven by strong net earned premiums of $10,700,000,000 and a consolidated underlying combined ratio that improved 2.9 points to an excellent 84.8%. All three segments contributed to these underlying results with strong and higher net earned premiums and excellent underlying profitability. The underlying combined ratio in business insurance improved to an excellent 88.2%. The underlying combined ratio in our bond and specialty business was a very strong 87.3%. And the underlying combined ratio in personal insurance improved by more than six points to a terrific 79.9%. Consistent with the announcement we made in February, our catastrophe losses from the California wildfires were $1,700,000,000 pretax. I'm grateful to our claim team, their continued excellent work taking care of our customers, and supporting the community's recovery. We've already paid out nearly $0.07 $5,000,000,000 including substantial advance payments to our customers who suffered total losses. Even after that, operating cash flows for the quarter were a very strong $1,400,000,000 Turning to investments. Our high quality investment portfolio continued to perform well.

After tax net investment income of $763,000,000 for the quarter was driven by strong and reliable returns from our growing fixed income portfolio and positive returns from our thoughtfully managed alternative investment portfolio Our underwriting and investment income our underwriting and investment results together with our strong balance sheet enabled us to return nearly $600,000,000 of excess capital to shareholders including $358,000,000 of share repurchases. At the same time, we continue to make important investments in our business as we completed another quarter of successful execution on a number of important strategic initiatives. Even after this deployment of capital, adjusted book value per share increased by 11% as compared to a year ago. In recognition of our strong financial position, confidence in the outlook for our business, I'm pleased to share that our Board of Directors declared a 5% increase in our quarterly cash dividend to $1.1 per share marking twenty one consecutive years of dividend increases with a compound annual growth rate of 8% over that period. Turning to production. Excellent execution by our field organization drove our top line growth. With all three of our segments contributing. During the quarter, we grew net written premiums to $10,500,000,000 In business insurance, we grew net written premiums by 2% to a record $5,700,000,000 After the ceded premium impact of the enhanced casualty reinsurance program that we announced last quarter, As we previewed with you, that reduced the segment's net written premium growth in the quarter by four percentage points.

As a full year's worth of ceded premium was booked in the first quarter. Renewal premium change in the segment was double digits or high single digits in every line other than workers' comp. Even with strong pricing pretty much across the board, retention improved nearly two points from the fourth quarter to 86%. And was higher in every line. That dynamic of strong pricing and retention speaks to continued discipline in the marketplace. New business for this segment was a record $735,000,000 a reflection of the fact that our customers and distribution partners value the products and services that we offer and the experiences that we provide. In Bond and Specialty Insurance, we grew net written premiums by 6% to $1,000,000,000 with excellent retention of 89% our high quality management liability business. Our industry leading surety business, we grew net written premiums by 13%. Given the attractive returns, we are very pleased with the strong production results in both of our commercial business In personal insurance, net written premiums grew 5% to $3,800,000,000 driven by strong renewal premium change particularly in our homeowners business. You'll hear more shortly from Greg, Jeff and Michael about our segment results. Before I turn the call over to Dan, I'd like to comment on how Travelers is positioned for what feels like an uncertain macroeconomic road ahead.

In short, we are entering 2025 in a position of strength We are a market leader in a diversified portfolio of businesses. Each with a strong value proposition to offer to our customers and distribution partners. Our underlying margins are in great shape. And in each segment, we have attractive loss ratios, and expense ratios that reflect years of strategic focus on optimizing operating leverage. Our cash flow is strong and resilient Our investment portfolio was thoughtfully managed to deliver highly reliable returns including through periods of market stress. And we have a fortress balance sheet featuring a strong capital base, and almost no debt coming due in the next eight years. On top of all that, we have the resources and financial strength to continue making strategic investments in our business without interruption. All of which is to say just as we have successfully served our customers and distribution partners, and created shareholder value over time, including through periods of economic disruption we are very well positioned to continue doing so now. And with that, I'm pleased to turn the call over to Dan. Thank you, Alan. Travelers delivered $443,000,000 of core income in the first quarter despite significant losses from the California wildfires.

The higher level of cat losses was partially offset by a significant increase in underlying underwriting income higher level of net favorable prior year reserve development and higher net investment income. And as you heard from Alan, trailing twelve month core return on equity was 14.5%. Our pretax underlying underwriting gain of $1,600,000,000 was up 32% from the prior year quarter reflecting higher levels of earned premium and an underlying combined ratio that improved by 2.9 points to 84.8%. The underlying combined ratio was our second best result ever and once again featured very strong results in all three business segments. We were pleased with the first quarter expense ratio of 28.3% an improvement of 40 basis points from the prior year quarter. For the full year, remain comfortable with an expense ratio expectation of 28% to 28.5%. Our continued focus on operating leverage enables us to maintain this level of expense ratio even as we increase the amount of strategic technology spend, to further strengthen our competitive advantages. Positioning us for continued success well into the future. We reported net favorable prior year reserve development of $378,000,000 pretax in the first quarter with all three segments contributing. In Business Insurance, net favorable development of $74,000,000 pre tax was driven by workers' comp.

In Bond and Specialty, net favorable PYD of $67,000,000 pretax was driven by better than expected results in management liability and surety. Personal insurance recorded net favorable PYD of $237,000,000 pretax with significant improvements in both auto and home. [indiscernible] Catastrophe losses for the quarter totaled $2,300,000,000 pretax. Driven by the California wildfires in January, for which our estimate of $1,700,000,000 is unchanged from the estimate we preannounced in February. After tax net investment income increased 9% from the prior year quarter to $763,000,000 Fixed income NII was higher than in the prior year quarter and in line with our expectations. Benefiting from both higher yields and a higher level of invested assets. Our outlook for fixed income NII by quarter including earnings from short term securities is $725,000,000 after tax in the second quarter growing to approximately $755,000,000 in the third quarter and then to around $790,000,000 in the fourth quarter. NII from our alternative investment portfolio was also positive in the quarter. Given recent movement in the equity markets, this is a good time to remind you that results for our private equities hedge funds and real estate partnerships are generally reported to us on a one quarter lag.

And while not perfectly correlated, our non fixed income returns tend to directionally follow the broader equity markets. In other words, the impact of the decline in financial markets that occurred in the first quarter will be reflected in our second quarter results. Turning to capital management. Operating cash flows for the quarter of $1,400,000,000 were again very strong despite the elevated payout related to the California wildfires. And we ended the quarter with holding company liquidity of approximately $1,600,000,000 As interest rates decreased during the quarter, our net unrealized investment loss decreased. From $3,600,000,000 after tax at year end to $3,300,000,000 after tax at March 31. Adjusted book value per share excludes unrealized investment gains and losses, was $138.99 at quarter end basically unchanged from year end and up 11% from a year ago. Share repurchases this quarter included $250,000,000 of open market repurchases. We had an additional $108,000,000 of buybacks in connection with employee share based compensation plan. We have approximately $4,800,000,000 remaining under prior Board authorization authorizations for share repurchases. Dividends were $241,000,000 in the quarter, And as Alan mentioned earlier, our Board authorized a $05 increase in the quarterly dividend to $1.1 per share. In summary, our first quarter results once again demonstrate the significant earnings power that results from our ability to leverage our competitive advantages to grow premiums across our well diversified book of business while maintaining very attractive margins.

Along with steadily increasing net investment income from our growing investment portfolio. And with that, I'll turn the call over to Greg for a discussion of Business Insurance. Thanks, Dan. Business Insurance had a strong start to 2025, with segment income for the first quarter of $683,000,000 Underlying underwriting income, net prior year reserve development and net investment income all improved from the first quarter of twenty twenty four. The underlying combined ratio of 88.2% was an excellent result and a point better than the prior year quarter driven by the benefit of earned pricing. Turning to the top line, we grew net written premiums by 2% to a record quarterly high of $5,700,000,000 inclusive of the four point ceded premium impact that Alan referenced. As we indicated in our comments previously, we expect the change in our reinsurance program to be neutral. In terms of underwriting income. Pricing remains strong renewal premium change of 9.2% driven by renewal rate change of 6.4%. Retention increased to an excellent 86% and new business of $735,000,000 was an all time quarterly high. We're pleased with these production results and our ability to sustain strong levels of pricing and retention. That combination is a reflection of market wide discipline in response to ongoing environmental trends and uncertainty.

Renewal rate change remained high coming in at well over 6% for the eighth quarter in a row. The small tick down from Q4 was driven by our national property book, where returns are very strong after several years of compounding rate and improvements in terms and conditions. In our select and core middle market businesses, renewal rate change remains strong and in line with fourth quarter levels. From a line perspective, renewal rate change was highest in umbrella and auto. While CMP reached an all time high and GL remained strong. The execution by our field organization was exceptional achieving the highest retention levels in our best performing business and the highest levels in our other accounts. The granular execution contributes to optimizing the portfolio's returns. This success is possible based on the robust data that we have, the advanced analytics and sophisticated tools we put in the hands of our frontline underwriters. As well as the strength of the talent that we have in the field. As for the individual businesses, in select renewal premium change remained strong at 11.6%. Up one point points from the first quarter of last year while renewal rate change of 5.8% was up nearly two points from a year ago.

As we expected retention was stable at 80% driven based on our targeted CMP risk return optimization efforts. Which will begin to wind down in the third quarter. New business of $159,000,000 was a quarterly record. Overall, we feel terrific about how we're strategically managing the mix of business to drive long term profitable growth in Select. Our distribution partners have embraced industry leading experience and segmentation benefits we're getting from our BOP two point zero and new commercial auto products. In middle market, renewal premium change was in line with the fourth quarter at close to 10% with strong renewal rate change of 7.5%. The rate increases remain broad based as we achieve positive rate change on more than three quarters of our middle market accounts. Retention of our high quality book remained historically high at 89% and increased one point from the fourth quarter while new business of $434,000,000 was an all time quarterly high. To sum up, Business Insurance had a great start to the year. We continue to grow our high quality book while investing in capabilities that position us well for long term success. With that, I'll turn the call over to Jeff. Thanks, Greg.

Bonded Specialty started the year with another strong quarter on both the top and bottom lines. We generated segment income of $220,000,000 an excellent combined ratio of 82.5% and a strong 87.3% underlying combined ratio in the quarter. Turning to the top line. We're pleased that we grew net written premiums by 6% in the quarter. In our high quality domestic management liability business, we delivered excellent retention of 89%. Renewal premium change remained positive and generally consistent with the fourth quarter. As expected, new business was lower than the first quarter of twenty twenty four. As a reminder, Corvus production was reflected as new business in the prior year quarter and now is mostly renewal premium. Comparison to prior year new business levels will be similarly impacted for the next few quarters. Turning to our market leading surety business. We grew net written premiums by an excellent 13% from the prior year quarter. This growth reflects a robust construction environment, continued strong demand for our surety products and services and outstanding execution by our team in growing our high credit quality portfolio. So we're pleased to have once again delivered strong top and bottom line results this quarter, while continuing to make significant strategic investments in our business.

With some notable achievements. To name just a few, we released our first product on our new management liability technology platform, a modernized accountants' professional liability product, Emre plan, with enhanced digital capabilities, and a significantly streamlined workflow. Capitalizing on the Corvus acquisition for the benefit of our admitted cyber customers, we launched an improved cyber risk policyholder portal with enhanced value added services. And we're leveraging our industry leading data advantage and deploying multiple artificial intelligence models to drive underwriting enhancements. Including as just one example automating the process for certain employment practices liability renewals. Looking ahead, we're planning additional capability and product release during the year that will further extend our competitive advantages. And with that, I'll turn the call over to Michael.

Thanks, Jeff, and good morning, everyone. In Personal Insurance, the first quarter segment loss of $374,000,000 and combined ratio of 115.2% reflect the impact of the California wildfires a significant event for us and the industry. Strong underlying underwriting income favorable prior year development partially offset catastrophe losses in the quarter. The underlying combined ratio of 79.9% a record quarterly result for the segment, continues to reflect the actions we've taken to improve the underlying fundamentals of our business in both automobile and homeowners and other.

Net written premiums grew 5% in the quarter, driven by higher renewal premium change. In automobile, the first quarter combined ratio was 83.4% and included a six point benefit from favorable prior year development. The underlying combined ratio of 87.5% improved 7.4 points compared to the first quarter of the prior year. This improvement was driven by lower losses resulting from both favorable frequency across all coverages and sustained moderation of severity trends. As well as the benefit of higher earned pricing. As a brief reminder, the first quarter is historically our seasonally lowest combined ratio of the year in auto. In Homeowners and Other, the first quarter combined ratio of 145.5% includes the impact of the California wildfires. The underlying combined ratio of 72.6% improved five points compared to the first quarter of twenty twenty four. Driven by the continued benefit of earned pricing, and lower non weather losses compared to the prior year. Our production results reflect our efforts to position our portfolio for long term profitable growth. In domestic automobile, retention of 82% remained consistent with recent periods. Renewal premium change continues to moderate as intended reflecting improved profitability and our focus on returning to profitable growth in auto.

We're pleased to note that auto new business premium increased relative to the prior year quarter, driven by states that are not constrained by our property actions. In Domestic Homeowners and Other, renewal premium change increased to 19.6% as a result of our actions to align insured values with rising replacement costs while we continued to achieve strong rate increases.

The decline in homeowners policies in force continues to be driven by our deliberate efforts to improve profitability and reduce exposures in high cat risk geographies. While those same actions continue to constrain our ability to grow auto PIF the near term, We believe the trade off makes sense for the long term performance of our diversified personal lines portfolio. Before I wrap up, I'd like to thank our team and our distribution partners. For their hard work and dedication in serving our customers. With their partnership and support, we remain confident in our ability to deliver value to our clients and to build a larger, more profitable business over time. And with that, I'll turn the call back over to Abby.

Thanks, Michael. We are ready to open up for Q and A. Thank you. We will now begin the question and answer session. We'll go first to David Motemaden at Evercore.

Thanks. Good morning.

Alan, you made some comments just on the macro environment at the end of your prepared remarks. I'm wondering if you could just talk about how you're thinking through the impacts of the tariffs across your businesses, both personal and commercial lines. And more importantly, how you're thinking about responding in the marketplace. Sure, David. Good morning. Thanks for the question. You know, just in terms of background and then a high level, I'd say as far as the direct impacts go, we think it's pretty manageable for us. It's just a fraction of auto and property losses that are physical related and only a fraction of those are for materials that would be impacted by the tariffs. The most significant impact for us is likely to be a onetime impact to physical damage repair costs. For us that most notably impacts private passenger auto from there the impacts diminish pretty significantly. And just to give you a sense of the magnitude David assuming the tariffs as been announced remain in place and are largely passed through and I think there's a question about that. We'd expect somewhere around a mid single digit increase to PI auto severity Again, that's a onetime impact, not slope impact.

Having said that, we would actually expect the actual impact to be somewhat less. So first, we think participants in the value chain will likely seek to mitigate the impact through some combination of advanced inventory buildups, substitution of goods, reorganization of supply chain, lower tariff pass through rates, things like that. And second, the actual impacts could be mitigated by other factors, for example, extended lives of cars on the road. Also just looking at our PI auto margins now, the auto margins as you can see are in a pretty good place and if the recent favorable loss trends persist then we'll see whether they do or not. But if recent favorable trends persist we may be able to absorb whatever the impact is inside our loss picks. So I would say for now we're prepared to watch and react to the extent that we need to and however the loss trends evolve, we've got the tools and the capabilities see it pretty quickly, and we'll reflect it in our pricing models. Understood. Thanks for that. And maybe just switching gears to the growth in the quarter within Business and insurance. Sorry to be super short term here, but when I think about the 2% is it right to think about just adding back that four points of reinsurance drag and sort of that's like a sort of like a run rate level before I think about different moving pieces as we head into the second quarter such as mix and price?

David, let me start and I'll turn it over to you, Greg. So So as per starting point, we would you definitely would add back to Florida to get to a level. There's always other things in the quarter that are going to impact premium from one period to another. You know, there's the production booking, for example. There's endorsements. Cancellations, all those sorts of things. So so that would have an impact. I would I would tell you to look at the strength of the production in the quarter. I mean you can look at retention price all very strong levels.

Thank you.

We'll go next to Gregory Peters at Raymond James.

Good morning, everyone.

I think it was Dan in the comments around the expense ratio you mentioned increased tech spend. One of your peers had an investor day and spoke at length about what they're doing on the tech side of the business. I went back to your fourth quarter presentation where you gave a slide on your technology investments the routine and necessary versus the strategic I'm under the impression that a portion of your tech spend is just maintenance on legacy systems. Should can you talk about what you're doing on the tech spend area in in in in response to this? And is the strategic just all new initiatives, or is that partly rehab of legacy systems?

Yes. Well, first of all, Greg, thank you. Good morning. I love that you're focusing on that slide as we think it tells a great story. I mean, you can see over the period in that slide we've done a great job of of maintaining the routine but necessary expenditures. And yes, that is everything from licensing fees to patching systems, all the things you have to do whether you like it or not, routine but necessary, I think sums it up. And if you look over that period, we have increased the mix of our strategic spend from I think at the beginning of the first year in that period, think it's something like a third and I think last year was approaching a half. And so it's I mean that certainly would be new expenses, but it would also be the carryover expenses of things that we started in prior years that we continue to invest So all in all, we are spending considerably more over $1,000,000,000 a year Our strategic mix is much more favorable now And we've done all that inside an expense ratio that we've reduced meaningfully over the period. So we think we're investing in the right things and doing it pretty effectively.

Got it. Thanks for the color. My follow-up question and I I don't I don't get too hung up on our quarterly number, but the PYD for the first quarter seemed a little bit better than expected. And I know you already addressed the tariff component inside your loss cost, but I'm just curious has there been any change in your perspectives on what your underlying loss cost trends are across your book? And then maybe speak specifically to the development again in the auto business, which clearly was a little stronger than I expected at least.

Greg, it's Dan. So I'll start with the PYD auto piece just to give you a little bit of color there. So better than we had allowed for. And in auto, you're really talking about better than expected frequency and severity in both the physical damage coverage and bodily injury. So sort good across the board Just to go back to the loss trend question, we've sort of tried to get away from giving a specific trend number, but I think it's fair to say that trend in the quarter at least behaved pretty much as we would have expected it to. And so that's why you hear both Mike and Greg talking about the benefit of earned price and how that shows through an improved margins because the loss trend really was about as expected.

Got it. Thanks for the answers.

Thanks, Greg.

We'll move next to Brian Meredith at UBS.

Yes, thanks. A couple of them here quickly. Dan, I'm just curious when we think about the deductible on your cat program, is it fair to just assume whatever the cat losses were in the quarter? And [indiscernible] the remainder up to $4,000,000,000 is kind of what you've got less than your deductible or we think about it a different way?

Yes, Brian. So the one thing to keep in mind is, as we said in the describing that program at the end of the year, which is not a change from the way it had worked in previous years, the first $100,000,000 of any event is for our account. So really would look at the items that we put in the 10 Q table of cats because that's anything over $100,000,000 take $100,000,000 off of those and that's what goes towards the $4,000,000,000 that's basically that's directionally how it works. Perfect.

Thanks for that clarification. And then my second question, I'm just curious, maybe this is for Jeff. Surety bond growth. Given what we're seeing for economic activity as well as just some of the reductions in kind of government spending. Do you think that will have any impact on surety business here going forward? Or is this just not a big government component to it?

No, there's definitely a government component to a lot of the large projects, Brian. So that's a fair question. We're watching that closely. We're working with our contractors. There's a lot of planning that they do, long term planning that they're on. So we're definitely hearing that from them. All of that said, we've had some nice strong growth. We expect the infrastructure investments in bond demand to continue.

But and as I've mentioned to you before, have a really high credit quality book of contractors on the surety side. And so we've feel good about our position as we move forward.

Great. Thank you.

We'll take our next question from Meyer Shields at KBW.

Thanks.

Don't know if it's too early to ask this question, but do you have a sense as to how your insureds are responding to potential uncertainty in the economy?

Good morning, Mayor. We're also looking at today. Sure if you mean too early in the morning or too early in the I I do I do think it's it's it's too early for for us to see that. And I also as I really think about that question, I think it's too early to really know what it we're all responding to. I mean there's obviously a a lot of change, you know, back and forth. So I'm I'm not sure people really know what they're responding to yet.

Right. I was kind of asking whether that level of uncertainty itself produces a result maybe just because of caution, but I completely take your point. On the timing. Second question, I guess, Michael, The two pronged question. How quickly you think travelers can respond if there is an inflection in loss costs compared to maybe the most recent interruption? And is there any reason to switch the book more towards six month policies because we keep on seeing these fluctuation or these inflections and loss trend. Yeah. Thanks, Meyer. I think as Alan mentioned, we see the changes in our loss cost relatively We incorporate those into our experience relatively quickly.

As a little bit of a technical point, right, what doing as you factor those increased costs into your experience is including them in the historical experience that you had. So one of the things that impacts how quickly you can respond is how good your experience was as you factor those things in. But I don't see a challenge with our ability to recognize and factor those costs into our outlook as quickly as we see them. To the second part of your question in terms of six month policies, we did make a change in the last year or two in terms of monoline auto policies being predominantly written on a six month basis. At new business. So that is working its way into the portfolio. I wouldn't say it's dramatically changed the makeup of the portfolio between six month and annual. But directionally, we are moving a little bit towards a higher percentage of six month policies in the portfolio as a result.

Okay, great. Thank you.

Thanks, Meyer. We'll move next to Alex Scott at Barclays.

Hi, morning.

First one I have for you is on the international insurance business. I noticed you know, net premium written continues to be up more significantly year over year. And just interested in where you're seeing the growth opportunities there?

Alex, this is Greg. What you're seeing there if you're looking at the Internet international within the BI segment, there's two primary drivers of that. One is the Fidelis relationship continues to be very strong. That's one of them. And the other one is Lloyd's can bounce around and be a little bit lumpy. From quarter to quarter and we had a strong quarter this month. So that's what's driving those items.

Okay. That's helpful. And then maybe along the same lines, just trying to understand premiums Notice middle market was down a little bit year over year. Know, I had kinda been thinking that that's an area where pricing's staying, you know, pretty attractive relative to loss cost trend. I mean, hard to tell whether that's just the casualty reinsurance impact.

In the allocation middle market, but could you help me think through that and just relative attractiveness of that market?

Yes. Alex, and you nailed it. We feel terrific about the returns we're producing across the portfolio and specifically in middle market and the growth we're getting there. What you just mentioned is the primary driver of the casualty ag treaty that we called out think about middle market it has a much higher amount of umbrella and excess casualty products much more casualty based than you would see particularly relative to Select. So it's going to feel disproportionately that impact in that business.

Alex, I don't I mean, I don't mean to stress for a second that we're immune from what's going in the economy and economic activity. But again I would point you back to the production statistics. Middle market had very strong retention pricing and new business I would just point you back there. Just for a sense of health of the growth.

Yep. That's all helpful. Thank you.

Our next question comes from Wes Carmichael at Autonomous Research.

Hey, good morning. My first question on business insurance with $74,000,000 of favorable development. You called out workers' comp as the primary driver, but could you any color on the gross development from comp and if there are any netting offsets to that?

Yes. So it's Dan. So really, try to do a pretty good job of calling out the things that moved and were noteworthy in any way. In this quarter, So usually that means we're talking about more than one or two things. But this quarter it really did happen to be driven driven by comp. It's not to say that there weren't other lines that moved. There are always other puts and takes in any given line in any given quarter just nothing that moved big enough to call out one way or the other. That was helpful, Dan. And maybe just back on the macro capital management, but curious how management is thinking about buybacks from here and perhaps some heightened macro uncertainty. Maybe if there's a bit of pressure on the stock just from broader stock market pressure generally, is that an opportunity to lean into buybacks or might you want to be more measured in a period of heightened uncertainty Yes. So we really we have the same philosophy of capital management first also. So no change in the way we think about that. Remember, entered 2025 in a pretty strong capital position given how strong the finish to the 2024 year was.

We talked about buyback activity in the first quarter. I'd say that was probably dialed back a little bit from what we might have otherwise have done given the significance of the California wildfires and the fact that they occurred so so early in the quarter. I feel like we're going to maintain a very healthy capital position. Our history is we're going to continue to generate more capital than we need to run the business and can deploy attractive returns. And so I'd expect us not in any particular month or any particular quarter, but I'd expect us to continue to to be doing buybacks. And we don't really try to sort of lean in or lean out depending on short term fluctuations in the stock price. We're really just rightsizing capital over time.

Next, we'll go to Robert Cox at Goldman Sachs.

Hey, for taking my question. First question, appreciate the thoughts on the the impacts of tariffs. I was curious if you also see tariffs eventually impacting the liability costs, within your claims over time?

Yes. Good morning. I would say that for now we see that as pretty negligible. I mean you just look at the mix of the cost drivers and the liability lines and just not a lot of it is subject to tariffs. And I don't mean to suggest that it's a zero impact but but we think the likely outcome is pretty negligible.

Okay. Thank you. And then as a follow-up, just wanted to ask on the business insurance underlying loss ratio. How the pressure that you guys have kind of been seeing and the industry has been seeing for the last couple of years and casualty is trending there. Maybe more specifically the other liability occurrence loss ratios, are there still kind of going up year over year? I know you guys added to the conservatism in those picks last year and also, is there any kind of onetime items like non cat weather this quarter?

Sure, Rob, it's Dan. So no one time call outs. Again, that's something we try to be pretty careful on if there is one and really didn't hear anything from Greg, Michael or Jeff about reasons to adjust the sort of jump off point for this quarter.

In terms of the casualty lines and the way we're thinking about those loss picks, yes, you're right to remember that last year we talked about adding a bit more in the IBNR for those lines given the uncertainty in the line. We've carried that into 2025. So I wouldn't put a fine point and quantify it, but we've carried that sort of philosophy into the way we're thinking about making our loss picks this year.

Thanks. Thank you.

Our next question comes from Michael Zaremski at BMO Capital Markets.

Yes, thanks. Good morning. First question on home insurance. Just wanted to unpack more. And Michael, I appreciate your comments. In the prepared remarks, but unpack kind of the reacceleration we've seen in pricing. Do you feel this is more a traveler specific you know, as you continue to kind of reshape your geographic footprint? Or is this more of kind of industry wide you feel in terms of re react to what you said was also higher replacement costs and what we can see is persistently higher catastrophe levels And just also curious, is your pricing power, does that include changes in deductibles or terms and conditions?

Thanks.

Sure. Thanks Michael. So I would say the change from Q4 to Q1 really is about increasing insured limits to keep up with replacement costs And we think that's really in response to broad industry trends, right, continued increases in labor and materials, particularly things like roofing costs, roofing labor are big drivers of that. So we think that's really sort of a broad based industry and economic trend that we're responding to. And again, the delta from the mid to low teens to the high teens from Q4 to Q1 really is driven by that limit change. As I mentioned, we continue to seek and obtain significant rate in property underneath that, and those two come together form that RPC number.

Got it. And my follow-up is kind of switching gears to social inflation. When when we look at statutory statutory data on an industry wide basis, which I, you know, I appreciate is a bit backward looking. It appears that social inflation levels are are rising. Would you agree with that viewpoint? Or or are are you all seeing that maybe the trend line has stabilized and obviously, we appreciate that the travelers has been very proactive and taking more conservative know, views on on your reserves and etcetera. But just curious on a industry wide basis if Travelers has a view whether kind of social inflation continues to to kind of gear a bit higher? Thanks. I would say social inflation is unfortunately alive and well and continues to impact the industry including us. See that I would also say we've anticipated that. So the levels of social inflation we're seeing are generally consistent with our expectations.

Thank you for the question.

We'll move next to Elyse Greenspan with Wells Fargo. Hi, thanks. Good morning. My first question within Personal Lines, are there any kind of I think you called out lower non weather losses in home. Any kind of one off items that you would put numbers on within the underlying combined ratios in auto and home in the quarter?

Thanks Elyse, it's Michael. I don't think really beyond what I called out again just to reiterate, right, on auto we said improved frequency across multiple coverages and we talked about sustained moderation and severity trends. The one thing I would say in auto again just to reiterate is is Q1 is typically our lowest combined ratio quarter in that line. So if you think of that as a one off, that's just I think an important reminder Other than that, I think we had another mild winter in 2025 We had a mild winter in 2024. So that's, again, just something keep in mind as you as you look forward. The last thing I would point out on auto is renewal premium change has been declining on a written basis. That will drive lower earned impact from lower earned favorable impact from pricing as we look forward, which again you can just see as you look in the rearview mirror at those RPC numbers, there won't be as much favorable earned effective pricing in the go forward quarters. As respects property, again, I pointed to favorable non weather experience That's something we've been talking about. It's something we continue to see particularly favorable frequency in non weather water and fire loss experience.

Thanks. And then my follow-up, sticking, I guess, with personal auto on the impact of tariffs. I know in response to an earlier question, right, you guys mentioned one of the offsets, right, as it advanced buildup in advance of these tariffs. And you guys, I think, said mid single digit impact on trend. So as you think about timing, just given right that there is obviously going to be a buildup of parts and it takes time for there to be an impact, you think you'll start to see the impact of the tariffs and that higher loss trend in May and June, so like in the Q2? Or how do you think about just like the quarterly cadence of the impact on your personal auto margin from the tariffs?

Yes. At least two things. One, I just want to be really clear on this It's not a change in trend. It's a onetime change in the severity. So I think it's just an important clarification And two, it's hard for us to really know when this would take effect, but May, June timeframe seems a little short So probably a little later in the year, sometime in the back half of the year, but I'm not sure I'd call it more finally than that.

Thank you.

Thank you.

We'll move next to Andrew Anderson at Jefferies.

Hey, good morning. Just on the auto business, I think you mentioned it was constrained a little bit by some actions on the property side. Could you maybe level set for us how much of the auto book is open for new business and how much of the homeowners book is open for new business?

Sure. Maybe I'll just step back and give a little broader context in addition. So I would say that we are open for new business in most geographies across the country. And then within that, we have some very specific constraints. On the auto side, we're open for new business in virtually every state. Again, we have a more limited appetite. In a couple of key geographies there. Related to whether or not we think we have rate But at this point, we're talking less than a handful of states we have those challenges. The property answer is a little more complicated because in property, we've really got three primary issues that we're working through in terms of managing and thoughtfully deploying our property capacity First is overall profitability. As we've talked about, property is a little bit behind auto in terms of reaching target margins on a state by state basis, and so we're managing that. Second is catastrophe exposure And then third is local market concentration of exposure. And so predominantly in property, the place that we are not open for new business fall into those last two categories. We have some specific local geographies where we've got market share that we're working to manage down.

And then we've got our sort of continued optimization of risk and reward as respects catastrophe losses So that's the color behind it. But I would say the places that were literally closed for new business are pretty limited. But that more broadly, it's a matter of monitoring and thoughtfully deploying the property capacity in many of those markets.

Thank you.

Then just on workers' comp, it looks like it was down 7% year over year. I wouldn't think that's impacted by the casualty reinsurance program. But could you maybe just talk about the pricing that you're seeing there and maybe growth in that market?

Yes. Yes, Andrew, this is Greg. Yes, we continue to see pricing that's down in the workers' comp side of the business. So that's what's driving that. We'll have fluctuations from quarter to quarter of course like audit premium And audit premium I just want to comment on audit premium goes into net written premium is the change in audit premium. And we had historically high levels last year we still have strong levels of audit premium. That change also factored into that.

Thank you.

We'll move next to Kaveh Montezeri at Deutsche Bank.

Good morning. A follow-up on personal insurance. Go ahead.

In force.

Situation in California, I guess, a bit of a headwind when it comes to growth. Are you seeing any other geographies for the homeowners that maybe could help you offset that, maybe a geography where you're not really big, Thinking maybe we're seeing Florida is improving a bit, albeit from a low base.

Are you seeing any offsets that could maybe allow you to grow [indiscernible] Yes. Thanks for the question. I would say to to take that question and link it back to my response to the previous one, California certainly is a distinct example of where we are constraining property capacity, but it's not the only one. We have a number of states particularly in the South and in the Midwest, where we're constraining property capacity for the reasons that I mentioned. And again, most of the time that's limiting growth But in some of those cases, it's non renewing business in areas where we've got too much concentration. That said, to your point, there are places where we're open for business in both property and auto. And I think that you see that contributing to the new business growth in auto this quarter. Because we are seeing new business growth in those places. It is important to remember, I think, when you think about our line of business growth and production, that we're essentially fifty-fifty property and auto. And so we're different from most participants in the industry Our actions in property given that mix of business and given our tendency to package auto and property does mean that our property actions are going to have an impact on our ability to grow auto.

But really, at the end of the day, we focus on each state individually, looking at the auto and property opportunities and the opportunity to to best manage the portfolio. And we are working to take advantage of those places where we don't have the constraints to help support auto and overall portfolio growth.

Thank you.

And my follow-up is on the reserve releases in workers' comp. Could you guys give us an update on what you're seeing in terms of medical claims inflation versus your own assumptions? Sure. So that's continued to behave pretty well for us. And we've made the comment a bunch of times, but it's worth worth reiterating the long tail nature of comp just means you can't afford to get behind on the assumptions that you're making. So even though we've seen medical costs inflation come in benign to what we had allowed for we've been pretty reluctant to make a fundamental change to our longer term view that we're baking into our pricing assumptions and reserving actions. So another quarter where you saw some good news in in medical severity And again, our view is we continue to assume that that is going to return to some higher normal by historical standard level of inflation on a go forward basis.

Thank you.

We'll take our next question from Bob Huang at Morgan Stanley.

Good morning. I think a lot of the questions I have were asked, but maybe one on commercial auto. I know that you talked about auto PYD as a whole, but if we look at statutory disclosures on commercial auto, as well as your like, a variety of other data. For example, your 10 q claims and claims adjusted expenses data and things of that nature.

Industry seems to be facing continued headwind litigation costs and reserve challenges. But it seems like you're holding up fairly okay Just curious to how you think about commercial auto. The industry, but also as well as for yourself going forward. Yeah. Maybe some commentaries around that.

Yes, Bob, it's Dan. So I'll focus on on us rather than the industry.

Commercial auto was a challenge when we started talking about social inflation back in 2018, 2019. We really we really haven't called had much mention of commercial auto in the last couple of years really because I think we've reached a point where we started to make sure that we were reviewing and assessing the data as it came in informed by what we went through in 2018 and 2019. And as a result to your observation, we really haven't had to do much in the way of changing those estimates in the last couple of years as to whether or not the industry is is in a good place from a reserving perspective, I'm not sure One thing that we are sure about the industry in commercial auto is it continues to need price because returns on that line still where we'd like them to be. But as you heard Greg say again today, we continue to get price there. But feel good about where we are in the balance sheet.

Just to we have a new commercial auto product that is out in the market and we feel terrific about it.

Excellent. Thanks. I got a my next one is kind of a long winded tech question. So if you think about the capabilities you've mentioned, right, enhanced digital capabilities, streamline work workflow, cyber risk policies. How much of the capabilities are contingent on in house software development How much of it is based on third party capabilities, I I guess the way I'm thinking about it is that if we go back to how much we think about maintenance tech versus new technology spend, Like, does that ratio eventually change the point where don't have to spend as much on maintenance technology going forward? Just kinda curious on your tech strategy thoughts there, if that makes sense at all.

Yep. Bob, I I think you're I think you're premise is right. I'm not going to quantify how much is in in which bucket. Will say that anytime we're investing in a capability, we analyze whether there's a proprietary benefit to us developing it and owning it. And when there is a proprietary benefit, do that. When there's not a proprietary benefit, we're happy to source it from third parties. So I do think the trend you're describing probably is a fair one. And we'll continue to drive the favorable mix of our investment spending.

Excellent. Thank you.

Thank you.

And we'll take our last question today from Mark Hughes at Truist.

Yeah. Thank you very much. The change in reinsurance, is it possible to break that up by line of business Was that all in GL Mark, it's Dan. It's mostly GL, but we described it sort of broadly as the casualty lines. So I think we're going to not probably get more specific. But it would help us with things like your Core GL umbrella [indiscernible] Things like that.

Understood. Thank you very much.

Thank you.

And that does conclude the q and a I'll turn the conference back over to Abby Goldstein for closing remarks. Everyone for joining us today. And as always, if there's any follow-up, please get in touch with the Relations.

Have a good day. And this concludes today's conference call. Thank you for your participation. You may now disconnect.