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DATE

Friday, Oct. 16, 2026

CALL PARTICIPANTS

• Senior Vice President of Investor Relations - Abbe F. Goldstein
• Chairman and Chief Executive Officer - Alan David Schnitzer
• Chief Financial Officer - Daniel Stephen Frey
• President, Business Insurance - Gregory Cheshire Toczydlowski
• President, Bond and Specialty Insurance - Jeffrey Klenk
• President, Personal Insurance - Michael Frederick Klein

TAKEAWAYS

• Core Income -- $1.947 billion or $9.18 per diluted share, driven by strong underwriting performance and record investment results.
• Core Return on Equity -- 22.1% for the quarter and 24.1% over the trailing four quarters, reflecting strong contributions from both underwriting and investment portfolios.
• Combined Ratio -- 86.8%, improving 0.5 percentage points primarily due to higher net favorable prior year reserve development.
• Underlying Combined Ratio -- 84.1%, marking the ninth consecutive quarter below 86% as a result of sustained underwriting discipline.
• After-Tax Net Investment Income -- $908 million, increasing 7% year over year as the fixed income portfolio benefited from higher invested assets and yields.
• Capital Return -- $1.8 billion, consisting of $1.5 billion in share repurchases and $261 million in dividends paid during the quarter.
• Adjusted Book Value Per Share -- $172.47, rising 15% over the past year reflecting strong earnings even after returning $8 billion in capital since early 2025.
• Business Insurance Net Written Premiums -- $5.868 billion, representing 4% growth excluding the impact of the Canadian business divestiture.
• Business Insurance Retention -- 86%, remaining strong and stable across all product lines as a primary indicator of marketplace stability.
• Bond & Specialty Insurance Net Written Premiums -- $1.209 billion, growing 12% driven by significant production in the surety business and an 18% increase in new management liability business.
• Personal Insurance Net Written Premiums -- $4.403 billion, reflecting a 3% decrease excluding the Canadian divestiture as pricing moderated following improved profitability.
• Catastrophe Losses -- $538 million pretax, primarily resulting from wind and hail events in the Central United States.
• Prior Year Reserve Development -- $234 million net favorable pretax, with favorability in all three segments partially offset by a $295 million charge for asbestos reserves.
• Expense Ratio -- 28.9% for the quarter, with management projecting the full-year 2026 ratio to remain slightly below 29% due to higher variable compensation from strong results.
• Fixed Income NII Guidance -- $875 million after-tax projected for the fourth quarter, bringing the expected full-year total to $3.3 billion.
• Cyber Reinsurance Cession -- $165 million projected reduction in fourth-quarter net written premiums, following an increase in the percentage ceded to a quota share agreement effective Oct. 1.
• Select Commercial Renewal Premium Change -- 7.8%, reflecting disciplined pricing segmentation and the utilization of BOP 2.0.
• Middle Market New Business -- $431 million, up 10% over the prior year supported by granular execution and predictive modeling.
• Automobile Underlying Combined Ratio -- 87.3%, improving 1 percentage point due to favorable loss experience across coverages.
• Homeowners Underlying Combined Ratio -- 68%, demonstrating strong profitability and disciplined property capacity deployment.
• Surety Net Written Premiums -- 21% growth, attributed to premier contractor activity and new account relationships in infrastructure projects.
• Operating Cash Flow -- $3.9 billion for the quarter, contributing to a year-to-date total of $8 billion.
• New Money Rates -- 120 basis points above the portfolio's embedded yield, providing a tailwind for future investment income as the portfolio turns over.
• Business Insurance Combined Ratio -- 90.9%, improving 2 percentage points primarily due to favorable reserve development across every major product line.

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RISKS

• Alan Schnitzer stated, "The drivers remain active and continue to put upward pressure on liability losses," noting that lawsuit abuse continues to affect general liability, umbrella, and commercial auto lines.
• Daniel Frey noted that strong underwriting performance "results in variable expenses like profit sharing and contingent commissions coming in higher than planned," leading to an uptick in the projected full-year expense ratio.
• Michael Klein warned that "the fourth quarter auto underlying loss ratio has historically been about 5 to 6 points above the average for the first 3 quarters," due to seasonal factors like winter weather and holiday driving.

SUMMARY

The Travelers Companies, Inc. (TRV +1.54%) reported core income of $1.947 billion for the third quarter, supported by strong underwriting margins across all segments and record after-tax net investment income. Management highlighted the company's competitive advantages in data analytics and artificial intelligence, which are being utilized to navigate an environment of elevated lawsuit activity and social inflation. The company returned $1.8 billion of capital to shareholders during the quarter while growing adjusted book value per share by 15% year over year. Strategic focus remained on disciplined pricing segmentation and innovation in claims handling to improve efficiency and maintain the durability of underlying underwriting income.

• Management reported a significant focus on legal system abuse innovation, with CEO Schnitzer stating, "In a pilot, more than 80% of the claimants to whom we have offered the tool have engaged with it."
• The company expects continued benefits from its scale, as CEO Schnitzer noted, "we think scale is going to be increasingly important" in the ability to out-select and out-price competitors.
• CFO Frey indicated that the current level of underwriting income represents a significant step-change, noting that "the ZIP code that we are in now is just a completely different ZIP code than we used to be in."
• The company utilized AI to improve claim professional effectiveness, with Alan Schnitzer stating that AI provides a "faster, deeper command of claim files that can run hundreds of pages."
• Management increased its cyber reinsurance quota share to manage dynamic risks, projecting a $230 million reduction in net written premiums for 2027 with de minimis impact on earnings.

INDUSTRY GLOSSARY

• Combined Ratio: A measure of insurance underwriting profitability calculated by dividing the sum of incurred losses and expenses by earned premium; a ratio below 100% indicates profit.
• Underlying Combined Ratio: A profitability metric that excludes the impact of catastrophe losses and prior year reserve development to reflect the performance of current-period business.
• Net Written Premiums: The total amount of premiums customers are required to pay for insurance policies issued during a period, minus premiums ceded to reinsurers.
• Prior Year Reserve Development: The increase or decrease in estimated costs for claims occurring in previous years as more information becomes available.
• Renewal Premium Change: The estimated change in average premium for policies that renew, including changes in both price and the amount of risk covered.
• Social Inflation: The rising cost of insurance claims resulting from societal trends such as increased litigation, broader jury awards, and legal system abuse.
• Incurred But Not Reported (IBNR): An estimate of the amount of money an insurance company will need to pay for claims that have occurred but have not yet been reported to the company.
• Quota Share: A form of reinsurance where the primary insurer and the reinsurer share a proportional percentage of premiums and losses.

Full Conference Call Transcript

Operator: This conference is being recorded on today's call. At this time, I would like to turn the conference over to Ms. Abbe F. Goldstein, Senior Vice President of Investor Relations. Miss Goldstein, you may begin.

Abbe F. Goldstein: for it. Thank you. Good morning, and welcome to Travelers discussion of our third quarter 2026 results. We released our press release, financial supplement and webcast presentation earlier this morning. All of these materials can be found on our website at travelers.com under the investor section. Speaking today will be Alan David Schnitzer, chairman and CEO Daniel Stephen Frey, CFO and our 3 segment presidents, Gregory Cheshire Toczydlowski of business insurance, Jeffrey Klenk of Bond and Specialty Insurance, and Michael Frederick Klein of personal insurance. They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks, and then we will take your questions.

Before I turn the call over to Alan, I would like to draw your attention to the explanatory note included at the end of the webcast presentation. Our presentation today includes forward looking statements. The 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 would like to turn the call over to Alan David Schnitzer.

Alan David Schnitzer: Thank you, Abbe. Good morning, everyone, and thank you for joining us today. We are pleased to report excellent third quarter results. It was another in a run of successful quarters with very strong underwriting performance across all 3 segments and a record result from our investment portfolio. We also continue to make steady progress on important strategic initiatives, that will continue to set us apart. For the quarter, we earned core income of $1.95 billion or $9.18 per diluted share generating core return on equity of 22.1%. Over the trailing 4 quarters, we generated core return on equity of 24.1%.

Underwriting income of $1.4 billion pretax was driven by strong levels of underlying underwriting income and net favorable prior year reserve development. Profitability was excellent on both the reported and underlying basis. The combined ratio improved to 86.8%, and the underlying combined ratio remained very strong at 84.1% with all 3 segments posting strong contributions. Turning to investments. Our high quality investment portfolio continued its trajectory of delivering higher levels of net investment income, After tax, net investment income increased by 7% to $908 million benefiting from strong and reliable returns from our growing fixed income portfolio, and a strong result from our non fixed income portfolio.

Our underwriting and investment results together with our strong balance sheet, enabled us to return $1.8 billion of excess capital to shareholders during the quarter including $1.5 billion of share repurchases. Just since the beginning of 2025, we have returned $8 billion in capital through share repurchases. Retiring 12% of the shares then outstanding in the process. Even after the return of capital and having made substantial investments in the business, adjusted book value per share at the end of the third quarter was 24% higher than at the beginning of 2025 and 15% higher than a year ago. Turning to the top line, we generated net written premiums of $11.5 billion in the quarter.

In business insurance, we grew in every line other than property, generating net written premiums of $5.9 billion. that is 4% higher than the prior year quarter adjusting for the sale of our Canadian business. Across the board, the triad of renewal premium change, retention, and returns reflects outstanding and deliberate execution. Renewal premium change in this segment was 4.1%, including renewal premium change of 5.4% in our core middle market business, and 7.8% in our small commercial select business. Excluding the property line, remote premium change in the segment was 7%.

Retention, which, as you have heard us say before, is an important indicator of marketplace stability, remained very strong at 86%, and was higher or stable in every line. New business of $699 million was 4% over the prior year quarter. To be growing 4% ex-Canada at such strong returns is a terrific achievement. In bond and specialty insurance, we also delivered terrific growth as strong returns. We grew net written premiums by 12% to $1.2 billion In our management liability business, renewal premium change improved sequentially to 3.8% while retention remained steady at an excellent 89%. New business was up 18% over the prior year quarter.

In our leading surety business, we grew net written premiums by 21%, reflecting continued strong production across the portfolio. In personal insurance, we generated net written premiums of $4.4 billion with solid retention of both auto and homeowners, and hire new business and homeowners. You will hear more shortly from Gregory, Jeffrey, and Michael about our segment results. Before I turn the call over to Daniel, I would like to spend a few minutes on an important focus of our innovation work. Defending our customers against legal system abuse. Lawsuit abuse raises cause for everyone, from the businesses and families we insure to every corner of the broader economy.

Liability across GL umbrella auto and CMP is a significant share of our loss costs. While conditions have been generally consistent with our expectations, the drivers remain active and continue to put upward pressure on liability losses. Our approach is straightforward. Resolve legitimate claims fairly and promptly, by paying what we owe, We were early to recognize the change in the litigation loss environment, at the end of 2018. And that gave us a head start in investing in technology and developing innovative claim strategies. We believe that gives us a meaningful early mover advantage, and our innovation efforts are now giving us tools we have never had before. Let me share a few examples.

For unrepresented claimants, we have developed a digital tool to help resolve claims promptly and fairly. it is grounded in our simple philosophy of empathy, and empowerment. Which we have built directly into the experience. In a pilot, more than 80% of the claimants to whom we have offered the tool have engaged with it. And overall results are very encouraging. When a claimant has an attorney, we are using AI to sharpen our responses to their demands. It starts with the file. AI gives our claim professionals a faster, deeper command of claim files that can run hundreds of pages. It services key facts and issues, and helps shapes arguments.

That makes our people both more effective and more efficient. Consistent with our long time practice of maintaining a tight feedback loop between claim and underwriting, which is how we were so early to recognize social inflation in the first place, The technology also feeds granular loss information back to our underwriter, A more accurate view of loss information drives better risk selection, pricing, and claim strategies. We pay what is fair, and when we cannot resolve a claim of what we believe is a fair outcome, we are prepared to defend our customers in litigation. We choose our matters carefully, and the outcomes demonstrate that we are effective when we do.

Beyond the direct financial impact of our success in litigation, our approach helps set realistic expectations from the start and that is part of the value proposition we bring to our customers. These are just a few illustrations of a broader proprietary effort that leverages talent, technology, behavioral science, more. What we are doing now is not about doing what we have always done a little better. We have developed new and growing capabilities that let us do what simply could not be done before. We believe our expertise, capabilities, and approach will help us bend the law cost curve.

As we continue to invest, we expect this to deliver growing value for our customers and shareholders, building on the benefits we have already seen from some of our initiatives. To wrap it up, our excellent underwriting and investment results through the first 9 months of the year reflect our unmatched competitive advantages and the strength of the value proposition we offer to our customers and distribution partners. We are well positioned to close out an outstanding year. That momentum, the advances we are making on our innovation agenda, and the best talent in the industry give us tremendous confidence heading into 2027 and beyond. And with that, I am pleased to turn the call over to Daniel.

Daniel Stephen Frey: Thank you, Alan. In the third quarter, we once again delivered excellent financial results on a consolidated basis, and in each of our 3 segments. Core income for the quarter of $1.95 billion marked our sixth consecutive quarter with earnings of more than $1 billion and brings our trailing 12 month core return on equity to 24.1%. Both the quarter and the trailing 12 months reflect excellent underwriting results coupled with strong investment income. We generated slightly higher net written premiums despite the absence of Canadian businesses we sold at the beginning of 2026. While delivering excellent combined ratios on both the reported and underlying basis. At 84.1%, the underlying combined ratio marked its ninth consecutive quarter below 86%.

The combination of strong earned premiums and the excellent underlying combined ratio led to after tax underlying underwriting income of $1.4 billion continuing our run of historically strong underlying underwriting results. Our year to date after tax underlying underwriting income of $3.9 billion is virtually identical to last year's record level despite moderating pricing and the sale of our Canadian business. Demonstrating the durability of our underlying underwriting earnings power. The expense ratio for the third quarter was 28.9%. Bringing the year to date expense ratio to 29%.

Regarding the expense ratio outlook, the continued strength of our consolidated underwriting performance I just described results in variable expenses like profit sharing and contingent commissions coming in higher than planned. that is a trade we are very willing to make. And it results in an uptick for our expected full year expense ratio which we now expect to come in a little below 29% for 2026, and about the same for 2027. Catastrophe losses in the quarter were $538 million pretax, consisting mainly of tornado hail events in the Central US. Turning to prior year reserve development. We had total net favorable development of $234 million pretax, with favorability in all 3 segments.

In business insurance, the annual asbestos review resulted in a charge of $295 million. Excluding asbestos, business insurance had net favorable PYD of $336 million with favorability in every line. In Bond and Specialty, net favorable PYD was $95 million pretax, with favorability in Fidelity and surety as well as management liability. Personal insurance had net favorable PYD of $98 million pretax, with favorability in both home and auto. Turning to investment income. For the first time ever, after tax net investment income surpassed $900 million for the quarter. Up 7% from the prior year quarter. Fixed maturity NII was again the driver of the increase, reflecting both the benefit of higher invested assets and higher average yields.

Through the first 3 quarters of 2026, we have grown our investment portfolio by approximately $6 billion even after having returned a record level of capital to investors through dividends and share repurchases. Our outlook for fixed income NII in the fourth quarter including earnings from short term securities, is up slightly from the outlook we provided a quarter ago. Now expecting approximately $875 million after-tax in Q4, bringing the full-year 2026 total to $3.3 billion For 2027, we expect more than $3 billion with quarterly figures starting at around $875 million in Q1 and growing to around $965 million in Q4.

New money rates on purchases during the third quarter were roughly 120 basis points above the yield embedded in the portfolio. The significant increase in interest rates during the quarter resulted in an increase in our net unrealized investment loss. From $2 billion after tax at June 30 to $6.4 billion after tax at September 30. This is a good time to remind you that the unrealized loss in our investment portfolio is interest rate driven not credit quality driven. Remember, the changes in unrealized investment gains and losses do not impact how we manage our investment portfolio. We generally hold fixed income investments to maturity, The quality of our fixed income portfolio remains very high.

And the changes in unrealized gains and losses have little or no impact on our cash flows, statutory surplus or regulatory capital requirements. And, of course, the same rise in rates that increase the unrealized loss is a tailwind for future results. As we reinvest at higher yields, it supports higher continued growth in net investment income. Adjusted book value per share, which excludes net unrealized investment gains and losses, was $172.47 at quarter end. Up 9% from year end and up 15% from a year ago. Turning to capital management.

Operating cash flows for the quarter of $3.9 billion were again very strong and brought the year to date operating cash flow figure to $8 billion Also of note for Q3, in July, we issued $750 million of 5 year debt at an attractive rate of 4.95%. As part of our ordinary capital management. Maintaining a debt to capital ratio in our target range as we continue to grow the business. Sticking with the theme of capital management, we returned $1.8 billion of capital to our shareholders in the quarter. With share repurchases of $1.5 billion and dividends of $261 million Before I wrap up, let me add 1 comment about the fourth quarter for your modeling purposes.

Effective October 1, we increased the percentage ceded to our cyber reinsurance quota share. That will reduce net written premiums by about $165 million in Q4 and by about $230 million for full-year 2027. Primarily in the Bond and Specialty segment. We expect the impact on bottom line earnings to be de minimis in both years. Recapping our results, Q3 was another quarter of excellent underwriting profitability on both an underlying and as reported basis. And another quarter of rising net investment income. These strong fundamentals delivered core return on equity of 22.1% for the quarter, and 24.1% on a trailing 12 month basis, and we continue to be very well positioned to deliver strong results in the future.

And now for a discussion of results in business insurance. Turn the call over to Gregory.

Gregory Cheshire Toczydlowski: Thanks, Daniel. Business Insurance had another very strong quarter. Delivering record third quarter segment income of $1.04 billion and continued solid top line growth. This quarter's results reflect the continued benefit of strong underwriting results, driven by higher earned premiums, and a combined ratio that improved 2 points to a terrific 90.9%. We are particularly pleased with our underlying combined ratio which remains strong at 88.9%. Beyond our execution in the marketplace, we are encouraged with the contributions we are seeing from our ongoing strategic investments. For example, our ongoing advancement of analytical capabilities including the utilization of sophisticated predictive models continues to enhance our risk selection and pricing segmentation.

The expanded use of external data sources such as aerial imagery in combination with our proprietary historical claim data further equips our frontline underwriters with the insights they need to make better decisions at the point of sale. Within property, analytics have supported our improvements and ensured the value and deductible adequacy. Which has contributed to a stronger and well positioned book. We believe these and other strategic investments will be important contributors to our continued success and long term profitable growth. Turning to the top line, our net written premium reached a third quarter record at $5.9 billion Domestic net written premiums grew 4%. Excluding the property line, domestic net written premiums grew 6%.

Net written premiums in national property continued to decline, We remain focused on writing business only where pricing terms align with our view of the risk and our return objectives. Turning to production across the segment, Renewal premium change was 4.1%. Excluding the property line, RPC was 7% and positive in all lines. Retention remained excellent at 86%, a reflection of strong returns and our continued focus on retaining our high quality book of business. New business was strong at $699 million up 4% from the prior year. We are pleased with these production results and our field's continued execution of our proven segmentation strategies. Aligning price terms and conditions with environmental trends for each life.

As for the individual businesses, in select, renewal premium change was strong at 7.8% while retention was steady at 81%. And new business of $139 million was up 3% over the prior year. These results reflect the industry leading segmentation in our product offerings. Including BOP 2.0 and TCAP, our commercial auto product. As well as the digital experience we deliver to our distribution partners. In middle market, renewal premium change was 5.4%, while retention remained exceptional at 89%. New business of $431 million was up 10% over the prior year. Our continued profitable growth is supported by predictive models that guide our underwriters' granular execution at every step. From prospecting and quoting new business through renewals.

Once again, another terrific quarter for business insurance. We are energized by both the strength of our current execution and the additional capabilities we continue to build, capabilities that we believe will drive our continued success through the remainder of 2026 and beyond. With that, I will turn the call over to Jeffrey.

Jeffrey Klenk: Thank you, Gregory, and good morning, everyone. We are pleased to report that Bonded Specialty posted an outstanding quarter on both the top and bottom lines. We generated record segment income of $309 million driven by strong earned premium, and a terrific combined ratio of 77.3%. Turning to the top line, we grew net written premiums by a very strong 12% in the quarter to $1.2 billion In our high quality domestic management liability business, we drove retention to a very strong 89% while improving renewal premium change by nearly a point sequentially. We are very pleased that we also increased new business by 18% from the prior year quarter.

These results reflect terrific execution by our outstanding field organization, leveraging our strategic investments and enhanced pricing segmentation tools, and sales effectiveness capabilities. Turning to our market leading surety business, we posted excellent net written premium growth of 21% from the prior year quarter. Continuing the recent trend of strong production across our high credit quality portfolio. Our growth this year is primarily attributable to our portfolio of premier contractors that are well positioned to deliver on large public and private infrastructure projects, that have driven construction spending as well as meaningful contributions from new account relationships as more customers choose a carrier with exceptional financial strength, market leading value added services, and an unparalleled team.

So bonded specialty insurance delivered terrific profitability and excellent growth in the quarter, while continuing to make strategic investments to further extend our competitive advantages. And with that, I will turn the call over to Michael.

Michael Frederick Klein: Thanks, Jeffrey, and good morning, everyone. I am very pleased to share that personal insurance delivered third quarter segment income of $706 million Strong underlying income and favorable prior year reserve development both contributed to this excellent bottom line result. The combined ratio of 83.5% was a terrific result in the quarter. Catastrophe losses were favorable to our plan and continue to benefit from the actions that we have taken to reduce volatility across our portfolio. The underlying combined ratio of 76.7% improved by 1 point compared to the prior year, and continues to demonstrate strong profitability in both automobile and homeowners and other.

Net written premiums for the segment were $4.4 billion in the third quarter, as pricing continued to moderate reflecting strong profitability, while retention remained solid. New business premium in homeowners was higher year over year, as we thoughtfully deployed property capacity in support of our efforts to generate profitable growth. Third quarter homeowners' net written premiums also benefited from decision not to renew the PI Property XOL Treaty, which would have taken effect July 1. As Dan mentioned last quarter, it was more cost effective to obtain the coverage we sought through the lowering of the attachment point on the corporate catastrophe XOL treaty.

In auto, the third quarter combined ratio of 87.1% reflects a strong underlying combined ratio and favorable net prior year development. Underlying combined ratio was 87.3%, a 1-point improvement compared to the prior year. This strong result was driven by continued favorable loss experience across coverages. This quarter's result included about a 1.5-point benefit related to the re estimation of prior quarters in the current year. Looking ahead to the fourth quarter of 2026, it is important to remember that the fourth quarter auto underlying loss ratio has historically been about 5 to 6 points above the average for the first 3 quarters, because of winter weather and holiday driving.

In homeowners and other, third quarter combined ratio was a very strong 80.5% and the underlying combined ratio of 68% was outstanding and comparable to the prior year. Turning to production. In auto, retention was 81%, while renewal premium change was slightly negative. As we continue to incorporate sustained levels of profitability into our pricing. We remain pleased with the high quality profile of the new business we are writing, as we maintain our disciplined approach to managing base rate levels and further enhancing our sophisticated segmentation. In homeowners and other, retention of 85% remained strong, while renewal premium change continued to moderate, reflecting strong profitability, and replacement costs that are generally aligned with insured values.

We were pleased that for the third consecutive quarter, new business premium was higher year over year, driven by our intentional and disciplined efforts to deploy property capacity. We continue to invest in strategic capabilities that will deliver sustainable profitable growth. At the same time, we are executing complementary marketplace actions that include expanding distribution by appointing new agents, and actively pursuing book consolidation opportunities. These deliberate efforts, combined with our strong agent relationships, portfolio solutions for customers, and industry leading claim capabilities, position us to be the undeniable choice for consumers and an indispensable partner for our agents.

To sum up, this was another great quarter for personal insurance on the bottom line, and we continue to focus on taking a measured, thoughtful approach. to profitably grow our business over time. Now I will turn the call back over to Abbe.

Abbe F. Goldstein: Thanks, Michael. We are ready to open up for Q&A.

Operator: We will now begin with the question and answer session. If you would like to ask a question, please press 1. To raise your hand. To withdraw your question, press 1 again. Please limit yourself to 1 question and 1 follow-up question. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Paul Newsome with Piper Sandler. Paul, your line is open. Please go ahead. Oh, Paul, your line is open. Please go ahead. We can come back to Paul.

Maybe we will take the next caller. Your next question comes from the line of David Motemaden with Evercore ISI. David, your line is open. Please go ahead.

David Motemaden: Hey. Thanks. Good morning. Alan, you. You have discussed. And Dan as well, you guys have discussed the durability of the 5.5 billion of underlying underwriting income. I did not hear you guys say that again explicitly. And so, it sounds like you guys are definitely on pace for that this year, but I am wondering how you are thinking about that into next year just given the moving pieces with the market cycle and where we are?

Alan David Schnitzer: Yes. Good morning, David. Thanks for the question. We would absolutely reiterate the durability of underlying underwriting income. And just to give you a little color behind that, I mean, putting in some historical context, we are a larger, more profitable company than we have been historically. Strong competitive advantages with a strong value proposition, demonstrated success with innovation and investing, We think AI gives us tremendous opportunity. And as I have been saying, think, I worded for the first time in my 2022 annual letter, we think scale is going to be increasingly important.

And so we think all of that will continue to give us the ability to out select and out price and so that gives us great confidence in the durability of the underlying underwriting income. Yeah.

Daniel Stephen Frey: David, it is Daniel. The only thing I would add to that is you should not mean it does not mean it is not gonna move a little bit 1 way or the other. The other comment that Alan made relative to that metric is we do not know if 2027 is going to be a little higher than that, a little lower than that, or flat. But the ZIP code that we are in now is just a completely different ZIP code than we used to be in, and we do not see any reason that is likely to change.

David Motemaden: Got it. Thanks. that is helpful. And then maybe just maybe on the favorable PYD in business insurance So it sounds like that was across all lines. So I am assuming that general liability. Could you just confirm that, maybe talk about which accident years you are seeing that? And, you know, maybe just how you guys are thinking about the level of IBNR that you guys have been putting up over the last few years.

Daniel Stephen Frey: Yes, David. So we feel great about where the balance sheet is, as we have said now for a couple of years. It was all lines across the board. So we saw favorability in commercial auto commercial property, CMP, general liability, workers' comp, None of them were particularly outsized, although in aggregate, a number as big as we talked about on the call is a very good result. So I would say we continue to be thoughtful about the reserves that we carry on the book, respectful of the long term loss trends that come out of the liability or the comp lines. And as things emerge somewhat favorably to what we had provided for and our prior picks.

We are getting PYD, but yes. Across the board, including GL. Got it.

Alan David Schnitzer: for it. Thank you. Thanks, David.

Operator: Your next question comes from the line of Gregory Peters. With Raymond James. Gregory, your line is open. Please go ahead.

Gregory Peters: Good morning, everyone. So I guess kind of building on the last question, but I would like to see if you could give us some comments on your view of loss cost trend inside business insurance. I guess I am looking at it because, you know, I am I am watching the renewal rate change premium you know, slide down. And, also, I was intrigued by your comments, Alan, about, you know, the commercial auto liability and the other casualty claims and the pressure you continue to see there And I am I am. It just kind of brought to my mind.

Are you foreshadowing another negative step change in sort of how the loss cost trend is moving in those lines?

Alan David Schnitzer: No. Quite the contrary, actually. Just looking at the loss environment broadly, I would say it is as we have expected. No surprises at all whether we are talking about social inflation or anything else. So no surprises at all in terms of the loss environment.

Gregory Peters: Okay. I guess then a pivot You know, this quarter's new development was the rollout of Muse. And, yeah, obviously, there is other tech initiatives that are spooking the market. With their potential to disrupt distribution. Maybe it is mostly focused in personal lines, but there is some crossover into the small and middle market commercial area too. So maybe you could just step back and provide us some perspective on your value of your current agency distribution model. And maybe also give some nuggets on how you are working with these new initiatives, you know, to help get to your objectives?

Alan David Schnitzer: that is the question, Gregory. Mike, do you wanna take that?

Michael Frederick Klein: Sure. I will take it, Gregory. Because to your point, Muse in particular at least today, is mostly focused in the personal insurance space, certainly. Gregory's team and mine have been collaborating, and he can he can chime in as well. You know, the first thing I would say just broadly about Muse and AI assistance is it is it is it is early days. Right? I mean, the actual volume of observable activity is pretty minor. And I think there are a lot of things that could potentially impede the pace and scope of change there. We have got to pay attention to consumer adoption.

Gotta work through technology and data dynamics. there is a variety of legal and regulatory considerations as we deal with these developments and work in this space. And you know, just to put a put a point on it, you know, if and when you are engaging with an AI assistant, you have to confirm a number of things. Right? First and foremost, is that AI assistant actually authorized by the consumer that is doing the shopping? Secondly, is the consumer affirming and confirming that the information provided is accurate? And third and probably most importantly, does the customer actually understand what they are buying?

And those things are not sort of particularly transparent and clear, as you as you engage digitally in this space. And those considerations grow in importance with the size and the complexity of the asset or the or the risk that you are insuring. So we are engaged in exploring the opportunities and the threats here. We are going to continue to test and learn and make sure that we are prepared to respond. And we have been building digital capabilities across the organization for a really long time. On the commercial side, we have got Simply Business. And then personal insurance, we have got Insuramatch and D2C, and I think we will be prepared for wherever this goes.

Alan David Schnitzer: Yeah. Gregory, I would just add to that if you look at a continuum of risk from the most complex to the least complex, the stuff that trades digitally today. And I do think it is important to remember that, you know, customers can trade digitally today but the things that actually trade digitally are way over at the simplest end. it is renters. it is pet, it is, you know, that sort of stuff. You get mildly more complicated People might use the technology to shop and do some price discovery. But very often, they opt out to talk to a person. And so, you know, an.

Unlike a lot of other commerce, where you can imagine, you know, digital trading being more popular, in a complicated domain like insurance. So far, it has not been the case. But to Michael's point, going back, you know, 20 years talking about D2C, we contemplated the world would get more digital and that is. You know, we did not invest in D2C because we thought we were going to be a leader in D2C. We invested in D2C 20 years ago. Because we wanted to make sure we have the capabilities of a digital company.

We wanted certainly, we wanna understand distribution, but we also wanted to understand how to engage with our distribution partners, how to service our customers, And then more recently, when we acquired Simply Business and Zen and InsureMatch, that was also with the thought that the world was going to be more digital. So you know, you can get a sense of our view that we think this is going to be sort of a measured adoption to the extent there is adoption. But wherever it goes, we are very prepared for it. Thank you.

Operator: Your next question comes from the line of Tracey Benjiji. With Wolfe Research. Tracey, your line is open. Please go ahead.

Tracy: for it. Thank you. Good morning. I want to go back to David's, reserve development question. Sounds like you built conservative loss picks. So the loss experience might be more favorable to that. I am just curious how much time needs to pass to assess that I appreciate your confirmation. The releases came from GL and commercial auto. I think it is important to have a better understanding of those accident years. I noticed in the 10 Q, you said that it was more recent year. Yeah, Tracey.

Daniel Stephen Frey: it is Daniel. So do not know that I would use the word conservative when we came up with our loss picks. I think what we tried to say is we are making certain that we are leaving a provision for the level of uncertainty that comes out of those long tail lines and the more recent changes in development patterns and attorney rep rates and things like that. Look. We had a number of years contribute to the favorability in PYD this year. I think if you just look at the gravity of where most of the reserves and particularly IBNR is, it is naturally going to be in the most the most recent accident year.

So I think not a big surprise there. You should not read that as saying that we have changed our view in terms of whether there still needs to be consideration for and respect for the potential uncertainty in those lines and the health of the IBNR that we continue to maintain. But as quarter after quarter goes by and we have seen things come in a little bit better, we felt it was appropriate to take some reaction here We certainly have not run to the other side of the boat. Okay.

Tracy: Got it. So select renewal premium change improved in the second quarter, but you gave that improvement back in the third quarter and the slowdown was driven mostly by rate rather than exposure. So I am just curious which quarter was the anomaly and how we should be thinking about the underlying trend from here.

Gregory Cheshire Toczydlowski: Yeah. Tracey, this is Gregory. Yeah. I did share with you last quarter that depending on what filings state-by-state get approved quarter to quarter, you can have some variation. And, of course, you have separate accounts that are coming up for renewals in each quarter. So I would not say 1 quarter was an aberration more than the other. Every day, we look at that business in terms of what the returns are in that business and what the pricing and new business needs to be, and that is how we execute. Okay.

Tracy: for it. Thank you.

Operator: Your next question comes from the line of Katie Sakys With Autonomous Research. Katie, your line is open. Please go ahead.

Katie Sakys: Morning. it is a Quinn from me. Just kind of wanted to get your thoughts here on the business insurance segment premium growth results. I think pro form ex-property quite a strong result there this quarter. I think about where RPC has trended this year and might continue to trend, going forward. As well as Gregory's prepared remarks on underwriting discipline. Are you guys thinking about growth momentum as you start looking at 2027 in BI?

Alan David Schnitzer: Okay. Good morning. I do not think we are gonna give outlook on the top line other than to say we feel great about the execution and the growth we put on the books this quarter, and we feel like we have got all the capabilities and value proposition to continue to be successful at executing in the market. So we are we feel great about next year, we are optimistic. But we are going to stop short of indicating a trend or giving a number. that is fair.

Katie Sakys: for it. Thank you. for it. Thank you.

Operator: Your next question comes from the line of Josh Shanker with Bank of America. Josh, your line is open. Please go ahead.

Josh Shanker: Yes. Thank you very much for taking my question. The margins are fantastic. And I am sure that you would like to get every piece of business that fits your underwriting appetite But the growth across a lot of lines is flattish or not moving very much As you innovate with all these opportunities in technology and artificial intelligence, and you are able to save money, to what extent is the goal to pass those saving on to the customers to make your value proposition more attractive than your competitors in terms of price action? Do you see an opportunity for you to outgrow your competitors by cutting costs with no impact on your margins?

Alan David Schnitzer: Yeah, Josh. I do think that there will be an opportunity for us to do that. We know that we are generating operating leverage. And just to just to give you a little bit of color into that. So there is some things that we know and we have a lot confidence in. So let me give you a couple of examples. Our cost per unit of software development much improved. Our labor costs associated with first notice of loss down. Our cost to service a policy has come down. There are just some areas where we know and that goes into operating leverage. There are other areas where attribution is a little more difficult.

So, for example, we are very confident we are giving our underwriters better insights. And you know, you can you can look at the excellent underwriting result, but it is hard to draw a very straight line from the improved insights we are giving the underwriters and exactly that outcome. So it is it is a little bit harder to see that. But taking a step back, if the combination of the ways that we can deploy the operating leverage and the benefits that we cannot quantify are embedded in the results that we have. And if we decide that we want to redeploy some of those into pricing without compromising our return objectives, we will do that.

Josh Shanker: Do you have a confidence if we look 5 years out you will be taking a greater share of your agents business overall, a higher percentage of their footprint, I guess, than you have right now?

Alan David Schnitzer: Josh, it is really hard to look 5 years out, I think, in any business. But, you know, we have said for a long time that we think there are meaningful benefits of scale, including the ability to invest at the level that we are investing and you know, I think you know, the early benefits, you know, come through expenses and the loss ratios. So we will see it in margins. And over time, that is gonna, you know, translate into growth. So I do think that Travelers will be a consolidator of premium.

Josh Shanker: Okay. Thank you for the answers. Appreciate it. for it. Thank you.

Operator: Your next question comes from the line of Mike Zaremski with BMO. Mike, your line is open. Please go ahead.

Michael Zaremski: Hey, thanks. Good morning. I am in commercial lines. I do not believe there was any kind of color on RRC rate change drivers this quarter. If you would be willing to kind of just unpack whether there is any particular line or lines that kind of are driving the downwards trend line?

Alan David Schnitzer: Yeah. Mike, good morning, and thanks for the question. Let me just step back and just make a few observations about the overall pricing environment. If there is 1 word over the top to describe it, I would say it is stable. I am not going to get into what RPC did by every single line, but just for example, the sequential change in RPC and property was small. It was very small. We are we are we are not prepared to call the bottom. Certainly, you could not call the bottom off 1 data point, and who knows what is gonna happen 90 days from now. But we were very pleased to see a very, very small change there.

The sequential movement in RPC in the liability lines, and now I am talking about GL and umbrella, was also was also modest. So all in all, pretty orderly. And, you know, we talked all the time about the fact that we execute 1 account at a time. We are we are looking at the next account and deciding whether we want it in the portfolio and at what price. And it is also just a reflection of the returns by line. If you look at by line, pricing retention, and return, it is it is a perfectly rational picture across the board. it is just the execution could not be better.

Michael Zaremski: Got it. Thanks, Alan. And my follow-up just going back to a lot of the good color you have given on kind of travelers innovation. On the claims front and underwriting front, and think, Alan, you talked specifically about expecting to bend the loss curve, I believe, in casualty. If I if I juxtapose that with IBNR levels currently in the long tail casualty line, specifically commercial auto and commercial casualty noncomp. Is it fair to say that the current IBNR are kind of higher than the company's long term targets. And if you do bend the loss curve, the IBNR levels would kind of mean revert over many years to lower?

Daniel Stephen Frey: Mike, it is Daniel. I will try that. Look. I think 1 thing that is happened especially if you wanna look at the components of reserves between, you know, Chase and IBNR now versus 3 years ago or 5 years ago or 10 years ago, I do not think we are ever literally going to go back to the levels we saw 10 years ago because attorney rep rate is higher. That lengthens the tail. More claims come in later. So.

And that is really a point that we made a few years ago in 2024, you know, when we started talking about an uncertainty provision to allow for the possibility that those trends would continue And so when Alan referenced earlier in his comments, you know, pressure on the loss cost, which somebody else asked about, That just means loss cost continue to go up, but they are not going up by any more than we and anticipated than we anticipated in our picks. So I think the component of our ultimate loss picks is perfectly logical given the current development patterns.

If, in fact, the actions that we are taking in our claim organization translate into a better outcome, then for sure, there is going to be some IBNR that we ultimately do not need, but we are not projecting that as we sit here today.

Michael Zaremski: for it. Thank you.

Operator: Your next question comes from the line of Elyse Greenspan with Wells Fargo. Elyse, your line is open. Please go ahead.

Elyse Greenspan: Hi. Thanks. Good morning. My first question is on the expense ratio guide. I think you guys said, you know, a little under 29 this year and then guided to the same level next year, understanding why this year is a little higher than expected on variable comp. But, you know, as we think about next year or some, you know, improvements around AI, maybe being offset by other things that you expect 2027 to be more or less stable with where you are now expecting 26.

Daniel Stephen Frey: Yeah. Lisa, it is Daniel. So with the expense ratio, as we say all the time, we will decide what we want. The expense ratio to be and then dial into that number. A big component of that is what do we think we need the expense ratio to be in order to have a competitive position in the marketplace. And so we are pretty copacetic with where that is right now. As you mentioned and as I said, keep in mind that pretty much the largest component of the expense ratio is commissions. Which includes the contingent commission and the profit sharing. And so we are in a very strong position from a margin perspective.

I do not expect that to reverse itself in the near term. So about where we are is pretty good with us for right now.

Elyse Greenspan: Thanks. And then my second question is on the business insurance underlying loss ratio. That went up by about 50 basis points from last Q3. You guys did not call it anything in the prepared remarks, so maybe there was nothing that significant. But was there a non cat weather or anything else you would, you know, describe as the drivers of the year over year change there?

Daniel Stephen Frey: Yeah at least, Daniel. So I think I think you are right in the first place. Not a very big change and nothing in particular to call out. You know, it. it is a great number. And it moved by about a half a point year over year, which could have easily moved to half a point the other way, you know, a bunch of stuff in there as there always is. The impact of pricing, product mix, There are changes in non cat property losses. there is base year changes. there is the impact of strategic investments we are making as Gregory mentioned in his remarks again. But none of those things were particularly noteworthy as core. for it.

Thank you.

Operator: Your next question comes from the line of Andrew Kligerman with TD Cowen. Andrew, your line is open. Please go ahead.

Andrew: Hey. for it. Thank you. Good morning. I am looking at slide 7 of your presentation, and it just really strikes me how strong net investment income improves year after year. So the question is, is that now finally. And you are combines are fantastic. Is that gonna start to weigh into your price How are you thinking about net investment income with respect to pricing?

Alan David Schnitzer: Andrew, good morning. We do have a link between our expectation for net investment income and our insurance pricing. it is, of course, part of the model. Just a couple of things to think about though. The portfolio turns over relatively slowly, so it takes a while to earn in. And as the risk free rate goes up, our hurdle returns go up. So you sort of have to put all that into the blender to figure out what the impact is. Got it.

Andrew: Personal lines. So we saw renewal premium change go down point 6% in auto. new business was down 3% in auto, down 4 in homeowners, Could you talk a little bit about the competitive landscape in personal lines? And you know, with all this competition, how are you defending the fort How are you gonna keep if up rather than down?

Michael Frederick Klein: Sure, Andrew. it is it is Michael. I mean, I think you know, the comments that I made in my prepared remarks are really key to what we are doing there. And you know, to be clear, you know, we are definitely not 1 to chase premium growth at all costs in any given short period of time. Right? Our objective is to profitably grow this business over time. We do that by matching price to risk. And so you see that activity in the RPC numbers that you are looking at, right, in the in the third quarter of this year, we took about 10 rate decreases in auto.

Again, still in that same low single digit range that we have been talking about. But as we monitor our performance and look at lost costs, we adjust pricing. So that is certainly a lever that we pull. We continue to make strategic investments in products and services and capabilities that make sure that we have the products and services our customers want to buy and our agents want to sell. And then we do quite a bit around distribution management, making sure that we have got the agents appointed that we need, and that we are taking advantage of opportunities to solve problems for them.

When I talk about book consolidation opportunities as an example, when we are working with an agent or a broker who is having issues with another carrier, and we talk to them about bringing that business over to Travelers. So there are a number of things that we are doing from a. From an appetite pricing and distribution management standpoint. Both to, you know, defend the fort, to use your words, but also to play offense to make sure that we are leveraging the capabilities we have to profitably grow the business over the long term.

Andrew: Very helpful. Thanks.

Operator: Your next question comes from the line of Yaron Kinar with Mizuho. Yaron, your line is open. Please go ahead.

Yaron Kinar: for it. Thank you. Good morning. I want to start maybe with the cyber insurance. Just given Hugging Face, AI agents, maybe more hacking activity and capabilities, Is this the line of business that is a viable business line for the private market? Do you need maybe more government support or more systemic intervention here? How are you thinking about that?

Jeffrey Klenk: Good morning, Yaron. This is Jeffrey. You know, as consistently highlighted by the Travelers Business Risk Index, cyber is 1 of the most important topics that our customers are facing. it is a dynamic exposure, and it has been, and there is no question that the advanced AI models are adding to that dynamic. I would remind you when you think about our portfolio, it is heavily weighted toward the middle market main street businesses. We have always been focused on limits management, If you look inside our book of business, a substantial majority of our limits are at a million dollars or less.

Those accounts that are above that are predominantly at 5 million or less, and that is before you take into the into account any reinsurance that we have in place. And cyber's always been 1 of our most heavily reinsured lines of business. And then the last thing I would share with you is that we have really invested heavily in risk control capabilities, including our acquisition of Corvus a few years ago that we have shared with you We are not just assessing these accounts on the front end as we put them into the portfolio. We have got ongoing risk control capabilities to help them manage the risk.

So I think we are investing to address the exposure in partnership with our customers but in many ways.

Alan David Schnitzer: Yeah, Yaron, to the extent that was a public policy question and question about whether we need a government backstop, I do not really know. I mean, there is there is active conversations about that. Now, and we will see how that plays out. Okay.

Yaron Kinar: And then maybe going back a second to business insurance. So obviously, I see a little bit of noise quarter over quarter. But if I look at the year to date numbers, they are flat. Right, on the combined ratio of the loss ratio. Is that kind of a fair way of thinking about where the company is today and what the expectations would be going forward?

Alan David Schnitzer: You know, we should start with the noise comment. I mean, these are spectacular numbers and so there really is no noise in them. There are, as always, bunch of puts and takes. Some things are favorable. Some things are going the other way. But this is a spectacular number.

Daniel Stephen Frey: Yeah. And I think you know, to Alan's earlier comment on top line, you know, we are not going to give guidance on combined ratio expectations in any of the segments other than to reiterate like, profitability of the business is really strong. We are generating all time high levels of underlying underwriting income, and we think that is got some staying power.

Yaron Kinar: Okay. And just to be clear, I did not mean noise, right. I meant puts and takes to your point. Thank you for the clarification.

Daniel Stephen Frey: Yeah.

Operator: We have time for 1 last and that question comes from the line of Meyer Shields with Citi. Matthew, your line is open. Please go ahead.

Matthew: Hey. Good morning. I guess a question I had was we are seeing more at an industry level scrutiny of just claim settlement practices in general. there is some litigation in Oklahoma, California, obviously, has been active. I am just. I know that your claims practices are unique to your company and the industry is not necessarily representative of you. But I am curious just how you would frame the risk from continued scrutiny on practices Just from a regulatory perspective, I have diminution of value in the back of my head as kind of--.

I do not know if it is the right analog, but something similar where claims practices were scrutinized and saw some changes on the back of it both in terms of coverage and how companies operate?

Alan David Schnitzer: Yeah. Matt, let me just start. And you referenced our practice I should just say There have been a couple of articles recently about this 1, we were not in at all, and the other, we were we were profiled as pretty favorable. So I just wanna distinguish that from what is going on out there. You wanna talk about close to that pays and the things that could impact that, Michael?

Michael Frederick Klein: Yeah. Sure. I mean, I think, you know, again, those couple articles really focused on close without pay percentages across carriers, To Alan's point in that first article, we looked favorable. That said, comparing close without pay percentages across carriers is very fragile. The definition of claims when they are established why they are established, what causes them to be paid with and without or closed with and without payment, vary from 1 insured to the next just from a definitional standpoint. But know, you can have a claim filed and have the loss be below the deductible for example, as a as a reason that claim gets closed without payment.

And then I guess to your broader question about you know, seeing these cases in Oklahoma and other places against other carriers, their claim handling practices you know, just reinforcing Alan's comment. I mean, we have well established claim handling practices They are grounded in the philosophy to pay what we owe. To deliver exceptional customer experience, and do that as efficiently as an as possible. And I would say our claim handling and our claim organization is the best in the business We are proud of it. We hear from our agents and brokers. That it is 1 of the reasons they are proud to represent and sell Travelers.

So I think we have really got a strong foundation on. In that in that space.

Operator: Matt, with all that said, let me try to answer your question.

Alan David Schnitzer: We are very active as a company in an effort to be an honest broker out there in state capitals and with insurance commissioners and with the media And our trade association is very active in the same places, making sure that we are educating people and people understand the good work this industry does, the billions of dollars that we do pay out, the speed with which we pay it out, the risk control services that we provide. So we are we are very attentive to this as a topic of interest, and we are very engaged, in speaking to it.

Matthew: I appreciate that. Well, if I could sneak 1 last and 1 last 1, my fault, I misspoke. it is just is it fair to say then when you think about creating benchmarks measuring the performance of your claims organization and how you organize it, that is an internal effort rather than relying on third parties to shape practices and targets, etcetera.

Alan David Schnitzer: Not exactly sure of the question but we. I mean, we certainly have our internal benchmarks, you know, and our service level objectives. You know, for example, our objective is to close 90% of claims within 30 days after every catastrophe. And over the course of a year, we routinely achieve that objective. But our real objective is to pay what we owe and to pay it quickly. And we are we are very disciplined about that.

Matthew: Yeah. that is fair. I am sorry. I butchered the question. I really meant the source of some of the litigation at least is use of third party consultants shaping policies and procedures and other incentives within the organization, and that seems contrary to at least my historical recollection and experience with your company.

Alan David Schnitzer: Yeah. You know, we and others, you know, endeavor to use the data that we have about the good work we do to rebut some of the data others are using to try to make the other case. I think this industry is highly responsible and disciplined and we use the data that we have to make that case. Appreciate it. for it. Thank you.

Operator: for it. Thank you. We have reached the end of our call. I will now turn the call back to Abbe F. Goldstein for closing remarks.

Abbe F. Goldstein: Thanks very much for joining us today. As always, if there is any follow-up, please reach out investor relations, and have a good day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.