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    Travelers Companies Inc (TRV)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$223.12Last close (Apr 16, 2024)
    Post-Earnings Price$206.08Open (Apr 17, 2024)
    Price Change
    $-17.04(-7.64%)

    What went well

    • Travelers is not seeing any material slowdown in their Excess & Surplus (E&S) market segments, maintaining strong performance across diverse businesses.
    • Growth in Commercial Auto accelerated due to increased renewal premium change (RPC) and the rollout of a new automobile product expected to improve return profiles.
    • The integration of Corvus is progressing well, with Travelers feeling confident about the profitability and quality of Corvus's book of business, enhancing their capabilities.

    What went wrong

    • Travelers reported a decline in net written premiums in Workers' Compensation, primarily due to rate reductions and decreased exposures, which may impact profitability in this segment.
    • The company acknowledges headwinds and uncertainties, including social inflation, economic inflation, tight labor market, weather, and geopolitics, which could negatively affect their business performance.
    • Increased dislocation in the small commercial market suggests potential competitive pressures that could impact Travelers' growth and profitability in this segment.

    Q&A Summary

    1. Liability Reserves Increase
      Q: Why did you increase recent accident year liability reserves?
      A: We made small adjustments to our reserves for recent accident years in liability lines, adding more IBNR to recognize uncertainty. This reflects ongoing trends we've discussed, such as social inflation. Overall, these are modest changes with no significant new developments.

    2. ROE Targets for 2024
      Q: What's your outlook for ROE targets in 2024?
      A: While we won't share specific targets due to competitive sensitivity, we consider factors like the interest rate environment and aim to achieve margins over the 10-year treasury and our cost of equity.

    3. Personal Auto Improvement
      Q: Is the improvement in personal auto sustainable?
      A: The improvement is primarily driven by earned pricing, with mild winter weather contributing less than 1 point to the underlying combined ratio. While the mild weather benefit is one-off, we expect further improvement as more pricing earns into the book.

    4. Competitive Landscape in Business Insurance
      Q: How is the competitive environment affecting rates and retention?
      A: The market remains competitive across all segments. Despite this, we've achieved strong pricing with high retention levels, reflecting a marketplace reacting to uncertainties like social and economic inflation. In small commercial, we saw a 22% increase in new business due to market dislocation.

    5. Workers' Compensation Premium Trends
      Q: Why did workers' comp premiums shrink year over year?
      A: While exposure continues to be strong, it's down somewhat as the Fed curtails inflation. The primary driver of the decline is ongoing rate reductions, and we're maintaining disciplined underwriting to ensure profitability.

    6. Maintaining Combined Ratio Improvement
      Q: How are you maintaining strong underlying combined ratios in Business Insurance?
      A: The improvement stems from significant earned pricing benefits and favorable mix, partially offset by modest IBNR additions and some large loss activity. We continue to benefit from a strong pricing environment and high-quality retention.

    7. Homeowners Terms and Conditions
      Q: Any changes in homeowners terms given higher cat losses?
      A: We're implementing various non-rate actions, including stricter eligibility criteria, higher deductibles, and managing exposure aggregation. These measures aim to improve profitability amid increased severe convective storm activity.

    8. Florida Homeowners Market
      Q: Are Florida reforms prompting you to revisit the market?
      A: While recent reforms are a positive step, Florida remains highly cat-exposed with structural challenges. The risk-reward is not yet balanced, and concerns like potential assigned risk obligations persist. We're monitoring but haven't changed our stance on new property business there.

    9. Attorney Involvement in Auto Claims
      Q: Are you seeing higher attorney involvement in auto BI claims?
      A: Over time, we've observed increased attorney involvement impacting bodily injury claims. However, bodily injury loss trends this quarter were consistent with expectations, and we remain vigilant to social inflation trends.

    10. Commercial Auto Growth and Pricing
      Q: What's driving the acceleration in commercial auto growth?
      A: Growth is primarily due to renewal price changes, with rates increasing. We've also rolled out a new commercial auto product, enhancing segmentation and expected returns.

    11. E&S Market Dynamics
      Q: Are you seeing changes in E&S market competition or pricing?
      A: We haven't observed a material slowdown in the segments where we compete. Our diverse $2.5 billion E&S portfolio continues to perform well amid market conditions.

    12. Corvus Integration Update
      Q: Any major takeaways from re-underwriting the Corvus book?
      A: After 3.5 months into integration, we're pleased with the quality and profitability of the Corvus book. We're leveraging their proprietary technology across our existing book and are comfortable with the results.

    13. Personal Lines Renewal Premium Trends
      Q: Will renewal premium changes in personal lines decelerate?
      A: For auto, renewal premium change will moderate gradually, not sharply, due to our 12-month policies and the earning of prior rate actions. In property, we don't anticipate deceleration and will continue to drive rate increases to address loss costs.

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