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TRAVELERS COMPANIES, INC. (TRV)·Q4 2024 Earnings Summary

Executive Summary

  • Record quarter: Core income $2.126B ($9.15 EPS) and consolidated combined ratio 83.2%, driven by strong underlying profitability, favorable prior-year reserve development, and higher net investment income .
  • Underlying underwriting income hit $1.700B pre-tax; after-tax net investment income rose to $785M; net written premiums grew 7% to $10.742B .
  • Segment performance: Business Insurance combined ratio 85.2%, Bond & Specialty 82.7% (underlying up vs last year), Personal Insurance 80.7% with broad improvement in Auto and Home .
  • 2025 setup: Management guided to ~$3.0B after-tax fixed-income NII (Q1 ~$710M → Q4 ~$790M), a 2025 CAT plan of 6.9 combined ratio points, expanded CAT XOL reinsurance, and noted a material Q1 impact from California wildfires (later prelim loss estimate: ~$1.7B pre-tax) — key catalysts for near-term stock reaction .

What Went Well and What Went Wrong

What Went Well

  • Underlying margins strengthened: underlying combined ratio improved to 84.0% and pre-tax underlying underwriting income reached $1.700B, with strong contributions across all three segments .
  • Investment engine: after-tax net investment income increased 22–23% YoY on a larger fixed-income portfolio and higher yields; CEO highlighted adjusted book value per share growth to $139.04 (+13% y/y) .
  • Pricing and retention: Business Insurance delivered renewal premium change of 9.6% (rate +6.9%) with 85% retention, supporting 8% NWP growth in the segment .
  • Management quote: “We are very pleased to report record core income for the quarter of $2.1 billion driven by strong growth in earned premiums and excellent profitability.” — Alan Schnitzer .

What Went Wrong

  • Catastrophe losses ticked higher vs prior-year quarter (+0.4 pts impact), including Hurricane Milton and Helene re-estimation; management flagged a material Q1 impact from California wildfires .
  • Bond & Specialty underlying combined ratio rose to 86.8% (combined ratio +5.4 pts y/y) and segment income decreased $12M y/y, reflecting a lower underlying underwriting gain despite higher NII .
  • Reserve adds in runoff operations: Business Insurance’s favorable PYD included offsets from additions to reserves related to childhood sexual molestation exposure in run-off operations .

Financial Results

Consolidated – sequential trend and YoY metrics

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($USD Billions)$11.28 $11.90 $12.01
Diluted EPS ($)$2.29 $5.42 $8.96
Core EPS ($)$2.51 $5.24 $9.15
Combined Ratio (%)100.2% 93.2% 83.2%
Underlying Combined Ratio (%)87.7% 85.6% 84.0%
Net Investment Income (after-tax, $USD Billions)$0.73 $0.74 $0.79
Net Written Premiums ($USD Billions)$11.12 $11.32 $10.74

Segment breakdown

SegmentMetricQ2 2024Q3 2024Q4 2024
Business InsuranceNet Written Premiums ($USD Billions)$5.54 $5.52 $5.43
Combined Ratio (%)96.1% 95.8% 85.2%
Segment Income ($USD Millions)$656 $698 $1,188
Bond & SpecialtyNet Written Premiums ($USD Billions)$1.04 $1.07 $1.05
Combined Ratio (%)87.7% 82.5% 82.7%
Segment Income ($USD Millions)$170 $222 $228
Personal InsuranceNet Written Premiums ($USD Billions)$4.54 $4.73 $4.26
Combined Ratio (%)108.5% 92.5% 80.7%
Segment Income ($USD Millions)-$153 $384 $798

KPIs

KPIQ2 2024Q3 2024Q4 2024
Return on Equity (%)8.6% 19.2% 30.0%
Core Return on Equity (%)8.1% 16.6% 27.7%
Book Value per Share ($)$109.08 $122.00 $122.97
Adjusted BVPS ($)$126.52 $131.30 $139.04
Underlying Underwriting Income (pre-tax, $USD Billions)$1.214 $1.498 $1.700

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Fixed-Income Net Investment Income (after-tax)FY 2025Not previously quantified~$3.0B; Q1 ~$710M, Q4 ~$790M New disclosure; rising intra-year cadence
Pretax CAT Plan (combined ratio points)FY 2025Not specified6.9 points; Q2 typically largest CAT quarter Plan provided; bias to high end of historical experience
CAT XOL Reinsurance2025 TreatyPrior layer lower; ceded premium higher$100M per-event deductible; $4B agg layer above $4B attach; $3.7B placed (added $150M coverage) with lower ceded premium Coverage increased; cost reduced
Casualty Reinsurance Program2025Prior structureEnhanced coverage at lower attachment; BI Q1 NWP growth impact ~-4 pts; consolidated ~-2 pts; full-year < -0.5 pt Strengthened risk transfer; modest reported NWP impact
DividendQ1 2025$1.05/share$1.05/share declared; payable Mar 31, 2025 Maintained
California Wildfires LossQ1 2025N/AMaterial impact flagged Jan 22; prelim estimate disclosed Feb 11: $1.7B pre-tax ($1.3B after-tax) New event; quantified post-quarter

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
AI/Technology initiativesStrategic investments; operating leverage improvements (press release commentary) Ongoing innovation agenda (forward-looking statements) Tech spend >$1.5B; digitizing value chain; advanced analytics; AI talent; faster speed-to-market Increasing focus and disclosure
Pricing/Retention (Commercial)BI RPC ~10.1%, retention ~85%, strong new business BI RPC 10.5%, retention 86% BI RPC 9.6%, rate +6.9%, retention 85% Stable discipline
Catastrophe strategySevere convective storms impact; robust underlying Helene and hail events; robust underlying Milton & Helene re-estimates; 2025 CAT plan; expanded CAT XOL Proactive risk transfer
Tort environmentGeneric risk factor disclosures Management monitoring; regulatory attention Front-and-center concern; signs of favorable legislative steps (litigation financing disclosure) Cautious optimism
Personal Auto & PropertyPI underlying improved; still CAT-heavy PI profitability improved markedly Further improvement; Auto UCR 96.3%; Home UCR 65.4% (CY UCR), state-by-state profitability focus Improving trajectory
Macro/tariffsN/AN/AAuto tariffs: monitor and reprice if needed; not constraining current appetite Watchful

Management Commentary

  • Alan Schnitzer (CEO): “Adjusted book value per share…$139.04, after making important investments in our business and returning more than $2.1 billion of excess capital… We remain very confident in the outlook for Travelers in 2025 and beyond.” .
  • Dan Frey (CFO): “We expect approximately $3B after-tax [fixed-income] NII, beginning with $710M in the first quarter and growing to $790M in the fourth quarter… Our pretax catastrophe plan for 2025 is 6.9 combined ratio points.” .
  • Segment Presidents: Business Insurance delivered an all-time quarterly best underlying combined ratio of 86.2%; Bond & Specialty grew surety NWP +19%; Personal Insurance executed granular state-by-state actions and improved property and auto underlying performance .

Q&A Highlights

  • Pricing stability: BI renewal rate change broadly stable; granular local execution maintained .
  • Reserves: Workers’ comp drove ~$250M favorable PYD in BI; runoff abuse/molestation reserves strengthened .
  • Reinsurance: Enhanced casualty program at lower attachment; CAT XOL capacity increased while lowering ceded premium .
  • Margin discussion: BI underlying margins at multi-decade highs; management sees stable environment but avoids forecasting peaks .
  • California wildfires: Material Q1 impact expected; market share estimates are blunt instruments; aggregate treaty accumulation could matter with active Q2/Q3 .
  • Personal Auto competitiveness: Appetite increasing as margins improve; tariffs would be priced in if enacted .

Estimates Context

  • We attempted to pull S&P Global/Capital IQ consensus for Q4 2024 EPS and revenue, but estimates were unavailable at time of request due to API limits. As a result, we cannot provide vs-consensus beat/miss figures for this quarter (Values retrieved from S&P Global were unavailable).
  • Given strong core EPS ($9.15) and combined ratio (83.2%), sell-side estimate revisions are likely to move higher for FY 2025 NII and to reflect reinsurance program impacts on reported NWP growth and expected Q1 wildfire losses .

Key Takeaways for Investors

  • Earnings engine firing: Strength in underlying underwriting income and higher NII lifted core EPS and ROE; this supports higher capital returns and book value accretion .
  • Commercial pricing/retention remain robust, sustaining favorable BI margins even as casualty uncertainty is prudently addressed via IBNR and reinsurance .
  • Personal lines turning: Auto and Home underlying trends improved materially; continued rate/IV increases and selective capacity management should underpin property profitability into 2025 .
  • 2025 outlook levers: ~$3B after-tax fixed-income NII, CAT plan of 6.9 points, and expanded CAT XOL tranche provide visibility; watch the Q1 wildfire impact and potential aggregate treaty accumulation if CATs are heavy in Q2/Q3 .
  • Near-term catalyst: Feb 11 preliminary wildfire loss estimate (~$1.7B pre-tax) clarifies Q1 headwind; expect active dialogue on CAT exposure, California market reforms, and rate actions .
  • Capital deployment: Ongoing buybacks ($5.04B remaining authorization) and dividend continuity ($1.05/share) reinforce capital return narrative amid strong operating cash flow .
  • Risk monitor: Tort environment and runoff reserve adds require continued vigilance; management is proactive and conservative on picks and risk transfer .

Appendix: Additional Data Points

  • Combined ratio impact Q4: Net favorable PYD (-2.4 pts), Catastrophes (+1.6 pts), underlying 84.0% .
  • Segment details Q4: BI favorable PYD driven by workers’ comp; Bond favorable PYD in fidelity/surety; Personal favorable PYD in both Auto and Home .
  • Balance sheet: Debt-to-capital 22.4% (ex-AOCI 20.3%); invested assets $94.2B; adjusted BVPS $139.04 .

All claims above are sourced from Travelers’ Q4 2024 8-K press release/exhibits, Q4 2024 earnings call transcripts, and relevant company press releases as cited.