The Travelers Companies, Inc.

Good morning, and thank you for holding. Welcome to the fourth quarter results teleconference for travelers. We ask that you hold all questions until the completion of formal remarks, at which time you will be given instructions for the question and answer session. As a reminder, this conference is being recorded on January 21st, 2021. This time, I'd now like to turn the conference over to Ms. Abby Goldstein, Senior Vice President of Investor Relations. Ms. Goldstein, you may begin.

Thank you so much. Good morning, and welcome to Travelers' discussion of our fourth quarter 2020 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 Investors section. Speaking today will be Alan Schnitzer, Chairman and CEO, Dan Fry, Chief Financial Officer, and our three-segment president, Greg Teslowski of Business Insurance, Tom Kunkel of Bond and Specialty Insurance, and Michael 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 marks, and then we will take 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 10Q and 10K files 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 investor section on our website. And now I'd like to turn the call over to Alan Schnitzer.

Thank you, Abby. Good morning, everyone, and thank you for joining us today. Before I address our fourth quarter and full year results, a quick comment on current affairs. Yesterday, we witnessed the most American of events, the peaceful transfer of power from one democratically elected administration to the next. It's not a political statement, but a patriotic one, to say that we want to see this next administration succeed. We have significant challenges to overcome, a pandemic threatening the health and safety of our loved ones and neighbors, a distressed economy imperiling the lives and livelihoods of millions. in a deeply divided society which undermines our collective sense of security and well-being. Let's hope yesterday marks the beginning of our political leaders on both sides of the aisle taking a constructive approach to addressing these challenges. And with that, I'll turn to results. We're pleased to report a very strong finish to the year, with fourth quarter core income of $1.3 billion, or $4.91 per diluted share, and core return on equity of 20.5%, each up meaningfully from the prior year quarter. We're also pleased to report full-year core income of $2.7 billion, generating core return on equity of 11.3 percent, a substantial margin over the risk-free rate and our cost of equity. Our ability to deliver these results in the face of an historic pandemic, a record high number of PCS catastrophe events, and record low interest rates more specifically to our talented and committed workforce, the value of our hard-to-replicate competitive advantages, and our expertise in balancing risk and reward to achieve industry-leading returns over time. The principal driver of the higher level of core income for the quarter was very strong underlying underwriting income, resulting from record net earned premium of $7.5 billion and an underlying combined ratio that improved 3.4 points to an excellent 88.7 percent. We're pleased with the underwriting results in all three segments. We once again recorded the sub-30 consolidated expense ratio for the quarter and the full year, demonstrating that our strategic investments in improving productivity and efficiency continue to pay off. Turning to investments, this quarter, our high-quality investment portfolio performed well, generating net investment income of $572 million after tax. as the non-fixed income portfolio continued to recover from the pandemic-related impacts earlier in the year. Our operating results, together with our strong balance sheet, enabled us to grow adjusted book value per share by 7% during the year after returning $1.5 billion of excess capital to shareholders, including $672 million of share repurchases, which we resumed in the fourth quarter. Turning to production, Notwithstanding the challenges in the economy, we continue to successfully execute in our marketplace strategies to generate growth in the top line. Net written premiums in the quarter grew by 3%, driven by strong little rate change broadly across the book, and continued strong retention in all three segments. Given the headwinds facing the industry, we expect the favorable pricing environment to continue for some time. In business insurance, in our core middle market business, Renewal rate change was a record 9.1%, up 4.5 points over the prior year and about a point sequentially, while retention remained strong. Segmentation in pricing is key in this business, and to that end, the quality of the execution underneath the headline production numbers was excellent. In bond and specialty insurance, net written premiums increased by 12%, as renewal premium change in our domestic management liability business achieved a record 10.9%, driven by record renewal rate change, while retention remains strong. In personal insurance, net written premiums increased by 7%, driven by strong renewal premium change in our agency homeowners business, and strong retention and new business in both agency auto and agency homeowners. Fourth quarter production contributed to full year record net written premiums of almost $30 billion, up 2% compared to last year, Adjusting for the premium refunds we offered to our personal insurance auto customers, net written premiums were up 3 percent, a strong top line result in the context of this year's difficult economic environment. Taking a step back, let me direct your attention to slide 18 of the webcast presentation and put this year's results into a broader context. I've shared before our belief that any commitment to delivering industry-leading return on equity over time requires a strategy to grow over time. To that end, a few years ago, we laid out a strategy to achieve profitable growth in the context of the forces of change we have previously identified as impacting the industry. As you can see on the slide, despite the challenging economic and operating environment, 2020 was another successful year of the execution of that strategy. Since 2016, we have grown net written premiums at a 4.5% compound annual rate substantially outpacing both GDP growth over the same period and our growth rate over the prior years in the decade. We accomplished that while maintaining a stable underlying underwriting margin. In other words, we haven't grown by underpricing the product or changing our risk profile. The growth has come organically from customer segments, products, geographies, and producers that we know well. Over that same period, there are ongoing and relentless focus on optimizing productivity and efficiency. We've also improved our expense ratio by about two points compared to the run rate from earlier in the decade. As you can also see on the slide, the result of all that is significantly higher underlying underwriting income, meaningfully higher cash flow from operations, and double-digit growth in invested assets. have contributed to our ultimate objective of creating shareholder value through industry-leading return on equity over time. Our core return on equity has increased in each of the last three years and averaged 11% over that period. And that 11% is after bearing the impacts of significant CAT and non-CAT weather activity, a meaningful increase in social inflation, historically low interest rates, and a global pandemic. this year and over recent years is the result of a sound strategy and the successful achievement of our strategic objectives looking forward from here thanks to our team our strategy our capabilities and our strong track record of innovation and execution we feel very well positioned to capitalize on the opportunities ahead as the economy continues to recover and beyond Before I turn the call over to Dan, I want to acknowledge and thank my 30,000 colleagues, many of whom were listening this morning, for their tireless efforts over this past year. Notwithstanding concerns for their own safety and responsibilities for taking care of loved ones and educating their children, they never wavered from our purpose of taking care of the people we're privileged to serve for our mission of creating shareholder value. I couldn't be more proud of this team. I also want to acknowledge and thank all those who have been involved in the extraordinary effort of developing and manufacturing COVID vaccines in record time, from the scientists to the regulators to those who volunteered to participate in the trials. It's a remarkable feat. The sight of those vaccines rolling off the line inspires optimism for the coming year, and the sheer human will and ingenuity behind the effort inspire hope for the future. And with that, I'm pleased to turn the call over to Dan.