The Travelers Companies, Inc.

Good morning, ladies and gentlemen. 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 20th, 2022. At this time, I would like to turn the conference over to Ms. Abby Goldstein, Senior Vice President of Investor Relations. Ms. Goldstein, you may begin.

Thank you. Good morning, and welcome to Travelers' discussion of our fourth quarter 2021 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 presidents, Greg Teslowski of Business Insurance, Jeff Clank 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 remarks, and then we will take questions. Before I turn the call over to Alan, I would like to draw your attention to the explanatory notes 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. For the quarter and full year, we are very pleased to report excellent bottom line results as well as successful top line growth. We attribute these results to our strong franchise value and excellent execution day in and day out in every aspect of our business. At the same time, we're full steam ahead on strategic initiatives designed to position travelers for continued success. Core income for the quarter was $1.3 billion, $5.20 per diluted share, generating core return on equity of 19.8%. These results benefited from strong underlying underwriting income driven by record net earned premiums of $8 billion and a very strong underlying combined ratio of 88.7 percent. That brings full-year core income to $3.5 billion, $13.94 per diluted share, and full-year core return on equity to 13.7 percent. Our full-year core income includes record underlying underwriting profit, $2.9 billion pre-tax, catastrophe losses that were once again favorable compared to our market share, more than a half a billion dollars of favorable pre-tax prior year reserve development, and outstanding investment returns. In short, we're firing on all cylinders. We are particularly pleased with the continued strong underlying fundamentals in our commercial businesses, where we are seeing the margin expansion we anticipated. The underlying combined ratio for the quarter improved by almost four points year-over-year in business insurance and almost two points in bond and specialty insurance. Looking at the two commercial segments together, the combined BI-BSI underlying combined ratio was 90.4% for 2021, a significant improvement from 94.1% in the prior year. Underlying results in personal insurance were impacted by auto loss frequency returning to more normal levels as miles driven has increased and, to a lesser extent, elevated severity in both auto and property. Nonetheless, with a 96.5% all-in combined ratio, PI results for the year were solid. Our consolidated results demonstrate the value of our diversified group of businesses. Turning to investments, Our high-quality investment portfolio generated net investment income of $624 million after tax for the quarter and $2.5 billion for the year, reflecting reliable results from our fixed-income portfolio and another quarter of terrific returns from our non-fixed-income portfolio. Our very strong operating results, together with our solid balance sheet, enabled us to grow adjusted book value per share by 10% during the year. After making important investments in our business, and returning $3.1 billion of excess capital to shareholders, including $2.2 billion of share repurchases. In the fourth quarter, we repurchased $801 million of our stock. Turning to the top line, net written premiums grew 10 percent to $8 billion. Each of our three segments again contributed meaningfully to the top line growth. In business insurance, net written premiums grew by 9 percent. with renewal premium change of 9.2%, near an all-time high. At the same time, retention was higher. As we've shared before, strong retention is an important indicator of continued stability in the marketplace. New business levels were up 16%. Pure renewal rate change in business insurance was down about a point sequentially. Exposure growth was about 4.5 points, continuing an improving trend and reaching its highest level in 15 years. That's a very encouraging sign, both in terms of economic activity and its contribution to written margin expansion. Excluding the workers' comp product line, renewal rate change in BI for the quarter was nearly 7 percent, an historically strong result. Rate in workers' comp was a little more negative than we've seen over the past year, which is consistent with the strong profitability of the line. Overall renewal premium change in the workers' comp line was positive, as exposure growth was meaningfully positive, about as high as we've seen in a few years. According to the U.S. Bureau of Labor Statistics, average hourly earnings rose at a nearly 6% annualized rate over the past six months, up from about 3.5% in the first six months of the year. Wage inflation is a benefit in terms of margin contribution. In bond and specialty insurance, net written premiums increased by 13%, driven by strong renewal premium change of 10.9% in our management liability business and continued strong retention. In both of our commercial business segments, written margins continue to expand as written pricing outpaces estimated loss trends, and we expect that to continue for a while. In personal insurance, net written premiums increased by 10%, Renewal premium change in auto improved by more than a point. Renewal premium change in homeowners remained strong at 8.7 percent. Policies in force in both auto and homeowners increased to record levels. The innovation and technology investments we've been making over the past number of years have had a meaningful impact on our 2021 results, and we're confident that ongoing and planned initiatives will continue to drive successful top and bottom line results going forward. Our scale, profitability, and cash flow support our ability to invest well over a billion dollars annually on technology. By way of example, we're digitizing the value chain, leveraging cloud technology, leaning into artificial intelligence for everything from simple automation to deep learning, tapping into new data sources, and building increasingly accurate predictive models. With meaningful opportunities to transform the way business is done scale is going to be an increasingly important differentiator. Through our focus on optimizing productivity and efficiency, we have been able to meaningfully increase our overall technology spend over the last five years, while at the same time significantly reducing our expense ratio. Importantly, over that period, we have improved the mix of our technology spend, We have increased our spending on strategic technology initiatives by 50 percent while reducing routine but necessary expenditures. In 2021, our leading claim organization completed a strategic three-year plan we call Right Touch. That effort resulted in more than $125 million of annual REM rate savings, which is reflected in our results. In addition to creating efficiencies for us, investments in digital capabilities over the past few years have enabled us to improve the customer experience. Our timing was good. Pre-pandemic, we anticipated a higher rate of digital adoption, and when the pandemic accelerated the trend, we were prepared to meet the need. We are now using virtual claim handling capabilities on a significant majority of both auto appraisals and windtail claims, without the need for inspection by a traveler's claim professional. We are also handling significantly more water claims virtually as compared to pre-pandemic levels. In other words, we're delivering great experiences for our customers and a more efficient outcome for our shareholders. Throughout Travelers, we see a lot of benefit and opportunity from artificial intelligence. We've shared in recent quarters the success we've had in deploying aerial imagery coupled with proprietary deep machine learning to accelerate damage assessment and claim resolution in the wake of catastrophes. In the recent Colorado wildfire, we were able to serve some customers before they even had a chance to return to their homes. In severe wind events, our latest model can identify the extent of exterior property damage with a high degree of accuracy. These are some of the capabilities we use to meet our objective of closing 90% of all claims rising out of catastrophe events within 30 days, and exclusively with travelers' claim professionals instead of also relying on independent adjusters. Resolving claims quickly and with travelers' employees. Again, it's about delivering great experiences for our customers and a more efficient outcome for our shareholders. Other initiatives across the company leverage technology, data, and models to support decision-making. We have more than 60 million data records related to businesses, individuals, and distributors, including virtually every business in the U.S. These records are curated into well-designed proprietary data products. We leverage this with more than 2,000 external data sets, including high-resolution aerial imagery covering substantially all property exposures in the United States. All of this data fuels our more than 1,000 advanced analytical models. Our models support risk selection and segmentation, pricing, reserving, claim response, and more. Our tech data and analytics advantage is significant and hard to replicate. We deploy these capabilities across the value chain, from customer acquisition to underwriting to claim handling. For example, Understanding the size, condition, and geometry of a roof can be significant to segmenting risk. Most homeowners understandably wouldn't know if they had a hip roof or a gable roof, let alone its size or condition, so it's hard to get accurate information through the application process. We've developed and trained AI to evaluate those roofing characteristics using aerial imagery and are integrating that intelligence into our underwriting segmentation and pricing. Powering all of this is our exceptional workforce. We start with world-class expertise in traditional insurance-related disciplines and enhance that with leading computer data and industrial engineers, design professionals, geophysicists, behavioral scientists, AI experts, roboticists, meteorologists, specialized healthcare professionals, and so on. It takes all 30,000 of our travelers' colleagues to deliver the financial performance and strategic achievements we're reporting today. and I'm grateful to them all. To sum it up, we are very pleased with our results for the quarter of the year. With cutting-edge expertise in risk and risk management, complemented by the strengths we've built in digital excellence and innovation, we are well-positioned to identify and execute on the most promising opportunities in our industry. By extending our advantage in risk expertise, delivering industry-leading experiences, and continuing to improve productivity and efficiency, we will continue to deliver meaningful shareholder value over time. And with that, I'm pleased to turn the call over to Dan.