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 22, 2025. 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 2024 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 your questions. Before I turn the call over to Alan, I'd 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 in forward-looking statements in our earnings press release and in our most recent 10Q and 10K 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 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 we begin, I want to take a moment to acknowledge the tragic wildfires that have devastated communities across Los Angeles. Our hearts go out to everyone affected, those who have lost their homes, their businesses, and most tragically, their loved ones. At times like these, words alone are, of course, not enough. As a company rooted in the communities we serve, we will be there for our customers and neighbors to support them as they recover and rebuild. We've assessed impacted areas through aerial imagery and made live contact with the substantial majority of our customers with claims, enabling us to expedite claim payments. In addition, our expert claim team is on the ground. We're grateful for their efforts. We also have mobile claim offices positioned in the area where customers can file a claim in person or receive an advance claim payment. And we look forward to working with policymakers in California to make sure the state has a resilient insurance market going forward. Now let me turn to our fourth quarter and full year 2024 results. We're very pleased to report that for the full year, core income was up 64% to more than $5 billion, or $21.58 per diluted share, generating core return on equity of 17.2%. These results were driven by strong fundamentals, growth in earned premiums, excellent underwriting profitability, and a higher level of net investment income. That combination makes for a powerful earnings engine, and that momentum is at our backs as we enter 2025. Turning to our fourth quarter results, we are very pleased to have generated exceptional top and bottom line results. Core income for the quarter of $2.1 billion was a record. Net earned premiums increased 9% to $10.9 billion, and the combined ratio improved 2.6 points to 83.2%. The improvement in the combined ratio was driven by very strong underlying profitability and higher net favorable prior year reserve development. The underwriting margins were strong in all three segments. The combined ratio in business insurance improved by more than a point to an excellent 85.2%. The combined ratio in our bond and specialty business was a very strong 82.7%. And the combined ratio in personal insurance improved more than six points to an exceptional 80.7%. These terrific segment results led to a reported consolidated combined ratio that improved 2.6 points to 83.2%. Turning to investments, after-tax net investment income for the full year was up 21% to $3 billion, driven by strong and reliable returns from our growing fixed income portfolio and higher returns from our non-fixed income portfolio. These results, together with our strong balance sheet, enabled us to grow adjusted book value per share by 13% during the year to $139.04. After making important investments in our business, and returning more than $2 billion of excess capital to shareholders. Turning to the top line, through continued terrific marketplace execution across all three segments, we grew net written premiums during the year by 8% to more than $43 billion, and in the quarter by 7% to $10.7 billion. The strong value proposition that we offer to our customers and distribution partners, along with outstanding execution by our colleagues in the field, contributed to our top line success. In business insurance, we grew net written premiums in the quarter by 8% to $5.4 billion. Renewal premium change in the segment remained very strong at 9.6%, including renewal rate change of 6.9%. Retention also remained strong at 85%. A combination of strong pricing and excellent retention reflects our deliberate and granular execution in a generally disciplined marketplace. In bond and specialty insurance, we grew net written premiums by 7% to $1.1 billion, with excellent retention of 88% in our high-quality management liability business. In our market-leading surety business, we grew net written premiums by 19%. We are very pleased to have generated terrific production results across our commercial segments, where margins continue to be attractive. That includes our ENS offerings, where we grew net written premiums by 13% in 2024. In personal insurance, we do net written premiums in the quarter by 7%, $4.3 billion, driven by continued strong renewal premium change, particularly in our homeowner's business. As we wrap up the year, I'd like to take a few minutes to reflect on our 2024 results and put them into an overtime context. As we've shared, we are and have been focusing our investments on three strategic innovation priorities. First, extending our advantage and risk expertise. Second, providing great experiences for our customers, distribution partners, and employees. And third, optimizing productivity and efficiency. These investments are designed in large part to position us to grow over time at leading returns. The successful execution of that strategy has been an important contributor to our strong results, providing us with the financial resources that enable us to continue investing at scale which we believe will increasingly be a differentiator in this industry. It's a virtuous cycle. The data on slide 19 of the webcast presentation illustrate the significant acceleration of our performance since we launched this strategy. We've grown our net written premiums over the past eight years by more than 70% to over $43 billion. At the same time, we've improved our underlying combined ratio by nearly seven points. High-quality growth with strong underwriting profitability is a noteworthy achievement in this industry. In lines of business with returns that meet our objectives, growth over time has generally come from a combination of price increases and growth in customers. In lines where the emphasis has been on improving returns, premium growth has been driven by higher pricing. In addition, our growth has largely been organic, from products in which we have deep expertise the distribution partners with whom we have longstanding relationships, and in geographies, where we have a thorough understanding of the regulatory environment and other market dynamics. In other words, a relatively low risk growth strategy. Through our focus on productivity and efficiency, we've also meaningfully improved our operating leverage over this time. We've allocated some of that benefit to investments in strategic priorities. As you can see on slide 21, Since 2017, we've more than doubled our investments in strategic technology initiatives. Over that same period, we've carefully managed growth in routine but necessary technology expenditures. In other words, over an eight-year period, we simultaneously and meaningfully increased our technology spend and improved the strategic mix of that spend. In 2017, our strategic investments represented about a third of our tech spend. In 2024, our strategic tech investment approached nearly half of our overall tech spend of more than a billion and a half dollars. At the same time, our efforts to improve operating leverage also enable us to lower our expense ratio by more than three points, or about 10%. The flexibility that operating leverage gives us to allocate the benefit between investment opportunities and the bottom line is a valuable competitive advantage. Turning to underwriting, the tremendous strength and relative predictability of our underlying underwriting income has increasingly contributed to our bottom line. Our underlying underwriting income has more than tripled over the last eight years, reaching $4.5 billion after tax in 2024. This level of underlying underwriting income positions us to deliver strong income and returns, even with the level of outsized natural catastrophes we in the industry experienced in 2024. Our growth and underwriting income also contributes to the increase in our cash flow from operations, which was $9.1 billion in 2024, our highest level ever, and nearly $4 billion more than it was just five years ago. Our strong operating cash flow is important. It gives us the ability to make strategic investments in our business, return excess capital to shareholders, and grow our investment portfolio. Our investment portfolio, which we grew to almost $100 billion at year end, positions us to continue generating a higher level of predictable and reliable net investment income. In summary, we're capitalizing on the successful execution and effective strategy. Our strong results in financial position enable us to be there when our customers need us most, as our friends and neighbors in Los Angeles do right now. The significant momentum we have built gives us great confidence in our ability to continue serving our customers and distribution partners while delivering for our shareholders. In other words, we remain very confident in the outlook for travelers. And with that, I'm pleased to turn the call over to Dan.