The Travelers Companies, Inc.

Thank you. Good morning, and welcome to Travelers' discussion of our first quarter 2025 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 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 under 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. We are pleased to report a substantial profit for the quarter, despite the devastating January California wildfires. We delivered core income of $443 million, or $1.91 per diluted share, as outstanding underlying results, strong net favorable prior year reserve development, and higher investment income more than offset catastrophe losses. Over the last four quarters, thanks to strong underlying fundamentals, we generated a core return on equity of 14.5%. That demonstrates our ability to deliver healthy returns over time notwithstanding elevated industry-wide catastrophe losses. Underlying underwriting income of $1.6 billion pre-tax was up more than 30% over the prior year quarter. That was driven by strong net earned premiums of $10.7 billion and a consolidated underlying combined ratio that improved 2.9 points to an excellent 84.8%. All three segments contributed to these underlying results with strong and higher net earned premiums, and excellent underlying profitability. The underlying combined ratio in business insurance improved to an excellent 88.2%. The underlying combined ratio in our bond and specialty business was a very strong 87.3%, and the underlying combined ratio in personal insurance improved by more than six points to a terrific 79.9%. Consistent with the announcement we made in February, Our catastrophe losses from the California wildfires were $1.7 billion pre-tax. I'm grateful to our claim team, their continued excellent work taking care of our customers and supporting the community's recovery. We've already paid out nearly three-quarters of a billion dollars, including substantial advance payments to our customers who suffered total losses. Even after that, operating cash flows for the quarter were a very strong $1.4 billion. Turning to investments, our high-quality investment portfolio continued to perform well. After-tax net investment income of $763 million for the quarter was driven by strong and reliable returns from our growing fixed income portfolio and positive returns from our thoughtfully managed alternative investment portfolio. Our underwriting and investment results, together with our strong balance sheet, enabled us to return nearly $600 million of excess capital to shareholders. including $358 million of share repurchases. At the same time, we continued to make important investments in our business as we completed another quarter of successful execution on a number of important strategic initiatives. Even after this deployment of capital, adjusted book value per share increased by 11% as compared to a year ago. In recognition of our strong financial position and confidence in the outlook for our business, I'm pleased to share that our Board of Directors declared a 5% increase in our quarterly cash dividend to $1.10 per share, marking 21 consecutive years of dividend increases, with a compound annual growth rate of 8% over that period. Turning to production, excellent execution by our field organization drove our top line growth, with all three of our segments contributing. During the quarter, we grew net written premiums to $10.5 billion. In business insurance, we grew net written premiums by 2% to a record $5.7 billion after the seeded premium impact of the enhanced casualty reinsurance program that we announced last quarter. As we previewed with you, that reduced the segment's net written premium growth in the quarter by 4 percentage points as a full year's worth of seeded premium was booked in the first quarter. We know premium change in the segment was double digits or high single digits in every line other than workers' comp. Even with strong pricing pretty much across the board, retention improved nearly two points from the fourth quarter to 86% and was higher in every line. That dynamic of strong pricing and retention speaks to continued discipline in the marketplace. New business for the segment was a record $735 million a reflection of the fact that our customers and distribution partners value the products and services that we offer and the experiences that we provide. In bond and specialty insurance, we grew net written premiums by 6% to $1 billion, with excellent retention of 89% in our high-quality management liability business. In our industry-leading surety business, we grew net written premiums by 13%. Given the attractive returns, we are very pleased with the strong production results in both of our commercial business segments. In personal insurance, net written premiums grew 5% to $3.8 billion, driven by strong renewal premium change, particularly in our homeowner's business. You'll hear more shortly from Greg, Jeff, and Michael about our segment results. Before I turn the call over to Dan, I'd like to comment on how Travelers has positioned for what feels like an uncertain macroeconomic road ahead. In short, we are entering 2025 in a position of strength. We are a market leader in a diversified portfolio of businesses, each with a strong value proposition to offer to our customers and distribution partners. Our underlying margins are in great shape, and in each segment, we have attractive loss ratios and expense ratios that reflect years of strategic focus on optimizing operating leverage. Our cash flow is strong and resilient. Our investment portfolio was thoughtfully managed to deliver highly reliable returns, including through periods of market stress. And we have a fortress balance sheet featuring a strong capital base and almost no debt coming due in the next eight years. On top of all that, we have the resources and financial strength to continue making strategic investments in our business without interruption. All of which is to say, Just as we have successfully served our customers and distribution partners and created shareholder value over time, including through periods of economic disruption, we are very well positioned to continue doing so now. And with that, I'm pleased to turn the call over to Dan.

Thank you, Alan. Travelers delivered $443 million of core income in the first quarter, despite significant losses from the California wildfires. The higher level of CAT losses was partially offset by a significant increase in underlying underwriting income, higher level of net favorable prior year reserve development, and higher net investment income. And as you heard from Alan, trailing 12-month core return on equity was 14.5%. Our pre-tax underlying underwriting gain of $1.6 billion was up 32% from the prior year quarter. reflecting higher levels of earned premium and an underlying combined ratio that improved by 2.9 points to 84.8%. The underlying combined ratio was our second best result ever, and once again featured very strong results in all three business segments. We were pleased with the first quarter expense ratio of 28.3%, an improvement of 40 basis points from the prior year quarter. For the full year, we remain comfortable with an expense ratio expectation of 28 to 28 and a half percent. Our continued focus on operating leverage enables us to maintain this level of expense ratio even as we increase the amount of strategic technology spend to further strengthen our competitive advantages, positioning us for continued success well into the future. We reported net favorable prior year reserve development of $378 million pre-tax in the first quarter, with all three segments contributing. In business insurance, net favorable development of $74 million pretax was driven by workers' comp. In bond and specialty, net favorable PYD of $67 million pretax was driven by better-than-expected results in management liability and surety. Personal insurance recorded net favorable PYD of $237 million pretax with significant improvements in both auto and home. Catastrophe losses for the quarter totaled $2.3 billion pre-tax, driven by the California wildfires in January, for which our estimate of $1.7 billion is unchanged from the estimate we pre-announced in February. After-tax net investment income increased 9% from the prior year quarter to $763 million. Our fixed income NII was higher than in the prior year quarter and in line with our expectations, benefiting from both higher yields and a higher level of invested assets. Our outlook for fixed income NII by quarter, including earnings from short-term securities, is $725 million after tax in the second quarter, growing to approximately $755 million in the third quarter, and then to around $790 million in the fourth quarter. NII from our alternative investment portfolio was also positive in the quarter. Given recent movement in the equity markets, this is a good time to remind you that results for our private equities, hedge funds, and real estate partnerships are generally reported to us on a one-quarter lag. And while not perfectly correlated, our non-fixed income returns tend to directionally follow the broader equity markets. In other words, the impact of the decline in financial markets that occurred in the first quarter will be reflected in our second quarter results. Turning to capital management, operating cash flows for the quarter of $1.4 billion were again very strong, despite the elevated payout related to the California wildfires. And we ended the quarter withholding company liquidity of approximately $1.6 billion. As interest rates decreased during the quarter, our net unrealized investment loss decreased from $3.6 billion after tax at year end to $3.3 billion after tax on March 31st. Adjusted book value per share, which excludes unrealized investment gains and losses, was $138.99 at quarter end, basically unchanged from year end and up 11% from a year ago. Share repurchases this quarter included $250 million of open market repurchases. We had an additional $108 million of buybacks in connection with employee share-based compensation plans. We have approximately $4.8 billion remaining under prior Board authorizations for share repurchases. Dividends were $241 million in the quarter, and as Alan mentioned earlier, our board authorized a 5 cent increase in the quarterly dividend to $1.10 per share. In summary, our first quarter results once again demonstrate the significant earnings power that results from our ability to leverage our competitive advantages to grow premiums across our well-diversified book of business while maintaining very attractive margins, along with steadily increasing net investment income from our growing investment portfolio. And with that, I'll turn the call over to Greg for discussion of business insurance.

Thanks, Dan. Business insurance had a strong start to 2025 with segment income for the first quarter of $683 million. Underlying underwriting income, net prior year reserve development, and net investment income all improved from the first quarter of 2024. The underlying combined ratio of 88.2% was an excellent result. and a point better than the prior year quarter driven by the benefit of earned pricing. Turning to the top line, we grew net written premiums by 2% to a record quarterly high of $5.7 billion, inclusive of the four-point seeded premium impact that Alan referenced. As we indicated in our comments previously, we expect the change in our reinsurance program to be neutral in terms of underwriting income. Pricing remains strong, with renewal premium change of 9.2%, driven by renewal rate change of 6.4%. Retention increased to an excellent 86%, and new business of $735 million was an all-time quarterly high. We're pleased with these production results and our ability to sustain strong levels of pricing and retention. That combination is a reflection of market-wide discipline in response to ongoing environmental trends and uncertainty. Renewal rate change remained high, coming in at well over 6% for the eighth quarter in a row. The small tick down from Q4 was driven by our national property book, where returns are very strong after several years of compounding rate and improvements in terms and conditions. In our select and core middle market businesses, Renewal rate change remained strong and in line with fourth quarter levels. From a line perspective, renewal rate change was highest in umbrella and auto, while CMP reached an all-time high and GL remained strong. The execution by our field organization was exceptional, achieving the highest retention levels in our best performing business and the highest levels in our other accounts. The granular execution contributes to optimizing the portfolio's returns. This success is possible based on the robust data that we have, the advanced analytics and sophisticated tools we put in the hands of our frontline underwriters, as well as the strength of the talent that we have in the field. As for the individual businesses, in Select, renewal premium change remained strong at 11.6%, up a point and a half from the first quarter of last year, while renewal rate change of 5.8% was up nearly two points from a year ago. As we expected, retention was stable at 80%, driven based on our targeted C&P risk return optimization efforts, which will begin to wind down in the third quarter. New business of $159 million was a quarterly record. Overall, we feel terrific about how we're strategically managing the mix of business to drive long-term profitable growth in Select. Our distribution partners have embraced the industry-leading experience and segmentation benefits we're getting from our BOP 2.0 and new commercial auto products. In middle market, renewal premium change was in line with the fourth quarter at close to 10%, with strong renewal rate change of 7.5%. The rate increases remain broad-based as we achieve positive rate change on more than three-quarters of our middle market accounts. Retention of our high-quality book remained historically high at 89% and increased a point from the fourth quarter, while new business of $434 million was an all-time quarterly high. To sum up, business insurance had a great start to the year. We continue to grow our high-quality book while investing in capabilities that position us well for long-term success. With that, I'll turn the call over to Jeff.

Thanks, Greg. Bonded specialty started the year with another strong quarter on both the top and bottom lines. We generated segment income of $220 million, an excellent combined ratio of 82.5%, and a strong 87.3% underlying combined ratio in the quarter. Turning to the top line, we're pleased that we grew net written premiums by 6% in the quarter. In our high quality domestic management liability business, We delivered excellent retention of 89%. Renewal premium change remained positive and generally consistent with the fourth quarter. As expected, new business was lower than the first quarter of 2024. As a reminder, Corvus production was reflected as new business in the prior year quarter and now is mostly renewal premium. Comparison to prior year new business levels will be similarly impacted for the next few quarters. Turning to our market leading surety business, we grew net written premiums by an excellent 13% from the prior year quarter. This growth reflects a robust construction environment, continued strong demand for our surety products and services, and outstanding execution by our team in growing our high credit quality portfolio. So we're pleased to have once again delivered strong top and bottom line results this quarter, while continuing to make significant strategic investments in our business. with some notable achievements. To name just a few, we released our first product on our new management liability technology platform, a modernized accountants professional liability product and rate plan with enhanced digital capabilities and a significantly streamlined workflow. Capitalizing on the Corvus acquisition for the benefit of our admitted cyber customers, we launched an improved cyber risk policyholder portal with enhanced evaluated services. And we're leveraging our industry-leading data advantage and deploying multiple artificial intelligence models to drive underwriting enhancements, including as just one example, automating the process for certain employment practices liability renewals. Looking ahead, we're planning additional capability and product releases during the year that will further extend our competitive advantages. And with that, I'll turn the call over to Michael.

Thanks, Jeff, and good morning, everyone. In personal insurance, the first quarter segment loss of $374 million and combined ratio of 115.2% reflect the impact of the California wildfires, a significant event for us and the industry. Strong underlying underwriting income and favorable prior year development partially offset catastrophe losses in the quarter. The underlying combined ratio of 79.9%, a record quarterly result for the segment, continues to reflect the actions we've taken to improve the underlying fundamentals of our business in both automobile and homeowners and other. Net written premiums grew 5% in the quarter, driven by higher renewal premium change. In automobile, the first quarter combined ratio was 83.4% and included a six-point benefit from favorable prior year development. The underlying combined ratio of 87.5% improved 7.4 points compared to the first quarter of the prior year. This improvement was driven by lower losses resulting from both favorable frequency across all coverages and sustained moderation of severity trends, as well as the benefit of higher-earned pricing. As a brief reminder, the first quarter is historically our seasonally lowest combined ratio of the year in auto. In homeowners and other, the first quarter combined ratio of 145.5% includes the impact of the California wildfires. The underlying combined ratio of 72.6% improved five points compared to the first quarter of 2024, driven by the continued benefit of earned pricing and lower non-weather losses compared to the prior year. Our production results reflect our efforts to position our portfolio for long-term profitable growth. In domestic automobile, retention of 82% remained consistent with recent periods. Renewal premium change continues to moderate as intended, reflecting improved profitability and our focus on returning to profitable growth in auto. We're pleased to note that auto new business premium increased relative to the prior year quarter, driven by states that are not constrained by our property actions. In domestic homeowners and other, renewal premium change increased to 19.6% as a result of our actions to align insured values with rising replacement costs while we continued to achieve strong rate increases. The decline in homeowners policies and force continues to be driven by our deliberate efforts to improve profitability and reduce exposures in high cat risk geographies. While those same actions continue to constrain our ability to grow auto PIF in the near term, we believe the trade off makes sense for the long term performance of our diversified personal lines portfolio. Before I wrap up i'd like to thank our team and our distribution partners for their hard work and dedication and serving our customers. With their partnership and support, we remain confident in our ability to deliver value to our clients and to build a larger, more profitable business over time. And with that, I'll turn the call back over to Abby.

Thanks, Michael. We are ready to open up for Q&A.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We'll go first to David Motomanen at Evercore.

Thanks. Good morning. Alan, you made some comments just on the macro environment at the end of your prepared remarks. I'm wondering if you could just talk about how you're thinking through the impacts of the tariffs across your businesses, both personal and commercial lines, and more importantly, how you're thinking about responding in the marketplace.

Sure, David. Good morning. Thanks for the question. You know, just in terms of background and at a high level, I'd say as far as the direct impacts go, we think it's pretty manageable for us. It's just a fraction of auto and property losses that are physical damage related, and only a fraction of those are for materials that would be impacted by the tariffs. The most significant impact for us is likely to be a one-time impact of physical damage repair costs. For us, that most notably impacts private passenger auto. From there, the impacts diminish pretty significantly. And just to give you a sense of the magnitude, David, assuming the tariffs, as they've been announced, remain in place and are largely passed through, and I think there's a question about that, we'd expect somewhere around a mid-single-digit increase to PI auto severity. Again, that's a one-time impact, not a slope impact. Having said that, we would actually expect the actual impact to be somewhat less. So first, we think participants in the value chain will likely seek to mitigate the impact through some combination of advanced inventory buildups, substitution of goods, reorganization of the supply chain, lower tariff pass-through rates, things like that. And second, the actual impacts could be mitigated by other factors, for example, extended lives of cars on the road. Also, just looking at our PI auto margins now, the auto margins, as you can see, are in a pretty good place. And if the recent favorable loss trends persist, and we'll see whether they do or not, but if recent favorable trends persist, we may be able to absorb whatever the impact is inside our loss fix. So I would say for now, we're prepared to watch and react to the extent that we need to. And however the loss trends evolve, we've got the tools and the capabilities to see it pretty quickly, and we'll reflect it in our pricing models.

Understood. Thanks for that. And maybe just switching gears to the growth in the quarter within business insurance. Sorry to be super short term here, but when I think about the 2%, is it right to think about just adding back that four points of reinsurance drag? And sort of that's like a run rate level before I think about different moving pieces as we head into the second quarter, such as mix and price.

David, let me start and I'll turn it over to you, Greg. So as for a starting point, you definitely would add back to four to get to a level. There's always other things in the quarter that are going to impact premium from one period to another. You know, there's... production booking, for example, there's endorsements, cancellations, all those sorts of things. So that would have an impact. I would tell you to look at the strength of the production in the quarter. I mean, you can look at retention, price, all very strong levels.

I have nothing else to add. Thank you.

Thank you.

We'll go next to Gregory Peters at Raymond James.

Good morning, everyone. I think it was Dan, in the comments around the expense ratio, you mentioned increased tech spend. One of your peers had an investor day and spoke at length about what they're doing on the tech side of the business. I went back to your fourth quarter presentation where you gave a slide on your technology investments, the routine and necessary versus the strategic. I'm under the impression that a portion of your tech spend is just maintenance on legacy systems. Can you talk about what you're doing on the tech spend? area in response to this. And is the strategic just all new initiatives, or is that partly rehab of legacy systems?

Yeah, well, first of all, Greg, thank you. Good morning. I love that you're focusing on that slide because we think it tells a great story. I mean, you can see over the period in that slide, you know, we've done a great job of maintaining the routine but necessary expenditures. And yes, that is you know, everything from licensing fees to patching systems, all the things you have to do, whether you like it or not, routine and necessary, I think sums it up. And if you look over that period, we have increased the mix of our strategic spend from, I think at the beginning of the first year in that period, I think it's something like a third. And I think, you know, last year was approaching a half. And so it's, I mean, that certainly would be new expenses, but it would also be the carry over expenses of things that we've started in prior years that, that we continue to invest in. So all in all, you know, we, we are, we are spending considerably more over a billion and a half dollars a year. Our strategic mix is, uh, is much more favorable now. And we've done all that inside a, an expense ratio that we've reduced meaningfully over the period. So, you know, we, we think we're investing in the right things and doing it pretty effectively.

Oh, thanks for the color. My follow-up question, and I don't get too hung up on our quarterly number, but the PYD for the first quarter seemed a little bit better than expected. And I know you already addressed the tariff component inside your lost costs, but I'm just curious, has there been any change in your perspectives on what your underlying lost cost trends are across your book? And then maybe speak specifically to the development, again, in the auto business, which clearly was a little stronger than I expected, at least.

Hey, Greg, it's Dan. So I'll start with the PYD auto piece just to give you a little bit of color there. So, you know, better than we had allowed for. And in auto, you're really talking about better than expected frequency and severity. in both the physical damage coverage and bodily injury. So sort of good across the board. Just to go back to the loss trend question, you know, we've sort of tried to get away from giving a specific trend number, but I think it's fair to say that trend in the quarter at least behaved pretty much as we would have expected it to, and so that's why you hear both Michael and Greg talking about benefit of earned price and how that shows through and improved margins because the loss trend really was about as expected.

Got it. Thanks for the answers.

Thanks, Greg.

We'll move next to Brian Meredith at UBS.

Yeah, thanks. A couple of them here quickly. Dan, I'm just curious, when we think about the deductible on your CAT program, is it fair to just assume whatever the CAT losses were in the quarter and And, and the remainder, um, that's a 4 billion is kind of what you've got less than your deductible, or should we think about a different way?

Yeah, Brian. So the one thing to keep in mind is, as we said in the describing that program at the end of the year, which is not a change from the way it had worked in previous years, the first hundred million of any event is for, is for our account. So you really would look at the items that we put in the 10 Q table of significant cats, because that's anything over a hundred million. take $100 million off of those, and that's what goes towards the $4 billion. That's, you know, basically that's directionally how it works.

Perfect. Thanks for that clarification. And then my second question, I'm just curious, maybe this is for Jeff. Surety bond growth, you know, given what we're seeing, you know, potential for economic activity as well as just some of the, you know, reductions in kind of government spending, do you think that will have any impact on surety business here going forward, or is this just not a big government component to it?

No, there's definitely a government component to a lot of the large projects, Brian, so that's a fair question. We're watching that closely. We're working with our contractors. There's a lot of planning that they do, long-term planning that they're focused on, so we're definitely hearing that from them. All of that said, we've had some nice, strong growth. We expect the infrastructure investments and bond demand to continue. Um, but, um, and, and as I've mentioned to you before, we have a really high credit quality book of contractors on the surety side. And so we've, uh, we feel good about our position, uh, as we move forward.

Great. Thank you.

We'll take our next question from Meyer shields at KBW.

Um, thanks. I don't know if it's too early to ask this question, but do you have a sense as to how your insureds are responding to the potential uncertainty in the economy?

Good morning, Mayor. We're all sort of looking at you. I'm not sure, do you mean too early in the morning or too early in the... I do think it's too early for us to see that. And I also, you know, as I really think about that question, I think it's too early to really know what it is we're all responding to. I mean, there's obviously...

uh a lot of change you know back and forth so i'm not sure people really know what they're responding to yet right i was kind of asking whether that level of uncertainty itself produces a result maybe just because of caution but i completely take your point on the timing uh second question i guess for michael uh the two-prong question how quickly do you think travelers can respond if there is an infection and loss costs compared to maybe the most recent interruption? And is there any reason to switch the book more towards six-month policies because we keep on seeing these fluctuations or these inflections in lost rent?

Yeah, thanks, Meyer. I think as Alan mentioned, we see the changes in our lost costs relatively quickly. We incorporate those into our experience relatively quickly. As a little bit of a technical point, right? What you're doing as you factor those increased costs into your experience is including them in the historical experience that you had. So one of the things that impacts how quickly you can respond is how good your experience was as you factor those things in. But I don't see a challenge with our ability to recognize and factor those costs into our outlook as quickly as we see them To the second part of your question in terms of six-month policies, we did make a change in the last year or two in terms of monoline auto policies being predominantly written on a six-month basis at new business. So that is working its way into the portfolio. I wouldn't say it's dramatically changed the makeup of the portfolio between six-month and annual. But directionally, we are moving a little bit towards a higher percentage of six-month policies in the portfolio as a result.

Okay, great. Thank you. Thanks, Brian.

We'll move next to Alex Scott at Barclays.

Hi, good morning. First, what I have for you is on the international insurance business. I noticed net premium written continues to be up more significantly year over year. I'm just interested in where you're seeing the growth opportunities there.

Hey, Alex. This is Greg. What you're seeing there, if you're looking at the international within the BI segment, there's two primary drivers of that. One is the Fidelis relationship continues to be very strong. That's one of them. And the other one is Lloyd's can bounce around and be a little bit lumpy from quarter to quarter. And we had a strong quarter this month. So that's what's driving those items.

Okay. That's helpful. And then maybe along the same lines and just trying to understand premiums, you know, notice middle market was down a little bit year over year. You know, I had kind of been thinking that that's an area where pricing staying, you know, pretty attractive relative to loss cost trends. I mean, hard to tell whether that's just the casualty reinsurance impact in the allocation middle market, but could you help me think through that and just relative attractiveness of that market?

Yeah, Alex, and you nailed it. You know, we feel terrific about the returns we're producing across the portfolio and specifically in middle market and the growth we're getting there. What you just mentioned is a primary driver of the casualty ag treaty that we called out. You think about middle market, it has a much higher amount of umbrella and excess casualty products, much more casualty-based than you would see, particularly relative to select. So it's going to feel disproportionately that impact in that business.

Alex, I don't mean to suggest for a second that we're immune from what's going on in the economy and economic activity, but again, I would point you back to the production statistics. The middle market had very strong retention pricing in new business I would just point you back there, just for a sense of the health of the growth.

Yep, that's all helpful. Thank you.

Our next question comes from Wes Carmichael at Autonomous Research.

Hey, good morning. My first question on business insurance with the $74 million of favorable development. You called out workers' comp as the primary driver, but could you share any color on the gross development from comp and if there are any netting offsets to that?

Yeah, so it stands. So really what we try to do a pretty good job of calling out, you know, the things that moved in and were noteworthy in any way in this quarter. So usually that means we're talking about more than one or two things. But this quarter, it really did happen to be driven, driven by comp. It's not to say that there weren't other lines that move. There are always other puts and takes in any given line in any given quarter, just nothing that moved big enough to call out one way or the other.

That looks helpful, Dan. And maybe just back on the macro and capital management, but curious how management's thinking about buybacks from here and perhaps some heightened macro uncertainty. And maybe if there's a bit of pressure on the stock just from broader stock market pressure generally, is that an opportunity to lean into buybacks or might you want to be more measured in a period of heightened uncertainty?

Yeah. So we have the same philosophy of capital management, first of all. So no change in the way we think about that. Remember, we entered... know 2025 in a pretty strong capital position given how strong the finish to the 2024 year was you know we talked about buyback activity in the first quarter i'd say that was probably dialed back a little bit from what we might have otherwise have done given the significance of the california wildfires and the fact that they occurred so so early in the quarter um i feel like you know we're going to maintain a very healthy capital position Our history is we're going to continue to generate more capital than we need to run the business and can deploy attractive returns. And so I'd expect us, you know, not in any particular month or any particular quarter, but I'd expect us to continue to be doing buybacks. And we don't really try to sort of lean in or lean out depending on short-term fluctuations in the stock price. We're really just right-sizing capital over time. Thank you.

Next we'll go to Robert Cox at Goldman Sachs.

Hey, thanks for taking my question. First question, appreciate the thoughts on the impacts of tariffs. I was curious if you also see tariffs eventually impacting the liability costs within your claims over time.

Yeah, good morning. I would say that for now we see that as pretty negligible. I mean, you just look at the mix of the cost drivers and the liability lines, and just not a lot of it is subject to tariffs. And I don't mean to suggest that it's a zero impact, but we think the likely outcome is pretty negligible.

Okay, thank you. And then as a follow-up, I just wanted to ask on the business insurance underlying loss ratio, How the pressure that you guys have kind of been seeing in the industry has been seeing for the last couple of years and casualty is trending there. You know, maybe more specifically, the other liability occurrence loss ratios are still kind of going up year over year. I know you guys added to the conservatism in those picks last year. And also, is there any kind of one-time items like non-cat weather this quarter?

Sure, Rob. It's Dan. So no one-time call-outs. Again, that's something we try to be pretty careful on if there is one and really didn't hear anything from Greg, Michael, or Jeff about reasons to adjust the sort of quote-unquote jump-off point for this quarter. In terms of the casualty lines and the way we're thinking about those lost picks, yeah, you're right to remember that last year we talked about, you know, adding a bit more in the IVNR for those lines given the uncertainty in the line. We've carried that into 2025. so I wouldn't put a fine point and quantify it, but, you know, we've carried that sort of philosophy into the way we're thinking about making our loss picks this year.

Thanks.

Thank you.

Our next question comes from Michael Zaremski at BMO Capital Markets.

Hey, thanks. Good morning. First question on home insurance. Just wanted to unpack more, and Michael, I appreciate your comments in the prepared remarks, but unpack kind of the reacceleration we've seen in pricing. Do you feel this is more traveler-specific as you continue to kind of reshape your geographic footprint, or is this more of kind of a industry-wide you feel in terms of reacting to what you said was also higher replacement costs and what we can see is persistently higher catastrophe levels. And just also curious, does your pricing power, does that include changes in deductibles or terms and conditions? Thanks.

Sure. Thanks, Michael. So, I would say the change from Q4 to Q1 really is about increasing insured limits to keep up with replacement costs. And we think that's really in response to broad industry trends, right? Continued increases in labor and materials, particularly things like roofing costs, roofing labor are big drivers of that. So we think that's really sort of a broad-based industry and economic trend that we're responding to. And again, the delta from the sort of mid to low teens to the high teens from Q4 to Q1

really is driven by that limit change as i mentioned we continue to seek and obtain significant rate in property underneath that and those two come together to perform that uh that rpc number got it um and my follow-up is switching gears to um social inflation um when we look at statutory statutory data on industry-wide basis which i you know i appreciate is a bit backward looking It appears that social inflation levels are rising. Would you agree with that viewpoint, or are you all seeing that maybe the trend line has stabilized? And obviously, we appreciate that Travelers has been very proactive in taking more conservative views on your reserves and et cetera. But just curious, on an industry-wide basis, if Travelers has a view whether kind of social inflation continues to kind of gear a bit higher.

Thanks. I would say social inflation is unfortunately alive and well and continues to impact the industry, including us. We see that. I would also say we've anticipated that. So the levels of social inflation we're seeing are generally consistent with our expectations. Thank you for the question.

We'll move next to Elise Greenspan with Wells Fargo. Hi, thanks. Good morning. My first question, within personal lines, are there any kind of, you know, I think you called out lower non-weather losses in a home, any kind of one-off items that you would, you know, put numbers on within the underlying combined ratios in auto and home in the quarter?

Thanks, Elise. It's Michael. I don't think really beyond what I called out, again, just to reiterate, right, on auto, we said improved frequency across multiple coverages, and we talked about sustained moderation and severity trends. The one thing I would say in auto, again, just to reiterate, is Q1 is typically our lowest combined racial quarter in that line. So if you think of that as a one-off, that's just, I think, an important reminder. Other than that, I think we had another mild winter in 2025. We had a mild winter in 2024. So that's, again, just something to keep in mind as you look forward. The last thing I would point out on auto is renewal premium change has been declining on a written basis. That will drive... lower earned favorable impact from pricing as we look forward, which again, you can just see as you look in the rear view mirror at those RPC numbers, there won't be as much favorable earned effective pricing in the go forward quarters. As respects property, again, I pointed to a favorable non-weather experience. That's something we've been talking about. It's something we continue to see particularly favorable frequency in non-weather water and fire loss experience.

Thanks. And then my follow-up, you know, sticking, I guess, with personal auto on the impact of tariffs. I know in response to an earlier question, right, you guys mentioned, you know, one of the offsets, right, as an advanced, you know, buildup in advance of these tariffs. And you guys, I think, said, you know, mid-single-digit impact on trend. So as you think about timing, just given that there is obviously going to be a buildup of parts and it takes time for there to be an impact, do you think you'll start to see the impact of the tariffs and that higher loss trend in May and June, so like in the Q2? Or how do you think about just like the quarterly cadence of the impact on your personal auto margin from the tariffs?

Yeah, at least two things. One, I just want to be really clear on this. It's not a change in trend. It's a one-time thing. change in in the severity so i think it's just an important clarification and two it's it's hard for us to really know when this would take effect but the may june time frame seems a little short so probably a little later in the year some time in the back half of the year but i'm not sure i'd call it more finely than that thank you thank you we'll move next to andrew anderson at jeffries

Hey, good morning. Just on the auto business, I think you mentioned it was constrained a little bit by some actions on the property side. Could you maybe level set for us how much of the auto book is open for new business and how much of the homeowner's book is open for new business?

Sure. Maybe I'll just step back and give a little broader context in addition. I would say that we are open for new business in most geographies across the country. And then within that, we have some very specific constraints. On the auto side, we're open for new business in virtually every state. Again, we have a more limited appetite in a couple of key geographies there related to whether or not we think we have rate adequacy. But at this point, we're talking less than a handful of states where we have those challenges. The property answer is a little more complicated, because in property, we've really got three primary issues that we're working through in terms of managing and thoughtfully deploying our property capacities. First is overall profitability. And as we've talked about, property is a little bit behind auto in terms of reaching target margins on a state-by-state basis, and so we're managing that. Second is catastrophe exposure. And then third is local market concentration of exposure. And so predominantly in property, the places that we are not open for new business fall into those last two categories. You know, we have some specific local geographies where we've got outsized market share that we're working to manage down. And then we've got our, you know, sort of continued optimization of risk and reward as respects catastrophe losses. So that's the color behind it. But I would say the places that were literally closed for new business are pretty limited. But more broadly, it's a matter of monitoring and thoughtfully deploying the property capacity in many of those markets.

Thank you. And then just on workers' comp, it looks like it was down 7% year over year. I wouldn't think that's impacted by the casualty reinsurance program, but could you maybe just talk about the pricing that you're seeing there and maybe growth in that market?

Yeah, Andrew, this is Greg. Yeah, we continue to see pricing that's down in the workers' comp side of the business, so that's what's driving that. We'll have fluctuations from quarter to quarter, of course, like audit premiums. And audit premium, I just want to comment on audit premium that goes into net written premium is the change in audit premium. And we had historically high levels last year, but we still have strong levels of audit premium. That change also factored into that.

Thank you.

We'll move next to Kaveh Montazeri at Deutsche Bank.

Morning. A follow-up on personal insurance. All right. policies in force. Situation in California, I guess, a bit of a headwind when it comes to growth. Are you seeing any other geographies for homeowners that maybe could help you offset that? Maybe a geography where you're not really big, thinking maybe we're seeing Florida is improving a bit, albeit from a low base. Are you seeing any offsets that could maybe allow you to grow PIF in homeowners?

Yeah, thanks for the question. I would say, you know, to take that question and link it back to my response to the previous one, California certainly is a distinct example of where we're constraining property capacity, but it's not the only one. We have a number of states, particularly in the South and in the Midwest, where we're constraining property capacity for the reasons that I mentioned. And again, most of the time that's limiting growth. But in some of those cases, it's non-renewing business in areas where we've got too much concentration. That said, to your point, there are places where we're open for business in both property and auto. And I think that you see that contributing to the new business growth in auto this quarter because we are seeing new business growth in those places. It is important to remember, I think, when you think about our line of business growth and production, that we're essentially 50-50 property and auto. And so we're different from most participants in the industry. Our actions in property, given that mix of business and given our tendency to package auto and property, does mean that our property actions are going to have an impact on our ability to grow auto. But really, at the end of the day, we focus on each state individually looking at the auto and property impact opportunities and the opportunity to best manage the portfolio. And we are working to take advantage of those places where we don't have the constraints to help support auto and overall portfolio growth.

Thank you. And my follow-up is on the reserve releases in workers' comp. Could you guys give us an update on what you're seeing in terms of medical claims inflation versus your own assumptions?

Sure. So that's continued to behave, you know, pretty, pretty well for us. And, and we've made the comment a bunch of times, but it's worth, it's worth reiterating, you know, the, the long tail nature of comp just means you can't afford to get behind on the assumptions that you're making. So even though we've seen medical costs, inflation come in benign to what we had allowed for. we've been pretty reluctant to make a fundamental change to our longer-term view that we're baking into our pricing assumptions and our reserving actions. So another quarter where you saw some good news in medical severity, and again, our view is we continue to assume that that is going to return to some higher normal by historical standard level of inflation on a go-forward basis.

Thank you.

We'll take our next question from Bob Huang at Morgan Stanley.

Good morning. I think a lot of the questions I have were asked, but maybe one on commercial auto. I know that you talked about auto PYD as a whole, but if we look at statutory disclosures on commercial auto, as well as a variety of other data, for example, your 10 claims and claims adjusted expenses data and things of that nature, industry seems to be facing continue to headwind from litigation costs and reserve challenges, but it seems like you're holding up fairly. Okay. Just curious to how you think about commercial auto for the industry, but also as it was for yourself going forward. Um, yeah, maybe some commentaries around that.

Yeah, Bob, it's Dan. So I'll focus on, on us rather than the industry, you know, commercial auto was a challenge when we started talking about social inflation back in 2018, 2019. Um, we really, We really haven't had much mention of commercial auto in the last couple years, really, because I think we've reached a point where we started to make sure that we were reviewing and assessing the data as it came in, informed by what we went through in 2018 and 2019. And as a result, to your observation, we really haven't had to do much in the way of changing those estimates uh in the last couple years as to whether or not the industry is is in a good place from a reserving perspective i i'm not sure one thing you know that we are sure about the industry and commercial auto is it continues to need price because returns on that line still aren't where we'd like them to be but as you heard greg say again today we continue to get price there but feel good about where we are on the balance sheet just that we have a new commercial auto product that is out in the market and we feel terrific about it

Excellent, thanks. My next one is kind of a long-winded tech question. So if you think about the capabilities you've mentioned, right, enhanced digital capabilities, streamlined workflow, cyber risk policies, how much of the capabilities are contingent on in-house software development? How much of it is based on third-party capabilities? I guess the way I'm thinking about it is that If we go back to how much we think about maintenance tech versus new technology spend, does that ratio eventually change to the point where you don't have to spend as much on maintenance technology going forward? Just kind of curious on your tech strategy thoughts there, if that makes sense at all.

Yeah. Bob, I think your premise is right. I'm not going to quantify how much is in which bucket. I will say that anytime we're investing in a capability, we analyze whether there's a proprietary benefit to us developing it and owning it. And when there is a proprietary benefit, we do that. When there's not a proprietary benefit, we're happy to source it from third parties. So I do think the trend you're describing probably is a fair one and will continue to drive the favorable mix of our investment spending.

Excellent, thank you. Thank you.

And we'll take our last question today from Mark Hughes at Truist.

Yeah, thank you very much. The change in reinsurance, is it possible to break that out by line of business? Was that all in GL?

Marcus, Dan, it's mostly GL, but we described it sort of broadly as the casualty lines, and so I think we're going to not probably get more specific. But it would help us with things like your core GL, umbrella claims, things like that.

Understood. Thank you very much. Thank you.

And that does conclude the Q&A session. I'll turn the conference back over to Abby Goldstein for closing remarks.

Thanks, everyone, for joining us today. And as always, if there's any follow-up, please get in touch with Investor Relations. Have a good day.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.