Release Date: April 16, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Travelers Companies Inc (TRV, Financial) reported a substantial profit for the quarter with core income of $443 million, despite significant catastrophe losses from the California wildfires.
- The company achieved a core return on equity of 14.5% over the last four quarters, demonstrating strong underlying fundamentals.
- Net earned premiums reached $10.7 billion, with a consolidated underlying combined ratio improving by 2.9 points to 84.8%.
- The company returned nearly $600 million of excess capital to shareholders, including $358 million in share repurchases.
- The Board of Directors declared a 5% increase in the quarterly cash dividend, marking 21 consecutive years of dividend increases.
Negative Points
- Catastrophe losses from the California wildfires amounted to $1.7 billion pre-tax, significantly impacting the quarter's results.
- The personal insurance segment reported a loss of $374 million, with a combined ratio of 115.2% due to the wildfires.
- The company faces potential impacts from tariffs, which could lead to a mid single-digit increase in personal auto severity.
- Workers' compensation pricing remains under pressure, with continued pricing declines impacting growth.
- The company is managing constraints in property capacity, particularly in high-risk geographies, which affects growth in the personal insurance segment.
Q & A Highlights
Q: Alan, could you discuss the impact of tariffs on your business, particularly in personal and commercial lines, and how you plan to respond?
A: Alan Schnitzer, CEO: The direct impact of tariffs is manageable, primarily affecting a fraction of auto and property losses related to physical damage. The most significant impact is a one-time increase in physical damage repair costs, notably in private passenger auto, potentially leading to a mid-single-digit increase in auto severity. However, we expect the actual impact to be less due to mitigation efforts like inventory buildups and supply chain adjustments. Our current auto margins are strong, and we are prepared to adjust pricing as needed.
Q: Regarding the 2% growth in business insurance, should we add back the 4 points of reinsurance drag to understand the run rate level?
A: Alan Schnitzer, CEO: Yes, adding back the 4 points gives a clearer picture. Other factors like production booking and endorsements can impact premiums. The strength of production, retention, and pricing levels are strong indicators of our performance.
Q: Can you elaborate on your technology spending, particularly the balance between routine maintenance and strategic investments?
A: Alan Schnitzer, CEO: We've maintained routine expenditures while increasing strategic spend from about a third to nearly half over recent years. This includes new expenses and ongoing investments in prior initiatives. We're spending over $1.5 billion annually, focusing on strategic investments while maintaining a competitive expense ratio.
Q: How are you managing buybacks amid macroeconomic uncertainty, and would you consider leaning into buybacks if stock prices fall?
A: Daniel Frey, CFO: Our capital management philosophy remains unchanged. We started 2025 with a strong capital position and continue to generate excess capital. While buybacks were slightly reduced due to the California wildfires, we plan to continue buybacks over time without reacting to short-term stock price fluctuations.
Q: How are you addressing social inflation, and do you see it stabilizing or increasing industry-wide?
A: Alan Schnitzer, CEO: Social inflation remains a challenge and is consistent with our expectations. We've anticipated its impact and adjusted our reserves accordingly. While it's a persistent issue, our proactive measures have positioned us well to manage its effects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
