The Travelers Companies Q1 2026 Earnings Call | EPS Misses Forecasts

Thank you, Abby. Good morning, everyone, and thank you for joining us today. We're pleased to report an excellent start to 2026 with strong underwriting performance across all three segments and a strong result from our investment portfolio. We also continued to deliver on key strategic initiatives during the quarter. For the quarter, we earned core income of $1.7 billion or $7.71 per diluted share, generating core return on equity of 19.7%. Over the trailing four quarters, we generated a core return on equity of 22.7% driven by excellent underlying fundamentals. Underwriting income of $1.2 billion pre-tax benefited from strong levels of underlying underwriting income and favorable prior year development. Each of our three segments generated attractive underlying and reported margins. Turning to investments, our high quality investment portfolio continued to perform well. After tax net investment income increased by 9% to $833 million, driven by strong and reliable returns from our growing fixed income portfolio. Our underwriting and investment results together with our strong balance sheet enabled us to return more than $2.2 billion of excess capital to shareholders during the quarter, including approximately $2 billion of share repurchases. Even after that return of capital and having made important investments in the business, adjusted book value per share was 16% higher than 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 14% increase in our quarterly cash dividend to $1.25 per diluted share, marking 22 consecutive years of dividend increases with a compound annual growth rate of 8% over that period.

Turning to the top line, through disciplined marketplace execution across all three segments, we generated net written premiums of $10.3 billion in a quarter. In business insurance, we grew net written premiums to $5.8 billion. Excluding the property line, we grew domestic net written premiums in the segment by 6%. The declining premium volume in property continues to be a large account dynamic. Property premiums were higher in our small commercial business and about flat in our middle market business. We know premium change in business insurance was 5.8%. Retention increased a point from recent quarters to a very strong 86%. And was higher or stable in every line reflecting deliberate execution on our part and a generally high level of stability in the market. We know a premium change in our core middle market business was about unchanged sequentially also with retention higher at 89%. In terms of the product lines, RPC and auto, CMP and umbrella remained in the double digits. RPC and GL and workers comp was stable and RPC in the property line was positive. New business in the segment was a record $775 million, a reflection of our strong value proposition. In bond and specialty insurance, we grew net written premiums by 7% to $1.1 billion. In our high quality management liability business, renewal premium change ticked up sequentially with excellent retention of 87%. In our industry-leading surety business, we grew net written premiums by 14%. In personal insurance, we generated net written premiums of $3.5 billion with solid retention and positive renewal premium change in both auto and homeowners. You'll hear more shortly from Greg, Jeff, and Michael about our segment results.

The results we released this morning are part of a larger story. They reflect a set of advantages that we have developed and that have compounded over a long period of time. Over the course of many years, we've managed through a wide variety of challenging conditions. The 2008 financial crisis, dramatic changes in interest rates, a major inflection in liability loss cost trends, the global pandemic, severe natural catastrophes, and periods of heightened geopolitical and economic uncertainty. We didn't predict the full scope of any of those events, but by carefully balancing risk and reward on both sides of the balance sheet, we were positioned to manage successfully through all of them. We've consistently delivered growth in book value per share and earnings per share at industry-leading returns averaging more than a thousand basis points above the 10-year Treasury over the last 10 years and with industry low volatility. We've also built as strong a capital position as we've ever had. That track record isn't a coincidence. It reflects a set of structural advantages that hold up regardless of the environment. Starting with the breadth of the franchise, we're a market leader across nine major lines of insurance serving personal and commercial customers across the country and diversified across distribution partners, industry class, and customer size. That balance, which represents a bigger advantage than people sometimes appreciate, has resulted in our consolidated loss ratio being less volatile than the loss ratio of our least volatile segment. In an uncertain world, that kind of structural hedge is a meaningful source of stability. Where we operate also matters. More than 95% of our premiums cover North America. At a time of considerable geopolitical complexity, that concentration is a strategic advantage. And the domestic market offers substantial room for growth. With our broad product capability, our leading market position, and the execution you've seen from us over the years, we're well positioned to continue gaining share as we have in our commercial businesses over the past 5 years. Equally important is our ability to navigate the loss environment. We have the data, the analytics, and the discipline to see changes in loss activity early and to reflect what we see in our reserves, our risk selection, our pricing, and our claim strategy. That capability is foundational because until you have an accurate view of the loss environment, the many downstream decisions are working from the wrong inputs. Our early identification of the acceleration in social inflation is a good example. We adjusted before the market did and since then we've grown the business and significantly improved our margins. Our scale is also a significant and growing advantage. Our profitability and cash flow support our ability to invest more than a billion and a half dollars annually in technology, including in our ambitious AI strategy. Our size gives us a data to power AI and the resources to deploy it, creating a virtuous cycle of better insights, better decisions, and better outcomes. Our financial strength also enables us to absorb the increasing severity of weather losses. And all of these benefits position us as a preferred counterparty in the reinsurance market. Beyond that, our product breadth, risk control, claim expertise, and other capabilities that benefit from scale make us more relevant to our distribution partners, deepening those relationships and our access to quality business. Over time, companies that can leverage scale effectively will have a meaningful edge in consolidating industry premium. As for our investment portfolio, the principles that guide us are the same ones that have served us well for decades. We consistently manage for risk-adjusted returns, not headline yields. More than 90% of our portfolio is in high quality fixed income with an average credit rating of double A minus. The issue of the day, private credit is a non-issue for us. We manage interest rate risk by holding the vast majority of our fixed income securities to maturity and carefully coordinating the duration of our assets and liabilities. Our investing discipline has produced default rates that were a fraction of industry averages through every stress event of the past two decades. You can't gracefully reposition a portfolio in the middle of a dislocation. The time to build that resilience is before you need it. In short, whether we're talking about underwriting or investing, the advantages we built are designed to deliver across whatever environments we may have. Before I wrap up, I'd like to share that a number of my colleagues and I have just returned from our travelers leadership conference, a multi-day event we host each year for the principles and senior leaders of our most significant distribution partners. As we've shared before, the vision for our innovation agenda includes enhancing our value proposition as an indispensable partner to our agents and brokers. We continue to make significant investments to ensure that we realize that vision through best-in-class products, services, and experiences. What we heard consistently is that our deep specialization across a wide range of modernized, simplified, and tailored products along with a broad and consistent appetite and extraordinary field organization, the ability to deliver exceptional experiences and our industry-leading claim capabilities are major differentiators in the market. To sum it up, we're off to an excellent start for 2026 and we're highly confident that the advantages that have driven our success will extend our strong record of outperformance. And with that, I'm pleased to turn the call over to Dan.

Greg, good morning. Thanks for the question. I love that question and I'll take you back to I think it was 2017 when we came out and we said innovation is going to be a strategy

Travelers and what we've done in the intervening years really is hone our innovation skills. We're referring to the last essentially 10 years as Innovation 1.0, positioning us for Innovation 2.0. But when you talk about the culture, that's a culture that fortunately we've developed and honed over a decade. So that's everything from how do you pick the right initiatives, how do you assess performance along the way, how do you measure results, how do you prepare an organization to manage change, how do you communicate to an organization that's in the middle of change. That has been a constant for us. I just don't think you can wake up on Monday morning and say, 'Okay, we're going to be innovative today.' It's a skill set and we've got a lot of hard-won know-how in doing it. I think that shaped our culture, which is prepared for it.

Sure, Greg. Thanks for the question. That is absolutely what we're trying to accomplish — balance growth with returns and generate profitable growth over time. Certainly given the strong profit position, we've taken a number of actions across pricing, eligibility, and distribution management to drive growth. Importantly, I think we're doing that from a position of strength. The segment combined ratio and underlying combined ratio in personal insurance is the lowest first-quarter segment combined ratio in the last 10 years. That gives us some flexibility to look at pricing segmentation, the opportunity to look at base rate levels in certain states to ensure pricing is consistent with loss costs. As I mentioned in the prepared remarks, we're executing a range of initiatives across distribution management, expanding eligibility, relaxing limitations to support that growth. We're encouraged by the momentum we're starting to see.

Thanks, Greg.

Hey David, if you're referencing the RPC, first of all, let me point out that's a real strong number for select, just under 9%. You can see that drove a real strong retention number also. Rate came in at 4%, down from the fourth quarter, but that really is a reflection of how we feel about the portfolio and the rate adequacy and the very deliberate execution by our field organization. David, I'd add to that when you're looking at that pricing metric, any pricing metric, you really have to look at it as a package: what's the pricing, where are the returns, and where's the retention. When you look at that trio together and you look at select, it's an excellent outcome.

Rob, we've been very encouraged by what we saw in Florida, and we've seen other encouraging actions in some of the states as you've mentioned — Georgia, Texas, Louisiana, South Carolina, and so forth. It's been terrific to see, and I think in part attributable to a really strong ground game that we and the rest of the industry have put on, state by state, making sure that we're pounding the pavement together with other industries, making the case for the impact of litigation abuse on affordability. So we're really pleased to see early gains and we hope to continue the momentum. We will look at the dynamics in each state. We'll look at the actions that states take, and either at the outset or over time that'll impact how we think about the opportunity there and how we execute. We're hopeful that this is the beginning of some momentum.

The workers comp business is a fantastic business for us and it continues to perform very well. You can look at the calendar year returns. We are more than open for business in workers comp.

Yarren, I'm not going to respond to whether it's in fact expanding or shrinking on a written basis, but what I will say is we're thrilled with the book of business we have and we're very happy about the business we're putting on the books. The way we think about the execution isn't looking at retention as a headline number; it's executing at a very granular account-by-account basis. When you're looking at the business we want to retain, you want to keep your quality business, you want to get the right price on it, and through a lot of hustle and franchise value, write new business. The retention and the fact that it ticked up given the quality of the book and the returns in this business, it's fantastic.

I honestly think it's a little too early to know how that's going to happen. You know, we acquired three digital agencies, brokers over the years — Simply Business, Insurance, and Insure Match — expecting the digitization of small commercial to move up in size, and it really hasn't. When you think about Simply Business, for example, the small commercial it writes I would describe as micro. For whatever reason, we just haven't had the take-up there the way we would have expected eight or ten years ago. So I think before we see how this business is going to transition from one size of distributor to another, you're going to have to see customers adopt digital distribution for research and purchasing. We just haven't seen it. And Yarren, one thing I would throw out in addition: we're really excited about Gen AI within the independent agent channel, particularly select and middle market. In select, we've executed some Gen AI that helps us process the business endorsements and changes and just remove the friction and allow it to be much smoother for our independent agent channels. So I don't think it has applicability of just changing distribution channels; we think it can be a great facilitator in making us more efficient in our existing distribution channels.

It's pretty early, I think, in the evolution of AI and the distribution of insurance to probably get into that, Tracy, and it's probably a broader conversation for a different time, different day.

So Elise, I'll give you the same answer that I think I've given you for 10 years consistently on that, which is we're always interested in M&A of all potentially shapes and sizes, and we're very active in looking at things. I think our shareholders should demand that we're active in looking at things. Whether that's larger transactions, bolt-ons, or acquiring capabilities, that's all within our thought process and within our regular activity. We don't need to do anything at all to continue to be successful; we've got all the tools and capabilities that we need to be successful. But if we find the right opportunity that meets our objectives — and I've shared many times, we're going to assess a transaction in a million different dimensions — but we're looking for transactions that either improve our return profile, lower volatility, or provide us with some other strategic capability. We're active looking for those, and when we find them and can get them done at the right terms and conditions, we'll do it.

And I got to add to that. One of the reasons that we've gotten away from talking about loss trend is because it's a pretty narrow concept of frequency and severity. It's a very blunt instrument to think about what's happening across billions of dollars of premium. Each line has its own dynamic, and there are other things that impact margins: base year changes, exposure changes, mix changes, changes in our large loss assumptions, other adjustments that we make for one reason or another. There's a lot of estimation in that number. So we try to get away from it. But holistically speaking, the loss picks we have reflect what we think is going on with loss trend. On the whole, it behaved about as we expected.