Travelers Companies Q2 2026 Earnings Call | Underlying Premium Action Buffers Weather Catastrophes

Good morning, ladies and gentlemen. Welcome to the second quarter results teleconference for Travelers. We ask that you hold all questions until the completion of formal remarks at which time you'll be given instructions for the question and answer session. As a reminder, this conference is being recorded on July 17, 2026. At this time, I would like to turn the conference over to Miss Abby Goldsky, senior vice president of investor relations. Miss Goldsky, you may begin.

Thank you. Good morning and welcome to Travelers discussion of our second quarter 2026 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 Klene 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 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, Alan. Travelers delivered $2.2 billion of core income in the second quarter, resulting in quarterly core ROE of 24.9% and a trailing 12-month core return on equity of 24.2%. Second quarter earnings were driven by another very strong quarter of underlying underwriting income, which at $1.3 billion after tax marked our eighth consecutive quarter of more than a billion dollars. Net investment income of $883 million after tax and net favorable prior year reserve development of $456 million after tax also contributed to the strong bottom line result. After tax CAT losses were a little more than $400 million. The all-in combined ratio of 83.6% was again excellent. Underlying underwriting income reflects $10.88 billion of earned premium and an underlying combined ratio of 84.1%. Within the underlying combined ratio, the second quarter expense ratio of 29% was slightly higher than in the prior year quarter. As underwriting profitability has been stronger than expected, certain variable expenses have also been higher than expected. For example, profit sharing and contingent commissions. And that's a trade-off we're happy to make. Even with those higher profit driven variable costs, we continue to expect the full year expense ratio to be in line with our prior guidance of around 28.5%. We reported net favorable prior year reserve development in all three segments in the second quarter totaling $578 million pre-tax. In business insurance, net favorable development of $319 million was driven by workers comp and commercial property. In bond and specialty, net favorable PYD of $75 million was driven by better than expected results in management liability coverages and fidelity insurance. Personal insurance recorded net favorable PYD of $184 million with favorability in both home and auto. Tax net investment income increased 14% from the prior year quarter to $883 million.

Fixed income NI 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. New money yields at the end of Q2 were about 90 basis points higher than the yield embedded in the portfolio. Our outlook for fixed income NII by quarter, including earnings from short-term securities, is consistent with the guidance we previously provided, expecting approximately $840 million in the third quarter and roughly $870 million in the fourth quarter. And fixed income NII is expected to continue to grow beyond 2026 as the portfolio becomes larger and new money rates continue to be higher than the yield embedded in the portfolio. Net investment income from our alternative investment portfolio was also higher than in the prior year quarter. Turning to capital management, operating cash flows for the quarter of $1.9 billion were again very strong. And over the trailing 12 months, operating cash flows surpassed $11 billion. As interest rates decreased during the quarter, our net unrealized investment loss decreased from $2.4 billion after tax at March 31st to $2 billion after tax at June 30th. Adjusted book value per share, which excludes unrealized investment gains and losses, was $168.20 at quarter end, up 16% from a year ago. Adjusted book value per share also increased 6% from year end despite the very strong level of share repurchases in Q1 and Q2, the 14% increase in the quarterly dividend per share, and our continued investments in technology and other strategic initiatives. We returned more than $1.5 billion of capital to shareholders in Q2 with dividends of $266 million and share repurchases of $1.3 billion, leaving us with roughly $3.9 billion remaining under prior board authorizations for share repurchases. Turning to reinsurance, page 18 of the webcast presentation includes some highlights. First, we replaced our expiring CAT bond in May with a new CAT bond, increasing the bond size from $575 million to $750 million and decreasing the retention slightly. Second, on July 1st, we renewed our Northeast Property CAT XOL treaty, which continues to provide $1 billion of occurrence coverage above the attachment point of $2.75 billion. It's also worth noting that we chose not to renew the personal lines CAT XOL treaty we had purchased in 2024 and 2025. Recall that when we renewed our general corporate CAT treaty at January 1st this year, we decreased the attachment point from $4 billion to $3 billion. And the efficiency of that all perils enterprise-wide program was a more attractive way of getting the reinsurance coverage we wanted. In summary, our second quarter results once again demonstrated significant and durable underwriting earnings power, steadily increasing net investment income from our growing investment portfolio, and attractive returns across our well-diversified book of business. And now for a discussion of results in business insurance, I'll turn the call over to Greg.

Thanks, Dan. Business insurance had a terrific second quarter in terms of both top and bottom line results. Segment income of $1.2 billion was a second quarter record reflecting strong underlying underwriting income and favorable prior year reserve development. We delivered an underlying combined ratio of 88.2% a second quarter record. The improvement in the underlying loss ratio reflects favorable loss experience, including favorable experience consistent with the kind of investments we make in areas like predictive models, risk selection, products, technology, claim, and risk control. This gives us confidence that we're investing effectively. Turning to the top line, our net written premiums reached a new quarterly record of $6 billion. Excluding the impact of the sale of our Canadian business in the first quarter, we grew segment net written premiums by 5%. Led by 7% growth in our middle market business and 4% growth in our select business. National property premium declined as we maintain our deliberate and disciplined underwriting standards passing on business where price and terms both align with our view of the risk. Turning to production across the segment renewal premium change was 4.8%. Excluding the property line RPC was 7.8% and about flat sequentially. Retention remained very strong at 86%. reflecting our continued focus on retaining our high-quality book of business. New business was strong at $85 million, reaching a new quarterly record. The strength of these results reflects our ongoing commitment to investing in products underwriting precision and the capabilities we are building for our field organization and distribution partners. As for the individual businesses in select, renewal premium change increased sequentially to a strong 9.4% for the quarter. New business of $153 million was solid. These results underscore our continued investment in products in the industry-leading experience we delivered to our agents and brokers. BP 2.0 O remains a key contributor with industry-leading segmentation embedded in the product continuing to support profitable growth. We are encouraged by the new capabilities we are piloting within Travis, our digital platform with recently developed AI advancements that make submission upload seamless through advanced data extraction, rapid prefill of submission information, and the application of sophisticated underwriting rules that generate quotes in seconds. improving the speed and ease of doing business for our distribution partners and for us. In middle market, renewal premium change remains steady at 6.1% while retention of 89% remained at historically high levels. New business and middle market of more than $500 million reached an all-time high this quarter, up 17% from prior year levels driven by our strong value proposition. So, business insurance had a terrific second quarter in terms of both financial results and execution. We continue to grow our high-quality book while investing in differentiating capabilities that position us for long-term profitable growth. With that, I'll turn the call over to Jeff.

Thank you, Greg, and good morning, everyone. We're pleased to report that Bond and Specialty posted another strong quarter on both the top and bottom lines. We generated segment income of $234 million and an excellent combined ratio of 82.8%. Turning to the top line, we grew net written premiums by a terrific 14% in the quarter to a record $1.2 billion. In our high-quality domestic management liability business, retention ticked up a point from the first quarter to 88% while renewal premium change remained consistent. Our outstanding field team continues to achieve rate gains where appropriate through segmented and data-driven pricing initiatives and we are very pleased with the 8% increase in new business reflecting the value that our distribution partners and customers place on our products and services. To our market leading surety business, we're also very pleased to have grown net written premiums by 40% from the prior year quarter to a record level. The exceptional production this quarter spanned across our high credit quality portfolio and included a small number of large projects and increased bonding for data center development. We are pleased that our outstanding team's efforts to build the right customer relationships and our investments to support the long-term success of our portfolio of premier contractors generated such terrific production in this profitable business. So bond and specialty insurance delivered strong profitability and excellent growth in the quarter while continuing to make strategic investments in our competitive advantages including in our market-leading team and important technology and artificial intelligence capabilities to improve risk selection and efficiency. And with that I'll turn the call over to Michael.

Thanks Jeff and good morning everyone. I'm pleased to share that in personal insurance, we delivered segment income of $827 million for the second quarter. Strong underlying underwriting income, modest catastrophe losses, and favorable prior year reserve development contributed to this excellent bottom line result. The combined ratio was an outstanding 79.5% in the quarter and the underlying combined ratio of 77.3% once again demonstrated strong profitability in both automobile and homeowners and other. Net written premiums for the segment were $4.3 billion as retention remained solid while pricing moderated reflecting strong profitability. New business and homeowners was higher year-over-year. In automobile, bottom line results continue to be very strong. The second quarter combined ratio was 82.8% reflecting a 4.5 point benefit from favorable prior year reserve development and a strong underlying combined ratio of 85.8%. The underlying combined ratio improved just over three points compared to the prior year. This strong result was driven by favorable loss experience across coverages, including about a two-point benefit from the reestimation of the prior quarter in the current year. These benefits were partially offset by the impact of lower earned pricing, reflective of our strong profitability. In homeowners and other, the second quarter combined ratio was an excellent 76.7% reflecting modest catastrophe losses and very strong underlying underwriting income. The underlying combined ratio of 70.1% was comparable to a strong prior year quarter. We're pleased that our property results continue to demonstrate the benefit of our disciplined approach to optimizing our risk return profile through effective management of our appetite business mixing terms and conditions. Turning from production, we continue to make progress toward our objective of delivering profitable growth over time. In automobile, retention of 82% was consistent with recent periods. Renewal premium change was flat as we continue to incorporate improved profitability in our pricing. New business levels in auto remain healthy and we continue to be pleased with the high quality profile of the business we're writing. In homeowners and other retention was strong at 85%. Renewal premium change of 6.6% continue to moderate as intended given improved profitability and our successful efforts to align insured values with replacement costs. We're pleased with the increase in both new business premium and a number of new business policies compared to the prior year as we broadened our targeted efforts to deploy property capacity. We continue to execute a range of initiatives designed to generate growth in both auto and property. Adjusting rate levels to reflect strong profitability, enhancing product and pricing segmentation, refining eligibility restrictions, and pursuing new agent appointments and book consolidation opportunities. This quarter's results underscore the strong fundamentals across both auto and home, the product of deliberate, disciplined actions over the past few years to improve profitability, manage volatility, and position our portfolio for the long term. We also continue to invest in capabilities to deliver value to our customers and distribution partners by digitizing the insurance journey, modernizing our infrastructure, and simplifying our approach. We remain confident that our disciplined approach to performing today and investing for tomorrow will generate profitable growth over time. And with that, I'll turn the call back over to Abby.

Thanks, Michael. We're 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 one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. We ask that you please limit yourself to one question and one followup to allow everyone an opportunity to ask a question. We'll take our first question from Mike Zarky at

Hey, good morning. Thanks for taking my question. First one is just on the competitive dynamics in business insurance, maybe specifically on the select account segment. Maybe you can kind of talk about why pricing appears to be bucking the downwards trend line that the medium and larger accounts are experiencing. Is this you think more Traveler specific due to the things you're doing, or you think it's a reflection of the broader environment? Thanks.

Morning Mike. This is Greg. Well, first there's no strategic shift underneath the select, but that really is a function of the rate filings that get approved on a state-by-state basis from quarter to quarter. So that can just fluctuate. That's really what's underneath that.

That's helpful. I think maybe we focus a little too much, or at least I'm a little guilty of focusing a little too much on property. Okay. So just my final follow-up is, in terms of just the excellent profit margins pretty much across the board, any prior quarter adjustments that impacted the accident loss ratio that we should be considering?

And I could stand. So if you're asking about business insurance in particular, the answer is no. Happy to see half a point or so of improvement in the underlying loss ratio in business insurance. A little bit of pricing benefits, still a little bit of mix, a little bit of an improved view of the loss environment overall. And as Greg mentioned in his comments, you

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

Well, good morning everyone. So for the first question, I'm going to step back and just ask about the ROE. With a 24.2% ROE on a trailing 12-month basis versus your mid-teens target over time, Alan, I'm just curious as we look across the enterprise, do you think you could consider relaxing some of your underwriting standards on price, get more aggressive on pricing to grow faster considering you're over your returns are far in excess of what your target is longer term? And I guess related to that is when do we get back to that destination of the mid-teens core ROE over time?

Great. You know, it seems every quarter I ask technology questions and I just can't help myself. In the last couple months there have been numerous reports and commentary about the rising costs of technology implementation, including things like token costs, etc. As we've been looking at it from the outside in, we thought, at least I've been thinking about technology investments as a way to improve efficiency. So I'm just curious, as the cost side of technology implementation seems to be rising, do you think that's going to offset the expected efficiency gains? And related to that, there was a story that popped up about some software glitch that may have happened at your company through an implementation. I'm just curious when you deploy technology, how you manage potential challenges as that is being rolled out. Thank you.

We'll go next to Paul Newsome at Piper Sandler.

Good morning. A little bit of the same question on the ROE, but more talking about capital management. I would love to hear a little bit more full discussion of the high class problem of the ROE and how you think that we should think about the change in capital management prospective given you should be generating quite a bit of excess capital prospective.

Hey Paul, it's Dan. So, you know, I think we've had a longstanding capital management philosophy, which Alan referred to in his prepared remarks, that served us and our shareholders really well. And that's been throughout various cycles of either underearning relative to the mid-teens long-term objective or overearning relative to the mid-teens objective. So I think the beauty of that capital management philosophy is that you're able to apply it in all circumstances. And so said simply again, we expect to generate strong levels of capital. We want to be a strongly capitalized company. We have consistently generated more capital than we need to run the business, including to support the growth of the business. We're going to look to deploy it, whether that's organically or inorganically, if we think we can do so and generate attractive returns. And to the degree that we've accumulated more capital than we can, we're going to return the rest of it through dividend and share repurchases which you've seen from us clearly in the past several quarters.

Any different thoughts on the M&A environment which could be part of that capital management?

No. But we are highly attuned to M&A opportunities and confident that whenever attractive M&A opportunities come around, we'll find a way to finance them. So our view of M&A doesn't change relative to the excess capital that we have.

We'll take our next question from Katie Sanchez at Autonomous Research. Morning.

Thank you for the question. First, I wanted to unpack the new business momentum in domestic BI middle market a little bit more. Greg, wondering if you could give us a better understanding of some of the drivers behind the uptick this quarter and how sustainable you think new business momentum is in the middle market going forward.

Yeah, Katie, thank you. We're certainly proud of the number we put up in middle market. It can be lumpy from time to time given that's a transactional business. Dan already referenced in my prepared comments, I also talked about the investments we're making that not only impact the loss experience, they impact production also by making sure we've got the best predictive analytic tools, the best risk selections, and product and technology that we're putting into the marketplace in addition to claim and risk control. Those items are definitely in demand of our distribution and I think that helps with the new business also, but given that transactional business, it can bounce around from quarter to quarter.

Yep. No, totally understand that. And then perhaps as a follow up, sticking with middle market, completely understand the difficulties in national property and the desire to maintain underwriting discipline there. Are you guys seeing any signs of pricing terms not aligning with your view of risk in middle market property, or are trends kind of hanging in there or stronger there, I should say?

Yeah, no, we're not really seeing a material shift in terms and conditions in the middle market property. We're so much an account provider there and we're also going to typically have the GL and the comp, but that's been more of a national property dynamic.

We'll take our next question from Ryan Tunis.

Hey, thanks. Good morning. First question just for Michael on the personal auto side, just looking for a little bit of an update on what you're seeing in terms of frequency and severity. Obviously gas prices have been a little bit higher. Curious if there's any impact flowing through results from that.

Sure, Ryan. Yeah, this is Michael. I would say the improvement in underlying in auto was really favorable experience across coverages. That's actually a combination of favorable frequency and severity. As respects the question on frequency related to gas prices, I think I've said this before, it's always a little tough to diagnose what's driving frequency improvements. There tend to be a range of factors and we can point to a few things. Most importantly, improving vehicle technology and advanced safety features in vehicles, less distraction that again we can measure. But there's not a ton of evidence at least this point that there have been material changes in driving behavior related to gas prices, particularly as we look through the first part of this year.

Got it. And then follow up just from Dan probably, but the favorable development in business insurance. Just curious with the casualty lines outside of workers comp, commercial auto, GL, what's kind of the bottom line on the reserve review this quarter? Thank you.

Sure, Ryan. So PI, good solid number. I mentioned comp and commercial property those were the biggest drivers. And just to give you sense of magnitude on those, comp was a little more than $200 million, commercial property was around $80 million. And if you think about what's left then you think about all the other lines of business, there's definitely ups and downs in some of them, but the net of those things was a good guy. We have paid particular attention to the casualty lines including umbrella and commercial auto and did not see any pressure there at all this quarter.

We'll move next to Mark Hughes at Truist Securities.

Yeah, thank you. Good morning. You talked about the bonded specialist, sounds like a couple of large projects helped the BI premium there and then the data center impact. How durable do you think that'll be?

Yeah, Mark, good morning. It's Jeff Clank. We did see some exceptional growth in the quarter across the portfolio and you referred to the things I called out in the prepared remarks. It's important to remember that the majority of surety production is coming from new bonds, right? So renewals are really limited to just a few types of obligations in commercial surety. So we've always expected there will be topline variability. I wouldn't get into projecting the durability of those things, but if you think about the type of projects, the large projects, the data center construction as the leader in surety in North America and our quality portfolio of high credit quality customers, we believe that we're well positioned to benefit from that future investment in infrastructure, particularly when it involves public spending, but also included in these other opportunities I've called out.

Yeah, I appreciate that. Then a quick follow up on the commercial property in business insurance, the downdraft was less than it had been the last few quarters. Was that anything to do with mix in the quarter? Is the worst behind us in terms of your topline experience in commercial property?

Yeah, good morning. This is Greg again. Yeah, I think you're just referencing the net written premium delta from the first quarter to the second quarter, the slight improvement there. There's a number of items, timing variances, reinsurance, the trees that come up in that particular quarter, but I wouldn't read into that that it's a signaling of the pricing cycle. I would say that it's incrementally softer and certainly not a reflection of that net written premium delta.

We'll take our next question from David Madden at Evercore.

Hey, thanks. Good morning. Dan, in a prior question you had mentioned on business insurance you had mentioned a little bit of an improved view of the loss environment overall. I was wondering if you could elaborate on that and maybe just talk about if you've changed the loss cost trend assumption.

David, Dan. So, we're going to stay away from the loss trend question for that reason because we say look, loss trend is one particular fairly narrow definition. You also consider things like changes in base year over time and how you view the loss environment. So not a big number. So I wouldn't shine a big light on it. It was just one in a series of modestly favorable items. But the reality is, if you just look back at the last couple of years, the margins in business insurance from an underlying perspective have been very good. And so we've seen a little bit of favorability probably relative to what we might have thought things were going to look like a year and a half or two years ago. And we're cautiously baking some of that into our picks now. But very small data.

Got it. That makes sense. And then one of the drivers, Greg and Dan also mentioned just on the investments that you've been making that are probably starting to have an impact within the underlying loss ratio in BI. I guess how should we think about that flowing through going forward? Is that just a step change now that's embedded in the run rate or is that sort of an ongoing tailwind that will keep building as an offset that we should consider to some of the pricing dynamics?

So, David, Dan again. Again, we're talking about very small numbers, right? The underlying loss ratio in business insurance changed by about half a point. So these are not big things, but it does go into our thought process of why it's important to think about more than just what's the pure rate number or what's the pure renewal premium change number. There are other things that impact the loss environment, including actions we take with underwriting appetite, terms and conditions, deductible levels, claim efficiency, all those things.

We'll go to our next question from Brian Meredith at UBS.

Yeah, thanks. First, I'm just curious, workers compensation insurance. We've seen some reports out there about maybe longer recovery times happening and perhaps that's related to just some of the fears of unemployment with respect to AI. Curious, are you seeing that? And maybe in that context, how does that factor in your thoughts on reserving for workers comp?

Hey, Brian, it's Dan. So I'll take it at least from a reserving perspective. So again, first quarter and second quarter here, another couple of favorable quarters in terms of PYD, which would tell you that we're really not seeing pressure from a severity perspective. And comp continues to be favorability both in frequency and severity. And I would just go back to the comments we've made many times before, which is we take a very respectful view of what the long-term severity trend in workers comp is going to be. And even if the more recent periods have been pretty benign, our assumption in our loss picks and in our reserves is still that severity is going to go back to some higher, more normal long-term trend. So even if there were some increase in severity, whether it's because people that are out longer or injuries cost more, unless it gets outside of your pick, we're not going to have a problem. The other thing I'd say just specific to your question, we didn't really see anything specific in the most recent data that aligns with the problem you're alluding to. But the other thing I would add, Brian, just as a general matter, is that we expect some changes in frequency and severity in workers comp as a function of economic activity. So that will impact the frequency at which workers go out and the length that they stay out. And so we've got a view on whether improving or deteriorating economy is going to contribute to those, and we bake that into our assumptions.

Makes sense. Thanks. And a second one, I guess for Michael. Michael, I know there's a bunch of initiatives that you're implementing to try to get growth going in personal auto insurance, but maybe I'm just curious how reasonable is it to think that growth is going to actually pick up there given just the competitive dynamics? It seems like every company out there is looking to grow and cutting prices.

Yeah, Brian, I think you're describing the environment. You have visibility into just like we do the rate environment and you see the filings, and broadly speaking, rate continues to be decreasing in personal auto. What we are doing is everything that we think is appropriate to profitably grow that business. The things that I mentioned, I would just put a little more color around. When we talk about adjusting rate levels to reflect strong profitability, Alan talked earlier about lowering price in this business to grow as a fool's errand. That's not what we're doing. What we're trying to do is match price to risk. And so our strategy in auto is we want to match price to risk. We want to have the most sophisticated segmented product we can have in the marketplace. We want to have the appropriate eligibility that aligns with our appetite. And then we want to make sure that we are in all the places taking advantage of all the opportunities that we can to be able to produce profitable business. And again, as I talked about this quarter, new business levels in auto have been healthy and we're very pleased with the profile of the business that we're writing as a result. So we're going to continue to execute our strategy. The outcome of that strategy is going to be a function of the market, but we're going to do what we think is appropriate to profitably grow the business.

We'll move to our next question from Pablo Singon at JP Morgan.

Hi, good morning. The first question is for Michael. As you pivot to growth in personal lines, can you talk about your approach to trading off or balancing margins versus unit growth? And I guess simplify the question, at what combined ratio would you be comfortable running the book, recognizing that it's producing margins that are really good today and that your book is more balanced between personal auto and homeowners compared to the broader market?

Sure, Pablo. Maybe just to put a point on the comment I made earlier, we have target returns, our target return is mid-teens over time. When we talk about adjusting pricing to reflect profitability, that's what we're doing. We're re-evaluating our loss experience state by state in the line of business, whether you're talking property or auto, determining what we think an adequate price is at those target returns, and then we're filing for that pricing. So that's the approach we take and it really is driven towards mid-teens ROE over time. Clearly we're above the mid-teens right now, and so that's why you see renewal premium change moderating in both lines of business.

Thanks for that. And then second question I have is for Dan. On the full year expense ratio guide of 28.5%, I was wondering if you could provide just more color on what gets you there in the second half of the year. You're implying that there's going to be improvement. Is it contingent on scaling off just premium growth picking up, expenses? So any color commentary would be helpful there. Thanks.

Yeah, Pablo. Not a lot I can give you other than, again, I think we made this comment last quarter. If you go back and look at the last 5 years or so of our results, with the exception of 2025, which was pretty steady, it's not at all unusual to see the expense ratio vary within a year by a point or more from quarter to quarter. So we've got an outlook view of what we think some of our run rate expense levels are. We line that up against what earned premium looks like. You get little math quirks like there are actually more days of earned premium in the second half of the year than there are in the first half of the year. That's our view. Currently there's no particular change coming in the second half of the year strategically or any kind of slowdown in investment spending or anything like that. We just think when we put the four quarters together, we're going to be pretty close to that 28.5%.

We'll take our next question from Rob Cox at Goldman Sachs.

Hey, thanks. Good morning. Just a follow up on the property discussion. I know large account property and cat rates get a lot of attention, but we've noticed Travelers in the industry, CMP loss ratios are at historic profitability as well. Maybe you could just talk about how you're viewing that book right now and if we should expect the gap between large and small account pricing could start to narrow.

Okay, that's really helpful. And then if I could just ask more directly on some of the opening comments on the claims straight through processing enhancements and AI initiatives there, are we starting to see that in the business insurance margin this quarter? And how should we expect that to trend?

We'll go next to Elise Greenspan at Wells Fargo.

Hi, thanks. Good morning. My first question was just going back to the BI discussion and just some of the commentary Dan you just gave around the change in view on loss trend in the quarter. Does that mean that you took down the uncertainty provision that you guys had put up over the last couple years?

No, at least it does not. We had the uncertainty provision in 2024 and 2025 and said I think at the end of the first quarter we had carried it into 2026 and we continue to carry it into 2026.

Okay, thanks. And then my second question, going back to the capital discussion, I know at times you guys have balanced capital return relative to capital needed for growth. As premium growth is slowing relative to some of the more recent years, should we think about repurchases and dividends combined constituting a greater percentage of operating earnings from here?

That would stand. So I think the short answer would be over time, yes. I don't think you could apply that to any particular quarter or even necessarily full year. We're going to always see what's happening in a particular quarter given profitability, cat activity in particular. But over time, yes. And that's why we made the comment probably going back now three years when the business was growing that the street we thought had gotten a little ahead of itself in terms of expected buybacks by not factoring in the need to hold capital for additional growth. We still expect to grow and are still growing, but to the degree that growth might be a little slower than it had been in recent years, the need to accumulate additional capital is going to come down a little bit with it.

And we have time for one more question and that question comes from Meyer Shields at KBW.

Thanks, Allison. I go back to the comment you made on creating some excess margin for growth. I guess the question is that I would assume that in the fragmented smaller middle market, there are companies that simply can't keep up with better pricing because of your scale and analytical advantages. Am I missing something there?

So when you talked about how it's a fool's errand to lower pricing to gain share, I understand that conceptually, but my impression or presumption is that you won't necessarily invite the same level of competitiveness because business that's very profitable for Travelers is not going to be anywhere near as profitable for companies with higher expenses and less capable loss control, which I think would call for maybe a little bit more aggressive pricing. So wondering what I'm not thinking of there.

Okay, understood. And then just a brief question on surety. How should we think about the policy terms, especially for the larger projects or the data center stuff? Does that extend the earnings period for the written premium?

So larger projects might have longer durations. Meyer, this is Jeff Clank by the way. Good morning. So there is an aspect on some of that. The underlying terms of all of these projects are bespoke. The contract between the contractor, the project owner are carefully analyzed. We actually provide consultative underwriting as part of that process. And so it's not like there's standard policy terms. These are all individual contracts and the bond responds to those. It's actually one of our competitive advantages and the service that we provide to our customers is engaging in that process. But it's fair for you to think that on some of this business, the longer they are or the larger they are, they might be longer. But for our portfolio broadly, we've got lots of different sizes of contractors and types of projects in there. So while there is some movement on some of the larger, it doesn't move the overall needle very much. Thanks for the question.

And that concludes our Q&A session. I will now turn the conference back over to Abby for closing remarks.

Thanks everyone for joining us. We appreciate your time. And as usual, if there's any follow-ups, 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.