Q1 2026 Earnings Call Transcript

Good morning, ladies and gentlemen. Welcome to the 2026. At this time, I would like to turn the conference over to Ms. Abbe Goldstein, Senior Vice President of Investor Relations. Ms. Goldstein, you may begin. Thank you.

Good morning, and welcome to The Travelers Companies, Inc. discussion of our first quarter 2026 results. We released our press release, financial supplement, and web 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 Frey, CFO; and our three segment presidents, Greg Toczydlowski of Business Insurance, Jeffrey Klenk of Bond and Specialty Insurance, and Michael Klein of Personal Insurance.

They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks, and then we will take your questions. Before I turn the call over to Alan, I would 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 10-Q and 10-Ks 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 Investors section on our website. And now I would like to turn the call over to Alan Schnitzer.

Thank you, Abbe. Good morning, everyone, and thank you for joining us today. We are 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 pretax 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 am 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. With disciplined marketplace execution across all three segments, we generated net written premiums of $10.3 billion in the 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.

Renewal 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. Renewal 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 in auto, CMP, and umbrella remained in the double digits.

RPC in 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. We will 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 have 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 did not 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 have consistently delivered growth in book value per share and earnings per share at industry-leading returns, averaging more than 1 thousand basis points above the ten-year Treasury over the last ten years, and with industry-low volatility. We have also built as strong a capital position as we have ever had. That track record is not a coincidence. It reflects a set of structural advantages that hold up regardless of the environment.

Starting with the breadth of the franchise. We are 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 come from 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 have seen from us over the years, we are well positioned to continue gaining share, as we have in our commercial businesses over the past five 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 have 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 $1.5 billion annually in technology, including in our ambitious AI strategy.

Our size gives us the 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 yield. More than 90% of our portfolio is in high-quality fixed income, with an average credit rating of AA-. Issue of the day, private credit, is a nonissue 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 in the past two decades. You cannot 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 are talking about underwriting or investing, the advantages we have built are designed to deliver across environments. And they have. Before I wrap up, I would like to share that a number of my colleagues and I have just returned from our The Travelers Companies, Inc. Leadership Conference, a multi-day event we host each year for the principals and senior leaders of our most significant distribution partners.

As we have 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 are off to an excellent start for 2026, and we are highly confident that the advantages that have driven our success will extend our strong record of outperformance. I will now turn the call over to Dan for the financial results.

Thank you, Alan. The Travelers Companies, Inc. delivered $1.7 billion of core income in the first quarter, resulting in a quarterly core return on equity of 19.7% and a trailing twelve-month core return on equity of 22.7%. First quarter earnings were driven by yet another very strong quarter of underlying underwriting income, which at $1.2 billion after tax marked our seventh consecutive quarter of more than $1 billion. Net investment income of more than $800 million after tax and net favorable prior year reserve development of $325 million after tax also contributed to the strong bottom line result.

After-tax cat losses were just over $600 million. The all-in combined ratio of 88.6% was again excellent. The underlying underwriting gain reflected $10.6 billion of earned premium and an underlying combined ratio of 85.3%. Within the underlying combined ratio, the first quarter expense ratio came in at 29%.

That is what we expected given the timing of expenses in Q1, and we still expect the full-year expense ratio to be in line with our prior guidance, right around 28.5%. The previously announced sale of most of our Canadian operations closed as expected on January 2, and I wanted to take a couple of minutes to summarize the impact of that sale on our first quarter results. Let us start with premium volume. The year-over-year comparison, with Canada’s business included in 2025 but not included in 2026, reduced the first quarter growth rate for consolidated net written premium and net earned premium by about two points each.

The impact in both Business Insurance and Bond and Specialty was about one point, while the impact in Personal Insurance was about four points. The impacts on the growth rate of both written and earned premium will be similar for the remaining quarters of this year. To help with modeling the year-over-year impact for the rest of the year, we provided the quarter-by-quarter dollar impact on Slide 19 of the webcast presentation. Within net income for the quarter is a gain on sale consistent with our expectations when we originally announced the transaction last May.

That gain does not impact core income. And finally, within the equity section of the balance sheet, you see a reduction in accumulated other comprehensive loss, which is primarily because the previously unrealized FX loss related to the sold Canadian entities became a realized loss upon sale. The move from unrealized to realized had no impact on total equity or on book value per share. Turning back to the rest of the quarterly results, catastrophe losses for the quarter totaled $761 million pretax, with the largest events being the winter storm that impacted much of the country in January, and a large tornado-hail event in March, both of which you can see in the table of significant cat losses in the MD&A section of our 10-Q.

We reported net favorable prior year reserve development of $413 million pretax in the first quarter, with all three segments contributing. In Business Insurance, net favorable development of $162 million pretax was driven by commercial property and workers’ comp. In Bond and Specialty, net favorable PYD of $65 million pretax was driven by better-than-expected results in surety. Personal Insurance recorded net favorable PYD of $186 million pretax, with both auto and home contributing.

After-tax net investment income increased 9% from the prior-year quarter to $833 million. Fixed income NII was higher than in the prior-year quarter in line with our expectations, benefiting from both higher yields and a higher level of invested assets. New money yields at the end of Q1 were about 70 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 provided on our fourth quarter earnings call: expecting roughly $810 million after tax in the second quarter, growing to approximately $840 million in the third quarter and then to around $870 million in the fourth quarter.

Net investment income from our alternative investment portfolio was also positive in the quarter, although down from a year ago. 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 market. 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 $2.2 billion were again very strong, as we generated more than $2 billion in operating cash flow for the fourth consecutive quarter. As interest rates increased during the quarter, our net unrealized investment loss increased from $1.5 billion after tax at year end to $2.4 billion after tax at March 31. Adjusted book value per share, which excludes unrealized investment gains and losses, was $161.60 at quarter end, up 16% from a year ago. Adjusted book value per share also increased 2% from year end, despite the very strong level of share repurchases during Q1. Share repurchases this quarter included $1.8 billion of open-market repurchases, in line with the guidance we shared last quarter.

And as a reminder, $700 million of that $1.8 billion came from the closing of the Canadian business sale in January. We had an additional $185 million of buybacks in connection with employee share-based compensation plans, and we still have approximately $5.2 billion remaining under prior board authorizations for share repurchases. Dividends were $238 million in the quarter, and as Alan mentioned earlier, our Board authorized a 14% increase in the quarterly dividend to $1.25 per share. In summary, our first quarter results once again demonstrate significant and durable underwriting earnings power and attractive margins across our well-diversified book of business, along with steadily increasing NII from our growing investment portfolio.

I will now turn the call over to Greg for a discussion of Business Insurance.

Thanks, Dan. Business Insurance had a strong start to 2026, delivering another quarter of excellent financial results and successful execution in the marketplace. Segment income of $839 million was a first-quarter record, benefiting from strong underlying underwriting results and net investment income as well as favorable prior year reserve development. For the fourteenth consecutive quarter, we delivered an underlying combined ratio below 90%.

That sustained underwriting success reflects the strength of our risk selection, granular pricing segmentation, and field execution. Turning to the top line, we generated net written premiums of $5.8 billion. Domestic net written premiums were up 4% over the prior-year quarter as we grew our leading middle market and Select businesses by 5% and 3%, respectively. National property premium declined as we maintained our disciplined underwriting standards.

Turning to production, we achieved renewal premium change of 5.8% for the quarter. Excluding the property line, RPC was nearly 8% and in line with the fourth quarter. Renewal premium change was positive in all lines and higher sequentially in the umbrella and auto lines. Retention increased to 86%, up sequentially from the fourth quarter, a reflection of our continued focus on retaining our high-quality book of business in generally stable market conditions.

Strong new business of $775 million was a quarterly record. These production results benefit from the investments we have made in product and underwriting precision. Our new commercial auto product, TCAP, which contains industry-leading segmentation, is now live in 47 states. We also recently enhanced our property pricing models, refining catastrophe and non-cat segmentation.

Our advanced analytics, market-facing tools, and sales enablement capabilities also played key roles in our success, reflecting the competitive advantages these investments continue to build. We are pleased with these production results and the excellent execution by our field organization. As for the individual businesses, in Select, renewal premium change was strong at 8.8%, while retention increased one point sequentially to 82%. As expected, we are seeing the benefit of having largely completed our targeted CMP risk-return optimization effort.

New business of $157 million was strong and in line with last year’s record. These results underscore our continued investments in product, underwriting, and agent experience. BAP 2.0 is now fully deployed nationwide, completing a multiyear initiative that has transformed our small commercial offering. The recent rollouts of the product in California and New York were meaningful milestones.

The industry-leading segmentation embedded in the product is contributing to profitable growth. We continue to enhance Travis, our digital quoting platform, which processes over 1 million transactions annually. In Middle Market, renewal premium change was 6.6%, while retention improved two points from the fourth quarter to a very strong 89%. Price increases remain broad-based, as we achieved higher prices on about three-quarters of our middle market accounts.

New business of $468 million was up 7% compared to the prior-year quarter, reaching a new quarterly high. Once again, another great quarter for Business Insurance. We are energized by both the impact of the new capabilities contributing to our strong performance and by the additional capabilities we are currently building that will drive our continued success throughout the remainder of 2026 and into the future. With that, I will turn the call over to Jeff.

Thank you, Greg, and good morning, everyone. We are pleased to report that Bond and Specialty started the year with another strong quarter on both top and bottom lines. We generated segment income of $254 million, an excellent combined ratio of 83.3% and a strong underlying combined ratio of 88.9%. Turning to the top line.

We grew net written premiums by a very strong 7% in the quarter to $1.1 billion. In our high-quality domestic management liability business, renewal premium change was slightly higher sequentially while retention remained strong at 87%. We are encouraged by our continued progress in achieving improved pricing through our purposeful and segmented initiatives while continuing to deliver strong retention. Turning to our market-leading surety business.

We are very pleased that we increased net written premiums by 14% from the prior-year quarter. Bond premium growth came from both long-term accounts, many of which are relationships spanning decades, as well as high-quality new accounts recently added to our industry-leading portfolio. These new surety relationships reflect years of efforts spent by our outstanding field team earning trust as well as the strategic investments we have made over time to deliver value beyond the bond itself. Our portfolio of premier contractors is well positioned to continue to benefit from higher and broad-based infrastructure spending.

So Bond and Specialty Insurance delivered strong results in 2026, driven by our consistent underwriting and risk management diligence, excellent execution by our field organization in delivering our leading products and value-added services, and by continuing to leverage our market-leading competitive advantages. And with that, I will turn the call over to Michael.

Thanks, Jeff. Good morning, everyone. In Personal Insurance, we delivered segment income of $704 million for 2026. Strong underlying underwriting income and favorable prior year development both contributed to this excellent bottom line result. The combined ratio of 82.9% was a terrific result in the quarter.

The underlying combined ratio of 78.3% improved by 1.6 points compared to 2025, reflecting strong profitability in both Automobile and Homeowners and Other. Net written premiums for the segment were $3.5 billion. As a reminder, we completed the sale of our Canada personal lines business on 01/02/2026. The decrease in domestic net written premiums of 5% year over year reflects the impact of both auto and home actions we have taken over the past year to improve property pricing, terms, and conditions, and to reduce exposure in high-catastrophe-risk geographies. The decrease also reflects higher ceded premium related to the expanded coverage we purchased as part of the enterprise catastrophe reinsurance program, which renewed on January 1. Turning to Automobile.

Bottom line results continue to be very strong. First quarter combined ratio was 82.9%, reflecting a very strong underlying combined ratio of 88.3% and a 6.3-point benefit from favorable prior year development. As a reminder, the first quarter is historically our seasonally lowest combined ratio quarter in Auto. In Homeowners and Other, first quarter combined ratio was an excellent 83%.

The underlying combined ratio of 69.7% improved by approximately three points compared to the prior-year quarter, primarily related to the continued benefit of earned pricing. As another reminder, the second quarter historically has been the seasonally highest quarter for homeowners weather-related losses. Turning to production. In Automobile, retention of 82% was relatively consistent with recent periods, and renewal premium change continued to moderate, reflective of our strong profitability.

We are pleased to note that both Auto new business premium and the number of new business policies written increased compared to the prior-year quarter. In Homeowners and Other, retention improved to 85%. Renewal premium change in homeowners moderated, reflecting our successful efforts to align replacement costs with insured values. We expect renewal premium change to further moderate into the mid-single digits reflecting improved profitability.

We were encouraged to see new business premium higher year over year as we broadened our disciplined efforts to deploy property capacity. These production results reflect progress toward our objective of delivering profitable growth over time. We are executing a range of initiatives to generate new business growth in both Auto and Property, including continuing to enhance product and pricing segmentation, unwinding eligibility restrictions, lifting agent binding limitations, and increasing new agency appointments. We are focused on providing total account solutions that, together with continued investment in digitization and ease of doing business, make us an indispensable partner for our agents, and an undeniable choice for customers.

To sum it up, we are operating from a position of strength. The underlying profitability in our personal lines business is excellent. Our multiyear efforts to improve returns and manage volatility in the property portfolio are largely behind us, and early signs of growth momentum in both Auto and Home are encouraging. And with that, I will turn the call back over to Abbe.

Thanks, Michael. We will now open the call for questions. To ask a question, please press star followed by the number one on your telephone keypad. We ask that you please limit your questions to one. Your first question comes from Gregory Peters with Raymond James. Good morning, everyone.

So for my first question, Alan and Dan, you have talked about your investment in technology every year for years now, and I am curious how it is affecting the culture of the company. I am thinking about this from two perspectives. First of all, a number of your peers have talked about the potential for headcount reduction. And then at the SBU or line of business level, there are risks, I suppose, of deploying new technology both on growth and margin, and maybe sometimes that might outweigh the benefits.

So some perspective on those two points would be helpful.

Greg, good morning. Thanks for the question. I love that question. I will take you back to, I think, 2017 when we came out and we said innovation is going to be a strategy for The Travelers Companies, Inc.

What we have done in the intervening years really is hone our innovation skills. We are referring to the last, essentially, ten years as innovation 1.0, positioning us for innovation 2.0. But when you talk about the culture, that is a culture that, fortunately, we have developed and honed over a decade. That is everything from how you pick the right initiatives, how you assess performance along the way, how you measure results, how you prepare an organization to manage change, how you communicate to an organization in the middle of change. That has been a constant for us, and I do not think you can wake up on Monday morning and say, okay, we are going to be innovative today.

It is a skill set, and we have a lot of hard-won know-how in doing it. I think that has shaped our culture, which is prepared for it.

Okay. I guess related to looking at the Personal Lines results, again, Michael, just balancing profitability with possibly adjusted pricing to drive new business and growth. Just curious about how you are looking at that equation.

Sure, Greg. Thanks for the question. That is absolutely what we are trying to accomplish: balance growth with returns and generate profitable growth over time. Given the strong profit position, we have taken a number of actions across pricing, eligibility, and distribution management to drive growth.

Importantly, we are 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 ten years. That gives us some flexibility to look at pricing segmentation. That gives us the opportunity to look at base rate levels in certain states to ensure that pricing is consistent with loss costs.

Then, as I mentioned in the prepared remarks, we are executing a range of initiatives across distribution management, expanding eligibility, relaxing limitations, to support that growth. We are encouraged by the momentum we are starting to see.

Got it. Thank you, everyone, for the answers.

Thanks, Greg.

Next question is from David Motemaden with Evercore.

Hey. Thanks. Good morning. I had a question just on the RPC within the Select business. I was a little surprised at the deceleration there. I was hoping you could unpack that a little bit and sort of what lines were driving that deceleration.

Hey, David. If you are referencing the RPC, first of all, let me point out that is 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% and down from the fourth quarter, but that really is a reflection of how we feel about the portfolio, the rate adequacy, and the very deliberate execution by our field organization.

David, I would add to that. When you are looking at that pricing metric—any pricing metric—and I would say this for Select or, frankly, anywhere else, you really have to look at it as a package of what is the pricing, where are the returns, and where is the retention. When you look at that trio together and you look at Select, it is an excellent outcome.

Got it. And then maybe just for my follow-up. I thought the underlying loss ratio in BI was definitely better than I was looking for. Could you just talk through the moving pieces there?

I think last year, you had talked about increased IBNR on liability lines. Any update there? And also, you had talked about some light non-cat property losses the first couple of quarters last year, and there were some questions if that is durable or not. Was wondering if you have any updated thoughts there that you might be reflecting in loss picks.

Yeah, David, it is Dan. Look, overall, we feel really terrific about the underlying profitability in Business Insurance. As Greg called out in his prepared remarks, that has been sustained for quite a while. I think we are in a really sweet spot, to the point Alan was just making about retention, pricing, and returns.

Nothing really unusual in the quarter—sort of the normal suspects that you would expect, a little bit of mix impact—but nothing that we would call out as being particularly unusual, including non-cat weather or anything else.

You also talked about our comment last year on the casualty lines and putting a little bit of what we called, I think, an uncertainty provision—

—in both 2024 and 2025. I think we said that at the end of the 2025 year-end call, but I will repeat it here. We did again carry that into the 2026 loss pick. The losses have not performed poorly. We like the margins in this line, but, again, it is a pretty long-tail line.

There is still a lot of uncertainty. There is still a lot of attorney representation. We are going to have a healthy respect for that uncertainty, and so we did include that provision again in the 2026 loss picks.

Got it. Thanks. That makes sense.

Your next question is from Robert Cox with Goldman Sachs.

Just a question for you around AI exclusions from policy terms. We are hearing brokers talk about increasing inbounds around AI-related exclusions from policy terms. So I am just curious how The Travelers Companies, Inc. is thinking about underwriting exclusions for AI-related risks and if you are seeing this play out in the market at all?

Hey, Rob. Clearly, we review our policy language all the time when there are new perils or dynamics in the marketplace, and that is evolving right now. We have not had any material changes, but it is something we are watching very closely.

Okay. Great. Thank you. Then maybe I just wanted to check in on tort reform.

I know we have talked in the past—Florida is kind of viewed as a success story there. There are a number of other states that have recently passed some fairly comprehensive actions. I am just curious if you think that these other states could have similar outcomes as Florida and if The Travelers Companies, Inc. would plan to proactively change strategy in those states with regards to underwriting and pricing, or would you wait to see an improvement before changing strategy?

Rob, we have been very encouraged by what we saw in Florida, and we have seen other encouraging actions in some other states, as you have mentioned—Georgia, Texas, Louisiana, South Carolina, and so forth. It has 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 are pounding the pavement together with other industries, just making the case for the impact of litigation abuse on affordability. We are really pleased to see early gains, and we hope to continue the momentum. It is hard to answer your question on how we are going to execute with a broad brush, but we will look at the dynamics in each state.

We will look at the actions that states take and, either at the outset or over time, that will impact how we think about the opportunity there and how we execute. But we are hopeful that this is the beginning of some momentum.

Thank you.

Thank you.

Your next question comes from Andrew Anderson with Jefferies.

Hey, good morning. Within BI, as some of these lines continue to see firm pricing other than property, how do you think about the relative attractiveness of workers’ comp from either a growth or a margin perspective?

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, and we are open—more than open—for business in workers’ comp.

Got it. And within surety, growth accelerated again. How would you frame the demand conditions relative to credit quality?

Hey, this is Jeff Klenk responding, Andrew. I would tell you that our growth in the quarter for surety was really broad-based. As I mentioned in the prepared remarks, it was new and existing customers. It was from several different segments within our surety business.

We are really proud of the high credit quality of our book of business. We continue to look at that as we take new customers into that portfolio. We feel really good that our portfolio will continue to benefit from the broad-based infrastructure spending that is out there as we look ahead.

Thanks for the question.

Thank you.

Your next question comes from Josh Shanker with Bank of America.

Yeah. Thank you for putting me in. I was curious about the expense ratio. It is a little higher than it has been in the past, on both the acquisition costs and the other expense ratio. Can you talk about the drivers and how we should think about that as the year progresses?

Sure, Josh. We are not at all surprised with the expense ratio. If you look at our results over the last five or six years, if you look at the quarters within any given full year, it is not at all unusual to see the expense ratio vary by a point or more from quarter to quarter. 2025 really did not, but 2025 was more of an outlier and just sort of happenstance. You mentioned compensation, commission—so things like at what point do you evaluate the level of accrual that you think you are going to need for profit sharing or contingent commission?

In the first quarter last year, we were sitting here coming out of one of the largest cat events in the history of the industry with California wildfires and saying, look, at this rate, we probably do not need a whole lot of accrual for contingent commissions and profit sharing. That is a different situation this year given the profitability of the book in the first quarter. But as I said in my prepared remarks, first quarter came out pretty much where we expected it to be when we gave the guidance last year that we expected 28.5% for this year’s full year.

And on Personal Lines, is there a difference in the complexion of the business that is churning out of your portfolio versus business that you are winning currently?

Thanks, Josh. I would say absolutely. The business that is churning out of the portfolio is not as high quality as the business that is coming in. When we look at the profile of the business lost versus the profile of the business added new, the profile of the business we are adding new is superior to the profile of the business that we are losing.

And what are the qualitative features that make business better? Is it bundled? Is it higher-value homes? Is it more cars per home? Or what is the difference between those two cohorts?

The elements that we look at when we look at profile include all those things—credit quality, limit, bundling, number of vehicles, age of vehicle, age of home—really pretty much across the board. The profile characteristics of the business we are adding are better than the profile characteristics of the business we are losing.

So can we say that you are churning the business you are losing with some intentionality, that that is actually a business you do not want anymore?

I would say we are very happy with the trade-off between what we are writing new and what we are losing. Remember, in Personal Insurance, the business is mostly systematized. There is certainly an element of business we are nonrenewing or declining to offer renewal for based on risk quality, risk characteristics, and our estimate of what the loss ratio relativity on that business is. But really, I think what you are seeing is the successful outcome of a pricing and segmentation strategy that is tuned to attract the business that we want.

Thank you very much.

Your next question comes from Yaron Kinar with Mizuho.

Good morning, everybody. I had two questions on Business Insurance. The first one: It seems like renewal pricing change is below loss trend for the first time in a while, at least based on the last long-term loss trend that the company provided a few years ago. Assuming that persists, how does that change the company’s approach to writing and retaining business?

As an example, I think the last time we saw RPC in this range, retention rates were a bit lower than where they are today.

Yaron, I am not going to respond to whether it is in fact expanding or shrinking on a written basis. But what I will say is we are thrilled with the book of business we have, and we are very happy about the business we are putting on the books. The way we think about the execution is not looking at retention as a headline number. It is executing at a very granular, account-by-account basis.

When you are 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. Given the quality of the book and the returns in this business, the retention and the fact that it ticked up is fantastic.

Okay. Got it. And then my follow-up, again in BI, more focused on Select accounts. I am trying to think about the impact of AI here, where on the one hand it probably offers an opportunity to increase TAM—you can drive scale and efficiency benefits.

But at the same time, it could also mean that we see more of a shift of small commercial to larger brokers with more data and analytics capabilities, maybe greater negotiating power. How do you think about those dynamics, whether I am thinking about this correctly, and how you see the business develop over the coming years with the advent of AI?

I honestly think it is a little too early to know how that is going to happen. We have acquired three digital agencies/brokers over the years—Simply Business, InsuraMatch, and others—expecting the digitization of small commercial to move up in size, and it really has not. For Simply Business, for example, the small commercial it writes is—I would describe it as micro. For whatever reason, we just have not had the take-up there the way we would have expected eight or ten years ago.

Before we see how this business is going to transition from one size of distributor to another, you are going to have to see customers adopt digital distribution for research and purchasing. We just have not seen it.

And, Yaron, one thing I would throw out in addition—we are really excited about Gen AI within the independent agents channel and particularly in Select and in Middle Market. In Select, we have 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 channel. I do not think it has applicability of just changing distribution channels. We think it can be a great facilitator in helping us be more efficient in our existing distribution channels.

Just to go back to your question, to the extent small commercial does gravitate to the larger brokers, that is probably a good thing for us. We have those relationships, and it is probably a plus for The Travelers Companies, Inc.

Thanks so much.

Your next question is from Elyse Greenspan from Wells Fargo. One moment for that last question. We can go to the next, and if Elyse jumps back in, we will take her later. Okay. One moment. Your next question is from Tracey Banque with Wolfe Research. Thank you. Good morning.

Hey, a follow-up on AI and commercial lines distribution. I appreciate your comments on Simply Business and the lower take-up rate. But if I could take that in a different angle, rather than brokers being disintermediated, I am wondering over time, can commission structures change due to the advancement of AI?

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

Okay. Also have a big picture casualty reserving question. Are claim patterns normalizing post-COVID catch-up period? If so, does that inform your loss development factor selection?

Hey, Tracey. Compared to what we saw in COVID, I would say COVID probably disrupted payout patterns as much as we have seen. Normalized relative to that, yes. But the trend in payout patterns in the casualty lines, particularly the long-tail liability lines, has still been increased frequency of attorney representation and a general lengthening of the tail.

The things that we talked about in 2024, when we made some adjustments to our loss picks for accident years 2021 through 2023 and then started to factor in that uncertainty provision I talked about in a question earlier today, are still relevant because we have not seen attorney representation rates slow down. We have not seen severity increases slow down. We have not seen payout patterns return to their pre-COVID patterns. It is an extended payout pattern that has, if anything, continued to slightly extend.

Thank you. Your next question is from Elyse Greenspan with Wells Fargo.

Hi, thanks. Sorry about that earlier. My first question, I wanted to ask just about M&A and capital, Alan. Given that things are starting to soften from a market and premium perspective, or continuing to soften, was hoping to get your current views on M&A—things that you might consider and how that fits into your capital priorities right now.

Elyse, I will give you the same answer that I think I have given you for ten years consistently on that, which is we are always interested in M&A of potentially all shapes and sizes, and we are very active in looking at things. I think our shareholders should demand that we are active in looking at things. Whether that is larger transactions, bolt-ons, or acquiring capabilities, that is all within our thought process and within our regular activity. We do not need to do anything at all to continue to be successful.

We have all the tools and capabilities that we need to be successful. But if we find the right opportunity that meets our objectives—and I have shared many times our objectives—obviously we are going to assess a transaction in a million different dimensions, but we are looking for transactions that either improve our return profile, lower volatility, or provide us with some strategic capability. We are actively looking for those. When we find them and can get them done at the right terms and conditions, we will do it.

Thanks. And then my follow-up on Personal Lines: as we start to think about gas prices being elevated, given what is going on overseas—and I guess the offset could be potential supply chain issues, which would impact severity—gas prices are potentially helpful to frequency. Can you give some color on the outlook for margins within Personal Lines given some of the things going on in the market right now?

Sure, Elyse. The gas price dynamic really depends on duration. Short- to even medium-term increases in gas prices do not materially change commuting patterns and driving levels, so it does have to be a sustained elevation in gas prices to really impact miles driven. To be clear, if gas prices stay high for an extended period of time, that puts downward pressure on miles driven and is a benefit to frequency.

That is the most straightforward dynamic that we could see. But, again, gas prices would need to stay high for an extended period of time to drive that. From a supply chain standpoint, it is a fast-moving, fast-changing situation. There are lots of different things that could happen.

There are scenarios where elevated costs actually put downward pressure on consumers and reduce used car prices because there is not as much demand—as just one example of the type of scenario we could see. At this point, it would be speculative to go beyond that and pick a path.

Your next question is from Michael Zaremski with BMO.

Hey. Thanks. A question on the home insurance side. Michael, I believe you said that pricing would start to move to mid-single digits.

If we look at The Travelers Companies, Inc. historical loss trend in home, it looks like it is well into the double digits. Are you signaling that the loss cost trend is better after the changes you have made, or you are letting margins deteriorate a bit to accelerate growth, or a little bit of both? Especially if you look at the cat load increased guide over the last few years, it has been a bigger part of the equation. Thanks.

Sure, Mike. Taking those pieces and putting them together, the guidance for property pricing moving down towards mid-single digits really just reflects the fact that we have rate adequacy broadly in virtually every state across the country as we sit here today, and we are pleased with the profitability of the portfolio. Importantly, that has been driven by pricing but also by changes in appetite, terms and conditions, and business mix, including state distribution. What you saw between fourth quarter of last year and first quarter of this year was that we had caught up on insurance-to-value.

We had gotten coverage limits where they needed to be on property policies, and so we have gone to a lower inflation factor on those property policies renewing in 2026. That explains most of the quarter-to-quarter drop in RPC. What I am signaling going forward is that rate will also start to moderate in response to that improved profitability. Underneath that is an assumption—based on what we have been seeing—that the elevated inflation you are referring to has returned to a more normal level, and that is aligned with that pricing expectation.

That is helpful. My follow-up, pivoting to Commercial Lines loss cost trend. If we look at your commentary about loss cost trend being mid-single digits plus in the past, and your reserve releases over the last year or more, it kind of implies that loss trend has been a bit below the historical stated trend. Would you agree with that?

Or is loss trend maybe improving slightly versus your historical view? Thanks.

Yeah, Mike. If you look at Business Insurance in particular, a large part of the favorable reserve development we have seen over the last several years in general has been comp related. We have said on comp, each time that it has come up, there has been favorability both in frequency and in severity, particularly in medical cost trend severity. That does not really bleed over into the way we think about loss trend in Commercial Auto or Commercial Property or the General Liability lines as an example.

I do not think that we have seen a sea change in the way we think about loss trend to the positive. There is still a lot of pressure on the liability lines, which is why we continue to talk about things like double-digit pricing in them—in umbrella. Fair question, but I do not think we have seen any big changes there.

Mike, I would add that one of the reasons that we have gotten away from talking about loss trends is because it is a pretty narrow concept of frequency and severity. It is a very blunt instrument to think about what is happening across billions of dollars of premium. Each line has its own dynamic, and there are other things that impact margins. There are base year changes, exposure changes, mix changes, changes in our large loss assumptions, and other adjustments that we make for one reason or another.

There is a lot of estimation in that number. We try to get away from it, but holistically speaking, what I would say is the loss picks we have reflect what we think is going on with loss trend and, on the whole, it behaved about as we expected.

Thanks.

We have time for one more question, and that question comes from Pablo Zuan with JPMorgan.

Hi. Thanks for speaking with me. First, just a quick modeling question. You talked about the impact of the Canada sale on earned and written premiums. I think you had mentioned two points. Should there be a similar proportionate impact on the dollar run rate acquisition and G&A expenses?

I think the way we think about it, Pablo, is just think about combined ratio in general. There is a little bit of a mix difference between the way Canada performed relative to the other lines, but not so significant that we think we should call it out and tell you that you need to adjust the run-rate loss ratio. If you asked the same question about whether it is acquisition cost or G&A or loss ratio or claim and claim adjustment expense—sort of up and down the income statement—we do not think it is going to significantly change the profile of the profitability related to those dollars.

Understood. My second one, just a follow-up to Rob’s questions about AI and not entirely related to the quarter. The Travelers Companies, Inc. is one of the largest cyber writers in the U.S., and the question is, how are you thinking about your exposures there and risk management given recent developments with AI? Thanks.

Thanks for the question, Pablo. Absolutely, it is an underwriting consideration. We are thinking about artificial intelligence, and with some of the more recent announcements in the last few days about the strength of the LLM models and what that could mean. It is not just on the negative side—it also has the potential to be on the positive side from an investment in resilience and capability to actually address the threat.

We are heavily invested and have continued to invest in our risk control capabilities to address the cyber risk issue. Ultimately, we will have to make sure we are staying on top of it in partnership with broader government entities, as we already are. The investments we have made in our cyber risk control team for the benefit of our customers—the really good news for them is that as this technology continues to expand and change, we are going to be in an even better position to help them identify and remediate vulnerabilities as they come about.

Thanks for the question. Thank you very much.

There are no further questions at this time. I will now turn the call back over to Ms. Goldstein for any closing remarks.

Thanks so much. We appreciate you tuning in. We know we left some questions in queue, so as always, please feel free to follow up with Investor Relations. We appreciate your time. Have a good day.

This concludes today’s conference call. Thank you for participating. You may now disconnect.