Travelers Companies (NYSE:TRV) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.
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Access the full call at https://events.q4inc.com/attendee/758651125
Summary
Travelers Companies reported strong financial performance for Q1 2026, with core income of $1.7 billion and a core return on equity of 19.7%.
The company returned $2.2 billion of excess capital to shareholders, including $2 billion through share repurchases, and declared a 14% increase in quarterly dividends.
Net written premiums reached $10.3 billion, with growth in business insurance and bond and specialty insurance, despite a decline in the property line.
The company continues to leverage investments in technology and AI to enhance underwriting precision and customer experience.
Management expressed confidence in navigating future challenges, citing strong capital positions and strategic advantages in the market.
Full Transcript
OPERATOR
Good morning, ladies and gentlemen. Welcome to the first quarter results teleconference for Travelers. We ask that you hold all questions until the completion of formal remarks, at which time you will be given instructions for the question and answer session. As a reminder, this conference is being recorded on April 16, 2026. At this time, I would like to turn the conference over to Ms. Abby Goldstein, Senior Vice President of Investor Relations. Ms. Goldstein, you may begin.
Abby Goldstein (Senior Vice President of Investor Relations)
Thank you. Good morning and welcome to Travelers’ discussion of our first 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, CFO and our three segment presidents, Greg Teslowski of Business Insurance, Jeff 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’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 10-Q and 10-K 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’d like to turn the call over to Alan Schnitzer.
Alan Schnitzer (Chairman and CEO)
Thank you, Abby. Good morning everyone and thank you for joining us today. We’re pleased to report an excellent start to 2026 with strong underwriting performance across all three segments and a strong result from our investment portfolio. We also continued to deliver on key strategic initiatives during the quarter. For the quarter, we earned core income of $1.7 billion or $7.71 per diluted share, generating core return on equity of 19.7% over the trailing four quarters. We generated a core return on equity of 22.7% driven by excellent underlying fundamentals. Underwriting income of $1.2 billion pre tax benefited from strong levels of underlying underwriting income and favorable prior year development. Each of our three segments generated attractive underlying and reported margins. Turning to investments, our high quality investment portfolio continued to perform well after tax. Net Investment income increased by 9% to $833 million, driven by strong and reliable returns from our growing fixed income portfolio. Our underwriting and investment results together with our strong balance sheet enabled us to return more than $2.2 billion of excess capital to shareholders during the quarter, including approximately $2 billion of share repurchases. Even after that return of capital and having made important investments in the business, adjusted book value per share was 16% higher than a year ago. In recognition of our strong financial position and confidence in the outlook for our business, I’m pleased to share that our board of Directors declared a 14% increase in our quarterly cash dividend to $1.25 per diluted share, marking 22 consecutive years of dividend increases with a compound annual growth rate of 8% over that period. Turning to the top line through disciplined marketplace Execution across all 3 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 reno. Premium change in business insurance was 5.8%. Retention increased a point from recent quarters to a very strong 86% and was higher or stable in every line, reflecting deliberate execution on our part and a generally high level of stability in the market. We know a premium change in our core middle market business was about unchanged sequentially also with retention higher at 89%. In terms of the product lines, RPC and auto, CMP and umbrella remained in the double digits. RPC 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. You’ll hear more shortly from Greg, Jeff and Michael about our segment Results the results we released this morning are part of a larger story. They reflect a set of advantages that we have developed and that have compounded over a long period of time. Over the course of many years, we’ve managed through a wide variety of challenging conditions the 2008 financial crisis, dramatic changes in interest rates, a major inflection in liability loss cost trends, a global pandemic, severe natural catastrophes, and periods of heightened geopolitical and economic uncertainty. We didn’t predict the full scope of any of those events, but by carefully balancing risk and reward on both sides of the balance sheet, we were positioned to manage successfully. Through all of them, we’ve consistently delivered growth in book value per share and earnings per share at industry leading returns averaging more than 1000 basis points above the 10 year treasury over the last 10 years. And with industry low volatility, we’ve also built as strong a capital position as we’ve ever had. That track record isn’t a coincidence. It reflects a set of structural advantages that hold up regardless of the environment, starting with the breadth of the franchise. We’re a market leader across nine major lines of insurance, serving personal and commercial customers across the country and diversified across distribution partners, industry class and customer size. That balance, which represents a bigger advantage than people sometimes appreciate, has resulted in our consolidated loss ratio being less volatile than the loss ratio of our least volatile segment. In an uncertain world, that kind of structural hedge is a meaningful source of stability. Where we operate also matters. More than 95% of our premiums 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 our leading market position and the execution you’ve seen from us over the years, we’re well positioned to continue gaining share as we have in our commercial businesses over the past 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’ve grown the business and significantly improved our margins. Our scale is also a significant and growing advantage. Our profitability and cash flow support our ability to invest more than a billion and a half dollars annually in technology, including in our ambitious AI strategy. Our size gives us 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 minus issue of the day. Private credit is a non issue for us. We manage interest rate risk by holding the vast majority of our fixed income securities to maturity and carefully coordinating the duration of our assets and liabilities. Our investing discipline has produced default rates that were a fraction of industry averages through every stress event of the past two decades. You can’t gracefully reposition a portfolio in the middle of a dislocation. The time to build that resilience is before you need it. In short, whether we’re talking about underwriting or investing, the advantages we’ve built are designed to deliver across environments. And they have Before I wrap up, I’d like to share that a number of my colleagues and I have just returned from our Travelers Leadership Conference, a multi day event we host each year for the principals and senior leaders of our most significant distribution partners. As we’ve shared before, the vision for our innovation agenda includes enhancing our value proposition as an indispensable partner to our agents and brokers. We continue to make significant investments to ensure that we realize that vision through best in class products, services and experiences. What we heard consistently is that our deep specialization across a wide range of modernized, simplified and tailored products, along with a broad and consistent appetite, an extraordinary field organization, the ability to deliver exceptional experiences and our industry leading claim capabilities are major differentiators in the market. To sum it up, we’re off to an excellent start for 2026 and we’re highly confident that the advantages that have driven our success will extend our strong record of outperformance. And with that, I’m pleased to turn the call over to Dan.
Dan Fry (Chief Financial Officer)
Thank you Alan. Travelers 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’s 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 2nd, and I wanted to take a couple of minutes to summarize the impact of that sale on our first quarter results. Let’s 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 2 points each. The impact in both business insurance and bond and specialty was about 1 point, while the impact in personal insurance was about 4 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 impacts 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 pre tax, 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 MDA section of our 10Q we reported net favorable prior year reserve development of $413 million pre tax in the first quarter with all three segments contributing in business insurance, net favorable development of $162 million pre tax was driven by commercial property and workers comp in bond and specialty. Net favorable Prior Year Development of $65 million pre tax was driven by better than expected results and surety personal insurance recorded net favorable Prior Year Development of $186 million pre tax with both auto and home contributing after tax. Net investment income increased 9% from the prior year quarter to $833 million. Fixed income Net Investment Income 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 Q1 were about 70 basis points higher than the yield embedded in the portfolio. Our outlook for fixed income Net Investment Income 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 1/4 lag and while not perfectly correlated, our non fixed income returns tend to directionally follow the broader equity markets. In other words, the impact of the decline in financial markets that occurred in the first quarter will be reflected in our second quarter results. Turning to Capital Management, operating cash flows for the quarter of $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 …
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