Travelers Aktie

Good morning, ladies and gentlemen. Welcome to the first quarter results teleconference for Travelers. [Operator Instructions] 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. Abbe Goldstein, Senior Vice President of Investor Relations. Ms. Goldstein, you may begin.

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 Frey, CFO; and our 3 segment presidents, Greg Toczydlowski of Business Insurance; Jeff Klenk of Bond & Specialty Insurance; and Michael Klein of Personal Insurance. We 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.

Thank you, Abbe. Good morning, everyone, and thank you for joining us today. We're pleased to report an excellent start to 2026, the strong underwriting performance across all 3 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 4 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 3 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. 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 and GL workers' comp was stable and RPC in the property line was positive. New business in this segment was a record $775 million, a reflection of our strong value proposition. In Bond & 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'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, 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 and industry-leading returns averaging more than 1,000 basis points above the 10-year treasury over the last 10 years and with industrial volatility. We've also built a strong 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 9 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 and people sometimes appreciate has resulted in our consolidated loss ratio being less volatile in 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've seen from us over the years, we're well positioned to continue gaining share as we have in our commercial businesses over the past 5 years. Equally important is our ability to navigate the loss environment. We have the data, the analytics and the discipline to see changes in loss activity early and to reflect what we see in our reserves, our risk selection, our pricing and our claim strategy. That capability is foundational because until you have an accurate view of the loss environment, the many downstream decisions are working from the wrong inputs.

Our early identification of the acceleration in social inflation is a good example. We adjusted before the market did. And since then, we've grown the business and significantly improved 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 has served us well for decades. We've consistently managed 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-. The 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 2 decades. We can't gracefully reposition a portfolio in the middle of the 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 multiday 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 indefensible partner to our agents and brokers. We continue to make significant investments to ensure that we realize that vision through best-in-class products, services and experiences.

What we heard consistently is that our deep specialization across a wide range of modernized, simplified and tailored products, along with a broad and consistent appetite and extraordinary field organization, the ability to deliver exceptional experiences and our industry-leading claim capabilities are major differentiators in the market.

To sum it up, we're off to an excellent start for 2026 and we're highly confident 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.

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 12-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 of 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'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 of both Business Insurance and Bond & 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 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 3 segments contributing. In Business Insurance, net favorable development of $162 million pretax was driven by commercial property and workers' comp. In Bond & 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 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 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 1-quarter 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, $100 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.

And with that, I'll 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 14th 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 and generally stable market conditions.

Strong new business of $775 million was a quarterly record. These production results benefit from the investments we've 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 competitive advantages, these investments continue to build.

We're pleased with these production results in 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 1 point sequentially to 82%. As expected, we are seeing the benefit of having largely completed our targeted E&P 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. BOP 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. In 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. Travis is a reflection of our ongoing commitment to delivering an industry-leading experience for our distribution partners. In middle market, renewal premium change remained attractive at 6.6% while retention improved 2 points from the fourth quarter to a very strong 89%. Price increases remain broad-based as we achieved higher prices on about 3/4 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'll turn the call over to Jeff.

Thank you, Greg, and good morning, everyone. We're pleased to report that Bond & Specialty started the year with another strong quarter on both the top and bottom lines. We generated segment income of $254 million, an excellent combined ratio of 83.3% and had 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're 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're 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 effort spent by our outstanding field team earning trust as well as the strategic investments we've 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 on Specialty Insurance delivered strong results in the first quarter of 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'll turn the call over to Michael.

Thanks, Jeff, and good morning, everyone. In Personal Insurance, we delivered segment income of $704 million for the first quarter of 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 the first quarter of 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 January 2, 2026. The decrease in domestic net written premiums of [ 5% ] year-over-year reflects the impact of both auto and home actions we've 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. The 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 3 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 real premium change continued to moderate, reflective of our strong profitability. We're 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 owners 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're 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're focused on providing total account solutions that together with continued investment in digitization and ease of doing business, make us an [indiscernible] partner for our agents and an undeniable choice for customers.

To sum it up, we're 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 the early signs of growth momentum in both auto and home are encouraging.

And with that, I'll turn the call back over to Abbe.

Thanks, Michael. Thank you. We are ready to open up for Q&A.

[Operator Instructions] Your first question comes from Gregory Peters with Raymond James.

So for my first question, Alan and Dan, you talked about your investment in technology every year for years now. And I'm curious how it is affecting the culture of the company. And I'm thinking about this from 2 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, their 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 2 points would be helpful.

And I love that question. And I'll take you back to -- I think it was 2017 when we came out and we said, innovation is going to be a strategy for Travelers. And what we've done in the intervening years really is hone innovation skills. And we're referring to the last essentially 10 years is innovation 1.0 positioning us for innovation 2.0. But when you talk about the culture, that's a culture that, fortunately, we've developed and honed over a decade.

And so that's everything from how do you pick the right initiatives, how do you assess performance along the way? How do you measure results, how do you prepare an organization to manage change? How do you communicate to an organization that's in the middle of change. And so that has been a constant for us. And I don't -- I just don't think you can wake up on Monday morning and say, "Okay, we're going to be innovative today". It's a skill set, and we've got a lot of hard one know-how in doing it. And I think that shaped our culture, which is prepared for it.

Okay. I guess related to just -- I'm 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're looking at that equation.

Sure, Greg. Thanks for the question. And that is absolutely what we're trying to accomplish, right, balance growth with returns and generate profitable growth over time. Certainly, given the strong profit position, we've taken a number of actions across pricing eligibility and distribution management to drive growth. And importantly, I think we're doing that. I mentioned it from a position of strength. The same combined ratio and underlying combined ratio in Personal Insurance is the lowest first quarter segment combined ratio in the last 10 years. So 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.

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

Our next question is from David Motemaden with Evercore.

I had a question just on the RRC within the Select business. I was a little surprised that the deceleration there. I was hoping you could unpack that a little bit and sort of what lines were driving that deceleration?

David, if you reference in the RPC, first of all, let me point out, that's a real strong number for Select just at under 9%, and 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 and the rate adequacy and the very deliberate execution of our field organization.

David, I'd add to that, when you're 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's the pricing, where are the returns and where is the retention. And when you look at that trio together and you look at Select, it's an excellent outcome.

Got it. And then maybe just for my follow-up. I thought the underlying loss ratio in BI that 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 increasing IBNR on liability lines. You saw maybe an update there. And then also, you guys had talked about some light non-cat property losses, I think, in the first couple of quarters last years and -- last year, and there were some questions if that is durable or not. So I was wondering if you have any updated thoughts there that you might be reflecting in loss picks?

Yes, David, it's Dan. I'll take that. So look, overall, I feel really terrific about the underlying profitability in Business Insurance. And as Greg called out in his prepared remarks, now that's been sustained for quite a while. So I think we're in a really sweet spot for 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. We also talked about our comment last year on the casualty lines and putting a little bit of what we call, I think, an uncertainty provision in both 2024 and 2025.

I think we said at the end of the 2025 year-end call, but I'll repeat it here. We did again carry that into the 2026 loss pick. So -- so the losses have not performed poorly. We like the margins in this line. But again, it's a pretty long tail line. There's still a lot of uncertainty. There's still a lot of attorney rep. We're going to have a healthy respect for that uncertainty. And so we did include that provision again in the 2026 loss picks.

Your next question is from Rob Cox with Goldman Sachs.

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

Rob, this is Greg. Clearly, we're looking at our policy language all the time when there's new perils or dynamics in the marketplace. And that's evolving right now, and we haven't had any material changes, but it's something we're watching very closely.

Okay. Great. And then maybe I just wanted to check in on tort reform. I know we've talked in the past, Florida is kind of viewed as a success story there. There's a number of other states who have recently passed some fairly comprehensive actions. I'm just curious if -- do you think that these other states could have similar success as Florida and if Travelers 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've been very encouraged by what we saw in Florida, and we've seen other encouraging actions in some of the states, as you've mentioned, Georgia, Texas, Louisiana, South Carolina and so forth. So it's been terrific to see and I think in part attributable to a really strong ground game that we and the rest of the industry have put on, just state-by-state, making sure that we're pounding the pavement together with other industries just making the case for the impact of litigation abuse on affordability.

And so we're really pleased to see early gains, and we hope to continue the momentum. We will -- it's hard to answer your question on how we're going to execute on a -- with a broad brush, but we will look at the dynamics in each state. We'll look at the actions that states take and either at the outset or over time, that will impact how we think about the opportunity there and how we execute. But we're hopeful that this is the beginning of some momentum.

Your next question comes from Andrew Anderson with Jefferies.

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 be -- continues to perform very well. You can look at the calendar year returns. And we are more than open for business and workers' comp.

Got it. And within Surety growth accelerated again, how would you kind of frame the demand conditions relative to credit quality?

Yes. This is Jeff Clink 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 of the 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. And we feel really good that our portfolio will continue to benefit from this broad-based infrastructure spending that's out there as we look ahead. Thanks for the question.

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

I was curious about the expense ratio. It's a little higher than it's 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. It's Dan. So we're not at all surprised with the expense ratio. If you look at our results over the last 5 or 6 years, if you look at the quarters within any given full year, it's not at all unusual to see the expense ratio vary by 1 point or more from quarter-to-quarter. 2025 really didn't, but '25 was more of an outlier and just sort of happen stance.

So you mentioned compensation commissions. So things like at what point do you evaluate the level of accrual that you think you're going to need for profit sharing or contingent commission. And so 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 don't need a whole lot of extra accrual for contingent commissions and profit sharing. That's 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 a business that's churning out of your portfolio versus business that you're winning currently?

Thanks, Josh. It's Michael. I would say, absolutely, the business that's churning out portfolio is not as of high quality as the business that's 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're adding new is superior to the profile of the business that we're losing.

And what are the qualitative features that make that business better? Is it bundled? Is it higher value homes? Is it more cars per home? Or what is the difference between those 2 cohorts?

I mean, 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 portfolio -- the profile characteristics of the business we're adding is better than the profile of the characteristics of the business we're losing.

So can we say that you're churning the business you're losing with some intentionality, that's a business you don't want any more?

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

Your next question comes from Yaron Kinar with Mizuho.

I had 2 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. And 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.

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

Okay. Got it. And then my follow-up, again, NBI, more focus on select accounts. I'm just trying to think about the impact of AI here, where, on the one hand, I think it probably offers an opportunity to increase TAM, you can drive scale and efficiency benefits there. 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. So I'm just curious to hear how you think about those dynamics, whether am I thinking about this is correct. How do you see the business develop over the coming years with the advent of AI?

I honestly think it's a little too early to know how that's going to happen. We acquired -- we've acquired 3 digital agencies brokers over the years, Simply Business Insurance and InsuraMatch expecting the digitization of small commercial or move up in size and it really hasn't. And we think about simply business, for example, the small commercial, it writes is, I would describe it as micro. And for whatever reason, we just haven't had the take up there the way we would have expected 8 or 10 years ago. So I think before we see how this business is going to transition from one size of distributor to another, you're going to have to see customers adopt that way, adopt digital distribution for research and purchasing. We just haven't seen it.

And one thing I would throw out in addition, we're really excited about the GenAI within the independent agent channel and particularly Select and in middle market. And in Select, we've executed some GenAI 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. So I don't think it has all applicability of just changing distribution channels. We think it can be a great facilitator and having us be more efficient in our existing distribution channels.

And your -- just to go back to your question, to the extent small commercial does gravitate to the larger brokers, it's probably good for -- I mean, it's probably a good thing for us. We've got those relationships and that's probably a plus for Travelers.

Your next question is from Elyse Greenspan from Wells Fargo.

We can go to the next and if Elyse jumps back and we'll take her later.

Okay. One moment. Okay. Your next question is from Tracy Benguigui with Wolfe Research.

A follow-up on the AI and Commercial Lines distribution. I appreciate your comments on Simply Business and the lower tick up rate. But if I could take that in a different angle, rather than bookers being disintermediated, I'm wondering, over time, can commission structures change due to the advancement of AI.

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

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

Tracy, it's Dan. So compared to what we saw in COVID, I would say COVID was probably as disrupted payout patterns as we saw. So normalize 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 reps, general lengthening of the tail. So the things that we talked about in the middle of 2024 when we made some adjustments to our loss picks for accident years '21 through '23 and then started to factor in that uncertainty provision, I talked about in a question earlier today is still relevant because we have not seen attorney rep rate slowdown. We have not seen increases of slowdown. We have not seen payout patterns return to their pre-COVID -- pre-COVID patterns, it's an extended payout pattern that as, if anything, continues to slightly extend. .

Your next question is from Elyse Greenspan with Wells Fargo.

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

So Elyse, I'll give you the same answer that I think I've given you for 10 years consistently on that, which is we're always interested in M&A of all potentially shapes and sizes, and we're very active in looking at things. I think our shareholders should demand that we're active in looking at things. And whether that's the larger transactions or whether we're considering bolt-ons or whether we're considering acquiring capabilities, that's all within our thought process and within our regular activity. I don't -- we don't need to do anything at all to continue to be successful. We've got all the tools and capabilities that we need to be successful. But if we find the right opportunity that meets our objectives, and I've shared many times, our -- I mean obviously, we're going to assess the transaction in 1 million different dimensions, but we're looking for transactions that either improve our return profile, lower volatility or provide us with some of the strategic capability. And we're active looking for those and when we see them and can get them done at the right terms and conditions, we'll do it.

And then my follow-up on personal lines, as we start to think about gas prices being elevated, just given what's going on overseas and I guess the offset could be potential that there's potentially supply chain issues, right, which would impact severity gas prices, obviously, potentially helpful to frequency. Can you guys just -- just hoping to get some color just on the outlook on just for margins within personal lines given some of the things going on in the market right now?

Sure, Elyse. It's Michael. I would say the gas price dynamic really depends on duration short to even medium-term increases in gas prices don't materially change commuting patterns and driving levels. So it does have to be a sustained elevation in gas prices to really impact miles driven. And to be clear, if gas prices stay high for an extended period of time that puts downward pressure on miles driven and it's actually a benefit to frequency. That's the most kind of 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, I mean, it's a fast-moving, fast-changing situation. There's a lot of different things that could happen. There are scenarios where elevated costs actually put sort of downward pressure on consumer purchases and actually reduce used car prices because there's not as much demand. As just one example of the type of scenario we could see, but at this point, it would be speculative to really go beyond that and sort of pick a path.

Your next question is from Mike Zaremski with BMO.

A question on the home insurance side. Mike, I believe you said, Michael, that pricing would start to move to the mid-single digits. And if I look at -- if we look at Travelers' historical loss trends in home, it looks like it's well into the double digits. So are you signaling that that the loss cost trend is better after kind of the changes you've made or you're letting margins deteriorate a bit to accelerate growth or a little bit of both? Because especially if you look at the cat load increased guide over the last few years, it's pretty much all emanated from being a bigger part of the equation.

Sure, Mike. This is Michael. Sort of taking those pieces and putting them together, what I would say is 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're pleased with the profitability of the portfolio.

And I think importantly, that's been driven by pricing but also by changes in appetite, terms and conditions and business mix, including state distribution. And so what you saw between fourth quarter of last year and first quarter of this year was really 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've gone to a lower inflation factor on those policy -- property policies renewing in 2026. That really explains most of the quarter-to-quarter drop in RPC.

What I'm signaling in the go forward is that rate will also start to moderate in response to that improved profitability. And underneath that certainly is an assumption based on what we've been seeing that the elevated inflation that I think you're referring to in your question, has returned to a more normal level, and so that's aligned with that pricing expectation.

That's helpful. And my follow-up is pivoting to Commercial Lines loss cost trend. And if we look at your commentary about loss cost trend being mid-single digits plus in the past. If you look at kind of your reserve releases and especially 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?

Yes, Mike, it's Dan. I think -- if you look at Business Insurance, in particular, a large part of the favorable reserve development we've seen over the last several years in general has been comp related. And we've said on comp each time that it's come up, there's been favorable -- favorability in both frequency and in severity, particularly in medical cost trend severity. That doesn't 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. So I don't think that we've seen a sea change in the way we think about loss trend to the positive. There's still a lot of pressure on the liability lines, which is why we continue to talk about things like double-digit pricing in umbrella. Fair question, but I don't think we've seen any big changes there.

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

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

So first, just a quick modeling question. You talked about the impact of the Canada sale and earned and written premiums. I think you had mentioned 2 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. And so there's 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 would call it out and tell you, you need to adjust the run rate loss ratio. So you asked the same question you asked about whether it's acquisition cost or G&A or loss ratio or claims and claim adjustment expense sort of up and down the income statement, we don't think it's going to significantly change the profile of the profitability related to those dollars.

Understood. And then the second one, just a follow-up to Rob's question on AI and not entirely related to the quarter. So Travelers is one of the largest hybrid riders in the U.S. And I guess the question is, how are you thinking about your exposures there on risk management given recent developments of the AI?

Yes. Thanks for the question, Pablo. It's Jeff. So absolutely, it is an underwriting consideration. We're 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's not just on the negative side. It's also got the potential to be on the positive side from an investment in resilience and capability to actually address the threat. And so we're heavily invested. We've continued to invest in our risk control capabilities to address the cyber risk issue.

And I think that ultimately, we're going to have to make sure we're staying on top of in partnership with broader government entities as we already are. And I think the investments we've 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're going to be even in a better position to help them identify and remediate vulnerabilities as they come about.

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

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

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

Good morning, ladies and gentlemen. Welcome to the Fourth Quarter Results Teleconference for Travelers. [Operator Instructions] As a reminder, this conference is being recorded on January 21, 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 Travelers' discussion of our fourth quarter 2025 results. We released our press release, financial supplement and webcast presentation earlier this morning. All 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 3 segment Presidents, Greg Toczydlowski of Business Insurance, Jeff Klenk of Bond & 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.

Thank you, Abbe. Good morning, everyone, and thank you for joining us today. We're pleased to report excellent fourth quarter and full year results, with strong and broad-based performance across both underwriting and investments. For both periods, the bottom line results were driven by very strong underlying underwriting income. Particularly given the written margins remain attractive, this is a durable dynamic.

For the quarter, we earned core income of $2.5 billion or $11.13 per diluted share, generating core return on equity of 29.6%. Underwriting income of $2.2 billion pretax increased 21% compared to the prior year quarter, benefiting from higher underlying underwriting income, higher favorable prior year reserve development and a lower level of catastrophe losses. The underlying result was driven by strong net earned premiums and excellent margins. The underlying combined ratio improved nearly 2 points to 82.2%. Underwriting results were strong in all 3 segments.

Our high-quality investment portfolio also continued to perform well, generating after-tax net investment income of $867 million for the quarter, up 10%, driven by strong and reliable returns from our growing fixed income portfolio.

Our terrific underwriting and investment results, together with our strong balance sheet, enabled us to return $1.9 billion of capital to shareholders during the quarter, including $1.7 billion of share repurchases. Importantly, at the same time, we continue to make significant strategic investments in our business. Even after this deployment of capital, adjusted book value per share was up 14% compared to a year ago.

Turning to the top line. Through disciplined marketplace execution across all 3 segments, we grew net written premiums to $10.9 billion in the quarter. In Business Insurance, we grew net written premiums to $5.5 billion. Excluding the property line, we grew domestic net written premiums in the segment by 4%.

As I shared last quarter, the declining property premium is a large account dynamic. We'll continue to be disciplined in terms of risk selection, pricing and terms and conditions.

Renewal premium change in Business Insurance was 6.1%. Renewal premium change in auto, CMP and umbrella remained in the double digits. Excluding the property line, renewal premium change came in strong at just over 8%, including workers' comp, which continues to be low single digits positive. Given the attractive returns, we were pleased that retention in the segment remained strong at 85%.

In Bond & Specialty Insurance, we grew net written premiums to $1.1 billion with excellent retention of 87% and positive renewal premium change in our high-quality management liability business. In our industry-leading surety business, we grew net written premiums from a very strong level in the prior year quarter.

In Personal Insurance, net written premiums of $4.2 billion reflected continued strong renewal premium change in homeowners and higher new business in auto. You'll hear more shortly from Greg, Jeff and Michael about our segment results.

Before I turn the call over to Dan, I'd like to take a step back and talk about what's driving this performance and what's ahead. About 10 years ago, we embarked on an innovation strategy designed to position our business to grow at industry-leading returns with low volatility.

As you can see on Slide 18 of our webcast presentation, over the past decade, we've grown our top line at a compound annual rate of 7% while improving our underlying profitability by almost 8 points. Notwithstanding a significant increase in our technology spending, that improvement in underlying profitability includes a 3-point or 10% improvement in our expense ratio. As a consequence of all that, compared to 10 years ago, our underlying underwriting income is more than 4x what it had been, our cash flow from operations has more than doubled and our investment portfolio has grown by 50% to more than $100 billion.

As you can see on Slide 19, over that same period, core return on equity has averaged more than 1,000 basis points over the 10-year treasury at industry low volatility, and we've grown earnings per share on average by 12%. In short, the execution of our strategy has been exceptional. We think about that chapter as Innovation 1.0.

Our success with Innovation 1.0 is the result of having done 3 difficult things very well, identifying the initiatives that really matter and passing on the merely good ideas that don't, executing effectively and capturing the value of what we built.

Over the decade, we developed the competitive advantage of an innovation skill set. Now we're bringing all that hard one know-how to Innovation 2.0 at Travelers, powered by AI and not too far off quantum computing.

The P&C industry is well positioned to benefit from AI across the entire value chain. This generation of AI can understand and execute on the complex stakeholder interactions, well-defined processes, data-intensive workflows and massive amounts of unstructured data that characterize our industry. It gains compound over many, many interactions. In that context, Travelers is particularly well positioned.

As an industry leader, we bring differentiating domain expertise. Because AI amplifies existing strength, leaders in the domain are best positioned to use it to drive improvement. In addition, we have decades of high-quality data from millions of transactions and interactions and the scale to invest at significant levels as AI and technology continue to segment the market.

We have thousands of engineers, data scientists and analysts building AI and other sophisticated technology solutions. Dozens of scale generative AI tools are already in production. Millions of transactions are now automated. More than 20,000 of our colleagues use AI tools on a regular basis, and agentic AI isn't a future aspiration, it's embedded in our business operations today.

Last week, we and Anthropic announced a partnership to empower 10,000 of our engineers, data scientists, analysts and product owners with personalized context-aware and integrated AI assistance. This initiative will enhance and accelerate the development of software, analytics and predictive models.

In extensive testing, we achieved significantly improved engineering output and meaningful productivity gains. We expect that this will result in faster and more cost-effective delivery of new capabilities across Travelers, everything from product development to new business prospecting, to underwriting speed and quality, the agent and customer service and more, benefiting our business, our customers and our distribution partners.

In our claim organization, more than half of all claims are now eligible for straight-through processing, with customers adopting straight-through processing about 2/3 of the time. Another 15% of all claims are processed with advanced digital tools. All of those percentages are growing.

To accommodate customers who still prefer to call in to report a claim, just last week, we launched a natural language generative AI voice agent that takes first notice of loss by phone. Early customer adoption is exceeding our expectation. The results are tangible.

In our claim organization, investments we've made, including an automation, straight-through processing and analytics, refine indemnity payouts and drive operational efficiencies. It's worth pointing out that the efficiency gains in our claim organization come through loss adjustment expense, benefiting the loss ratio.

As just one example, our claim call center population is down by 1/3. And this year, we'll be consolidating 4 claim call centers down to 2. And of course, we're deploying AI broadly across the business. Other use cases enhance underwriting decision quality and efficiency and improve the experience for customers, agents, brokers and employees.

You'll hear some examples from Greg, Jeff and Michael. We're still early in this transformation, which means the benefits, more effective underwriting, improved operating leverage and profitable growth will continue to build.

To sum it up, our results this year and over time reflect the power of our earnings engine, fueled by the disciplined execution of our strategy. For the full year, core income was up 26% to $6.3 billion or $27.59 per diluted share, generating core return on equity of 19.4%. And during the year, we grew adjusted book value per share by 14% after returning $4.2 billion of excess capital to shareholders and investing more than $1.5 billion in cutting-edge AI and other technology initiatives.

Our operational and financial success in the face of another year of elevated catastrophe losses for the industry supports our ability to be there for our customers. In 2025, we handled 1.5 million claims. That's about one every 20 seconds and paid out more than $23 billion in claim payments. We also met our objective of closing 90% of claims arising out of catastrophes within 30 days. 2026 and in future years, we'll be there to help our customers and communities recover and to enable individuals and businesses to thrive.

Looking ahead, we're also very well positioned to continue generating substantial shareholder value. The durability of our strong underlying business performance provides a powerful foundation for continued strong bottom line results, leading returns and strong cash flows. Operating from this position of strength, we remain highly confident in the outlook for Travelers in 2026 and beyond.

And with that, I'm pleased to turn the call over to Dan.

Thank you, Alan. Core income for the fourth quarter was $2.5 billion and core return on equity was 29.6%, as we once again delivered excellent financial results on a consolidated basis and in all 3 segments. The full year underwriting results were also excellent on both an underlying and as-reported basis, and net investment income was once again higher than a year ago.

The strong fourth quarter finish brings full year core income to $6.3 billion and full year core ROE to 19.4%. In Q4, we generated higher levels of written and earned premiums compared to a year ago while delivering excellent combined ratios on both the reported and underlying basis.

At 82.2%, the underlying combined ratio marked its fifth consecutive quarter below 85%. The combination of higher premiums and the improved underlying combined ratio led to a 15% increase in after-tax underlying underwriting income. That brings the full year after-tax underlying underwriting results to $5.5 billion, up 23% from the prior year. The growth in underlying underwriting income in recent years is worth an extra minute of commentary.

In 2022, we reported a very strong $2.1 billion after tax. Through the successful and disciplined execution of our strategy, we grew that figure to $3.2 billion in 2023 and to $4.5 billion in 2024 and now to $5.5 billion for 2025. Those earnings are what drives strong cash flow from operations, which, after averaging about $4 billion for the 10 years from 2011 through 2020, surpassed $9 billion in 2024 and reached $10.6 billion in 2025.

Expense ratio for the fourth quarter was 28.4%, bringing the full year expense ratio to 28.5% as expected. We continue to expect the expense ratio for 2026 to be right around 28.5%. Catastrophe losses in the quarter were $95 million pretax.

Turning to prior year reserve development. We had total net favorable development of $321 million pretax in the quarter, with all 3 segments contributing.

In Business Insurance, net favorable PYD of $205 million was driven by favorability in workers' comp. In Bond & Specialty, net favorable PYD of $30 million was driven by better-than-expected results in Fidelity and Surety. Personal Insurance had $86 million of net favorable PYD with favorability in both auto and home.

After-tax net investment income of $867 million increased by 10% from the prior year quarter. Fixed maturity NII was again the driver of the increase, reflecting both the benefit of higher invested assets and higher average yields.

Driven by the strong cash flows I referenced earlier, during 2025, we grew our investment portfolio by approximately $7.5 billion to $106 billion. As of December 31, new money rates were about 70 basis points above the yield embedded in the portfolio.

In terms of our outlook for fixed income NII for 2026, including earnings from short-term securities, we expect approximately $3.3 billion after tax, beginning with about $800 million in the first quarter and growing to about $870 million in the fourth quarter. As with underwriting income, the growth in investment income over the past several years has been significant. Our 2026 outlook represents nearly twice as much fixed income NII as we delivered in 2021 just 5 years ago.

Page 22 of the webcast presentation provides information about our January 1 catastrophe reinsurance renewal, and we're very pleased with the changes for 2026. Our long-standing cat XoL treaty continues to provide coverage for both single cat events and the aggregation of losses from multiple cat events. The per occurrence loss deductible is unchanged at $100 million. And for 2026, we dropped the attachment point to $3 billion compared to the $4 billion attachment point we had in 2025.

We believe an all perils cat aggregate is the most efficient way to protect the balance sheet. And the combination of our industry outperformance, refined reinsurance structures and more favorable reinsurance pricing have allowed us to meaningfully improve our coverage with only a modest increase to our total ceded premium costs. We also renewed the enhanced casualty reinsurance program first introduced for 2025. We were once again able to purchase working layer coverage on a roughly margin-neutral basis.

On Page 23 of the webcast presentation, we have again provided both a summary of the seasonality of our cat losses over the prior decade and a view of our cat plan by quarter for 2026. As you can see, the 2026 cat plan in terms of combined ratio points is higher than both the 5- and 10-year averages.

As a reminder for your modeling in terms of seasonality, as you can see from the data, the second quarter has historically been our largest cat quarter. Also of interest for 2026, we continue to value our relationship with Fidelis and are very pleased to have once again renewed our 20% quota share with them. The renewal includes the same loss ratio cap we've had in place since the quota share began in 2023.

Interest rates decreased during the quarter, and as a result, our net unrealized investment loss decreased from $2 billion after tax at September 30 to $1.5 billion after tax at December 31. Adjusted book value per share, which excludes net unrealized investment gains and losses, was $158.01 at year-end, up 14% from a year ago.

Turning to capital management. We returned $1.9 billion of capital to our shareholders this quarter, comprising share repurchases of $1.65 billion and dividends of $244 million. In our prepared remarks last quarter, we indicated that we expected to execute roughly $1.6 billion of share repurchases in the first quarter of 2026, including the use of about $700 million from the sale of our Canadian operations, which did close as planned on January 2.

Even with the increased level of share repurchases we just executed in Q4, given the strong finish to the 2025 year, we now expect repurchases of around $1.8 billion in Q1. Of course, the actual amount and timing of repurchases will depend on a number of factors, including cat events and other quarterly earnings impacts as well as other factors we disclosed in our SEC filings.

I'd like to make one other comment on capital management to help with your models. Given the growth we've generated over the past several years and the outlook for continued growth, we're now more likely to issue debt every year, assuming we're comfortable with market conditions. Our recent history has been to issue debt every other year. Annual debt issuance allows us to maintain a more consistent debt-to-capital ratio.

Recapping our results for 2025, we're very pleased to have delivered net and core income of $6.3 billion, core return on equity of 19.4%. We ended the year with our all-time high in adjusted book value per share and with our largest investment portfolio ever. In short, we're extremely well positioned for 2026 and beyond.

And with that, I'll turn the call over to Greg for a discussion of Business Insurance.

Thanks, Dan. Business Insurance had another very strong quarter, rounding out another terrific year in terms of financial results, execution in the marketplace and progress on our strategic initiatives.

Segment income for the quarter was nearly $1.3 billion and up more than $100 million from the prior year quarter. Improvement from the prior year was driven by higher net investment income, higher favorable prior year reserve development and lower catastrophes.

The all-in combined ratio of 84.4% was a great result and about 1 point better than the prior year quarter. We're once again particularly pleased with our exceptional underlying combined ratio of 87%. The underlying loss ratio was the second best quarterly result ever, trailing only last year's fourth quarter record. The expense ratio remained excellent at 29.3%.

Turning to the top line. Net written premiums reached an all-time fourth quarter high of more than $5.5 billion. We grew our leading select and middle market businesses by 4% and 3%, respectively. These 2 markets make up almost 3/4 of our net written premiums for Business Insurance in the quarter.

We saw a decline in national property premiums, reflecting our disciplined execution in terms of risk selection, pricing and terms and conditions. Excluding the property line, domestic net written premiums were up 4%. As always, our focus is on writing business that meets our risk profile and underwriting standards and where we can get an appropriate price with terms that reflect the exposures perils.

As for production across the segment, pricing remained attractive with renewal premium change of just over 6%. Excluding the property line, RPC was strong at 8%. Renewal premium change was positive in all lines, including property and double digits in CMP, umbrella and auto. Retention remained excellent at 85% and new business of $675 million was up 6% from the prior year quarter.

We're pleased with these production results and our field's execution of our proven segmentation strategy. Across the book, pricing and retention results this quarter reflect excellent execution, aligning price, terms and conditions with environmental trends for each line.

As for the individual businesses, in Select, renewal premium change and renewal rate change both remained strong for the quarter and about flat with third quarter levels. Retention was up 2 points from the fourth quarter of last year as we continue to wind down our CMP risk return optimization efforts. Lastly, new business was up 6% from the fourth quarter of last year to a healthy $139 million.

In our core middle market business, renewal premium change remained attractive at 6.6%. Price increases remain broad-based as we achieved higher prices on about 3/4 of our middle market accounts. And at the same time, the granular execution was excellent with meaningful spread from our best-performing accounts to our lower-performing accounts.

To a large degree, the sequential decline in RPC was impacted by the property line, where RPC remains positive, healthy and reflective of attractive returns. We're pleased that middle market retention remained exceptional at 87% and new business of $395 million was up 11% to an all-time fourth quarter high.

As we close out 2025, let me provide a little color on full year results before turning the call over to Jeff. We're very pleased to report segment income of nearly $3.7 billion, an underlying combined ratio of 88% and top line of $22.7 billion. This was the third year in a row where we delivered an underlying combined ratio of less than 90%.

As for production, renewal premium change and retention both remained historically high, while new business premiums approaching $3 billion reached an all-time best. These sustained exceptional results are a direct reflection of our strong value proposition as well as the successful execution of our thoughtful and deliberate strategies.

Beyond our execution excellence, we're pleased with the contributions we're getting from our ongoing strategic initiatives. The decision support tools we're putting in the hands of our underwriters at the point of sale, including models that drive risk characteristics, refine technical pricing and summarize historical model loss experience results in better risk selection, pricing and terms and conditions.

In addition, we're encouraged by the impact we're seeing from our product and user experience initiatives, including how well they've been received in the market. Our new BOP product is now fully rolled out, and our new auto product is live in 46 states. Both products contain industry-leading segmentation, which contributes to profitable growth. We also continue to enhance the insights around our submissions based on quality and appetite that allow our underwriters to focus on those new business opportunities that we most want to add to the portfolio.

We're pleased with our progress with gen AI. We're building and executing a robust portfolio of gen AI initiatives that will enable enhanced risk assessment and selection, ultimately improving loss experience as well as drive gains in productivity and efficiency and improve our industry-leading experience for our agents and brokers.

As just one example, we've recently rolled out gen AI agents to efficiently mine both internal and external data sources to better understand and synthesize the risk characteristics and ensure appropriate business classification. This capability both accelerates the underwriting process and results in improved risk classification and segmented pricing.

To sum up, we feel terrific about our performance and financial results in 2025. We're excited about what we're investing in for the future, and we have the best people in the business. And they're not only executing with excellence in the market today, but they're also helping to shape the transformation of our industry. In short, we're well positioned for continued profitable growth.

With that, I'll turn the call over to Jeff.

Thank you, Greg, and good morning, everyone. Bond & Specialty ended the year with another strong quarter on both the top and bottom lines.

In the fourth quarter, we generated segment income of $236 million and an excellent combined ratio of 83%. A strong underlying combined ratio of 85.7% was a little more than 1 point better than the prior year quarter.

Turning to the top line. We grew net written premiums by 4% in the quarter to $1.1 billion. In our high-quality domestic management liability business, renewal premium change was 2.8%, while retention remained strong at 87%. We're very pleased with the progress we've achieved to improve pricing through our purposeful and segmented initiatives while continuing to deliver strong retention.

As we expected, new business was lower than the fourth quarter of 2024. As a reminder, this is the final quarter of year-over-year new business impact from our Corvus acquisition, with most Corvus production now reported as renewal premium.

Turning to our market-leading surety business. Net written premiums increased from the very strong prior year quarter, reflecting strong demand for our products and unparalleled value-added services. So we're pleased to have once again delivered strong results in Bond & Specialty this quarter.

Reflecting on the full year, we're also very pleased with the performance of our business in 2025. In our Management Liability business, we successfully navigated ongoing soft market conditions, and we're among the first carriers to drive higher pricing to improve product returns where needed. Despite market headwinds, we drove profitable account and premium growth by leveraging our investments in advanced analytics, including the automated delivery of next-generation sophisticated pricing models.

Our AI investments to automate submission intake for new business reduced our time to ingest submissions from hours to just minutes, and we recently extended automation capabilities to renewal workflows. We've also made important investments in sales effectiveness and enhancements to our product offerings.

In capitalizing on our Corvus acquisition, we've successfully extended cyber risk services to customers across our portfolio. This includes always-on threat monitoring with same-day alerts, continuous dark web surveillance, 24/7 access to a tailored policyholder dashboard and personalized security consultations from our in-house cyber experts. As we've expected, these capabilities are helping our customers to more effectively manage cyber risks and are mitigating our exposure to evolving cyber vulnerabilities.

In our surety business, we drove solid growth by capitalizing on our industry-leading expertise and premier value-added service offerings. We've entered into new and expanded distribution arrangements domestically and internationally that position us for continued growth. We've more closely aligned and integrated our outstanding Canadian surety operation, which contributes to our position as the leading surety in North America.

And in our commercial surety flow business, we've leveraged AI to enhance distribution submission and fulfillment experiences, improving efficiency and fueling growth. All of these investments and initiatives and the terrific execution by our outstanding team drove another strong year of profitable growth in Bond & Specialty, and we're excited about the opportunities that lie ahead.

And with that, I'll turn the call over to Michael.

Thanks, Jeff. I'm very pleased to share that Personal Insurance generated segment income of more than $1 billion in the quarter and a combined ratio of 74%. Both results reflect the strong underlying fundamentals of our business.

For the full year, Personal Insurance generated over $2 billion of segment income and a combined ratio of 89.5%. These results improved compared to the prior year, notwithstanding significant losses from the California wildfires, reflecting the strength of our diversified book of business and our disciplined approach to selecting pricing and managing risk.

Net written premiums in the fourth quarter were comparable to the prior year, reflecting strong renewal premium change in homeowners and other and higher auto new business premiums. Full year net written premium increased 2% to a record $17.4 billion.

In auto, the fourth quarter combined ratio was 89.4%, reflecting a strong underlying combined ratio and favorable net prior year development. The underlying combined ratio of 92.2% improved just over 4 points compared to the prior year quarter, driven by continued frequency -- continued favorable frequency across coverages with sustained moderation in severity, partially offset by the impact of continued moderation in earned pricing. This quarter's underlying combined ratio included a 3-point benefit related to the re-estimation of prior quarters in the current year.

The full year auto combined ratio of 85.7% represents improvement of over 9 points compared to the prior year as we experienced favorability in both frequency and severity.

In Homeowners and Other, the fourth quarter combined ratio of 60.3% improved by 7.5 points compared to the prior year quarter, primarily as a result of improvement in the underlying combined ratio and lower catastrophe losses. The underlying combined ratio of 59.9% improved by 5.5 points compared to the prior year quarter, reflecting the impact of our actions to achieve target returns. The year-over-year favorability was primarily related to the benefit of property earned pricing as well as favorability in non-catastrophe weather and non-weather losses.

Stepping back, the 2025 full year property combined ratio of 93% was a notable improvement compared to the prior year. This reflects our actions to manage exposures in high catastrophe risk geographies, along with favorable non-catastrophe weather losses.

Turning to production. Our results reflect continued disciplined execution to position our diversified portfolio to deliver long-term profitable growth. In domestic auto, retention of 82% increased slightly from recent quarters. Renewal premium change of 2.2% continued to moderate as expected and will continue to do so in 2026, reflecting our sustained profitability and our focus on generating growth. Auto new business premium was up year-over-year as new business momentum continued in states less impacted by our property actions.

In domestic Homeowners and Other, retention of 84% remained relatively consistent with recent quarters. Renewal premium change remained strong at 16.7% as we concluded our efforts to align replacement costs with insured values.

We continue to expect RPC to drop into the single digits beginning in early 2026, reflecting improved profitability and values that have now largely aligned with replacement costs.

Quarterly new business premium and policies in force declined compared to the prior year. These production results reflect the deliberate choices we've made to improve profitability and manage volatility in property.

Over the past few years, we've executed a granular strategy to reposition our portfolio to optimize our risk return profile. The results have been meaningful. We reduced property policies in force by 10%, with most of that decrease coming from high cat geographies, reflecting disciplined risk selection and concentrated actions to manage volatility and reduce local market aggregations of exposure. While these actions impacted auto policies in force, the impact was muted as we grew auto in many of the markets less affected by our property actions, demonstrating our ability to sustain a competitive position where portfolio economics remain favorable. Overall, the net impact of our actions is shifting the portfolio back toward a better balance between auto and property.

Looking ahead to 2026, as we wind down many of our actions in property, we're focused on maintaining this progress by deploying property capacity in support of writing package business.

The strength of our 2025 results reflects years of disciplined execution and strategic investment. Since year-end 2020, net written premiums grew $6 billion to $17.4 billion, while we generated an average combined ratio of 98%. Over that same period, our domestic auto book grew both in terms of PIF and premium. And in our homeowners portfolio, our actions to address profitability, geographic distribution and terms and conditions have meaningfully improved risk-adjusted returns.

In addition, we continue to invest in and deploy strategic capabilities. As just one example, we're leveraging artificial intelligence to make our renewal underwriting process more effective and efficient. We start with a proprietary AI-enabled predictive model that scores every account in the property portfolio. Based on this score, accounts with the highest probable risk of loss are presented to underwriters for review. From there, our renewal underwriting platform leverages generative AI to consolidate data into summaries of relevant actionable information for our underwriters to evaluate, with early results showing more than a 30% reduction in average handle time. The net result is that our underwriters focus their efforts on decisions most likely to improve profitability and do so more efficiently.

To sum up, thanks to the continued diligent efforts of our team and with support from our distribution partners, Personal Insurance continues to deliver on a long track record of profitably growing our business over time.

Now I'll turn the call back over to Abbe.

Thanks, Michael, and we are ready to open up for Q&A.

[Operator Instructions] And your first question comes from Gregory Peters with Raymond James.

And as you said in your comments, you did have a great year, so congratulations. I wanted to -- thank you for the commentary around the technology. I've been asking you about this off and on like others have for a couple of years now. In Dan's guidance for the expense ratio, I think he said it's going to be flat in '26, 28.5% versus what it was in '25 versus the same in '24. So I guess what I'm trying to reconcile is the emphasis on growing the strategic investments, you're harvesting efficiencies with these technology investments. Just wondering when the structural shift in the expense ratio might materialize.

And maybe I was looking at the responsible artificial intelligence framework section of your website. Maybe you could talk about some of the regulatory and other considerations that might delay some of the expected benefits from your technology spend.

Greg, thanks for the question. I appreciate it. In terms of the expense, I mean, we give you sort of a year outlook of where we'd like it to be, and that's not something that happens to us. That's something we manage. And we talk a lot about trying to optimize operating leverage. So in other words, we want the gains from the efficiencies that we're generating. And that just gives us a lot of flexibility in the way we run the business. We can let it fall to the bottom line if we want through lower expense ratio. We can continue to invest it in other capabilities. Just gives us the flexibility to manage the business.

And as I shared in my remarks, the extent that some of these productivity and efficiency benefits are in the claim organization, those come through loss adjustment expense in the loss ratio. Again, we've got the flexibility there to think about that as an operating leverage component. But just in terms of where those benefits are or where they might arise in the future.

In terms of the regulatory environment, we -- it's -- from our perspective, it's constructive. We try to make sure that we're using the technology in ways that are thoughtful and careful. And frankly, we, as a company and we, through our trade association are on a regular basis, working with policymakers to make sure that we're achieving smart public policy and regulations as it comes to the development and implementation of technology.

I guess related on the regulatory front, there are increased example -- more examples of regulators becoming more focused on the profitability of the insurance business and particularly the personal lines business. And I'm just curious if you have a view on any regulatory pushback you might be getting on the profit levels in your business? And if you think there's anything bigger issues at play that's going to spread throughout the country as it relates to that?

Yes. Greg, we certainly understand the affordability issue and I think it's an important one for all of us to be focused on, and we are focused on it. And let me just put the profitability of our Personal Insurance business into some perspective. We had a good year in '25. We had a good year in 2024. But the 2 years prior to that, our combined ratio was over 100%. And if you look at the last 5 years, it was 98%, I think. So that would be below our target returns.

And so this really is a business that you need to look at and manage over a period of time. And I think when you think about Personal Insurance results over a period of time, I mean, certainly, in our case, you wouldn't say that we're over-earning. So we are trying to get the right price on the risk and earn a fair return for helping customers manage their risk.

Your next question comes from the line of Ryan Tunis with Cantor Fitzgerald.

Alan, in your prepared remarks, I think you mentioned that in Business Insurance, renewal premium change ex property was a little over 8%. I think that number was 9% last quarter. Just curious how much of that 1 point deceleration is attributable to rate versus exposure?

Yes. So we're looking for the exact breakout, Ryan. It's a little bit of both.

Yes. I mean, Ryan, if you look at the middle market webcast, you can see exposure was down. You can do the math between rate and RPC, it's not perfect math. So to Alan's point, a little bit of an exposure and a little bit of rate.

Got it. And then I guess just on the property side, clearly it was a bit of a challenging year in the large account space just from a trading standpoint. Just curious how you guys are thinking about overall rate adequacy in National Property headed into 2026.

Yes. Ryan, it's a challenging year. I mean the pricing dynamic is what the pricing dynamic is. But to a very large degree, that's reflective of the profitability of that business. I mean that business has been achieving rate gains over a very long period of time and have gotten to a point where the profitability was strong. So we don't really look at a macro level and look at it and say it was challenging and appropriate. It's not -- you can certainly find examples of accounts and we'll scratch our head and say, "Gee, we're surprised that got priced that way" or -- and honestly, more than price, we're surprised sometimes with the terms and conditions that we see given away in the marketplace that we're not willing to do. But sort of writ large, we look at it and we say it's not so crazy when you think about where the returns are.

Your next question comes from the line of David Motemaden with Evercore.

Dan, just had a follow-up just on the capital return. So hear you loud and clear on the $1.8 billion that's expected in the first quarter. But just given what sounds like a change in terms of the -- just how you guys are managing the debt load and what looks like $1 billion of excess at the holding company now before the Canada proceeds and pretty healthy statutory capital levels. Any sort of thought in terms of how we can think about the buybacks throughout the rest of this year, outside of 1Q into '27, just given the current growth environment?

David, so I'd say not really. I mean we can't really sit here at the very beginning of the year and give much guidance on what we think buybacks are going to look like in the second, third and fourth quarters of this year. There's no change in our capital management strategy, and we made these comments last quarter when we alerted you to the fact that we did expect higher levels of buybacks in at least Q4 and Q1 because we had, as you recognize, reached a point where we're probably carrying a little more capital on the balance sheet than we needed to. But no change in the overall capital management strategy and the rest of the year is going to be impacted by all the usual things that would impact buybacks. What do cat losses look like? What does overall profitability look like? How do we feel about the growth environment? And we're going to responsibly manage the capital, right? We're not looking to hoard capital. We're looking to hold the right amount. And when we have excess, it's not ours, and we're going to give it back to the shareholders.

The only thing I would add to that, David, is our first objective for every dollar of capital that we generate is to invest it back into the business.

Got it. That makes sense. And then just as my follow-up, just looking at Slide 23 and the 7.8% expectation for catastrophe losses in 2026. If I just sort of do rough math on the 2025 premium levels, that implies a little bit above, I think, $3.4 billion, $3.5 billion, which is above where you guys have the retention at your XoL -- your aggregate XoL. So could you help me understand a little better the moving pieces there? And then just relatedly, just the cost of that, how much of a drag that might be on BI premium growth in 2026?

Sure, David. Thanks for the question. So I guess I'll start with the second part of it and say we don't expect it to be much of a drag. In my prepared remarks, we talked about improvements in pricing in the reinsurance environment and a couple of other things we're doing around the edges that we don't think the year-over-year impact of ceded premium is going to be that big a deal in '26. Really importantly, though, what you were getting to in terms of cat load on a percentage point basis and what that might translate into dollars, the thing you got to remember when you think about the attachment point of the treaty is the first $100 million of every event is ours. So you can't just say if we thought we were going to have $3.X billion of cat losses next quarter, anything over $3 billion goes to the treaty. First $100 million of every event is ours.

We said with this treaty historically, this is really we're buying tail protection for the balance sheet. That's still true. Clearly, with a $3 billion retention compared to a $4 billion retention, we're a lot closer in on the tail of possibly being able to hit that book. But if we looked at -- if you look, for example, at if we had that treaty in 2025, we would not have attached that treaty.

Your next question comes from the line of Mike Zaremski with BMO.

My question is around all the great color you gave on technology initiatives. Would you be able to share what you may be roughly expect your organic headcount growth or shrinkage to be on a percentage basis this year versus maybe last year or so?

Mike, we gave you an example of narrow view of that in our claim organization in our call centers. We're not going to get into projecting headcount beyond that. But what I would say is premium per employee is up, thanks to some productivity and efficiency initiatives, and we expect premium per employee to continue to go up.

Okay. Got it. That's helpful. Switching gears for my follow-up to commercial lines. I think we can tease it out based on the comments in the prepared remarks. So maybe you could just tell us in casualty, commercial, maybe nonworkers' comp, what was the change in pricing kind of sequentially? Or what's the trend line looking there?

Yes, Mike, that would predominantly be the GL line and the umbrella. And in my prepared comments, I shared with you, umbrella had double digit in terms of renewal premium change. What I didn't include was GL. GL think has been running in the mid-single digits in terms of renewal premium change. Those would be the 2 components outside of the comp.

Your next question comes from the line of Katie Sakys with Autonomous Research.

Alan, you mentioned in your prepared remarks that the strength seen in underlying underwriting this quarter is a durable dynamic. I guess, with pricing momentum seeming to continue to slow down here, can you map out for us what's driving your confidence that those underlying results hold in 2026?

Katie, so Dan shared and I shared the trajectory of underlying underwriting income in our prepared remarks, and you can see it in the slides and the webcast. We are a larger and more profitable company today than we have been historically. And thanks to investments that we've made in products, services, experience, capabilities and so on, we are very confident in our ability to continue writing premium at substantial levels. And we're very happy with the business that we're putting on the books.

So when you combine those premium levels with reasonably strong profitability, you get high levels of underlying underwriting income. And if you look at the trajectory, you get a sense of what it's done over the last several years and we're confident it will continue to be a strong foundation for strong results in the years to come.

And then as a follow-up, I think last year in the fourth quarter, the Business Insurance underlying loss results included some additional IBNR for casualty lines. I guess with the net favorable reserve development results this year, that probably seems to be holding in fairly well. But could you give us any additional color there? And let us know if there was any similar additions to IBNR this quarter?

Katie, it's Dan. So we did say, as you recall from last year, that we were including in the accident year loss pick for 2024, what we call sort of a load for uncertainty related to the casualty lines. I'm pretty sure we said we were doing that again in 2025, and we did do that again in 2025. And just to get the question out of the way, as we head into 2026, our planned loss ratio for 2026 once again includes an uncertainty provision in the casualty space.

I would say the casualty loss has generally performed about as we expected, not really better than we had expected. The Business Insurance workers' comp favorability has really been driven by workers' comp. But long tail line still in the casualty space, a little bit of uncertainty. So we're going to stay prudent and stick with that load again in '26.

Your next question comes from the line of Meyer Shields with KBW.

I think it was probably for Dan. I know you talked about not having much of an overall margin impact from lowering the catastrophe reinsurance attachment point. Should there be any impact on a seasonal basis? In other words, is there any pressure on first quarter combined ratio components?

Yes. I don't think so, Meyer, again, because when we look at our reinsurance program in the aggregate in terms of what we're going to pay out for ceded premium, given the pricing dynamic in the reinsurance space and again, some other changes we made around the margins on the reinsurance program, we don't think it's going to have much of an impact.

Okay. Perfect. And just a question for Michael. When you look forward to 2026 and beyond, are you comfortable growing the more cat prone state policy counts in line with the overall book? Or are we still constraining growth?

Yes. Thanks, Meyer. I think my point in my prepared remarks about deploying property capacity to support package growth, but maintaining the progress that we've made implies that certainly at most, we would grow cat prone states in line with the rest of the portfolio, but we do still have some spots where we'll be constrained. So I'd expect in aggregate, the property PIF growth will continue to trail auto as it has been, but both -- the growth trajectories of both lines should improve.

Your next question comes from the line of Alex Scott with Barclays.

First one is on just capital deployment, maybe a little bit of a follow-up of the question earlier. How are you viewing the prospects for M&A relative to organic growth at this point? I mean the profitability seems really attractive, but the growth is obviously a bit lower. So I'm just trying to gauge if the organic growth isn't quite as attractive to you. Could M&A be a way that you go?

Alex, I'm going to give you the same answer I've given probably for 10 years. So I'm sorry for -- probably not going to be the satisfying answer you're looking for. But the answer to that question for us is we're always looking for M&A opportunities. And we've got the capital, and we've got the expertise to diligence the deals and find the deals and execute the deals. And we are always looking for attractive inorganic opportunities. And -- but I would have answered that question the same way at any point in the last decade.

Okay. Understood. I guess second one for you on tariffs. And just all of a sudden, it seems like maybe a wider range of outcomes again. How does that affect the way that you go about pricing maybe across all your businesses, but I'd be particularly interested in personal auto.

A couple of quarters ago, when we first started talking about tariffs, we shared our view that we thought that the impact was going to be relatively mild for us. And if you go back and look at the transcripts, and we shared a fair amount of commentary about how we got there. And at the time, for lines that are potentially impacted, we did provide a little bit in the loss pick for that. What we've seen so far hasn't even been the relatively modest amount that we expected. Now as the world changes and as the tariffs are out there longer, certainly, that dynamic could change, but we feel like the provisions that we've made in the loss picks for potentially impacted lines are there to cover it.

Your next question comes from the line of Brian Meredith with UBS.

First one for Michael. I'm just curious, Michael, the personal auto insurance space is getting increasingly more competitive, some new entrants in the agency space. Maybe you could talk a little bit about those competitive dynamics. And what is going to enable travelers to actually maybe recoup some of the market share you've lost over the last couple of years in personal auto, given the competitive dynamics in that market?

Yes. Thanks, Brian. I would start with the marketplace is always competitive. And certainly, I think a lot of the news that you see is around competition in the IA space. The first thing I'd say about that is I think it's a great validation of our strategy to be largely an independent agent carrier for personal lines and the value of choice and advice in this type of a marketplace.

The second thing I would say is we've competed successfully in the independent agent channel for years. We remain confident in our ability to compete successfully in that channel. And I think it really comes down to a handful of competitive advantages in the space. Certainly, the strength and the durability of our relationships with independent agents, our investments in digitization and ease of doing business.

And then lastly, and again, I've been talking about this for the last several quarters, the value of our package value proposition for both agents and customers and our ability to deliver balance sheet protection for consumers is another key advantage that we have in that space. And again, we're confident in our ability to compete going forward.

Yes, Brian, it's Dan. I'll just add one more comment in there on the auto space in particular. So last couple of years, we've seen policy count down. But if you looked at the business now compared to what it was, say, 5 years ago, we're up one of only a very small number of carriers that's actually got a higher PIF count now than we did 5 years ago. And our view always again on growth is how you think about growth over time, right? We're not really looking to influence a growth number in the next quarter or even necessarily the next year. What's the right balance of returns, and are you sure that you're growing over time.

Great. That's helpful. And then, Alan, I'm just curious, I always welcome your thoughts on the tort environment and casualty trend. And what you see here going forward? Anything positive that's developing here that maybe curves that kind of loss trend on tort inflation?

Yes, Brian, I mean, it continues to be a very challenging environment, and I wish I could say that we saw improvement. It continues to be a pretty challenging environment. What may be a little bit of a bright light is we do see more states reacting to a difficult tort environment. And certainly, the impact of tort costs is impacting affordability for businesses and consumers. And I think we're seeing that in some states. And so that's a potential positive. The other thing we are seeing more of is disclosure requirements when it comes to third-party litigation financing, and that's also a very good thing. So we are continuing to put our shoulder into it and there's more work to do.

That's all the time that we have for questions. I would now like to turn the conference back over to Ms. Abbe Goldstein for closing comments.

Thanks, everyone, for joining. I know we left several analysts in the queue. But as always, please feel free to follow up with Investor Relations. Thanks, everyone, and have a good day.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Good morning, ladies and gentlemen. Welcome to the third quarter results teleconference for Travelers. [Operator Instructions] As a reminder, this conference is being recorded on October 16, 2025. 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 Travelers' discussion of our third quarter 2025 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 Frey, CFO; and our 3 segment presidents: Greg Toczydlowski of Business Insurance Jeff Klenk Bound & 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 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 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.

Thank you, Abbe. Good morning, everyone, and thank you for joining us today. We are pleased to report excellent third quarter results. We have core income of $1.9 billion or $8.14 per diluted share. Core return on equity for the quarter was 22.6%, bringing our core return on equity for the trailing 12 months to 18.7%. Very strong underwriting results and higher investment income drove the bottom line.

Underwriting income of $1.4 billion pretax more than doubled compared to the prior year quarter, benefiting from both the lower level of catastrophe losses and higher underlying underwriting income. The underlying result was driven by higher net earned premiums and an underlying combined ratio that improved 1.7 points to an exceptional 83.9%. Underwriting income was higher in all 3 segments.

Our high-quality investment portfolio also continued to perform well, generating after-tax net investment income of $850 million for the quarter, up 15% 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 almost $900 million of capital to shareholders during the quarter, including $628 million of share repurchases.

At the same time, we continue to make strategic investments in our business. Even after this deployment of capital, adjusted book value per share was up 15% compared to a year ago. With strong results over the past year in a particularly light cat quarter, we have a higher-than-usual level of excess capital and liquidity.

Consequently, we anticipate a higher level of share repurchases over the next couple of quarters. Dan will have more to say about that in a minute. Turning to the top line, we grew net written premiums to $11.5 billion in the quarter. In Business Insurance, we grew net written premiums by 3% to $5.7 billion, led by 4% growth in our domestic business. Excluding the property line, we grew domestic net written premiums in the segment by more than 6%.

The declining premium volume in property continues to be a large account dynamic. In fact, we grew property in both middle market and small commercial. We've seen this dynamic in the large property market before, and we won't compromise our underwriting discipline. Over time, particularly as catastrophic events inevitably unfold, the value of that discipline and the cost of those who abandon it will become unmistakable.

Renewal premium and change in business insurance was 7.1%, driven by continued historically high RPC in our middle market and select businesses. Excluding the property line, renewal premium change in the segment was a very strong 9%, and renewal rate change was a very strong 6.7% Greg will share additional detail by line.

Retention in this segment was 85%. Given the high quality of the book, we were very pleased with that result. In Bond & Specialty Insurance, we grew net written premiums to $1.1 billion with higher renewal premium change and continued strong retention of 87% in our high-quality management liability business. Net written premiums in our market-leading surety business remains strong.

In Personal Insurance, net written premiums were $4.7 billion, with strong renewal premium change in our homeowners business. You'll hear more shortly from Greg, Jeff and Michael about our segment results. As we head toward the end of the year, our planning for 2026 is well underway. As always, that process involves assessing the environment ahead.

There are uncertainties out there. Economic, political, geopolitical not to mention the loss environment. We are very confident that we're built and very well positioned for whatever lies ahead. We're operating from a position of considerable strength. Profitability is strong, reflecting our leading underwriting expertise and the operating leverage we've built through a sustained focus on productivity and efficiency.

Our competitive advantages have never been stronger or more relevant. Strong underwriting is the flywheel that sets everything in motion. Our premium growth at attractive margins has generated strong cash flow, which enables us to make strategic investments in our business, return excess capital to shareholders and grow our investment portfolio. Since 2016, we have successfully invested $13 billion in technology returned more than $20 billion of excess capital to our shareholders and grow our investment portfolio by nearly 50% to more than $100 million.

Scale matters increasingly so. We have the scale to win in an environment where technology and AI will continue to segment the marketplace. We have a track record of identifying the right strategic priorities and driving value from them. You can see that in the 300 basis point reduction we've achieved in our expense ratio since 2016, even while we were significantly increasing our overall technology spend.

Importantly, our size gives us the data to power AI, creating a virtuous cycle, better insights, better decisions, better outcomes, more resources to invest. For example, our long-time focus on organizing and curating data has given us access to more than 65 billion clean data points from decades of history across multiple business lines. We leverage that to sharpen our underwriting and shape our claims strategies.

With the vast majority of our business in North America, we hold a leading position in the largest and most stable insurance market in the world. An advantage that insulates us from much of the risk arising from the economic instability and geopolitical uncertainty around the globe. Our fortress balance sheet and exceptional cash flow provide us with the financial strength to invest consistently in the business regardless of the external conditions.

Our financial strength also enables us to manage comfortably through large loss events like the January California wildfires. When it comes to the loss environment from weather volatility to the impact of social inflation on casualty lines, no one is better positioned. Diversification provides powerful protection. In fact, our business mix produces a consolidated loss ratio that's actually less volatile than the loss ratio of our leased volatile segment.

That's the power of a balanced and diversified portfolio. Equally important is our demonstrated ability to confront the loss environment head on. We have the data, the analytics and the discipline to establish reserves and loss picks appropriately and generally ahead of the market. That matters because until you have an accurate view of the loss environment, your risk selection, underwriting and claim strategies are all operating with the wrong inputs.

Since our early identification of the acceleration of social inflation in 2019, we've grown the business and delivered significantly improved margins. Getting an accurate and timely view of the loss environment isn't just about the balance sheet. It's foundational to running the business effectively. Our internally managed investment portfolio is another source of strength.

Our disciplined focus on achieving appropriate risk-adjusted returns has served us exceptionally well through various markets, especially during periods of market turmoil. More than 90% of our portfolio is in fixed income with an average credit rating of AA. We're highly selective. We don't reach for yield. We hold the vast majority of our fixed income securities to maturity, and we carefully coordinate the duration of our assets and liabilities.

The track record speaks for itself. Our default rates during the most challenging environments over the past 2 decades were a fraction of industry averages. This consistency comes from a world-class investment team with extraordinary tenure and a shared long-term perspective. In short, the franchise we've built, the capabilities we've developed and our depth of expertise created advantages that are durable across operating environments.

Before I wrap up, I'll share that we're just back from one of the industry's premier conferences, but we have the opportunity to meet with dozens of our key agents and brokers who collectively represent a substantial amount of our business. We left as convinced as ever that our position with the independent distribution channel is an unmatched strategic advantage.

We heard clearly that our strategic investments are resonating and that looking ahead, we're focused on the right priorities to extend that advantage. I want to acknowledge and thank all of our distribution partners. I also want to reiterate our unwavering commitment to being an indispensable partner for them, and the undeniable choice for their customers.

To sum it up, we're very well positioned and very confident about the road ahead. And with that, I'm pleased to turn the call over to Dan.

Thank you, Alan. In the third quarter, we once again delivered excellent financial results on a consolidated basis and in each of our 3 segments. Core income for the quarter of $1.9 billion resulted in core return on equity of 22.6%, reflecting both excellent underwriting results and strong investment income.

We generated higher levels of written premium and earned premium, while delivering excellent combined ratios on both a reported and underlying basis. At 83.9% the underlying combined ratio marked its fourth consecutive quarter below 85. The combination of higher premiums and the excellent underlying combined ratio led to an 18% increase in after-tax underlying underwriting income, which surpassed $1 billion for the fifth consecutive quarter.

The expense ratio for the third quarter was 28.6% bringing the year-to-date expense ratio to 28.5%. We continue to expect an expense ratio of around 28.5% for the full year 2025 and expect to manage to that level again in 2026.

Catastrophe losses in the quarter were fairly benign at $402 million pretax consisting mainly of tornado hail events in the Central United States. Turning to prior year reserve development. We had total net favorable development of $22 million pretax. In Business Insurance, the annual asbestos review resulted in a charge of $277 million.

Excluding asbestos, Business Insurance had net favorable PYD of $152 million driven by continued favorability in workers' comp. In Bond & Specialty, net favorable PYD was $43 million pretax with favorability in Fidelity and Surety Personal Insurance had net favorable PYD of $104 million pretax driven by favorability in auto.

After-tax net investment income of $850 million increased by 15% from the prior year quarter. Fixed maturity NII was again the driver of the increase reflecting both the benefit of higher invested assets and higher average yields. Returns in the non-fixed income portfolio were also up from the prior year quarter. During the quarter, we grew our investment portfolio by approximately $4 billion.

Our outlook for fixed income NII, including earnings from short-term securities has increased from the outlook we provided a quarter ago, and we now expect approximately $810 million after tax in the fourth quarter. For 2026, we expect more than $3.3 billion with quarterly figures starting at around $810 million in Q1 and growing to around $885 million in Q4.

New money rates as of September 30 are roughly 70 to 75 basis points above the yield embedded in the portfolio. Turning to capital management. Operating cash flows for the quarter were a new record at $4.2 billion, and we ended the quarter with holding company liquidity of approximately $2.8 billion.

Interest rates decreased during the quarter, and as a result, our net unrealized investment loss decreased from $3 billion after tax at June 30 to $2 billion after tax at September 30. Adjusted book value per share, which excludes net unrealized investment gains and losses, was $150.55 at quarter end, up 8% from year-end and up 15% from a year ago. Also of note for Q3, we issued $1.25 billion of debt back in July with $500 million of 10-year notes and $750 million of 30-year notes.

This was simply ordinary course capital management, maintaining a debt-to-capital ratio in our target range as we continue to grow the business. Sticking with the theme of capital management, we returned $878 million of our capital to shareholders this quarter, comprising share repurchases of $628 million and dividends of $250 million.

As Alan shared, our very strong earnings over the past year have provided us with an elevated level of capital and liquidity well in excess of what we had planned to use for investment and to support continued growth. As a result, we expect to increase the level of share repurchases in the fourth quarter to roughly $1.3 billion.

Also keep in mind that we previously shared our plan to deploy about $700 million from the sale of our Canadian operations expected to close in early 2026 for additional share repurchases as well. So if we look across the 3 quarter period from Q3 2025 through Q1 2026, our repurchases in Q3, combined with our current outlook for the next 2 quarters, has us repurchasing a total of somewhere around $3.5 billion worth of our stock.

Using the average share price over the past 30 days for purchases during the next 2 quarters, that would result in a reduction of our outstanding share count of about 5% in the 9-month period. Of course, the actual amount and timing of repurchases will depend on a number of factors, including the timing of the closing of the transaction in Canada, actual quarterly earnings and other factors we disclosed in our SEC filings.

Recapping our results. Q3 was another quarter of excellent underwriting profitability on both an underlying and as-reported basis and another quarter of rising net investment income. These strong fundamentals delivered core return on equity of 22.6% for the quarter and 18.7% on a trailing 12-month basis and position us very well to continue delivering strong results in the future.

And now for a discussion of results in Business Insurance, I'll turn the call over to Greg.

Thanks, Dan. Business Insurance had a very strong quarter, delivering a record third quarter segment income of $907 million and an all-in combined ratio of 92.9%. The quarter reflected relatively benign catastrophes and the continued strong contribution from our exceptional underlying underwriting results. This quarter's underlying combined ratio of 88.3% and marked the 12th consecutive quarter where we've produced an underlying combined ratio below 90%.

We're pleased that our ongoing strategic investments have contributed to this sustained level of profitability. In particular, through meaningful advancements in data and analytics, we continue to advance our underwriting tools. One specific highlight is the development and utilization of sophisticated models that derive risk characteristics, refined technical pricing and summarize historical and modeled loss experience, all of which is provided to our underwriters at the point of sale.

Moving to the top line. Our net written premiums increased to an all-time third quarter high of $5.7 billion. We grew our leading middle market and select businesses by 7% and 4%, respectively. These 2 markets make up 70% of the net written premiums in business insurance. We saw a decline in net written premiums in National Property and other, which, as you heard from Alan, reflects our disciplined execution in terms of risk selection, pricing and terms and conditions.

As for production across the segment, pricing remained attractive with renewal premium change just over 7%. We Renewal premium change remained strong in select and middle market. From a line of business perspective, renewal premium change was positive in all lines, double digits in umbrella, CMP and auto and up from the second quarter or stable in all lines other than property.

As you heard from Alan, excluding the property line, renewal premium change in the segment was 9%. The Retention remained excellent at 85%, and new business of $673 million was about flat to a very strong prior year level. We're very pleased with these production results and particularly our field execution of our proven segmentation strategy. Across the book, Pricing and retention results this quarter reflect excellent execution, aligning price, terms and conditions with environmental trends for each line.

As for the individual businesses, in Select, renewal premium change of 10.8% was about flat with the second quarter. Retention ticked up as expected as we near completion of our targeted CMP risk-return optimization efforts. And lastly, for Select, we generated new business of $134 million, up 3% over the prior year.

As we've mentioned previously, we've made meaningful strategic investments in this market in both product and user experience. Our new BOP and auto products have been well received in the market. And we're pleased that the industry-leading segmentation contained in both products is contributing to profitable growth. We're also very pleased with the success of Travis our digital experience platform for our distribution partners.

As we continue our strategic rollout, Travis is already producing over 1 million transactions annually. In our core middle market business, renewal premium change of 8.3% was also about flat sequentially from the second quarter. Price increases remain broad-based as we achieved higher prices on more than 3/4 of our middle market accounts. And at the same time, the granular execution was excellent with meaningful spread from our best performing accounts to our lower-performing accounts.

We're pleased that retention of 88% remained exceptional given the level of price increases we achieved. And finally, new business of $391 million was our highest ever third quarter result and up 7% over the prior year. We're pleased with the new business risk selecting and strength of pricing and overall with the combination of strong returns and customer growth in middle market.

On a strategic note for Middle Market, we continue to enhance our industry-leading underwriting workstation. With models that assess new business opportunities for risk characteristics with the propensity to produce the highest level of lifetime profitability. This information helps our field organization focus on the highest priority opportunities, resulting in a greater likelihood of success in winning more accounts that contribute to strong margins.

To sum up, Business Insurance had another terrific quarter. We're pleased with our execution in driving strong financial and production results while continuing to invest in the business for long-term profitable growth.

With that, I'll turn the call over to Jeff.

Thanks, Greg. Bond & Specialty delivered very strong third quarter results. We generated segment income of $250 million an outstanding combined ratio of 81.6%, nearly 1 point better than the prior year quarter. The strong underlying combined ratio of 85.8% drove very attractive returns in the segment. Turning to the top line. We grew net written premiums in the quarter to $1.1 billion.

In our high-quality domestic management liability business, renewal premium change improved to 3.7% and while retention remained strong at 87%. These results reflect our intentional and segmented initiatives to improve pricing in certain lines with a focus on employment practices liability, cyber, and public company D&O.

We're pleased with the strong underlying pricing segmentation achieved by our outstanding field organization on both renewal and new business. enabled by our advanced analytics and sophisticated pricing models. New business was lower than the third quarter of 2024 as we expected as [ Corvus ] production was reflected as new business in the prior year quarter, and is now mostly reflected as renewal premiums.

Comparisons to prior year new business levels will be similarly impacted for the remainder of the year. Outside of the Corvus impact, we're pleased with early returns on multiple tech and operational investments we've made to drive account growth. For example, in our private and nonprofit business, we're leveraging predictive analytics and AI to enhance our customer segmentation and sales effectiveness.

We're pleased that these initiatives drove a 40% increase in new lines of business sold to existing customers as compared to the prior year quarter. Turning to our market-leading surety business. where production can be lumpy based on the timing of bonded construction projects. Net written premiums remained strong relative to the record high quarter in the prior year.

This reflects our customers' continued confidence in our industry-leading surety expertise and value-added service offerings as well as benefits from digital investments we've made to enhance distribution experiences in our small commercial surety business. So we're pleased to have once again delivered strong results this quarter, driven by our continued underwriting and risk management diligence, excellent execution by our field organization and the benefits of our market-leading competitive advantages.

And with that, I'll turn the call over to Mike.

Thanks, Jeff, and good morning, everyone. In Personal Insurance, we delivered third quarter segment income of $807 million an excellent result that reflects the continued impact of our disciplined approach to selecting, pricing and managing risk. The combined ratio of 81.3% improved 11 points relative to the prior year quarter. Driven primarily by lower catastrophe losses and a lower underlying combined ratio.

The underlying combined ratio of 77.7% was 5 points better compared to the prior year quarter driven by continued improvement in both homeowners and other and auto. Net written premiums of $4.7 billion in the third quarter reflect our continued focus on improving profitability in homeowners while seeking growth in auto as we execute our strategy to deliver appropriate risk-adjusted returns across the portfolio.

The ceded premium impact of the enhanced personal insurance excess of loss reinsurance program we announced last quarter, reduced net written premium growth in the quarter by 1 point as the full year's worth of ceded premium was booked in the third quarter. In auto, the third quarter combined ratio was very strong at 84.9%. And reflecting lower catastrophe losses, a strong underlying combined ratio and favorable net prior year development.

The underlying combined ratio of 88.3% improved by 2.9 points compared to the prior year quarter. The improvement was driven by favorable loss experience in bodily injury and to a lesser extent, vehicle coverages. Similar to last year's third quarter results, this quarter's underlying combined ratio included a 2-point benefit related to the reestimation of prior quarters in the current year.

The year-to-date underlying combined ratio was also 88.3% and reflecting sustained profitability in an auto book that is larger than it was 5 years ago, both in terms of premium dollars and policy count. Looking ahead to the fourth quarter of 2025. It's important to remember that the fourth quarter auto underlying loss ratio has historically been 6 to 7 points above the average for the first 3 quarters because of winter weather and holiday driving.

In Homeowners and Other, the third quarter combined ratio of 78% improved by 13.5 points compared to the prior year quarter, primarily because of lower catastrophe losses and improvement in the underlying combined ratio. Net prior year development was favorable, but lower compared to the prior year. The underlying combined ratio of 68% improved by almost 6.5 points compared to the prior year quarter.

The year-over-year favorability in homeowners was primarily related to the benefit of earned pricing as well as favorable non-catastrophe weather. Overall, these outstanding results reflect favorable weather conditions throughout the third quarter along with our actions to manage exposures in high catastrophe risk geographies to help optimize risk and reward.

Turning to production. We're making progress in positioning our diversified portfolio to deliver long-term profitable growth. While our production results don't quite show it yet, we're confident that the actions we're taking will build momentum towards this objective. In domestic auto, retention of 82% remained consistent with recent quarters.

Renewal premium change of 3.9% continued to moderate and will continue to decline in the fourth quarter, reflective of improved profitability and our focus on generating growth. Auto new business premium was up year-over-year for the fourth consecutive quarter as new business momentum continued in states less impacted by our property actions.

In Homeowners and Other, retention of 84% remained relatively consistent with recent quarters. Renewal premium change remained strong at 18% as we continue to align replacement costs with insured values. We expect RPC to remain elevated in the fourth quarter and then drop into single digits beginning in early 2026 as values will have largely aligned with replacement costs.

We continued to execute actions to reduce exposure and manage volatility in high-risk catastrophe geographies in the quarter, causing further declines in property new business premium policies in force. Most of our property actions will be completed by the end of the year, at which point the downward pressure on both property and auto growth should begin to moderate.

As we conclude this year and ahead into 2026, we're focused on building momentum toward generating profitable growth. To that end, we have a range of actions currently or soon to be in market, including the following: adjusting pricing appetite, terms and conditions to better reflect improved profitability in both auto and home, removing temporary binding restrictions and winding down some of our property non-renewal actions in certain geographies.

And appointing new agents and partnering with existing agents to consolidate books of business, continuing to modernize our specialty products and platforms and investing in artificial intelligence and digitization to deliver better experiences for our agents and customers. These messages resonate as we share them in the marketplace, reinforcing our commitment to being the undeniable choice for consumers and an indispensable partner for our agents.

To sum up, we delivered terrific segment income as our team continued to invest in capabilities and deliver value to customers and agents. These results position us well to build on a long track record of profitably growing our business over time. Now I'll turn the call back over to Abbe.

Thanks, Michael. And with that, we're ready to open up for Q&A.

[Operator Instructions] Your first question today comes from the line of Gregory Peters from Raymond James.

Well, you're producing great kind of surprising the stock is down as much as it is on the open I think probably a reflection of the top line. And I know you spoke in detail about the different headwinds that you're facing whether it's in business insurance, the property, Corvus and Biomet specialty or the underwriting actions in personal insurance that have affected your top line when you go beyond the balance of this year and you start thinking at 26%, 27%, what does the Travelers business model look like in terms of top line growth on a consolidated basis? And how are you thinking about that?

It's Alan. Thanks for [indiscernible] So we're not going to get out like on the top line, as you can imagine. But clearly, we understand that in order to meet our objective of delivering industry-leading return on equity over time, we need to grow over time. So it's a priority for us.

And if you look back over the last couple of years, we've been very successful with that. In our -- as you noted by segment, we've talked about what's driving the results this quarter. But I guess what I would say is -- we are very confident that we've got the right value proposition. We're investing in the right capabilities to make sure we're positioned to grow this business.

So we feel very good about the execution in the quarter. We feel very good about what we've accomplished in recent periods, and we feel very good about the outlook.

Okay. The other -- I seem to ask this like every other quarter on the technology front, but you keep bringing it up -- you talked about the digital initiatives you have going on in business insurance. Talk about some of the stuff going on in Personal Insurance. I think one of your peers came out earlier in the third quarter and talked about the potential of artificial intelligence to deliver human resource savings and headcount reductions over time.

Maybe up to 20%. I'm just curious if we can just go back to -- I know you've got a best use case on technology and AI, but go back to how you're thinking about this in a 3- to 5-year period in terms of what it might mean to your expense ratio?

Yes. So Greg, I'll tell you, we are very bullish on AI, and we're leaning into it. We're spending more than $1.5 billion a year on technology. A lot of that is focused on we expect significant benefits from it. And I think we've got a long track record, as I said in my prepared remarks, of identifying the right strategic initiatives and then driving value from them.

We're not going to tell you what our plan is for the expense ratio beyond next year. But I'll also tell you that more than our focus is on the expense ratio, it's on creating operating leverage, and that's what gives us the flexibility to deploy those gains however want to deploy them.

And so maybe it will be efficiency, maybe there'll be productivity, but we are very bullish about the opportunity for the investments that we have underway. We're very bullish about the data we have to fuel the and think that it will make a big difference in the years to come.

Our next question comes from the line of David Motemaden from Evercore.

I had a question. You gave the and rate ex property. I was wondering that's a new disclosure. Wondering if you can just talk about what that was last quarter versus this quarter? And then maybe zooming in specifically in Business Insurance what do you guys see in property pricing outside of national property this quarter.

Yes, Greg, do you want to take that?

Yes, certainly. Well, on the first one, David, it is a metric that we're not going to give every quarter. We're not going to go back and give that. We offered it up this quarter just to give you some color and let you know how much property the leverage it had on the pricing for this particular quarter.

As we've shared with you, the large property has definitely been a market where typically leads in terms of when softening may happen, and it certainly has been the case over the last couple of quarters in the select and middle market to directly answer your question, we continue to get positive price increases there.

But it's certainly -- we're stealing some deceleration, but again, certainly still seeing positive increases.

Got it. And then maybe this is just sort of related to your answer there. But on business insurance premium growth by market. So it was good to see the tick up in select year-over-year in national accounts sort of we know the story there, but I'm surprised we saw the deceleration in growth in middle market.

I was hoping you could just impact that unpack that a little bit. Is that just sort of the property dynamics you just mentioned?

Yes. And if you're looking at overall quarter of middle market, I think you're reading that, Ron, the quarter alone was up for middle market, 7% relative to year-to-date of.

Got it. Yes. No, I was just looking at -- because I know 1Q had the reinsurance dynamic. So I was just comparing it to 2Q, the 10 decelerating to 7 -- that's what I was looking at there, but I appreciate the answer.

Your next question comes from the line of Mike Zaremski from BMO.

Great. My first question is on the loss cost trend line. I know it's not easy putting a broad brush, but if we look at kind of your reserve release trend line, the loss ratio trend line, you're also adding IBNR. But a lot of good things going on. Curious if your view on loss cost inflation has changed at all or directionally? Is it -- I feel like you've only raised it over recent years over long periods of time. Is it flattening out?

Mike, it's Dan. So another quarter of net favorable PYD despite the asbestos charge. I don't really think you can put a trend on PYD. And really what matters for us is in aggregate across the enterprise, is it favorable or unfavorable. And we've got now a very long track record of generally having that favorable -- as it relates to loss trend, we haven't explicitly commented on loss trend for a while because we think it's just too narrow a way to look at the business in terms of what's pure rate versus what's some blended number of loss trend, but it hasn't moved dramatically in recent period.

Alan's talked about that in prior quarters. We do take a look at it every quarter. Some lines do move up a little bit, some lines do move down a little bit over time, but it's been pretty stable for a while now.

And Mike there was nothing in the quarter that particularly surprised us when it comes to loss activity.

Okay. Great. And my follow-up honing in on the home segment, maybe you need to comment on auto 2 since there's a lot of bundle in there. But if we -- if you look at the RPC trends, they remain very high, I'm assuming that there's terms and conditions, changes that you're incorporating in kind of those double-digit our PC increases. But the last few years haven't been great for you all in the industry.

Consensus kind of has you guys pegged at a 95% combined ratio for the foreseeable future in home. Maybe you can kind of remind us what -- do we expect RPC to eventually fall? Are those terms and condition changes going to help? Is 95% the right combined ratio that you guys are targeting given how profitable auto is.

Sure. Thanks, Mike. It's Michael. So just to unpack the RPC part of your question for starters, as I mentioned in my prepared remarks, RPC remains elevated. And again, this is -- it's rate and exposure, right? So RPC remains elevated largely because we're raising insured limits to keep up with rising replacement costs and my point about RPC dropping to single digits in 2026 is we'll have largely caught up in getting replacement costs in line with insured values.

And so the change in RPC as we head into 2026 will really be those -- the premium impact from increasing coverage A, the dwelling limits on property coming back to more normal levels. Yes, baked into RPC is also a reflection of a number of the other actions we're taking on the book, I think increasing deductibles, particularly across the Midwest.

I think different strategies around targeted limits on how big a coverage we're going to write in some hail prone geographies. Other things like that are all rolled into that figure. And again, I think it's just reflective of the actions that we're taking to improve the profitability of that book. As respect to target combined ratio, we're not going to really disclose the target combined ratio by line.

We are certainly encouraged by the progress we've made, particularly in improving the underlying combined ratio in property. It's down period-to-period, quarter-over-quarter for something like the last 10 or 11 quarters in a row. So that is demonstrative of the progress that we're making there. And again, continue to be pleased with our progress there.

Your next question comes from the line of Meyer Shields from KBW.

Great. I don't know if this is a question for Alan or Greg. But is there any way of disentangling the -- how much of the property premium decline in BI is from non-renewed business as opposed to accepting lower rates because you still had adequacy?

Yes. Meyer, I don't think we're going to unpack that, certainly not right here right now. I don't think we're going to get into that level of detail. And I Honestly, we don't have that little of data at our fingertips right now.

Okay. Fair enough. I also want to talk a little bit Michael talked about, I guess, book rolls in Personal Lines. Does that involve any changes to agency commissions or what other tools are you using to encourage that?

Sure, Meyer. Thanks for the question. Yes. So typically, and again, book rolls, consolidations in the personal line space are pretty much standard operating procedure. We had stepped away from them. The reason I mentioned it is because we had stepped away from them as we were working to improve profitability.

And I think it's an important point to recognize that we're back actively engaged in the marketplace in those conversations with agents looking for situations where their book of business may be disrupted for 1 reason or another. It is fairly typical in a book consolidation scenario to offer enhanced commission on that book roll for the first term as that business comes over.

Your next question comes from the line of Tracy Benguigui from Wolfe Research.

My first question is for Mike. I'm curious what you're seeing that's driving favorable loss experience in bodily injury and to a lesser extent, vehicle coverages?

Sure, Tracy. Thanks for the question. I mean, it really is a combination of favorable frequency in both bodily injury and physical damage losses as well as continued moderation in severity. Again, really across coverages.

Got it. And a follow-up on Dan's comment about elevated level of capital driven by your earnings that's well in excess of your investment needed to support growth. As you know, capital is a big focus for me. And I've really not seen so much excess capital for the entire sector.

So is it fair to assume that your excess capital position surpasses the buyback targets you shared -- and could we expect concurrent deployment of capital in the technology side and/or M&A?

Yes. Tracy, it's Dan. So I think I understand the question. So I guess I'd start by saying, look, there's no change at all to what has been now our long-standing capital management philosophy, which is we've got a business that's generating terrific margins. We generate a lot of capital. We generate more than we need just to support the growth of the business. First objective for that excess capital is going to be to find a way to deploy it and generate a return.

And so we'll make all the technology investments that we think we can and should make always be open to -- open any opportunity to generate returns on an excess capital. Once we've exhausted all those opportunities, then it's not our capital, is to shareholders, and we're going to give it back through dividends and buybacks.

Your next question comes from the line of Robert Cox from Goldman Sachs.

I just wanted to go back to the removal of the growth restrictions. It looks like a couple of parts of the business, CMP within Select and then also in homeowners, can you give us a sense of how much business is being unlocked for growth here? And if easing those restrictions can result in a noticeable uplift in growth.

Robert, this is Greg. I'll start off and then Michael can talk about the PI. We've been talking about the select mix optimization for some time now. And as we begin to finalize some of those actions. You saw a slight tick up in our retention. We're not really going to quantify what that means for overall growth -- but that was the reason that we pointed out the slight tick up in retention.

Yes. And Robert, Michael following up here on the personal line side. I think the important point to note in terms of the impact on growth in personal insurance as we relax those property restrictions as our goal is to leverage that property capacity to write package business.

And so if you my suggestion, if you want to sort of dimensionalize it is just look back historically at retention and new business levels in property and in auto, you can see that retention remains depressed right now, given the actions we're taking, again, the property actions depress retention in both lines.

And you can see, particularly in property, the new business levels are pretty significantly depressed relative to what they've run historically. And so those levers, I think, would give you a way to kind of dimensionalize it.

Okay. Great. And then I just wanted to follow up on the business insurance underlying loss ratio. When you think about the margin improvements during this year, are we seeing improved picks in casualty at all? Or is the improvement year-to-date largely been a shift lower in some of the shorter tail exposures?

Rob, it's Dan. Look, I think if you look at the improvement you're talking about business insurance specifically, right?

Yes.

Yes, I think the single biggest factor we'd say in terms of that sort of 50 basis point improvement on a year-to-date basis has been the continued benefit of earned price. So in the casualty lines, especially, and we've talked about this a couple of times, we're continuing to include some provision for a level of uncertainty in those lines that we think is going to serve us well in the long term as opposed to taking those pigs down.

The improvement in the loss ratio. You have other things that impact every quarter to mix will change a little bit. But headline number the main driver of the improvement year-over-year has been the continued benefit of earned price.

Your next question comes from the line of Elyse Greenspan from Wells Fargo.

I guess I want to stick there with business insurance. So if we look, I guess, just specifically at the underlying loss ratio that was stable year-over-year in the Q3, so I'm not sure if there were certain pushes and pulls that you want to point out specific to the third quarter or if maybe this quarter rate earned rate got close to trend, and that's kind of what we're seeing in the numbers.

And just how do we think from here, just given slowing pricing, which I know is mostly driven by property, how do we think about just the underlying loss ratio in BI should we think about that starting to deteriorate as rate gets closer to trend?

Yes. Elyse, let's just start with where the margins are in business insurance. I mean they are pretty spectacular margins. And I don't think we're going to parse out that level of detail, and we're certainly not going to get into what the outlook for margins is, but I'll tell you, at these margins, we really like the margins and we really like the business that we're putting on the books at these margins.

Okay. And then I guess -- my second question would be, I guess, maybe shifting to personal auto. Have you guys seen any impact of tariffs at all in the quarter, whether it was September relative to July and August. And how are you guys currently thinking about a potential impact of tariffs on the margins in that business?

Sure, Elyse. It's Michael. Thanks for the question. I would say we haven't seen a ton of impact to date from tariffs but our results for the third quarter do include a small impact from tariffs. That said, it's well below the single-digit severity numbers that we discussed a couple of quarters ago.

There certainly is the potential for that impact to grow. The longer tariffs remain in effect. As you know, it's a very fluid situation. tariff changes weekly, daily, fairly frequently. So predicting is challenging, but we are keeping a very close eye on it. To your point, there are some external indices that show some moderate increases Others look largely unaffected.

So we're going to continue to closely monitor it, but there is a little bit of a provision in the third quarter results for tariff increases, but it's not yet at the level that we had potentially forecast.

And just to be clear, Michael, correct me if I'm wrong, we've got a provision in there because we expected that we might see it. We're not really seeing it in any meaningful way.

Yes, it's not significant. Again, we're seeing it on the margins. And so we booked a provision for it, but again, well below the mid-single-digit level that we had described before.

Your next question comes from the line of Paul Newsome from Piper Sandler.

Yesterday, Progressive gave us a little unpleasant news about the quarter charge. Just curious if that is something that you've looked at yourself? And also curious about the accounting related to these kinds of things. I know that orders not unique, there are other states that have restrictions on profitability. I'm just curious about how you account for that as well.

Sure, Paul, it's Michael. I'll start with sort of the response on the overall situation, maybe Dan can chime in on accounting. The Florida excess profit provision and the statute isn't actually a new thing. It's sort of standard operating procedure in Florida. It's actually fairly infrequent that people have to return premiums given the statute.

What I would say about our business in Florida is we're pleased with our auto business in Florida but we don't expect to need to make a return of premium to policyholders in Florida due to excess profits for the '23 to '25 accident year period or which we would make the filing in 2026.

The only thing I would say is, given the size of our business in Florida, think of our Florida auto business, less than 10% of our PI auto business, think of the Florida PI auto business, 1.5% of Travelers overall premium. I mean it's just not going to be a significant issue for the organization, even if we were to need to make a return of premium, which we don't anticipate.

Then Paul, it's Dan. With regard to the accounting, I guess I'm going to not give a definitive answer. And 1 of the reasons I won't give a definitive answer is if you go back to COVID when we and some of our peer companies returned premium because frequency and losses declined so rapidly, so quickly. Not every company accounted for that the same way so we had a view of how that should be accounting for. That's what we reflected in our results.

Other peer companies had a slightly different view of how that should be accounted for and reflected differently in their results by which I mean some companies took that as an expense. Some companies took that as a return to premium. And as Michael said, since we've not had to deal with the Florida excess profit issue, we haven't done a real deep dive on how we think it would come to the P&L.

But most importantly, I think as Michael said, if we ever had it, we wouldn't expect it to be much of an impact on our consolidated results in any event.

Great. That's super helpful. That's all I had. I appreciate it.

Your next question comes from the line of Josh Shanker from Bank of America.

I was trying to understand a little bit about your retention -- effective retention numbers that you give in the back of the supplement about auto and home. Your retention bottomed, I guess, about 3 quarters ago, and it's ticked up, but you're still losing more cars or more policies than you were before. Is that a projected retention based on where you're pricing the business today? Or have you already seen retention bottom and it's improving here?

Josh, it's Dan. So retention is a way that we try to give you color relative to what's the change in net written premium. So a couple of things we know definitively. We know definitively at any point in time how many policies are enforced. We give you that number. We know definitively at any point in time how much premium made into the ledger, we give you that number.

Production statistics like retention, renewal premium change new business are all in the disclosure, say, they're all subject to actuarial estimate of what do we think the ultimate retention is going to be because you could start on day 1 of a policy and look like you'd retained all of them, but we know that there's some period of those, they're going to cancel early in the term and either go somewhere else or drop their insurance.

So it's very challenging to do, I think, what you're trying to do at a very specific level and go -- as B equals C. The production statistics are really color around what's happening with the top line. And I'm sorry, I can't give you a more helpful answer than that.

If I look back at 3Q '24 is that a more -- because now you have all that data, is that a more accurate representation of what you know to have happened over the past year?

Production statistics do get updated. So if you went back and true in Business Insurance, true in Personal Insurance, if you looked at historical quarters, you could almost do a triangle of what was retention as originally reported because it's an estimate we true those up as time goes on.

And can you confidently say and I'll leave it at this, that retention has improved from where it was a year ago? Or it's still not certain?

I think we're pretty confident in saying that retention has improved from where it was a year ago.

Your next question comes from the line of Alex Scott from Barclays.

First one I have is on commercial auto and general liability. Just noticing those are sort of the lines were net written premium is growing more. And I was just interested in if that's more a reflection of the rate is obviously different there than maybe some of the other lines where there's pressure.

But is there anything about the commercial auto product launch and some of the things you're doing that are actually causing you to lean into those businesses a little more?

Alex, this is Greg. Just to get the second part of your question, we did roll out a new automobile product across all business insurance that includes select and middle market that would roll up into the aggregate commercial auto numbers. So we do think that that's our most sophisticated product in auto that we brought into the marketplace.

So that helps us from a segmentation point of view. But we've been very thoughtful around our growth in commercial auto. The thrust of what you're seeing there in the premium delta really is based on renewal premium change. And that's why I gave you some of that color in my prepared comments at a product line level.

Got it. Okay. That's helpful. And over Personal Lines, I mean, Yes, but you've been pretty clear on -- and that should help on the growth front. Is there anything from just a marketing spend kind of standpoint and thinking through the expense ratio we should be aware of as you think through ramping up growth?

Sure, Alex. It's Michael. I would say that on the margins, we have increased our marketing spend in Personal Insurance largely in support of our direct-to-consumer business, but it's a very different ball game for us than marketing spend. other places. Our direct-to-consumer business is less than 10% of our overall business.

So we are on the margin increasing marketing spend there to drive more growth, but it doesn't have a dramatic impact on the overall financial results of the business.

And we have time for one more question, and that question comes from the line of Ryan Tunis from Cantor.

I just had a question, just one on Business Insurance, just on incurred losses. But I do think like in national property we don't trend losses like we do -- or property for that matter. We don't trend losses like we do with other stuff, but certainly are still attritional losses on that line. I guess I'm just curious if those attritional losses have run better or worse or in line with your expectations so far this year?

Ryan, it's Dan. On the quarterly results are really strong. the weather was generally leaning towards favorable, including in business insurance. If you're wondering about whether it's so significant that we would say this isn't really a clean jump-off point for business insurance and you make some big adjustment, we would say no, sort of inside of the normal realm of variability from quarter-to-quarter, but leaning towards the favorable.

And we have reached the end of our question-and-answer session. I will now turn the call back over to Abbe Goldstein for closing remarks.

Thanks, everyone, for joining us today. And as always, please follow up with Investor Relations if you have any other questions. Have a good day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, ladies and gentlemen. Welcome to the second quarter results teleconference for Travelers. [Operator Instructions] As a reminder, this conference is being recorded on July 17, 2025.

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 Travelers' discussion of our second quarter 2025 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 Frey, CFO; and our 3 segment Presidents: Greg Toczydlowski of Business Insurance; Jeff Klenk of Bond & 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 and measures 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.

Thank you, Abbe. Good morning, everyone, and thank you for joining us today. We are pleased to report exceptional second quarter results, driven by excellent underwriting and investment performance. We earned core income of $1.5 billion or $6.51 per diluted share. Core return on equity for the quarter was 18.8%, bringing our core return on equity for the trailing 12 months, 17.1%.

Underwriting income reflects strong net earned premiums and a reported combined ratio that improved almost 10 points to 90.3%. The improvement in the combined ratio benefited from strength across the board as lower catastrophe losses, higher underlying underwriting results and favorable prior year reserve development, all contributed. Underlying underwriting income of $1.6 billion pretax was up 35% over the prior year quarter, driven by 7% growth in net earned premiums to $10.9 billion and an underlying combined ratio that improved 3 points to an excellent 84.7%. All 3 segments contributed to these terrific results with strong net earned premiums and excellent reported and underlying profitability. The underlying combined ratio in Business Insurance improved by almost 1 point to an excellent 88.3%. The underlying combined ratio in our Bond & Specialty business was a very strong 87.8%, and the underlying combined ratio in Personal Insurance improved by 7 points to a terrific 79.3%.

Our high-quality investment portfolio also continued to perform well. generating after-tax net investment income of $774 million for the quarter, driven by 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 $800 million of capital to shareholders during the quarter, including $557 million of share repurchases. At the same time, we continue to make strategic investments in our business. Even after this deployment of capital, adjusted book value per share was up by more than 14% as compared to a year ago.

Turning to the top line through skilled execution by our field organization, we grew net written premiums to $11.5 billion in the quarter, with growth in all 3 segments. In Business Insurance, we grew net written premiums by 5% to $5.8 billion. Renewal premium change remained strong 7.7% with renewal premium change of 8.6% in our core middle market business, and 10.7% in our small commercial select business. Those 2 markets make up 70% of the net written premiums in Business Insurance. Given the high quality of the book, we were very pleased with strong retention of 85% in this segment. New business was a record $744 million, a reflection of the relationships we've built with customers and distribution partners, by delivering value products, services and experiences.

In Bond & Specialty Insurance, we grew net written premiums by 4% to $1.1 billion, with retention of 87% in our high-quality management liability business. In our industry-leading surety business, we grew net written premiums by 5% from a particularly strong result in the prior year quarter.

In Personal Insurance, we grew net written premiums by 3% to $4.7 billion, driven by strong renewal premium change in our homeowners business. You'll hear more shortly from Greg, Jeff and Michael about our segment results.

In May, we announced an agreement to sell most of our Canadian business to Definity for $2.4 billion or 1.8x book value, excluding excess local capital. As we noted at the time, the transaction does not include our premier surety business. We also shared that we expect to allocate about $700 million of the net cash proceeds for additional share repurchases in 2026. And that we expect the transaction to be slightly accretive to earnings per share in each of the next several years. It was a relatively small transaction for us, it's noteworthy in reflecting an important point. We are relentless in our commitment to disciplined capital allocation and value creation.

Taking a step back, the Canadian marketplace has evolved over the last decade or so in a few significant ways. First, a small number of insurers have built significant scale and market influence, in part, through vertical integration with distribution. There were no compelling inorganic opportunities for us to close the market share gap and we didn't see vertical integration as a realistic opportunity for us. Also, the regulatory environment has become more challenging. But we were confident that we could continue to manage successfully in Canada. The outlook for our Canadian business relative to our other businesses, combined with the very attractive offer from a strategic buyer made reallocating the capital the better decision. Disciplined capital management isn't only about deciding how to deploy the marginal dollar. It's also about continually and rigorously reassessing the capital we have already deployed and whether it's still delivering the best long-term value.

I want to thank our outstanding team in Canada and recognize the value they've created over many years. I'm confident that they and our Canadian customers and brokers will benefit from being part of the country -- of one of the country's leading and fully integrated property casualty insurers. I also want to reaffirm our commitment to our ongoing international businesses. This deal is not part of a broader geographic repositioning, it's simply a smart transaction. Transaction speaks volumes about the way we think about our business. At Travelers, we're optimizers, relentlessly focused on ensuring that both our capital and our retention are invested that we can generate attractive returns, profitable growth and the greatest long-term value for our shareholders.

To sum things up, our results for the first half of the year reflect exceptional underwriting performance, record operating cash flow and steadily rising investment returns in our growing fixed income portfolio. We're building on the strong momentum through continued disciplined execution of our proven strategy. With our diversified business operating from a position of strength, our outlook for continued premium growth at attractive underwriting margins, orderly conditions generally in our target markets and a positive trajectory for investment income, we remain highly confident in the outlook for our business. And with that, I'm pleased to turn the call over to Dan.

Thank you, Alan. We're very pleased with our financial results this quarter, both overall and by segment. We generated higher earned premiums and meaningfully improved both the reported and underlying combined ratios compared to the prior year quarter. At 84.7%, the underlying combined ratio marked its third consecutive quarter below 85. The combination of higher premiums and the excellent underlying combined ratio led to our fourth consecutive quarter with after-tax underlying underwriting income of more than $1 billion, up $339 million or 36% from the prior year quarter. The expense ratio for the second quarter was 28.6%, 20 basis points better than last year's second quarter and in line with our expectations. That brings the year-to-date expense ratio to 28.4% and we continue to expect the full year expense ratio of 28% to 28.5%.

As we've discussed previously, the second quarter is historically our most active cat period. This year, however, our pretax cat losses of $927 million or 8.5 combined ratio points, while significant, were nearly 4 points less than the second quarter cat plan we shared with you during our year-end earnings call in January.

Turning to prior year reserve development. We had total net favorable development of $315 million pretax. In Business Insurance, net favorable PYD of $79 million pretax was driven by better-than-expected loss experience in workers' comp, partially offset by reserve additions in our runoff book related to environmental, abuse, and other long-tail exposures with no single adjustment being particularly noteworthy. In Bond & Specialty, net favorable PYD was $81 million pretax with favorability in Fidelity and Surety. Personal Insurance had net favorable PYD of $155 million pretax, driven by recent accident years in both auto and home.

After-tax net investment income of $774 million increased by 6% from the prior year quarter. As expected, fixed maturity NII was again higher than the prior year quarter, reflecting both the benefit of higher invested assets and higher average yields. Returns in the non-fixed income portfolio were positive but not as strong as in the prior year quarter. Notably, for the first time, Total invested assets surpassed $100 billion, excluding the net unrealized loss. Our outlook for fixed income NII, including earnings from short-term securities has increased from the outlook we provided a quarter ago. We now expect approximately $770 million after tax in the third quarter and $805 million after tax in the fourth quarter. New money rates as of June 30 are more than 100 basis points above the yield embedded in the portfolio. Fixed income NII should continue to increase beyond 2025 as the portfolio continues to grow and gradually turns over with higher yields replacing maturing yields.

Turning to capital management. Operating cash flows for the quarter of $2.3 billion were, again, very strong. we ended the quarter with holding company liquidity of approximately $2 billion. This marks our 21st consecutive quarter with operating cash flows of more than $1 billion, totaling more than $40 billion over that time frame. Interest rates decreased during the quarter, and as a result, our net unrealized investment loss decreased from $3.3 billion after tax at March 31 to $3 billion after tax at June 30. Adjusted book value per share, which excludes net unrealized investment gains and losses, was $144.57 at quarter end up 4% from year-end and up 14% from a year ago. We returned $809 million of capital to our shareholders this quarter comprising share repurchases of $557 million and dividends of $252 million and we have approximately $4.3 billion of capacity remaining under the share repurchase authorization from our Board of Directors.

Turning to reinsurance. Page 18 of the webcast presentation shows a summary of our July 1 reinsurance placements. 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. We also replaced our personal insurance coastal hurricane cat XoL treaty with an all perils countrywide personal insurance treaty that provides 50% occurrence coverage for the $1 billion layer above an attachment point of $1 billion. You may recall that last year's treaty had an attachment point of $2 billion. While in a modeled year, we wouldn't expect this to have much of an impact given the prospect of continued weather volatility, we were pleased to obtain broader coverage at a reasonable cost.

Recapping our results. Q2 was another quarter of continued premium growth in all 3 segments. The quarter also featured excellent underwriting profitability, both on an underlying and as-reported basis and rising net investment income. These strong fundamentals delivered core return on equity of 18.8% for the quarter and 17.1% on a trailing 12-month basis and position us very well to continue delivering strong returns in the future. And now for a discussion of results and business insurance, I'll turn the call over to Greg.

Thanks, Dan. Business Insurance had a very strong second quarter, delivering segment income of $813 million, up nearly 25% from the prior year quarter, driven by higher net earned premiums and a combined ratio that improved 2.5 points from the prior year quarter to a terrific 93.6%. The improvement was broad-based, reflecting higher underlying underwriting income, higher favorable prior year reserve development, higher net investment income and lower catastrophes. We're extremely pleased with our underlying combined ratio of 88.3%, which improved from the prior year by almost 1 point, driven by the benefit of earned pricing.

Moving to the top line. our net written premiums increased 5% to an all-time quarterly high of $5.8 billion, led by strong growth of 10% in our core middle market business. This was partially offset by a 3% decline in net written premiums, in National Property and other, reflecting our disciplined underwriting. As for production across the segment, with renewal premium change of nearly 8%, driven by renewal rechange of 5.3%.

Renewal rate change and renewal premium change in every line other than CMP and property were about the same or higher compared to the first quarter. Renewal premium change in both umbrella and auto were both well into double digits. Renewal premium change in CMP was a little lower, but remained in the double digits. The decline in renewal premium change in property was driven by based on national property, reflecting the outlook for continued attractive returns after several years of compounding price increases and improvements in terms and conditions. Renewal premium change in the property line outside of National Property was down some, but remained solid.

Retention across the segment remained excellent at 85%. Retention in middle market was strong, while retention in our National Property business was a bit lower as we ceded some large accounts to the subscription market on terms and pricing that we weren't willing to access. Lastly, new business of $744 million was a new quarterly record.

We're pleased with these production results and particularly our field segmented execution. Our proven strategy focuses on managing our business in a granular manner, balancing retaining our high-quality book of business while obtaining appropriate pricing. Our rate and retention results this quarter reflect excellent execution, aligning rates, terms and conditions with environmental trends for each line. While our continued high retention levels are an indication of a rational marketplace, we believe our execution is differentiating. It's the best people in the business powered by the best analytics and tools at the point of sale that deliver these segmented production results, ultimately producing these strong returns across BI.

As for the individual businesses, in Select, renewal premium change remains strong at nearly 11%, marking the seventh quarter in a row of double-digit renewal premium change. Renewal rate change of 5.3% was in line with the prior year level. As we expected, retention was stable at 80%, reflecting our targeted CMP risk return optimization efforts, which will begin to wind down next quarter. New business of $148 million continues to benefit from our industry-leading product offerings, including BOP 2.0 and our new commercial auto product, which is now live in 42 states.

In our core middle market business, renewal premium change also remained strong at almost 9%. Renewal rate change of 7.1% was up a bit from the second quarter of last year, while retention remained excellent at 89%. New business of $430 million was a second quarter record.

To sum up, Business Insurance had another outstanding quarter. We continue to grow our quality book of business while investing in differentiating capabilities that position us for long-term profitable growth. With that, I'll turn the call over to Jeff.

Thanks, Greg. Bond & Specialty posted another very strong quarter on both the top and bottom lines. We generated segment income of $244 million and an outstanding combined ratio of 80.3% in the quarter -- up modestly driven by the impact of earned pricing on our management liability business.

Turning to the top line. We're pleased that we grew net written premiums by 4% in the quarter. In our high-quality domestic management liability business, renewal premium percent, while retention remained strong at 87%. These results reflect our intentional and segmented initiatives to improve pricing given the loss environment. As expected, new business was lower than the second quarter of 2024. As a reminder, [ core business ] production was reflected as new business in the prior year quarter and is now mostly reflected as renewal premium. Comparisons to prior year new business levels will be similarly impacted for the remainder of the year.

Turning to our market-leading surety business. We grew net written premiums by 5% from a very strong level in the prior year quarter, reflecting continued robust demand for our surety products and services. So we're pleased to have once again delivered strong top and bottom line results this quarter, driven by our continued underwriting and risk management diligence, excellent execution by our field organization and the benefits of our value-added approach and market-leading competitive advantages.

And with that, I'll turn the call over to Michael.

Thanks, Jeff, and good morning, everyone. I'm very pleased to share that Personal Insurance delivered segment income of $534 million for the second quarter of 2025. Significantly improved underlying underwriting income and favorable prior year development contributed to this excellent bottom line result.

The combined ratio of 88.4% improved 20 points relative to the prior year quarter, driven by a decrease in catastrophe losses of nearly 14 points and a 7-point improvement in the underlying combined ratio. The underlying combined ratio of 79.3% reflects the benefit of the actions we've taken to improve the fundamentals of our business in both auto and homeowners. Net written premiums grew 3% in the quarter, driven by higher renewal premium change in homeowners. In automobile, the second quarter combined ratio was 85.3% and included a 5-point benefit from favorable prior year development. The underlying combined ratio of 89% improved 6.2 points compared to the second quarter of the prior year. This improvement was driven by favorable loss experience across both bodily injury and vehicle coverages and, to a lesser extent, the benefit of higher earned pricing.

In homeowners and other, the second quarter combined ratio of 91.3% was a significant improvement compared to the prior year, reflecting lower catastrophes and strong underlying underwriting income. The underlying combined ratio of 70.3% improved over 7 points compared to the second quarter of 2024. This year-over-year improvement was driven by both favorable non-catastrophe weather losses and the continued benefit of earned pricing.

Turning to production. Our results reflect further progress toward positioning our diversified portfolio to deliver long-term profitable growth. In domestic automobile, retention of 82% remained consistent with recent periods. Renewal premium change continues to moderate as intended, reflecting improved profitability and our focus on returning to profitable growth in auto. We're pleased to note that all the new business premium increased 12%. In addition, for the first time in more than a year, we wrote more new business policies than in the prior year quarter. The new business momentum was primarily driven by our continued efforts to improve auto growth. The relaxing of some of our property restrictions also contributed to the new business momentum in auto.

In domestic homeowners and other, retention remained relatively consistent. Renewal premium change of 19.3% reflects our continued actions to align insured values with rising replacement costs and secure rate increases in geographies where we have the need. The decline in homeowners policies in force continues to be a result of our deliberate actions to manage exposures in high cat risk geographies. We're pleased with the progress we've made.

While we will maintain restrictions on property capacity where we can't achieve appropriate risk reward, we expect to relax many of our rate and non-rate actions in most markets by the end of 2025.

To sum it up, this is a great quarter. We delivered strong segment income as our team continue to improve the fundamentals of our business while further positioning our portfolio for long-term profitable growth.

With that, I'll turn the call back over to Abbe.

Great. Thanks, Michael. We are ready to open up for Q&A.

[Operator Instructions] And our first question comes from the line of Gregory Peters with Raymond James.

Good morning, everyone. So I think for the first question, I'll zero in on business insurance and pricing. Looking at the renewal premium change, both in business insurance ex national accounts and select accounts in middle market. I feel like pricing is holding up pretty good. Maybe there's some pockets of weakness that you're seeing or some pressure. But Greg, in your comments, you talked about in the large national account market, losing some accounts to the subscription market. When you talk about the pricing environment, how much of the select or middle market business has exposure to potential subscription market price competition? And just some additional color on where you're seeing pricing pressure in your middle markets business.

Yes, first of all, it wasn't casualty. It was national property that I referenced. And so yes, typically, you would see a shared and layered a large property schedule be built into a tower and we're definitely seeing that some of the softer element of the property business in those larger schedules. That would leak a little bit into the top end of middle market, but not much and not be relevant for Select.

Greg, just to come back and paint a picture here. And I think Greg laid out a lot of detail in this answer, but just to create the context again. I think as he shared, price and national property was lower. Workers' comp pricing was about the same, but price change in every other line including the component of property that's outside of the national property business was actually quite strong. And in that context, I would also point to retention, which we've always shared is a real indicator of market stability. So we are quite comfortable with the very, very strong execution.

Absolutely. That's apparent in Slide 7 on your ROE slide. Can I pivot to the personal lines business? And I think, Michael, you said in your comments, you're going to relax some restrictions by the end of the year. Can you sort of foreshadow what that looks like in terms of premium production or how that might affect either your renewal -- your retention rates or your policy count growth?

Sure, Greg. Thanks for the question. I think the reason I made the comments around the plans to relax some of our restrictions in property by year-end was just to give you a little bit of a feel for the progress that we're making. As I mentioned, we're pleased with our progress there, and we continue to see progress in our ability to improve profitability and manage volatility in the property line.

The other reason I mentioned is, as we've talked about in the past, those property actions have been a headwind to auto production. And so while most of our progress this quarter in auto really was a direct result of our efforts to grow auto. Some of the states we've begun to relax have also shown signs of progress in auto growth. So the point there on the property side is we've got a game plan in terms of the places we need to reduce exposure to manage volatility. We've got a game plan in terms of pricing, in terms and conditions, we need to make changes due to improved profitability, and we're making good progress in executing that plan, and most of those actions should be completed by the end of 2025.

Our next question comes from the line of David Motemaden with Evercore.

Alan, I had a follow-up question just on the property side. So I hear you loud and clear, renewal premium change in property outside of national property was down a little bit, but I guess, obviously positive still. How concerned are you about the durability of that? And if some of that weakness that you're seeing in large accounts, national account property starts to trickle down more into middle market and even further down.

David, I think you're sort of missing the forest for the trees. I mean, the overall landscape is very positive and really consistent with what we're seeing in terms of returns. Now we would expect the overall property market to sort of move in a direction. But historically, the property outside of national property has just performed differently, as you'd expect.

Got it. And then maybe just a follow-up question for Greg. So on the business insurance underlying loss ratio, very strong at the 58.4. I think in 2Q last year, there was about a point of light non-cat weather, any of that happen again this year in second quarter that may have flattered the results a little bit? Or is this sort of a cleaner number?

David, it's Dan. I'll take that. So you're right in remembering that we did point out a little bit of favorability in last year's quarter. We saw a little bit of favorability again in this year's quarter. I don't know if it's a new normal, but we've now seen several quarters where we've had a little bit of favorability there. Again, it wasn't a big component last year. So yes, we see a little bit of favorability again this year, but plus or minus a point, the combined ratio is still outstanding in business insurance.

Our next question comes from the line of Brian Meredith with UBS.

A couple, just back on the underlying account loss ratios in BI. How do you think about kind of the effect of tort inflation and kind of what that's doing with your underlying kind of loss picks? I appreciate you're seeing improvement, but I would have thought just what we're hearing about all the problems with tort inflation out there. You may not see that much improvement in underlying loss ratios at this point because of some conservatism there.

Yes, Brian, the tort inflation is alive and well, it hasn't gone anywhere and continues to show up in the numbers. I would say we've got an expectation for it, we're pricing for it, it appears the whole market is pricing for it. If you look at what pricing is doing. And so all the social inflation we see is inside the numbers that you're looking at.

Great. So your price in [indiscernible] is not having much effect to margins. Okay. Second one, Michael, I'm just curious, I appreciate the comments about what's going on with personal auto. Do you expect kind of retention to kind of trend back towards, call it, the mid-80s as kind of I think where personal auto has been. Is that kind of where we should think about things heading?

Yes, Brian, I think it's a great question. Certainly, you're right to recall that historically, in auto, we would have run more, say, an 84 retention versus an 82. I would tell you that coming into 2025, our expectation was we would have seen retention recover as pricing moderated. Clearly, you haven't seen that in the numbers. I think that's reflective of the overall competitive environment in auto, but we continue to focus on both new business production and retention improvement as we see margins and auto continue to improve. So again, our focus is on returning auto to growth, and we've got a number of efforts underway to drive that. But we are still a couple of points off the historical run rate of retention in auto.

Our next question comes from the line of Meyer Shields with KBW.

So two questions. First, Michael, if I can follow up on that. If you're growing an a new -- well [indiscernible] how confident are you that there's no -- maybe [indiscernible] related adverse selected issues growing in new business but retention hasn't yet come back to where you expected?

I think it's a good question, Meyer. I would tell you that underneath the production levels that we're generating, we look at retained business, we look at new business, we look at the profile underneath it. We don't see any signs of adverse selection in our profile metrics for either the business we're retaining or the new business we're writing. So we really don't see any evidence of that.

Okay. Excellent. And then, I guess, Alan, and on the commercial side, is there any sense that when lines of business soften in sort of the current cycle, and I know it's very line of business specific, because it seems to be softening faster than we've seen after past hard markets? I know right now focused on property and [ DNO ] a couple of years ago, but I'm wondering whether there's a theme there of this sort of rapid softening that we hadn't seen.

I'm not sure I get the question, Meyer. But I don't think so. What's your hypothesis that it's softening faster because of what?

So I'm not sure what [indiscernible] because of it would be. But in the past, you had like very sudden and abrupt rate increases when the market got hard and then it was still really soften and the problem was that it's soft for too many years at a moderate level. And I'm wondering whether for the lines of business that are seeing softening now, whether it's working faster than it had in the past. I have no good suggestion in terms of why that would be happening. I'm just wondering if it's happening.

I think the bigger trend here, if you look back over a very long period of time, the amplitude of the pricing cycle, I think, is shrinking. The last time we made a bottom, we didn't really go below 0 and price has been positive for years now in most lines. The other dynamic you see really is dispersion of pricing by line as a function of rate adequacy and returns. And so that's really what I think we're seeing. I think it's less of some market dynamic and big shifts up or down. I think it's pretty rational relative to what we're seeing in terms of returns.

Our next question comes from the line of Robert Cox with Goldman Sachs.

For the first question, I just wanted to revisit the tariff discussion that you all provided us with helpful thoughts on last quarter. How are you considering tariffs within the pricing and margins today?

Yes. We really haven't seen really any impact of tariffs across any of our businesses, certainly not in any meaningful way. And we do have some expectation that there could be an impact. I think we said last quarter that we would expect it in the back half of this year to the extent we do expect it, we'll put it into our loss picks, and that will make its way through to our pricing indications. But so far, no impact really.

Okay. Great. And then a question on distribution. Just curious how you all are thinking about this continued consolidation of insurance brokers and how that might impact travelers. You guys obviously have some great relationships. Is that a tailwind?

Yes. This has now become a pretty long-term trend, and we've been evaluating it really probably over more than a decade now. And I think for the most part, it has been a tailwind and no reason to expect that wouldn't continue. We've got great relationships with those on the acquiring side. So we tend to be a net beneficiary of that process.

Our next question comes from the line of Alex Scott with Barclays.

First one I have is just on sort of casualty versus property and mix shift. I think for the whole industry, some of the growth in property over the last couple of years has been pretty helpful for underlying margins, at least, maybe even overall margins. Would you expect over the next 12 months, just given what's going on with property and that being a little bit more pressure in terms of price, would you expect any reversal on that? Any help you can provide us just making sure we're capturing that dynamic over the next 12 months.

Yes, Alex, it's Dan. So we give you every quarter written premium by product in Business Insurance. And we did make the comment maybe a year, maybe 1.5 years ago or so when property was growing faster than the rest of the book largely because of the significant price increases that were occurring, but we're also taking some new business that, that had a modest benefit to margin and mix. And maybe a quarter or two ago, we got a question of has that sort of gone away as the level of price increase in national property has moderated to which the answer was yes. And if you look at property growth now, it is no longer outsized relative to business insurance overall.

So the short answer is it doesn't have much of an impact in terms of mix change. It was never big enough that we actually called it out in any meaningful way, but it was a slight good guy maybe 1.5 years ago, and that's sort of gone away, but that's inside of the terrific results we just posted this quarter.

Got it. Helpful. Second one I have is on workers' comp. I was just interested if you're seeing any impact from some of the heightened claim environment in California, I think, related to cumulative trauma claims and so forth. And also maybe just broadly, if some of the medical cost pressures that we're hearing some of the health insurer talking about or finding their way into workers' comp loss costs turned at all?

Alex, yes, this is Greg. Regarding cumulative trauma, clearly, we're seeing that in California, and it's not a new quarterly trend. It's something we've been seeing for a few years now. We've been very responsive with underwriting and claim strategies to make sure we're managing that dynamic. I think if you look at the overall rate indications of the bureau and the state that have just been approved of cumulative trauma has definitely a dynamic underneath that. So I think it's a good example where, again, our evidence-based culture and our collaboration has us in a really well-positioned position right now.

Alex, the thing I'd add generally on workers' comp is loss trend continues to come in favorable to our expectations and -- consistent with the trends we've been seeing really over a couple of years.

Our next question comes from the line of Wes Carmichael with Autonomous Research.

I just wanted to come back to Business Insurance in particular, middle market. pretty strong premium growth here at 10% in the quarter. It seems like renewal rate change is pretty stable. But I just want to get any additional color on if you think you can sustain that type of premium growth rate in middle market? Or maybe what's driving the relatively stronger growth there in your view?

Yes, we're not going to give you an outlook in terms of where middle market pricing is going to go up, just give you some color underneath that 10%. You pointed out the 2 -- well, the 3 dynamics, we have strong rate exposure change that's driving good premium change. And then retention continues to be near historical highs on that business, which I think, just demonstrates the strong value that we're bringing out into the marketplace and new business. Our underwriters have been incredibly active in the marketplace and to put those 3 into action in the quarter and you get a terrific number like 10%.

Fair enough. And maybe just coming back on social inflation and loss cost. For Travelers, is this as pronounced in middle and small accounts as it is for national? And I guess there is a discrepancy. Is there any way to think about it in terms of rule of thumb and differences in loss cost trends?

Yes, I do think that you probably see it maybe a little bit more pronounced in larger business where there are larger limits involved and it's a more potentially attractive target for the [ plaintiffs bar ] but we pretty well see it across the entire book.

Our next question comes from the line of Ryan Tunis with Cantor Fitzgerald.

I guess just first question, just trying to think about where your business might be impacted by the macro, I guess, in business insurance, there's like a small tick down in exposure. Is it kind of safe to say that, that tells the whole story. Or is there something else you'd point to underneath it, they might say something else?

Ryan, this is Greg. Yes, clearly, when you look at the exposure trend in business insurance, it's aligned with economic activity. And that shouldn't be surprising where inflation trends have been coming down also. So I think it's more linear with the longer-term economy than anything short term right now.

And then I guess just one for Dan. On the sale of the Canada business, should we think about that as having any type of pro forma impact on the combined expense ratio, the underlying loss -- I guess [indiscernible] figures.

Yes, not much of an impact, Ryan. So for 2 reasons. One is just a very small component of the overall mix of our business. So the inclusion or exclusion of those results is -- and we don't expect to have a significant impact on margin really one way or the other, which is one of the reasons that we said when we announced the deal, we expected to have favorable but modestly favorable impact on EPS going forward.

SP1 Our next question comes from the line of Elyse Greenspan with Wells Fargo.

I guess my first question is going to be a follow-up just on the Canadian sale. You guys marked part of the proceeds right to be used for buyback, but that leaves some extra capital. So is that being set aside for growth or for M&A? And irregardless of whether you pick the M&A bucket, maybe Alan, you can just kind of give us a current update on just views surrounding M&A?

Elyse, so you can just think about that capital is being reallocated to our other capital needs of supporting our business, supporting our growth, supporting other capital objectives that we have, it's not really big enough to change our view towards M&A one way or the other, frankly. So I don't think it makes M&A even more or less likely, but we continue to be very active in looking for things that would meet our objectives. And as we've been pretty consistent about for a long time, we would be interested in opportunities that would improve our return profile improve volatility or provide us with other strategic capabilities. So there's really no change to our M&A strategy or approach.

And then my follow-up is kind of coming back to just medical inflation. Are there any considerations from the OBB legislation? And then obviously, we've seen, combined with just the fact that we've seen some companies already point to higher utilization stemming from some changes in Medicaid availability.

We really haven't seen any -- nor would we expect any significant or even meaningful impact from Medicaid at all. Typically, workers' comp claims tend to come from people that are employed and aren't on Medicaid. So that wouldn't be an issue. And even if you have somebody who was both employed and on Medicaid, you almost always default to workers' comp anyway because it's a better health care alternative for them. So there's really nothing in OBB or in the Medicaid world generally that we think is impacting worker's comp.

And the one thing I'll add, Elyse, there was a change to the Medicare fee schedule, but that was within expectations and historical norms. So no surprises for that either.

Our next question comes from the line of Cave Montazeri with Deutsche Bank.

My first question is on the elevated amount of share repurchases in the quarter. Was that mainly linked to market volatility in April and the proceeds that you had from Canada? Or should we think of that level as being kind of a new baseline going forward?

It's Dan. So a couple of things on that. So one, we don't have proceeds from the Canada transaction. We said we'd expect that transaction to close in the early part of 2026. So that's when you'd see the incremental $700 million for share repurchases sort of start to become available. Second, we don't really forecast a level of share repurchases. What we're doing is rightsizing capital. And so also related to the first part of your question, we're really not market timing in terms of what the stock price is at any given moment. We have a long-term view of stock price intrinsic value, likely growth in book value and our view of what stock price is likely to be. And is when we reach a point where we have excess capital because we continue to generate excess capital, as Alan just said, we'll look for opportunities to deploy it either to grow the business organically to look for inorganic opportunities, make new strategic investments when we've exhausted all those opportunities it's not our capital, it's investors and we're going to return it to shareholders. But that's really what we're doing, and we're not leaning in or leaning out based on stock price at any particular moment as long as we're comfortable that the value relative to our view of long term is still there.

Okay. And then if I could pivot to personal lines. you did mention relaxing some restrictions on the property side and you did say it's going to be -- it's got an impact on rate and non-rate actions by year-end. But does that also include relaxing the ratio of how much business you ride in property versus auto? I think you didn't mention in the past that you would like them to move in line just to keep a pretty good balance in your portfolio between the two. Is that changing as well? Would you be more likely to write more auto, even if you can't write as much on the property side? Or that's no change to that view?

Yes. So this is Michael. Thanks for the question. I think when we've talked about shifting the mix of business in the past and the mix of the portfolio in the past, our focus really has been shifting it more towards auto to get the portfolio back in balance between auto and property. When you look at the PIF changes over time, you see progress in that regard, right? The -- while we do still see a reduction in auto PIF, it's about 25% of the reduction in property. So that demonstrates progress in mixing toward property. As we -- sorry, mixing towards auto. As we relax the restrictions in property, our goal would be to deploy that property capacity and support of writing package business which is our primary strategy in Personal Insurance. And so we would expect the relaxing of some of the property restrictions to bring with it both property and auto opportunities as we look forward.

We have time for one more question, and that question comes from the line of Vikram Gandhi with HSBC.

My question relates to cyber, if you guys have seen any signs of moderation in the rate reductions for cyber and whether any of the recent losses might help [ down ] the sentiment for the better.

This is Jeff Klenk. I'd say that cyber remains a competitive price environment from a market perspective. As I pointed out in my prepared remarks, inside our management liability business, we've been taking some segmented a disciplined focus on a couple of specific lines of business. Cyber is one of those that we believe the loss environment is not fully reflected in the pricing in the marketplace. And so that's our perspective on it. What it means for the future of that market, I wouldn't forecast.

And my follow-up is related to the instrument book. So in terms of the ratings mix for the investment portfolio, I see a notable downward movement from the AAA bucket to AA. I'm assuming that would have been driven by the Moody's action on the U.S. Could you confirm if that was indeed the case? And what does that do to your capital model and the capital requirements on your internal model?

Yes, it's Dan. So that's correct. That's the driver both levels of credit quality still super strong. We're very comfortable with the overall mix of the portfolio and the overall credit rating of the portfolio were well within our internal guidelines and really don't view the U.S. government credits is necessarily less likely to be collected than they were previously, so it's moved down one notch, you're correct, that's the dragger and not really a level of concern for us.

I will now turn the call back over to Ms. Abbe Goldstein for closing remarks.

Thanks very much. We appreciate everyone joining us today. And as always, if there's any follow-up, please reach out to Investor Relations. Have a good day.

Thank you again for joining us today. This does conclude today's presentation. You may now disconnect.