Travelers (TRV) Q2 FY26 earnings call: guidance and Q&A

Why is Select pricing in Business Insurance bucking downward trends seen in larger accounts? Is it Travelers-specific or market-driven?

Greg Toczydlowski explained that Select pricing fluctuates based on state-by-state rate filings, not a strategic shift. Alan Schnitzer added that the overall pricing environment, excluding national property, remained stable.

“Well, first, there's no strategic shift underneath the select book. That really is a function of the rate filings that get approved on a state-by-state basis from quarter-to-quarter.”

asked by Michael Zaremski · answered by Greg Toczydlowski

Given the high ROE (24.2% trailing 12-month vs. mid-teens target), would Travelers relax underwriting standards or pricing to grow faster? When will ROE return to the mid-teens target?

Alan Schnitzer stated that relaxing underwriting standards or pricing to grow is a 'fool's errand' that would only lead to lower margins. He emphasized competing on franchise value and that their objective is not to chase growth at the expense of profitability.

“But to your question, are we going to relax underwriting standards or pricing to try to grow, that's a full [indiscernible], and we've always said that's a full here.”

asked by Gregory Peters · answered by Alan Schnitzer

Are rising technology implementation costs (e.g., token costs) offsetting efficiency gains? How does Travelers manage challenges during technology rollouts, specifically regarding a reported software glitch?

Alan Schnitzer affirmed a laser-focus on technology costs and confirmed substantial productivity and efficiency gains. He clarified that a reported 'software glitch' was a complex system conversion, not an underlying platform issue, with most issues resolved.

“In terms of the software glitch that you mentioned, it really wasn't a software glitch. The underlying platform is working just fine. We were moving substantial amounts of information as part of a system conversion, and that is just a highly complex undertaking.”

asked by Gregory Peters · answered by Alan Schnitzer

With high ROE and excess capital generation, how should capital management change prospectively? Are there any different thoughts on the M&A environment?

Dan Frey reiterated their long-standing capital management philosophy: generate strong capital, deploy organically/inorganically for attractive returns, and return excess via dividends/buybacks. Alan Schnitzer confirmed they are highly attuned to M&A opportunities and confident in financing them.

“No. But we are highly attuned to M&A opportunities. And confident that whenever attractive M&A opportunities come around, that we'll find a way to finance them.”

asked by Jon Paul Newsome · answered by Alan Schnitzer

What are the drivers behind the uptick in new business momentum in domestic BI middle market, and how sustainable is it?

Greg Toczydlowski attributed the strong new business to investments in predictive analytics, risk selection, product and technology, and claims/risk control, which are in demand by distribution partners. He noted that it can be lumpy due to the transactional nature of the business.

“Those items are definitely in demand of our distribution. And I think that helps with the new business also. But given that transactional business, it can bounce around from quarter-to-quarter.”

asked by Katie Sakys · answered by Greg Toczydlowski

What are the current trends in personal auto frequency and severity, and is there any impact from higher gas prices?

Michael Klein stated that the improvement in underlying auto results was due to favorable frequency and severity across coverages. He attributed frequency improvements to vehicle technology and safety features, noting no material changes from gas prices.

“But there's not a ton of evidence at least at this point that there have been material changes in driving behavior related to gas prices, particularly as we look through the first part of this year.”

asked by Ryan Tunis · answered by Michael Klein

How durable is the premium growth in Bond & Specialty, particularly from large projects and data center development?

Jeff Klenk explained that surety production is primarily from new bonds, leading to top-line variability, so he wouldn't project durability. However, he believes Travelers is well-positioned to benefit from future infrastructure investment due to its market leadership and high-credit-quality portfolio.

“I wouldn't get into projecting the durability of those things. But if you think about the type of projects, the large projects, the data center construction. As the leader in surety in North America and our quality portfolio, high credit quality customers, we believe that we're well positioned to benefit from that future investment in infrastructure particularly when it involves public spending.”

asked by Mark Hughes · answered by Jeffrey Klenk

Can you elaborate on the improved view of the Business Insurance loss environment, and has the loss cost trend assumption changed?

Dan Frey clarified that the improved view was a small, modestly favorable item from past years' margins, cautiously baked into their picks. He emphasized that the loss environment is influenced by more than just the pure rate number, including underwriting actions and claim efficiency.

“So not a big number, so I wouldn't shine a big light on it. It was just 1 in a series of modestly favorable items. But the reality is like if you just look back at the last couple of years, the margins in Business Insurance from an underlying perspective, have been very good.”

asked by David Motemaden · answered by Daniel Frey

Are you observing longer recovery times in workers' compensation due to unemployment fears or AI, and how does this impact reserving?

Dan Frey stated they are not seeing pressure from severity in workers' comp, which continues to show favorability. He noted their reserving assumes long-term severity trends will return to higher levels, mitigating current benign periods. Alan Schnitzer added that economic activity influences frequency and severity, which is factored into assumptions.

“The other thing I'd say just specific to your question, we didn't really see anything specific in the most recent data that aligns with the problem you are alluding to.”

asked by Brian Meredith · answered by Daniel Frey

Given Travelers' scale and analytical advantages, wouldn't some price reductions still be profitable where competitors cannot follow, despite the general principle of not trading margin for growth?

Alan Schnitzer clarified that his earlier comment was a general principle with variations. He distinguished between lowering price while maintaining returns versus impairing returns, and reiterated Travelers' preference to compete on franchise value rather than solely on price.

“The other thing I would distinguish is lowering price where you're actually lowering returns versus lowering price because you can do so without impairing returns. And those are 2 different scenarios.”

asked by Meyer Shields · answered by Alan Schnitzer