The Travelers Companies, Inc. (NYSE:TRV) Q4 2022 Earnings Call Transcript

Meyer Shields: Okay. No, that makes sense. And then a quick question for Michael. You talked a little bit about, I think un-quantified the impact of accident year €˜22 loss take increases in the fourth quarter, did that change have a meaningful impact on the indicated rate need?

Michael Klein: Sure, Meyer. Again, I would say every quarters of additional experience where we see double-digit loss increased experience impacts our rate need, it impacts our loss experience. The good news is it factors into the evidence we have to go to regulators to ask for rate increases. So, it certainly, the additional quarter of sort of double-digit severity did put additional upward pressure on our rate indications and that’s what we are factoring into the indications were taken to the department in early 2023.

Meyer Shields: Okay. Prefect. Thank you.

Operator: Our next question comes from Alex Scott with Goldman Sachs.

Alex Scott: Hi. Good morning. I had one follow-up on the personal auto. We saw a peer of yours that’s had severity sort of picking up maybe faster than they even were expecting earlier in the year and as well as bodily injury that’s sort of being settled at this point. Just wanted to see, is that something you have looked at harder in your book, how confident are you that you are fully capturing the severity in the way you are reserving on the auto? Do you feel comfortable with where that is headed into 2023 and the starting point here?

Michael Klein: Sure. This is Michael. Maybe I will start and Dan can speak to the reserving element of it. Certainly, as I talked about the prior period comparison in auto, we are seeing severity across auto physical damage coverages and bodily injury coverages. We have talked about both auto physical damage and bodily injury and either prepared remarks or Q&A sort of throughout the year. We have certainly spent more time talking about auto physical damage, but bodily injury severity trends have been elevated throughout the year. I think we have talked about them being elevated, but consistent with our expectations. They were a little worse in Q4, which is why we call them out. But we have booked to that in our Q4 results. They were also an element of the prior period €“ current year prior quarter development that I called out in the prepared remarks as well. So, they are in the loss estimates that we booked for the quarter and the full year.

Dan Frey: Alex, it’s Dan. Just in terms of the balance sheet, I think we made this comment last quarter as well. We were pretty consistent in 2020 and 2021 in saying that we felt we were being appropriately cautious in allowing for the elevated level of uncertainty in the environment at that time when we were making our loss picks, including in personal insurance. And I think that’s continued to proven to hold up. As Michael said, our expectation was always that bodily injury severity, not only was elevated, but the trend slope was upward moving on that. And so I think when you take into consideration the fact that we were sort of intentionally reflecting an elevated level of uncertainty in €˜20 and €˜21 and trying to continuously react to the most recent data as it comes in to this point all the way through the end of 2022, our reserves for prior years have held up just fine