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

Alex Scott: That’s really helpful. Thank you. And then my follow-up is on workers’ comp actually. We were just looking at some of the NCCI stuff out there. I mean it looks like in €˜23, maybe there is a bit more pressure on workers’ comp pricing than even in the recent years. I appreciate though that there is also an improving starting point for ultimate loss ratios just based on the way that the development has been trending. So, when I think about all those things, I mean can you help me think through what that means for accident year loss ratios in €˜23, just at a high level and whether we should be thinking about that as a pressure point?

Alan Schnitzer: Yes. Alex, let me start, and I will look at Greg, if I missed something here. So, renewal price change was mid-single digits positive, as you heard from Greg. Given the durations of the liability, we take a pretty cautious view on how we think about loss trend and the outlook for that. And so you would say pricing is a little bit positive, you would say loss trends negative. And the net of those two things would probably be a little bit negative as we think about next year. I think the question is going to be what’s loss trend going to do because it has €“ over the last few years or more than that surprised us to the benign side. And so we will just have to see where the losses come in and then take a look at the calendar year results. But again, I would just say workers’ comp has been a fantastic line for us. And we think the outlook for it is positive as well.

Alex Scott: Thank you.

Operator: Our next question comes from Yaron Kinar with Jefferies.

Yaron Kinar: Good morning everybody. First question, just going back to the cat load. So, I think we are seeing a non-renewal of the property ad cover, a shift up in XOL retention, maybe some additional cat coming in from Fidelis the quota share as well. How should we think about that kind of in aggregate as we think about 2023, does that essentially mean that we should think about maybe a lower aggregate loss ratio, but maybe some additional volatility?

Alan Schnitzer: I don’t think that’s where I would go Yaron on that. Tell me what you would look at that would lead you to look for a lower aggregate loss ratio?

Yaron Kinar: Well, I would think that more cat-exposed business would have a lower attritional loss ratio coming with it, provide retention rates, we have a lower return on additional loss year as well.

Dan Frey: Yes. I think you are really talking on the margins. I don’t think we are very €“ we are significantly changing the mix of the property book we write in terms of what its cat-exposed profile is. Fidelis, again, at those levels and a portion of what they write is going to be cat-exposed. But at that level, that’s going to have a very small impact on our overall base of premiums. We look at the cat results over the last few years. And I think like everyone sort of continually update our view of €“ and for us, it’s importantly €“ it’s weather losses, not just what falls into the catastrophe bucket, right, because we have got sort of a more restrictive definition of what cat is than most other folks. But it’s really not a significant change.

So, we don’t see a significant change in the relative percentage of the book that’s cat exposed. We don’t see a significant change despite some changes in reinsurance, I would describe those changes in reinsurance relative to the property book as a whole as pretty modest. So, I don’t think it dramatically changes our cat profile. So, I don’t really think it’s going to have a significant impact on the way we think about the property book going forward.