Travelers CEO Won't Call A Bottom In Commercial Pricing, Won't Give A 2027 Growth Number
Alan Schnitzer called commercial pricing "stable," but would not forecast premium trends for next year on the third-quarter call.
Asked on Travelers' third-quarter earnings call about falling commercial renewal rates, Chairman and CEO Alan Schnitzer said the pricing environment is best described as "stable" and added: "We're not prepared to call a bottom." He also declined to give a 2027 premium outlook for business insurance.
What Schnitzer said about pricing
Answering a question from an analyst at BMO Capital Markets, Schnitzer said the sequential change in renewal premium change, the price change on policies that renew, was "very small" in property. In the liability lines, general liability and umbrella, it was "modest." His summary: "pretty orderly."
He added that no one could call a bottom "off one data point," and that "who knows what's going to happen 90 days from now."
The quarter's numbers, as management gave them: business insurance renewal premium change was 4.1%, or 7% excluding property, with retention at 86%. Within that, core middle market renewal premium change was 5.4% and small commercial select was 7.8%. New business was $699 million, up 4% from a year earlier.
In personal insurance, President Michael Klein said auto renewal premium change was slightly negative. Klein said Travelers took about 10 auto rate decreases in the third quarter, still in the low single-digit range it has described before.
No number for 2027, and a conditional on AI savings
An analyst at Autonomous Research asked about business insurance growth in 2027. Schnitzer said he felt "optimistic," but "we're going to stop short of indicating a trend or giving a number." CFO Dan Frey said the company would not guide by segment, while repeating that underlying underwriting income has "some staying power."
An analyst at Bank of America asked whether savings from AI and technology could go toward lower prices to win share. Schnitzer said Travelers is generating operating leverage, citing lower software development cost per unit, lower labor cost for first notice of loss and lower cost to service a policy. If it decides to redeploy some into pricing "without compromising our return objectives," he said, "we'll do that."
He said early benefits show up in expenses and the loss ratio, will translate into growth over time, and that Travelers "will be a consolidator of premium."
The quarter behind the remarks
Travelers reported core income of $1.95 billion, or $9.18 per diluted share, with core return on equity of 22.1%. The combined ratio was 86.8% and the underlying combined ratio 84.1%. Net written premiums were $11.5 billion.
After-tax net investment income rose 7% to $908 million. The company returned $1.8 billion to shareholders, including $1.5 billion of buybacks.
Frey said the expense ratio should come in a little below 29% for 2026 and about the same for 2027. He also said an increase in the cyber reinsurance share ceded from October 1 will cut net written premiums by about $165 million in the fourth quarter, with a de minimis effect on earnings.
Schnitzer's own caution on the call was that a bottom cannot be called from one quarter's data, so the fourth-quarter renewal premium change figure is the next reading.
