The Travelers Companies (NYSE:TRV) reported results for the second quarter of 2025 on July 17, highlighting $1.5 billion in core income ($6.51 per share) and a core return on equity of 18.8%. The quarter included $11.5 billion in net written premiums, $809 million in capital returned to shareholders, and the announcement in May of the divestiture of its Canadian business for $2.4 billion.

Sharp Improvement in Underwriting Profitability Across All Segments

Core income reached $1.5 billion, reflecting an 18.8% core return on equity, with underlying underwriting income up 35% to $1.6 billion pretax. Net earned premiums rose 7% to $10.9 billion as all three business segments reported underlying combined ratios below or near 90%, including a personal insurance underlying combined ratio of 79.3%.

"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 three segments contributed to these terrific results with strong net earned premiums and excellent reported and underlying profitability."
— Alan Schnitzer, Chairman and CEO

The breadth and magnitude of underwriting improvements signal enhanced risk selection and disciplined pricing, directly reinforcing the company’s sustained profit momentum throughout volatile industry conditions.

Disciplined Capital Management and Strategic Portfolio Optimization

Adjusted book value per share was $144.57 at quarter's end, up 14% from a year prior, while operating cash flows were $2.3 billion and the board's share repurchase authorization stood at $4.3 billion. The $2.4 billion sale of most of the company's Canadian operations, at 1.8 times book value, announced in May, demonstrates aggressive internal capital reallocation favoring higher-return opportunities without shrinking core business capabilities.

"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."
— Alan Schnitzer, Chairman and CEO

This measured divestiture affirms management’s willingness to optimize the business mix, enhancing shareholder value independent of broader M&A trends or market timing considerations.

Fixed Income Portfolio Growth Drives Investment Income Upside

The investment portfolio’s assets surpassed $100 billion (excluding net unrealized loss), generating $774 million in after-tax net investment income. After-tax net investment income increased by 6% from the prior-year quarter. New money rates as of June 30, 2025, were more than 100 basis points above the embedded portfolio yield, boosting earnings visibility for the remainder of the year and into 2026.

"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."
— Dan Frey, CFO

The expanded, higher-yielding fixed income base is expected to increase net investment income.

Looking Ahead

Management projects a full-year expense ratio of 28% to 28.5% for 2025, targets $700 million in additional share repurchases in 2026 from the proceeds of the Canadian divestiture, and expects fixed income net investment income after tax of approximately $770 million in Q3 and $805 million in Q4. Management expects to relax most of its personal insurance rate and capacity restrictions by the end of 2025, reinforcing the outlook for continued premium growth and robust underwriting margins. No incremental guidance was provided regarding M&A, but management reiterated its focus on opportunities that demonstrably improve returns or strategic capabilities.

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