Alan D. Schnitzer
Chairman and Chief Executive Officer at Travelers Companies
Thank you, Abbie. Good morning, everyone, and thank you for joining us today. In the face of an historic cat quarter our top and bottom-line results demonstrate the strength of our franchise and the resilience of our business model. This quarter, we reported strong underlying results and investment returns as well as net favorable prior year reserve development, which were essentially offset by an historic level of industry-wide catastrophe losses. with PCS designated catastrophe events taking place on 88 of the 91 days of the quarter.
Despite pretax catastrophe losses of $1.5 million, we generated slightly positive core income for the quarter. We are very pleased with the underlying fundamentals of our business. Pretax underlying underwriting income of $781 million for the quarter was up nearly 40% driven by record net earned premiums of $9.2 billion and a consolidated underlying combined ratio, which improved 1.7 points to an excellent 91.1%. Earned premiums were higher in all three of our business segments.
Underlying profitability in our Business Insurance segment was particularly strong. The underlying combined ratio improved by three points to an excellent 89.4%. The underlying combined ratio in our bond and specialty business was higher year-over-year but at 87.8% still generated a very attractive return. In our Personal Insurance segment. The underlying combined ratio improved by two points, reflecting the actions we've taken to improve profitability.
Turning to investments, our high-quality investment portfolio generated net investment income of $594 million, after tax for the quarter reflecting stronger and reliable returns from our fixed-income portfolio and solid returns from our fixed-income portfolio. Given our confidence in the strength of our business, we returned $633 million of excess capital to shareholders during the quarter including $400 million of share repurchases.
Turning to production. Thanks, once again to excellent execution by our colleagues in the field. We grew net written premiums by $1.3 billion or 14% to a record $10.3 billion. In Business Insurance, we grew net written premiums by 18% to $5.2 billion. Renewal premium change in this segment was a record-high at 12.8% driven by renewal rate change, which accelerated to 2.5 points sequentially to 7.2%. The renewal premium change we achieved this quarter was broad-based. RPC was double-digit or near double-digit in every line, other than workers' compensation. It was higher sequentially in every line, including workers' compensation.
Even with strong pricing retention, an important indicator of marketplace stability remained very strong at 88%. New business increased 36% to $671 million, led by the property line.
In Bond & Specialty Insurance record net written premiums were about even with the prior year quarter. Retention in our management liability business was an excellent 91% and new business increased to 11%. Surety net written premiums were also once again strong. Given the attractive returns, we are very pleased with the strong production results in both of our commercial business segments. The growth we're putting on the books is from geographies, products, and distribution partners that we know well.
In Personal Insurance, top-line growth of 13% was driven by higher pricing. Renewal premium change was 19.2% in our Homeowners and Other business and increased to a record-high 16.1% in our auto business. Another quarter of terrific production across the board positions us well for the rest of the year and into 2024. You'll will hear more shortly from Greg, Jeff, and Michael about our segment results.
Before I turn the call over to Dan, I'd like to spend a few minutes on what Travelers is doing in an important area for us, artificial intelligence. We subscribe to the view that over time the impact of AI across the economy is going to be profound, so is the opportunity for Travelers. With our performance transform mindset and our disciplined framework for assessing our investment priorities, we've been focused for years on responsibly developing differentiating AI capabilities across our three innovation priorities. Extending our lead-in risk expertise; providing great experiences for our customers, agents, brokers, and employees; and optimizing productivity and efficiency. Between our colleagues who are dedicated to AI specifically and others in enabling discipline, we have a very significant number of our employees engaged on the objective of making sure that we're leading when it comes to AI.
As we've shared before and as you can see on Slide 23 of the webcast presentation. For some time, we've been steadily increasing our technology spend. This year, we'll spend more than a $1.5 billion on technology. As this slide demonstrates, we've also been improving the strategic mix of our tech spend. That includes a meaningful increase in investments to develop or acquire cutting-edge AI capabilities built on modern cloud technology. Importantly, we've done all of that, whilst significantly improving our expense ratio. In no small part thanks to the success of our technology investments. The quantity and quality of data are key differentiators when it comes to AI.
For more than a decade, we've been investing in datasets, data quality, and data accessibility. Between submissions in our commercial businesses in quotes NPI we intake millions of business opportunities each year. We also take care and adjust and adjudicate millions of claims. We are one of the largest risk control organizations in the industry. We provide risk mitigation to our commercial customers, completing more than 100,000 risk control consultations annually. We capture valuable data from virtually all of those interactions. Our data also include decades of curated institutional knowledge in the forms of policies, procedures, guidelines, forensic investigations, and so on. All of that creates an excellent foundation for the next iteration of generative AI.
In addition to our extensive proprietary data, we've been assembling actionable third-party data for years. In fact, we have more than 2,000 datasets from hundreds of third parties. All in, we believe that we have a significant and hard-to-replicate data advantage. Given the competitive advantages that will come from deploying AI across the insurance value chain and the expertise, resources, and data required to get there. Scale will increasingly be a differentiator in our industry as well be the ability to execute complex initiatives effectively and efficiently. Expertise, resources, data, scale, and execution excellence, all favor Travelers.
The potential use cases for AI in our industry are many and varied. We pursue very focused opportunities that are consistent with our innovation priorities and will create meaningful and sustainable competitive advantages all with an eye towards leveraging strategic capabilities across our organization. AI capabilities that we currently have in production span the spectrum from those driving efficiency through automation to more advanced generative AI large language models. More advanced models augment various aspects of our underwriting, claim handling, service delivery, and other work.
We use intelligent process automation broadly throughout our business to handle hundreds of routine workflows. Automation and AI have been meaningful drivers of our expense ratio improvement over the past seven years or so. The key success driver and Insurance is segmenting risk as finely as possible to achieve pricing as accurately calibrated to the risk. Deep learning models have significantly improved our ability to classify and segment risk in our flow businesses. For example in Personal Insurance, we leverage proprietary AI in aerial imagery to assess roof and other site-related conditions at the partial level.
Partial-level risk assessment at scale was practically unimaginable to several years ago and that type of information is very difficult to obtain from the insured with a reliable degree of accuracy. In our select accounts business, we estimate that AI has improved business classification, a critical underwriting input by more than 30%. In our middle-market business, we have developed a suite of sophisticated AI models, which facilitate targeted cross-selling.
Supporting our effort to sell more products to more customers. We're also using AI to better understand our customers and their needs. If this improve customer segmentation, we can better align new product development, and generate insights that improve the customer experience. Enhancing our industry-leading analytics using machine-learning models to deliver sophisticated actuarial insights into loss cost trends and development, which improve our already strong pricing and product monitoring capabilities.
On the most advanced end, we're leveraging generative AI in large language models and we've been doing so for several years. For example, in our Bond & Specialty business, our proprietary large language models have processed hundreds of thousands of broker submissions as we work toward improving intake time from hours to minutes. This will improve our responsiveness to our customers and distribution partners and contribute to our productivity.
In our claim organization, a proprietary large language model ingests legal complaints filed against our insurance and then highlights key liability and coverage issues, assists in routing the cases to the best of the defense council, and provides risk-related insights that can be incorporated back into our underwriting process.
We've also developed and are piloting a Travelers claim knowledge assistant. A generative AI tool trained on many thousands of pages of proprietary technical source material that was previously only accessible to thousands of different documents. The model provides claim professionals with the ability to easily access accurate actionable information on technical and procedural claim matters increasing speed, accuracy, and consistency in various workflows including in interactions with our customers and distribution partners.
So in terms of AI, we're investing with and strategic direction, consistent with our stated objective of delivering industry-leading returns. I've only shared some of what's in-flight and the capabilities that we've developed are in various phases of adoption. The full impact of the capabilities we're developing and others on our roadmap are still ahead of us. These are some things that we are very confident in the outlook for our business. We have terrific underlying fundamentals in our commercial businesses, improving underlying results in our Personal Insurance business, and steadily rising investment returns in our fixed-income portfolio. As you've heard, we're also investing in tackling new capabilities to advance our ambitious innovation agenda. With that momentum and the best talent in the industry, we are well-positioned to continue to deliver meaningful shareholder value over time.
And with that, I'm pleased to turn the call over to Dan.
