Dan Frey
Executive Vice President and Chief Financial Officer at Travelers Companies
Thank you, Alan. Core income for the fourth quarter was $810 million, a very strong result considering the significant impact of CAT 73 [Phonetic], the winter storm that occurred in late December. Core income for the full year was $3 billion. For the quarter, core return on equity was 12.3%, including the 5.9 percentage point adverse impact of CAT 73 [Phonetic]. For the full year, core ROE was 11.3%. As you heard from Alan, our consistently strong performance has delivered double-digit core ROE in nine of the past 10 years, averaging 12.6% over that timeframe, and our adjusted book value per share has nearly doubled over the past decade.
For the quarter, underlying underwriting income of $723 million pretax reflected higher levels of earned premium in all three segments and a consolidated underlying combined ratio of 91.4%. Terrific underlying combined ratios in both Business Insurance and Bond & Specialty were offset by results in Personal Insurance. Results in all three segments reflected the benefit of earned price that exceeded loss trend. One additional comment on underlying underwriting income. Prior to 2020, the highest level of full year underlying underwriting income we had ever reported was $1.5 billion after-tax. Despite the significant adverse impact of elevated inflation on profitability in Personal Insurance, 2022 marks the third consecutive year with underlying underwriting income above $2 billion after-tax.
Simply put, our increased premium volumes and diversified portfolio of businesses are generating underwriting profit dollars at a completely different level than where we were just a few years ago. The fourth quarter expense ratio of 27.9% brings the full year expense ratio of 28.5%, our lowest full year expense ratio ever. As we've discussed previously, improvement in the expense ratio has not been achieved through cutting corners or artificially managing expenses for the short term, rather, we have made and continue to make significant investments in technology and other strategic initiatives that we believe will drive our continued success. Our ongoing focus on productivity and efficiency has improved our operating leverage.
Looking ahead to 2023, we're very comfortable with an expected full year expense ratio in the range of 28.5% to 29%. Our fourth quarter CAT losses were $459 million pretax. Activity in the quarter was driven by $512 million from the large winter storm in late December, which impacted most of the U.S. as well as Canada. While our losses from this event were significant but were not outsized relative to our modeled estimates for a storm of this size and intensity.
Turning to prior year reserve development, we had net favorable development of $185 million pretax on a consolidated basis. In Business Insurance, net favorable PYD of $127 million was driven by better-than-expected loss experience in workers' comp across multiple accident years, partially offset by increased loss estimates for general liability coverages, primarily umbrella, where year-over-year inflation has resulted in more losses reaching excess layers of coverage. The Bond & Specialty segment saw a net favorable development of $51 million, while in Personal Insurance, we recorded net favorable PYD of $7 million.
After-tax net investment income of $531 million reflected another quarter of improving returns and higher invested assets in the fixed income portfolio and modest returns in the alternative portfolio, which we expected given the downturn in the broader equity markets that occurred during the third quarter. Looking forward to 2023, we expect after-tax fixed income NII, including earnings from short-term securities to average above $535 million per quarter with an estimated $515 million in Q1, growing to an estimated $560 million in Q4.
Page 21 of the webcast presentation provides information about our January 1st CAT treaty renewals. Our long-standing Corporate CAT XOL treaty continues to provide coverage for both single CAT events and the aggregation of losses from multiple CAT events. Consistent with the increase in our annual net written premium volume for property, we increased our retention level to $3.5 billion from the prior $3 billion level. The treaty provides 100% coverage for the $2 billion layer above the $3.5 billion retention. The per occurrence loss deductible remains unchanged at $100 million. We did not renew the underlying property aggregate catastrophe XOL treaty, which was only 45% placed in 2022.
As we've said previously, we believe that a hardening reinsurance market provides a relative advantage for Travelers. Our consistently strong underwriting results give us an advantage in terms of reinsurance pricing and capacity. That combined with the fact that we buy less reinsurance than most of our peers gives us a cost of good sold advantage. We can let that fall to the bottom line or reflected in pricing without compromising our return objectives, making us more competitive for attractive new business opportunities. Overall, while property reinsurance pricing was higher when we consider the level of price increase as well as changes in terms and conditions we are obtaining on our direct written business, we do not expect a noticeable impact on our net underlying loss ratio for property.
Also related to the overall reinsurance market as well as the E&S market, you'll recall that in 2021 we took a minority ownership stake in Fidelis. Effective January 1, 2023, we have separately entered into an agreement with Fidelis, whereby Travelers will take a 20% quota share on policies issued by Fidelis with effective dates in 2023. The market for Fidelis products is probably as favorable as it has been in 20 years or so when the market was impacted by 9/11, dotcom collapse and Hurricane Katrina. This quota share arrangement allows us to participate in the hard market while also accelerating our understanding of this marketplace.
While strategically valuable and expected to be accretive to earnings, the quota share deal is not expected to have a significant impact on our consolidated financial results. Our portion of net written premiums from Fidelis is expected to be around $550 million to $600 million for the full year, and those premiums will be reflected within the international results of Business Insurance. Detailed terms of the quota share have not been disclosed, but we can share that there is a loss ratio cap to ensure that even a worst case underwriting scenario is boxed to a very manageable impact on Travelers.
Turning to capital management. Operating cash flow for the quarter of $1.3 billion was again very strong. All our capital ratios were at or better than target levels, and we ended the quarter with holding company liquidity of approximately $1.5 billion. For the full year, operating cash flow was once again very strong at $6.5 billion, reflecting the benefit of continued increases in premium volume, strong profitability and paid losses that for the full year were once again less than 90% of incurred losses. As we've said previously, we are assuming that this lower level of payment activity is ultimately a timing issue.
In establishing our reserves and pricing our products, we assume that elevated severity related to social inflation has not abated at all. Our substantial cash flows give us the flexibility to continue to make important investments in our business, return excess capital to our shareholders and grow our investment portfolio, which increased to $86.7 billion, excluding net unrealized losses at year-end. Interest rates increased slightly during the fourth quarter, but spreads narrowed, and accordingly, our net unrealized investment loss decreased from $6.3 billion after-tax as of September 30 to $4.9 billion after-tax at year-end.
Adjusted book value per share, which excludes unrealized investment gains and losses was $114.00 [Phonetic] at year-end, up 4% from a year ago. We returned $721 million of capital to our shareholders this quarter, comprising dividends of $220 million and share repurchases of $501 million. For the year, we returned $2.9 billion of capital to shareholders, including $2.1 billion of share repurchases. Overall, we had another very good year with strong top line growth in all three business segments, excellent and improved margins in our commercial businesses, our best-ever expense ratio and a very strong balance sheet that has us well positioned for whatever economic conditions the future may bring.
Now I'll turn the call over to Greg for a discussion of Business Insurance.
