Good morning, ladies and gentlemen. Welcome to the Second Quarter Results Teleconference for Travelers. We ask that you hold all questions until the completion of formal remarks, at which time, you will be given instructions for the question-and-answer session. As a reminder, this conference is being recorded on July 23, 2020. At this time, I would like to turn the conference over to Ms. Abbe Goldstein, Senior Vice President of Investor Relations. Ms. Goldstein, please go ahead.

Thank you. Good morning, and welcome to Travelers’ discussion of our second quarter 2020 results. We released our press release, financial statement and webcast presentation earlier this morning. All of these materials can be found on our website at travelers.com under the Investors section. Speaking today will be Alan Schnitzer, Chairman and CEO; Dan Frey, Chief Financial Officer; and our three segment Presidents: Greg Toczydlowski of Business Insurance; Tom Kunkel of Bond & Specialty Insurance; and Michael Klein of Personal Insurance. They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks and then we will take questions. Before I turn the call over to Alan, I’d like to draw your attention to the explanatory note included at the end of the webcast presentation. Our presentation today includes forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under forward-looking statements in our earnings press release and in our most recent 10-Q and 10-K filed with the SEC. We do not undertake any obligation to update forward-looking statements. Also, in our remarks or responses to questions, we may mention some non-GAAP financial measures. Reconciliations are included in our recent earnings press release, financial supplement and other materials available in the Investors section on our website. And now, I’d like to turn the call over to Alan Schnitzer.

Thank you, Abbe. Good morning, everyone, and thank you for joining us today. As we shared in our pre-release last week and again this morning, we reported a small net loss for the quarter due to a high level of catastrophe losses and, as we expected, a loss in our non-fixed income investment portfolio. Dan will have more to say about both shortly. Our underlying underwriting income of $572 million pre-tax was up $254 million over the prior year quarter, benefiting from solid net earned premium and a 3.5 point improvement in the underlying combined ratio to a strong 91.4%. The pandemic and related economic conditions had only a modest net impact on our underwriting results. As I shared in my prepared remarks last quarter, there will be COVID-19-related loss activity, but there will be some offsetting decline in losses due to people across the country sheltering in place. For us, in the quarter, $114 million of direct losses and $63 million of audit premium adjustments were about offset by initial estimates of favorable loss activity, most of which is in short-tail lines. Given the continued uncertainty, we’ve taken a cautious approach to recognizing the net impact of COVID-19-related loss activity. Some industry observers have speculated about the aggregate level of insured and investment losses arising out of the pandemic. We don’t doubt the losses will be significant, but they won’t be borne evenly across insurers. Our manageable COVID-related insurance losses so far this year are a reflection of our disciplined approach to risk selection, as well as terms and conditions. And as we shared with you in some detail last quarter, we manage our investment portfolio with a similar regard to balancing risk and reward. Last quarter, I commented on the potential future impacts the pandemic might have on…

Thank you, Alan. Our core loss for the second quarter was $50 million, compared to core income of $537 million in the prior year quarter. The change resulted primarily from a higher level of catastrophe losses and, as expected, lower net investment income. For the quarter, the net impact related to COVID-19 is included in our underlying results, not as part of our cat figure and was modest, more on that in a minute. Our second quarter results include $854 million of pre-tax cat losses, compared to only $367 million in last year’s second quarter. This quarter’s cats include severe storms in several regions of the United States, as well as $91 million of losses related to civil unrest. Regarding our property aggregate catastrophe XOL treaty for 2020, as of June 30, we have accumulated about $1.4 billion of qualifying losses towards the aggregate retention of $1.55 billion. The treaty provides aggregate coverage of $280 million, or $500 million of losses above that $1.55 billion retention. The underlying combined ratio of 91.4%, which excludes the impacts of cats and PYD, improved by 3.5 points compared to 94.9% in last year’s second quarter. The underlying loss ratio improved by more than 4 points, and benefited from a lower level of non-cat weather losses, favorable frequency in personal auto from the shelter in place environment, net of related premium refunds, and the impact of earned pricing in excess of loss trend. The expense ratio of 31% is 0.8 point higher than the prior year quarter and above our recent run rate. This change was, as expected, due to the reduction in premiums associated with the pandemic’s impact on the economy, along with the premium refunds to our personal auto customers. The net impact of COVID-19 and its related effects on the economy…

Thanks, Dan. Let me start by expressing my deep appreciation to all my Travelers’ colleagues, as well as our agent and broker partners for continuing to provide exceptional service to our customers during these unprecedented times. As for the quarter’s results, Business Insurance had a loss for the quarter of $58 million, due to lower net investment income and higher catastrophe losses, as both Alan and Dan discussed. The combined ratio of 107.1% included more than 10 points of catastrophes, impacted by both weather-related losses and civil unrest. The underlying combined ratio of 97% improved by 0.4 points, reflecting a 0.2 point improvement in each of the underlying loss ratio and expense ratio. The net impact of COVID-19 and related economic conditions was modest. Turning to the top line. Net written premiums were 3% lower than the prior year quarter due to the impact of the economic disruption on insured exposures. Thanks to excellent execution by our field organization. These impacts were largely offset by strong renewal rate increases and high retention. Turning to domestic production. We achieved strong renewal rate change of 7.4%, while retention remained high at 83%. The renewal rate change of 7.4% was up almost 4 points from the second quarter of last year and more than 1 point from the first quarter of this year, notwithstanding the persistent downward pressure in workers’ compensation pricing. We continue to achieve higher rate levels broadly across our book, as rate increases in all lines other than workers’ compensation were meaningfully higher during the quarter as compared to the second quarter of last year. We achieved positive rate on about 80% of our middle market accounts this quarter, which was up from about two-thirds in the second quarter of last year. Importantly, we’ve achieved this progress in a highly…

Thanks, Greg. Bond & Specialty delivered solid returns and growth in the quarter, despite the impacts of COVID-19 and related economic conditions. Segment income was $72 million, a decrease of $102 million from the prior year quarter. As Dan mentioned, the combined ratio of 93.8% reflects unfavorable prior year reserve development in the quarter, as compared to favorable PYD in the prior year quarter and the higher underlying combined ratios. The underlying combined ratio of 88.1% increased 7.1 points from the prior year quarter, primarily driven by the impacts of higher loss estimates for managing the liability coverages, about half of which was due to COVID-19 and related economic conditions. Remaining half of the increase is due to a few smaller drivers, such as elevated claim activity under employment practices liability coverages and ransomware losses under cyber policies. Turning to the top line. Net written premiums grew 3% for the quarter, reflecting strong growth in our management liability and international businesses, partially offset by lower surety production. In our domestic management liability business, we are pleased that renewal premium change increased to 7.8%. This marks the seventh consecutive quarter, where RPC is higher than the corresponding prior year quarter. As Alan noted, renewal rate change was a record for the quarter, while retention remained at a historically high 89%. Similar to Business Insurance, RPC in the quarter was also impacted by lower insured exposures. These production results demonstrate the effective execution of our strategy to pursue rate where needed, while maintaining strong retention of our high-quality portfolio. We will continue to pursue rate increases where warranted. Domestic management liability new business for the quarter decreased $13 million, reflecting the disruption associated with COVID-19 and our thoughtful underwriting in this elevated risk environment. Domestic surety net premium – net written premium was down $24 million in the quarter, reflecting the impact of COVID-19, which slowed public project procurement and related bond demand. International BSI posted strong growth in the quarter, with record rate in our UK management liability businesses. So Bond & Specialty results remain resilient despite the challenges brought on by COVID-19. These results reflect the excellent work of our agents, brokers and employees who have adapted to operating in new ways to continue to provide leading products and services to our customers. We feel confident about our ability to navigate through this challenging environment and continue to deliver strong returns over time. And now, I’ll turn it over to Michael to discuss Personal Insurance.

Thanks, Tom, and good morning, everyone. Personal Insurance segment income for the second quarter of 2020 was $10 million, down from $88 million in the prior year quarter, driven by a higher level of catastrophe losses and lower net investment income. These impacts were partially offset by an improvement in the underlying underwriting gain. Our combined ratio for the quarter was 101.3%, an increase of 1.1 points and the 12.5 point increase in catastrophe losses was largely offset by a 10.6 point improvement in the underlying combined ratio. The underlying combined ratio benefited from lower non-catastrophe weather-related losses and lower automobile losses net of premium refunds. The increase of 2.6 points on the underwriting expense ratio was primarily driven by the reduction in net earned premiums, resulting from the auto premium refunds. Turning to the top line. Excluding the impact of premium refunds of $216 million, net written premiums grew 6%. Agency Homeowners and other net written premiums were up an impressive 13% and Agency Automobile net written premiums were up 3%, excluding premium refunds. Agency Automobiles delivered strong results with a combined ratio of 85.7% for the quarter. The loss ratio improved over 12 points, while the underwriting expense ratio increased by about 4 points. The increase in the underwriting expense ratio was primarily driven by the impact of the premium refunds I described earlier. The underlying combined ratio of 84.2% improved 9.6 points relative to the prior year quarter, continuing through reflect improvements in frequency, primarily due to fewer miles driven as a result of the pandemic. Data from our IntelliDrive auto telematics program indicates miles driven were down significantly from pre-COVID-19 levels during the second quarter, reaching a weekly low point in early April and partially rebounding as the economy has started to reopen. In response to…

Thanks, Michael. Before we begin Q&A, there’s one topic that we expect might be on people’s minds. So we thought we would kick off Q&A by addressing it. So before we open up the line, I’d like to turn the call back over to Dan.

Thanks, Abbe. There has been some discussion by industry observers about the timing of the recognition of COVID-related losses. So let me reiterate that our reserves reflect our best estimate of ultimate losses incurred as of the balance sheet date. In applying accounting principles, we would not record a reserve for a loss that has not yet occurred as of the balance sheet date. Using auto claims as an example, at the beginning of the year, we have an assumption as the volume of claims we will see over the course of the year and what the average cost of those claims will be. But when we report our second quarter results, including our balance sheet loss reserves as of June 30, those reserves do not include estimated amounts for auto accidents that will occur at Thanksgiving or on New Year’s Eve. Those would be fourth quarter events, and accordingly, they will be recognized in our fourth quarter results. The same principle applies when we consider losses related to COVID-19. While only some losses have been reported to us so far, the losses we booked in both the first and second quarter reflect our estimate of the ultimate amounts that we’ll pay for all losses and related costs that have been incurred as of June 30, including those for which we have not yet received a claim. In fact, as I said earlier, the majority of the COVID-related insurance losses we have booked through June 30 are still sitting in our IBNR reserves. That said, the pandemic is clearly not over, and tens of thousands of new infections are being confirmed in the United States each day. It is foreseeable that a healthcare worker, for example, who, to this point, has not contracted COVID-19, will become ill from COVID-19 as a result of their job duties in December. But again, that loss activity will be included in our fourth quarter results. We similarly would not advance the recognition of any continued favorability from lower frequency and non-COVID workers’ comp claims. Finally, I’ll remind you that on a year-to-date basis, setting aside net investment income, the impact on our results from COVID-19 and its related effects is a net charge of about $50 million pre-tax. And with that, operator, we’re ready to take questions.

Thank you. [Operator Instructions] Your first question comes from the line of Michael Phillips with Morgan Stanley. Please go ahead.

Thank you. Good morning, everybody, and thanks for the clarification, Dan, on your last comment, so that’s helpful. I guess, I want to try to get arms around Business Insurance and margins and pricing. Trying to kind of pull out the effect of COVID, you said, COVID was pretty modest in the quarter. Pricing was clearly very strong. Yes, core margins improved 40 bps or 20 bps on the well side. So, I guess, trying to understand, is – does that mean – and Alan, you gave us great commentary on pricing. Does that mean that the current level pricing still isn’t enough to expand margins today? Or kind of how do we think about that versus the level of conservatism that might be baked into the – to the current numbers?

Yes, Michael, good morning. It’s Alan. I’ll start by giving you a response to what’s on your mind. At the current levels, written rate is in excess of loss trend. So, looking narrowly at those factors, we are on a written basis expanding margins. Is that where you’re getting at?

It is. Yes, it is. I guess in business interruption, you had 20 basis points of improvement. So, not as much as maybe one would expect given a level of pricing. And so that’s what I’m trying to get my arms around.

Yes. So, as always, there are a number of factors that are driving the underlying combined ratio in the quarter, and that’s true for any business. So you’ve got weather. So year-over-year, that was better. And in this quarter, sort of within the normal level of variability, we would expect for that. You’ve got the earned impact of rate that, as I said, on both written and earned basis, rate is ahead of loss trend. We’ve had improved performances in some business. You’ve got some impact of COVID, it was modest, but not zero. You’ve got the year-over-year sort of ongoing carry-on impact of social inflation that I’ll call old news, what – the – what we’ve recognized in prior periods and it continues to roll through. So, those are – given the relative stability, we’re not going to quantify the pieces. But essentially, those are the pieces.

Okay. No, thank you. That’s helpful. Thanks, Alan. I guess, I didn’t see you mention – and I guess, this is good news, didn’t see you mention of anything on the commercial auto side for PYD. And so maybe could you speak to kind of that piece? And does that mean that there has been possibly some leveling off of the paid activity that’s been part of the concern there?

Michael, it’s Dan. Yes, as we had last quarter, so we had some movements in PYD, some puts and takes, some continued good news in comp, some continued pressure in the other liability lines. There were small adjustments in commercial auto and the general liability lines in CMP. But as I said in my remarks, relatively modest compared to those reserve bases.

Okay. Thank you, Dan.

Your next question comes from the line of Ryan Tunis with Autonomous Research. Please go ahead.

Hey, thanks. Good morning. I just wanted to get a better feel for just – forget about the net benefit from the COVID. Just from the direct losses alone or the direct impact, what was the hit that, that had in business interruption on the combined ratio?

Business interruption specifically or Business Insurance?

I’m sorry. I’m sorry, Business Insurance without considering the offsetting benefits, what was just the direct loss impact or direct hit impact on that number?

Yep. Ryan, it’s Dan. I don’t think we’re going to give the pluses and the minuses. But within the – we told you that there was $114 million of directly related charges. And while that included some charges for the management liability coverages in Bond & Specialty, the majority of what we took came through Business Insurance.

Okay. And then, in terms of thinking about the benefits that we’re seeing, I think, in the preannouncement, you said it was mostly short-tail lines. But – so should we take that to me – I mean, first of all, outside of the short-tail lines, are you seeing actual to expected look a little bit better in some areas in terms of the frequency? And is that not something – and if so, is that something that you’re not recognizing yet? You’re being conservative and waiting to see if that continues to be the case?

Yes, Ryan, it’s Dan, again. So we are, for sure, seeing some favorable indications relative to what you would otherwise expect in this current environment. And when we look at that, there was too much favorability to simply say, zero is the right reaction. But as Alan said in his comments and as I tried to reiterate in mine, I think, we’ve been very cautious in terms of the degree to which we’d recognize any good news in anything other than the short-tail lines. But there’s some, because it’s very apparent in the data.

And then just one more real quick. I was, I guess, a little bit surprised exposure growth held in – I think, especially in Select lines, retention has only declined modestly. How should we interpret that? Is retention – is it capturing cancellations? Or is that modest dip, mostly a function of you guys taking more rate? I’m just trying to figure out how to interpret those numbers that seem relatively modest, given what’s happening in the macro landscape?

Yes, Ryan, let me take – this is Greg. Let me take both of those in the order that you took on. Number one, in terms of exposure change, if you’re looking at relative to Middle Market, that’s really a product mix dynamic. In the Select business, we have – the thrust of the premium is two product, CMP and workers’ comp. In the CMP product, the rating on that is driven more off of property than the GL. And so, we’re continuing to see pricing and inflationary pressure on the property. And so there’s some inflationary impact that, that impacts on the CMP product. And so you don’t see as much of a drag on exposure on Select that you do on Middle Market, where the GL product is more on a standalone-rated basis. And then the retention overall, for Select, we certainly put our estimate of what we see in terms of business insolvencies, bankruptcies, and that’s all inside the 82% number.

Thank you.

Your next question comes from the line of Meyer Shields with KBW. Please go ahead.

Great. Thanks. Greg, if I heard you correctly in your prepared comments, you talked about a 50 basis point increase in loss trend. And I was hoping you could flush that out a little?

Sure, Meyer. Yes, we look at loss trends every quarter and across the full portfolio, and that’s obviously a headline number. What we did this quarter is, we looked at the impact of the new economy that we see in front of us. We also look at some of the social inflation or liability dynamics that Dan just talked about. When we roll that all up in aggregate, we believe we’ve got a 50 basis points increase in our loss trend in front of us.

The thing I’d add to that, Meyer, is that, that is reflected in the underlying combined ratio we reported for the quarter as is a piece of that, that would be catch-up from the first quarter.

Okay, perfect. That last point is exactly what I was looking for.

Yes.

Second question, I guess, with workers’ compensation being the most vulnerable to exposure unit pressure, does that impact rate need on the expense ratio side?

Say the question again?

I’m trying to understand, I know that in general, workers’ compensation pricing has been coming down, because the industry experience has been good, but we seem to be seeing a fairly significant exposure unit headwind. And I’m trying to get my arms around what that implies for indicated pricing?

Yes. Meyer, there’s a heavy regulatory component to pricing, as you know, and it tends to be a little bit backward looking. And it sort of factors in the overall profitability of the line, which is, as you know, has been very favorable over the years and that will continue to be the case. So, clearly, exposure will be one impact on profitability today, which will impact pricing tomorrow. But it’s really hard to isolate any one in – any one factor and its impact on profitability, because everything goes in, you’ve got – you start with your expiring rate and then you’ve got whatever the rate change is and you’ve got exposure change, you’ve got loss trends, things like that. So it’s definitely a factor. It’s hard to isolate what the extent of the impact is.

Okay, understood. Thank you very much.

Your next question comes from the line of Elyse Greenspan with Wells Fargo. Please go ahead.

Good morning, Elyse.

Hi, good morning. Could you hear me?

No. That – we hear you now.

Sorry. Thank you. In terms of Business Insurance, I was hoping for the COVID-19 losses. And I recognize in response to an earlier question, maybe you aren’t giving just the loss impact in Business Insurance, specifically by line. But could you give us a sense of where you saw the majority of your COVID losses, that’s ignoring the favorable impact in the second quarter just specifically within Business Insurance?

Yes, Elyse, so that’s what I had tried to do. So we took $114 million across the enterprise in direct COVID losses. None of that was in Personal Insurance. There was some component of management liability within Bonds & Specialty Insurance, which Tom described and going through their combined ratio. But the majority of those dollars came through Business Insurance.

So, Elyse, are you asking for a breakdown by product line?

Yes. I was hoping by product line, even if not in terms of dollars, you could just give us a sense of which Business Insurance product lines saw the majority of your COVID losses?

Yes. The largest line, for sure is workers’ comp, some property losses, both domestically and internationally. And then dribs and drabs, I would say, in other lines, but those are the two drivers with the comp by far being the largest.

And, Elyse, I’d point you to my prepared comments or what I did share that this was a modest net impact when we look at the offsetting of the favorable frequency on some of those lines also.

Okay, thanks. And then my second question is maybe a follow-up on the prior question on workers’ comp. We’ve heard a few folks in the industry, it seems like starting to point towards the bottom of costs in terms of just the pricing dynamics there. But if I go back to your comments throughout the call, it doesn’t sound like you guys are thinking that the rate declines that we’ve seen in that business are close to coming to an end. So if you could just help us think about worker’s comp in terms of the pricing dynamics there, and whether we might hit an inflection, and I’m not just talking 2020, perhaps even into 2021 as well?

Yes, Elyse, it’s a great question. When you look at the information coming out of some of the rating bureaus and when we look at our own, we would say that we are sort of at or near a bottom in workers’ comp pricing.

Okay, that’s helpful. One last numbers question. Could you give us a – you said that they were small numbers. But is there – could you give us a sense of the dollars in terms of the adverse development within general liability and commercial multi-peril in the quarter?

We’re not going to do that, Elyse. They’re all pretty modest.

Okay. Thank you. I appreciate the color.

Thank you.

Your next question comes from the line of David Motemaden with Evercore. Please go ahead.

Hi, thanks. Good morning. And, Dan, I guess, I appreciate the comments that you made just before the Q&A. But I guess, I’m just wondering if you could give us some sense of how you’re thinking about COVID-related adverse impacts throughout the rest of the year. Just looking through your portfolio of exposures and thinking how it might be affected by COVID, even if the losses haven’t occurred yet in the first-half. And you have the exposure and you think there’s a possibility that there could be a loss on it. Just wondering to get some thoughts there. I figured I’d take a shot at that?

David, good morning. It’s Alan. Let me start with that. And if I miss anything, I’d like Dan to take it up. We’re not going to forecast future losses. Our obligation under GAAP is to report the incurred and unreported losses as of the balance sheet date, and that’s what we’ve done. It’s hard to forecast the future. There’s some uncertainty. We don’t know the trajectory of the disease. We don’t know when we’re going to have a vaccine. We don’t know what the outlook for the economy is. And frankly, it’s – probably the uncertainties for the economy that have the biggest impact on – of the pandemic on us. But I do think it’s relevant to – and that’s why we pointed it out a few times that our net losses in the first-half of the year were – net charges were about $50 million putting aside the investment side. And we’ve put up that net number with a high degree of caution. So I can’t give you a number. We – I tried in my sort of line by line review to tell you some of the factors that we think about. But I think it’s not irrelevant to that assessment to think about our experience in the first-half of the year.

Okay, great. That’s helpful. I appreciate that, Alan. And then just one more. So excluding workers’ comp, the renewal rate change, so it was pretty strong, you said double digits. Wondering if we could get a finer point put on that, and then just sort of how that compares versus the last few quarters? And also, sort of thinking about and I think, Dan, you had mentioned you’re looking at loss trend of 5% now in the updated thinking. And that’s, I guess, what I should be comparing to the 7.4% renewal rate change that you got in the quarter?

Yes, I think that’s – it’s Dan. I think, that’s the right way to think about rate versus trend, and that’s about – that’s the ballpark. I think we’ve said previously, that trend was around 4.5% in BI and we’re taking it up about 0.5 point in the current quarter. But you got to look at that in, in relation to the pricing momentum as well. And I think, Greg could correct me if I’m wrong. But the pricing momentum you see in this quarter is a reflection of the strength of the market and the continued need for rate.

Yes. The only thing I’d add there to your point, outside of comp, all of our products were positive. And so we feel great about that execution and mostly, the changes line up with where the need is also.

Okay, great. And if I could just sneak one more in on the adverse development in general liability. Hoping to get a little bit more color in terms of what you saw in the quarter that, I guess, brought you to make that change, because I thought that, most of the courts were closed during the quarter. I would think the page would be nothing really accelerated during the quarter? Or was it more just a view of – yes, or was it more just an ongoing review that resulted in the change there?

Yes. David, it’s more of the latter. And remember, as we’re doing reserve reviews, especially in long-tail lines like those, you’re looking more backwards at your data. So the actual loss environment of May and June, we’re aware of it, but it’s not really – you don’t have enough time to gather all that data and fully factor into the reserve view that you’re making at that time. So a little more that is still backward-looking in terms of way things have developed, say, through the first quarter.

But again, as Dan noted in his remarks, those were relatively small movements.

Yes. Great. Understood. Thank you.

Thank you.

Your next question comes from the line of Paul Newsome with Piper Sandler. Please go ahead.

You’ve hit the big ones for me, but one just quick one. From an investment perspective, do you have expectations that we would see increased defaults as well come through and I guess that we will see them realized? And is that sort of booked into the investment expectations that you gave us this quarter as well? I’m thinking the actual defaults that we might see from the recession?

Yes. Paul, it’s Dan. We gave a fair amount of detail and did a fair amount of commentary on the construct of the investment portfolio and our comfort level with the way we thoughtfully invested. And we’ve given you an update of that investment detail again in the appendix of the webcast presentation this quarter. So I wouldn’t say more than we said, I think, last quarter in terms feeling really good about the way we’ve managed risk on the asset side of the balance sheet, clearly, we’re aware of and looking and looking at and have a regular process to assess credit impairment and default rates and all of that stuff is baked into our numbers. But it’s really not a big impact on us, given the thoughtful investment approach in the first place.

Has ratings migration had much of an impact yet, if at all, on the capital calculations for you guys?

No, it does not.

Great. Thank you.

Thanks, Paul.

Your next question comes from the line of Brian Meredith with UBS. Please go ahead.

Yes, thanks. Just two quick ones here. First one, what was the impact of premium adjustments on the BI written premium this quarter like comp and CMP?

I’m not sure I understand the question, Brian.

Meaning like for workers like reevaluating like what – like employment stuff is on workers’ comp. You usually do it in the fourth quarter, but were there’s any kind of early ones where you adjusted premium kind of to reflect what it’s going look like the year?

So I wouldn’t say we normally do it in the fourth quarter, I think, what you’re referring to maybe is we do it at the – when the policy period has ended and we’d like to go up.

Yes.

There has been some – and we’ve been open to it, there have been some more requests by customers to do some of that midterm. But all that’s baked into our production statistics and the written premium numbers we reported for the quarter, Brian, and you got to break out that one piece.

Okay, thanks. And then the second, just a quick question, just to understand the 50 basis points of increase in trend in the BI. Is that inclusive of what you’re seeing with respect to COVID-19 and maybe the benefits or adverse stuff you’re seeing on COVID-19? Or is that more related to what’s going on with just general kind of tort inflation and some of the increase you saw in your GL reserves and your CMP reserves?

I think we’re – we consider everything, Brian, and included in there. And there are some puts and takes, the net of the puts and takes was 0.5 point increase to the trend.

Right. And just on that – following on that, Alan, you made some comments about maybe some favorable stuff happening in the court system as far as some early quick settlements. But in general, what’s your kind of take on what’s going on with tort right now? could we potentially see an increase in tort inflation as a result of what’s going on with COVID-19?

Yes. I mean, I think, we certainly could, and that’s one of the reasons why we’re such big proponents of liability reform. I think it’s important in terms of making sure we’re protecting the nation’s recovery from the pandemic. I think, you hear a lot of rhetoric out there on that topic. But every – everything we see and everything we’re anticipating is in that loss trend number.

Great. Thank you.

Thank you.

And we have time for one more question coming from the line of Jamminder Bhullar with JPMorgan. Please go ahead.

Good morning. So first, I had a question on just the commercial auto business. If you could talk about what you’re seeing in terms of frequency, is that picking up as traffic’s been increasing recently? And then relatedly, just your views on the rate adequacy in that line, given that you’ve been raising prices for a while? Or do you think rates need to go up further?

This is – Jamminder, this is Greg. Yes, we certainly have seen some favorable frequency activity, as the shelter at home has taken place, certainly not to the levels of Personal Insurance. And just as a reminder, in commercial auto, it’s a little unique and personal, where we do have lay-up credits or premium credits when there’s limited use. And so, there’s a slight offset as we see that frequency. We have mechanisms to give that back. Now as the economy is starting to reopen, we’re seeing that frequency moderate.

Got it. And on the personal auto side, are you assuming or expecting additional refunds in the third quarter results?

So we don’t have further refunds planned in personal auto. I think, like many, we’re looking forward at what rate adequacy is over time and looking at more traditional mechanisms like rate filings to make sure that rates are in line with loss trend and loss cost. And in personal auto, the refunds really were a mechanism to respond to acute – an acute issue in the early days of the pandemic is sort of the way we’re thinking about it.

Okay. And then just lastly, you mentioned majority of the COVID losses were related to workers’ comp. You didn’t really mention anything about business interruption, and I’m assuming those losses were pretty modest. But is that more, because you haven’t seen a lot of claim submission? Or is it just your view – you have seen submissions, but your view is that those claims are uninsured, given the policy language?

Yes. We’ve certainly seen some submissions, and there’s some claim activity around it and even some litigation around it. As we’ve noted, we’ve got provisions in our policies that we think make that coverage inapplicable. And so we don’t expect many of those claims actually to pay out.

It’s Dan. One related comment to that. Even where we don’t expect ultimately to pay the indemnity on a loss, we have acknowledged in our reserves the fact that we’ll spend some money defending against claims that come in for business interruption.

Okay. And on COVID, is that the line where you see the most uncertainty in terms of claims, given what happens on in terms of litigation activity? Or are there other lines where there’s not a lot of clarity based on what’s happened so far?

I don’t think there’s a lot of uncertainty around business interruption. I mean, certainly, there’s some, because there’s some litigation and there’s always uncertainty when you have litigation. But we – we’ve got the requirement for direct physical damage. We’ve got two courts that have upheld that so far. And we’ve got a specific virus exclusion in our standard policy form. So we don’t actually see a lot of uncertainty there, and we don’t expect that to be a material loss contributor for us.

Okay. Thank you.

Thank you.

I will now turn the call back over to Abbe for closing remarks.

Thank you all for joining us this morning. Appreciate it. As always, if there’s any follow-up, please get in touch with Investor Relations and we’re happy to answer your questions. Be well, and have a good day. Thanks.

This concludes today’s conference call. You may now disconnect.