Net Income and EPS Surge Driven by Lower Catastrophes and Reserve Releases
Net income of $2.21 billion increased 46% and diluted EPS of $10.26 increased 57% YoY, with the higher rate of EPS growth attributed to the impact of recent share repurchases. Income before income taxes rose $886 million YoY, primarily reflecting (i) lower catastrophe losses, (ii) higher net favorable prior year reserve development, (iii) higher net investment income, (iv) higher net realized investment gains, and (v) higher underlying underwriting margins driven by Personal Insurance and Business Insurance.
Combined Ratio Improves Sharply to 83.6%
The combined ratio improved 6.7 points to 83.6% from 90.3% a year ago, as catastrophe losses fell to $518 million from $927 million (4.9 pts vs 8.5 pts of the ratio) and net favorable prior year reserve development rose to $578 million from $315 million (providing 5.4 pts vs 2.9 pts of benefit). The underwriting expense ratio ticked up 0.4 points to 29.0%.
Earned Premiums Declined Due to Canadian Divestiture
Earned premiums fell 2% to $10.75 billion, but this decline was driven by the divestiture of Canadian operations in Q1 2026, which contributed $266 million of earned premiums in the prior-year quarter; excluding this, premiums were roughly stable. In Personal Insurance, earned premiums decreased 5% YoY, while Bond & Specialty Insurance grew 3%.