The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — ST Paul Travelers Companies — Q2 2004 Earnings Presentation
32 slides from The Travelers Companies's earnings presentation, Aug 11, 2004
Slide 1: Second Quarter 2004: A Strong Foundation
ST PAUL TRAVELERS Second Quarter 2004 A Strong Foundation August 11, 2004
Slide 2: Link to searchable text of slide
Link to searchable text of slide shown abov e
Slide 3: A Strong Foundation
ST PAUL A Strong Foundation TRAVELERS = Progress on integrating operations = Evaluation of second quarter results + Focus on business retention and agency relationships + Analysis of current market conditions + Analysis of investment portfolio + Balance sheet and capital strength + Outlook for secon
Slide 4: Progress on Integrating Operations
ST PAUL TRAVELERS Progress on Integrating Operations
Slide 5: Integration Timeline — From Announcement
STPAUL Integration Timeline — From Announcement TRAVELERS + Single Premium + Major Platforms Audit System Selected (including Completed Claim, National accounts, Commercial accounts, Select accounts and General Ledger) 4Q03 1004 2004 + Merger Announced + Sr. Mgmt Selected Integration + Merger Closed
Slide 6: Integration Timeline — Future Projects
ST PAUL Integration Timeline — Future Projects TRAVELERS + Benefits Structure Merged *Bond System —. Financial Systems Consolidated Claim System Conversion —_. Payroll Systems Consolidated Conversion Started ~ Investments Systems Consolidated Started (Target + Agent Compensation Systems Consolidated
Slide 7: Focus on Business Retention and Agency Relationships
STPAUL TRAVELERS Evaluation of Second Quarter Results Focus on Business Retention and Agency Relationships
Slide 8: Commercial - Pro Forma Net Written Premiums
ST PAUL Commercial - Pro Forma Net Written Premiums TRAVELERS {in milions) 10 20 20 40 10 20 % Change ms _ 7032030205 v2004 cove National Sm $ mt § wr $m $m $F 136 Select 67 ea 0 68708 708 6 Northland Group 139 153 139 130 12 124 (19%) Commercial Accourts 4,053 s99 40884183 1135, oan 6 Total Core 21
Slide 9: Illustrative Business Statistics - Commercial
ST PAUL Illustrative Business Statistics - Commercial TRAVELERS (irmtions) 10 20 | 30 40 10 20 2003 2003 2003 2003 2004 2004 Travelers Commercial Accounts Group - Field Retention 84% BA% 83% 82% 83% 82% Renewal price change * 16% 11% 9% 8% 6% 6% ‘St. Paul Commercial Accounts Group - Field Retention
Slide 10: Specialty - Pro Forma Net Written Premiums
ST PAUL Specialty - Pro Forma Net Written Premiums RAVELERS ($ in milons) Domestic Specialty: Finenciel and Professional Senices Technology Excess end Surplus Olt and Gas Puble Sector cesn Marine other Tote ex Bend and Constuction Bond Construction Tote Bend and Construction Total Domestic Speciaty
Slide 11: Specialty — Adjusted Pro Forma Net Written Premiums
ST PAUL. Specialty — Adjusted’ Pro Forma Net Written Premiums TRAVELERS ($ in milions) 10 20 3a 4a 10 20 sechange me me 08 2008 2008 zo _ 2003 v2004 Domestic Specialty: Finanoial and Professional Servees «$128 HD 108 Technology w 03 07 od 08 12 % Excess and Super @ «0 “ ‘8 04 ey 0% OW and Gas @ ~ 8
Slide 12: Illustrative Business Statistics — Specialty
ST PAUL Illustrative Business Statistics — Specialty TRAVELERS (irmtions) 10 20 30 40 10 20 2003 2003 2003 2003 2004 2004 Domestic Specialty * Renewal Retention 74%| 74% 71% 71% 72% 73% Renewal Price Change * 23%| 23% 18% 16% 12% 7% Construction Travelers Renewal Retention 75%| 78% 82% 6% 64% 67% Re
Slide 13: Personal - Net Written Premiums
ST PAUL Personal - Net Written Premiums TRAVELERS {8 in mittions) 2Q 2003 By product line: Automobile $ 778 Homeowners and Other 533 Total Personal $4311 By distribution channel: Independent agerts $ 1,075 (Other channels * 236 Total Personal $1311 $ $ $ 2Q 2004 892 666 1,558 1,287 27 % Change 2003
Slide 14: Illustrative Business Statistics — Personal
ST PAUL Illustrative Business Statistics — Personal TRAVELERS 19 2a 3a 4a 19 2a 2003 2003 2003 2003 2004 2004 Automobile PIF Growth over prior yr gtr 2% 2% 3% 4% 8% 11% Retention * 87% 87% 87% 87% 87% 87% Renewal price change 8% 6% 6% 5% 5% 5% Homeowners and Other PIF Growth over prior yr qtr 1% 3%
Slide 15: Premium Dynamics
ST PAUL Premium Dynamics TRAVELERS Second Quarter = Substantial focus on account retention * Reports from our field units suggest that pricing required to obtain significant new business became more competitive = Focus on bottom line profitability of entire book of business drives pricing strategy 1
Slide 16: Analysis of Current Market Conditions
ST PAUL TRAVELERS Evaluation of Second Quarter Results Analysis of Current Market Conditions
Slide 17: Current Market Conditions
Current Market Conditions ST PAUL TRAVELERS llustrative Statistics - Travelers Liability Lines (Direct Guaranteed Cost) 50% 140% <3 0% i -—ay 120% 10% — ae 40% £8 og — 10% + 0% 1999 © 0020010022003 0d Accident Year (Ge Ea Los Trend —> Earned Price Ohange = Conbned ato] = If current trends continue,
Slide 18: Analysis of Investment Portfolio
ST PAUL TRAVELERS Evaluation of Second Quarter Results Analysis of Investment Portfolio 16
Slide 19: Net Investment Income Breakdown
Net Investment Income Breakdown. ST PAUL TRAVELERS 2004 Combined 2003* Travelers _St.Paul_ _ Total | Travelors St.Paul ___Total After-tax Net Investment Income: Fixed Income $ 310 § 179 § 49) $ 312 $ 180 § 492 Alternatives 44 14 58 33 15 4 Total before PGAAP adj 354 193 547 345 195 540 After-tax yie
Slide 20: Balance Sheet and Capital Strength
ST PAUL TRAVELERS Evaluation of Second Quarter Results Balance Sheet and Capital Strength
Slide 21: Summary of 2Q04 Reserve Adjustments
ST PAUL Summary of 2Q04 Reserve Adjustments TRAVELERS {8 in mitions) Charge/(benefit) St Paul: Surety $ 315 Construction 500 Resenes for uncollectibie reinsurance and amounts due from policyholders and co-surety participations 296 Resenes due to financial condition of a construction contractor 252 R
Slide 22: Capital Generation Capacity
Capital Generation Capacity STPAUL TRAVELERS (Sinmillions) Operating (loss)* Reserve adjustments and restructuring costs Subtotal Shareholder dividends Capital build ex-reserve adjustments and restructuring costs Resulting annualized impact ‘The difference between net and operating income fs realize
Slide 23: Capital Strength
Capital Strength STPAUL TRAVELERS (Sinmillions) Total debt Minority interest Shareholders’ equity (ex SFAS 115) Total capital Total debt to capital ratio Leverage Ratios NWP:Surplus Reserves Surplus ‘Second Half 2004 ‘Available Liquiclty 1.51 287 $1 billion + 2
Slide 24: Outlook for Second Half of 2004
ST PAUL TRAVELERS Evaluation of Second Quarter Results Outlook for Second Half of 2004 22
Slide 25: Outlook for Second Half of 2004
Outlook for Second Half of 2004 TRAVELERS = Premium environment is likely to be similar to that of 2Q04 * Net investment income levels also expected to be comparable to 2Q04 " Expect to achieve returns on equity in the mid-teens assuming no catastrophes, no change in capital market conditions, no pr
Slide 26: Optimistic About Cost Saving Opportunities Beyond Initial Expectations
STPAUL TRAVELERS Opportunistic About Cost Saving Opportunities Beyond Initial Expectations 24
Slide 27: Expense Reduction Projections
j =r STPAUL Expense Reduction Projections TRAVELERS Gis millions) Projected After-tax Cost Savings Original Estimates Revised Estimates $225 $228 $187 $150 $40 $53 2004 2005 2006 2004 2005 2006 Note: Assumed merger closed on June 30, 2004 Management Focused on Identifying Additional $100 million in
Slide 28: Revenue Synergies Over the Long Term
ST PAUL TRAVELERS Revenue Synergies Over the Long Term 28
Slide 29: Long-term Distribution Strategy: Leveraging the Partnership
STPAUI Long-term Distribution Strategy TRAVELERS Leveraging the Partnership = 6,400 agents have premium volume greater than $200,000 with St. Paul Travelers = Of these agents, 60% generate premium volume with only one of our major business units = Meaningful opportunity to grow premiums over the lon
Slide 30: Long-term Distribution Strategy: Personal Lines
Long-term Distribution Strategy TRAVELERS Personal Lines = Travelers today- Approximately 7,000 Commercial Lines agents + 42% do business with Travelers Personal Lines = Agents with combined Personal & Commercial Lines relationships provide more opportunity than Personal Lines relationships only + T
Slide 31: A Strong Foundation
ST PAUL A Strong Foundation TRAVELERS = Progress on integrating operations = Evaluation of second quarter results + Focus on business retention and agency relationships + Analysis of current market conditions + Analysis of investment portfolio + Balance sheet and capital strength + Outlook for secon
Slide 32: Searchable text section of graphics
Searchable text section of graphics shown above [ LOG O] Second Quarter 2004 A Strong Foundation August 11, 2004 Forward-Looking Statements [LOGO] This presentation may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statem
ST Paul Travelers Companies — Q2 2004 Earnings Presentation on 6ix