The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Barclays Capital Global Financial Services Conference 2011
29 slides from The Travelers Companies's conference presentation, Sep 12, 2011
Slide 1: Barclays Capital Global Financial Services Conference
Jay S. Benet Vice Chairman & Chief Financial Officer Barclays Capital Global Financial Services Conference September 12, 2011
Slide 2: Long-Term Financial Strategy
Long-Term Financial Strategy Balanced Generation of Meaningful approach to top tier earnings and rightsizing capital and capital sustainable and substantially in competitive growing book excess of growth advantages value per share needs over time Create Shareholder Value Objective: Mid-Teens ROE Ove
Slide 3: Agenda: Balance sheet strength, environment, capital management, accounting
• Balance sheet strength • The current environment • Capital management strategy • Accounting for insurance contracts 2
Slide 4: Very Strong Financial Position
Very Strong Financial Position ($ and shares in millions, except per share amounts) Capital June 30, December 31, 2011 2010 • At or above target levels for all rating agencies Debt $ 6,604 $ 6,611 • Continued to generate excess capital and repurchase Preferred equity - 68 common shares Common equity
Slide 5: Consistent High Quality Investment Portfolio
Consistent High Quality Investment Portfolio ($ in millions) June 30, December 31, Investment Strategy 2011 2010 Total invested assets $ 72,993 $ 72,722 • On-going Taxable fixed maturities 33% 33% - Investment portfolio managed to Tax-exempt fixed maturities 53% 53% support insurance operations Tota
Slide 6: Reserve Comparisons
Reserve Comparisons • The following two slides provide a comparison of certain Travelers net paid-to- incurred ratios and net IBNR-to-incurred ratios with the industry and a peer group - Travelers information is based on the 2010 combined annual statutory statement of the company’s domestic insuranc
Slide 7: Reserve Comparisons: Net Paid to Incurred Ratios
Reserve Comparisons Net Paid to Incurred Ratios – 2010 Industry Comparison Accident Workers Compensation Accident Private Passenger Auto Liability Accident Commercial Auto Liability Year Peer (1) TRV Industry Year Peer (1) TRV Industry Year Peer (1) TRV Industry 2001 66.1% 69.0% 81.8% 2001 99.8% 99.
Slide 8: Reserve Comparisons: IBNR to Incurred Ratios
Reserve Comparisons IBNR to Incurred Ratios – 2010 Industry Comparison Accident Workers Compensation Accident Private Passenger Auto Liability Accident Commercial Auto Liability Year Peer(1) TRV Industry Year Peer(1) TRV Industry Year Peer(1) TRV Industry 2001 21.0% 13.8% 8.9% 2001 0.4% 0.5% 0.2% 20
Slide 9: Financial Strength Ratings Very High
Financial Strength Ratings Very High Financial Strength / Claims Paying Chubb A++ AA Aa2 AA Travelers A+ AA Aa2 AA Progressive A+ AA Aa2 AA Allstate A+ AA- Aa3 A+ Ace A+ AA- A1 AA- Zurich - U.S. A+ AA- Aa3 A+ Cincinnati Financial A+ A A1 A+ AIG A A A1 A Hartford A A A2 A+ XL Capital A A A2 A Liberty
Slide 10: Agenda: Balance sheet strength, environment, capital management, accounting
• Balance sheet strength • The current environment • Capital management strategy • Accounting for insurance contracts 9
Slide 11: Components of Operating Return on Equity
Components of Operating Return on Equity 9.6% 17.9% 17.7% 12.4% 14.0% 12.5% 3.9% 10.6% 11.1% 11.0% 0.5% 1.4% 1.6% 9.3% 8.1% 9.4% 1.4% 0.8% 0.7% 0.9% 0.4% 8.2% 1.4% 0.1% 0.1% 6.8% 6.7% 5.8% 4.3% 8.3% 8.9% 8.7% 8.7% 7.9% 8.3% 8.3% 3.2% (0.1%) (0.6%) (1.0%) (5.5%) 2005 2006 2007 2008 2009 2010 2011 YTD
Slide 12: Current Interest Rate Environment
Current Interest Rate Environment 10 Year – Treasury Yields, AA Industrial Spreads & Yield S&P downgraded U.S. 8% 8% debt after market closed Jun. 30, Aug. 5, Sep. 8, 6% 6% 2011 2011 2011 10 Year 3.16% 2.56% 1.98% /Y SSpprreeaadd/ Y 4% Treasury 4% AA Industrial 0.93% 0.91% 1.08% 2% Spread 2% 10 Year
Slide 13: Insurance Pricing Environment: Business Insurance
Insurance Pricing Environment Business Insurance Travelers Business Insurance (Excluding National Accounts) ♦ Renewal Rate Change1 % • Exposure/Other % ▲ Renewal Premium Change2 % 0% 2006 2007 2008 2009 1Q 2Q 3Q 4Q 1Q 2Q 3QTD3 2005 2010 2010 2010 2010 2011 2011 2011 Rate gains in Business Insurance
Slide 14: Insurance Pricing Environment: Personal Insurance
Insurance Pricing Environment Personal Insurance Travelers Automobile Travelers Homeowners & Other Renewal Premium Change1 Renewal Premium Change1 0% 0% 1Q 2Q 3QTD2 1Q 2Q 3QTD2 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 2011 2011 2011 2011 2011 2011 Have consistently achieved increa
Slide 15: Hurricane Irene Prediction Versus Actual
Hurricane Irene Prediction Versus Actual National Hurricane Center Weather Service Analysis Prediction on Day of Landfall of Wind Observations • Hurricane strength winds observed in North Carolina only, according to Weather Services • Environmental influences disrupted the storm more than anticipate
Slide 16: Agenda: Balance sheet strength, environment, capital management, accounting
• Balance sheet strength • The current environment • Capital management strategy • Accounting for insurance contracts 15
Slide 17: Capital Management Strategy Unchanged
Capital Management Strategy Unchanged Operating Holding company company capital liquidity Holding company maintained at Excess capital in Unneeded leverage maintained in levels consistent operating capital maintained at excess of amount with internal companies returned level consistent equal to one
Slide 18: Capital Management
Capital Management ($ in billions) 2005 2006 2007 2008 2009 2010 2011 YTD1 Statutory: Net income $2.9 $4.3 $4.9 $4.1 $3.9 $3.7 $0.4 Dividends paid to parent company2 1.0 1.4 3.2 3.7 3.6 6.6 0.4 Surplus 17.8 20.9 22.9 21.5 23.2 20.1 20.2 1 Year-to-date through June 30, 2011. 2 Dividends paid from ope
Slide 19: Drivers of Reduction in Target Surplus Levels
Drivers of Reduction in Target Surplus Levels ($ in billions) Net Loss & LAE Reserves: Down 6% Reinsurance Recoverables: Down 34% $42.9 $41.3 $18.3 $40.2 $14.7 $12.0 Dec.2006 2006 Dec.2008 2008 Dec.2010 2010 Dec.2006 2006 Dec.2008 2008 Dec.2010 2010 1-in-100 Hurricane PML: Down 45% 1-in-250 Hurrican
Slide 20: Capital Management
Capital Management ($ in billions) 2005 2006 2007 2008 2009 2010 2011 YTD1 Statutory: Statutory: Net income $2.9 $4.3 $4.9 $4.1 $3.9 $3.7 $0.4 Dividends paid to parent company2 1.0 1.4 3.2 3.7 3.6 6.6 0.4 Surplus 17.8 20.9 22.9 21.5 23.2 20.1 20.2 GAAP: Net income $1.6 $4.2 $4.6 $2.9 $3.6 $3.2 $0.5
Slide 21: Capital Management
Capital Management ($ in billions) 2005 2006 2007 2008 2009 2010 2011 YTD1 Statutory: Statutory: Net income $2.9 $4.3 $4.9 $4.1 $3.9 $3.7 $0.4 Dividends paid to parent company2 1.0 1.4 3.2 3.7 3.6 6.6 0.4 Surplus 17.8 20.9 22.9 21.5 23.2 20.1 20.2 GAAP: GAAP: Net income $1.6 $4.2 $4.6 $2.9 $3.6 $3.2
Slide 22: Capital Management: Dividends Per Common Share
Capital Management Dividends Per Common Share 9.2% $1.41 C AG R: $1.23 $1.19 $1.13 $1.01 $0.91 crease 14% In $0.41 $0.36 2005 2006 2007 2008 2009 2010 1Q 2011 2Q 2011 Travelers has paid cash dividends without interruption for 139 years; current dividend yield1: 3.4% 1 As of September 9, 2011. 21
Slide 23: Consistently Growing Book Value Per Share
Capital Management Consistently Growing Book Value Per Share Book Value Per Share G R: 12.0% $58.47 $59.62 CA $52.54 $42.22 $43.12 $36.86 $31.94 2005 2006 2007 2008 2009 2010 June 30, 2011 Adjusted Book Value Per Share1 $54.19 $54.28 % AG R: 10.4 C $48.96 $43.37 $41.23 $36.20 $31.47 2005 2006 2007 2
Slide 24: Agenda: Balance sheet strength, environment, capital management, accounting
• Balance sheet strength • The current environment • Capital management strategy • Accounting for insurance contracts 23
Slide 25: Accounting for Insurance Contracts
Accounting for Insurance Contracts Last Year Current Status • IASB planned to develop • IASB and FASB views on several key comprehensive IFRS accounting issues have not converged and both standard for insurance contracts by organizations received strong opposition to June 2011 changing existing acco
Slide 26: Explanatory Note
Explanatory Note This presentation contains, and management may make, certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Words such as “may,” “w
Slide 27: Explanatory Note (continued)
Explanatory Note (continued) As noted above, this presentation contains, and management may make, certain “forward-looking statements”. Some of the factors that could cause actual results to differ from those expressed in, or implied or projected by, the forward-looking statements include, but are n
Slide 28: Disclosure
Disclosure • For further information, please see Travelers reports filed with the SEC pursuant to the Securities Exchange Act of 1934 which are available at the SEC’s website (www.sec.gov) • Copies of this presentation and the accompanying webcast are publicly available on the Travelers website (www
Slide 29: Travelers
rN TRAVELERS J
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