The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Barclays Global Financial Services Conference 2013
30 slides from The Travelers Companies's conference presentation, Sep 11, 2013
Slide 1: Jay Fishman, Chairman & Chief Executive Officer
Jay Fishman Chairman & Chief Executive Officer Barclays Global Financial Services Conference September 11, 2013 1
Slide 2: Long-Term Financial Strategy
Long-Term Financial Strategy Balanced Generation of approach to Meaningful and top tier earnings rightsizing capital sustainable and capital and competitive substantially in growing book advantages excess of growth value per share needs over time CREATE SHAREHOLDER VALUE Objective: Mid-Teens ROE Ove
Slide 3: Operating Return on Equity - Adjusted
Operating Return on Equity - Adjusted Six Months Ended June 30, 2013 2012 Operating return on equity - reported 15.0% 11.8% Less impact of: Net favorable prior year reserve development 2.4% 3.1% Favorable tax and legal settlements 1.1% -% Operating return on equity - adjusted 11.5% 8.7% Less impact
Slide 4: Total Return
Total Return1 20 Largest S&P Financial Companies2 & Other Selected Financial Companies 1 Year Total Return 3 Year Total Return 5 Year Total Return September 10, 2012 – September 9, 2013 September 10, 2010 – September 9, 2013 September 10, 2008 – September 9, 2013 Cigna 135.2% Cigna 75.0% 116.6% TRAV
Slide 5: Underlying Margin Improvement
Underlying Margin Improvement • Underlying underwriting margin1 improvement since 2011 has generated an increase in after-tax operating income of $1.025 billion on an annualized basis. Commercial Insurance2: $660 million Personal Insurance: $365 million Our granular, active approach has been very su
Slide 6: Overview
Overview • Business Insurance − Impact of rate, retention and mix • Personal Insurance − Impact of comparative rating technology − Introduction of Quantum Auto 2.0 6
Slide 7: Illustrative Impact of Rate, Retention & Mix on $3 Billion of Premium
Illustrative Impact of Rate, Retention & Mix on $3 Billion of Premium Available for Renewal Overview Indicative Underwriting Profit on Renewal Rate Renewed Premium Change Retention (Before Expenses) Baseline 8% 81% $1.094 Billion Lower Theoretical Calculation #1 9% 81% vs. baseline Higher Theoretica
Slide 8: Illustrative Impact of Rate, Retention & Mix on $3 Billion of Premium
Illustrative Impact of Rate, Retention & Mix on $3 Billion of Premium Available for Renewal Baseline Lower Loss Ratio Higher ------------------ Segmentation Bands ------------------ 1 2 3 4 5 Total Baseline Percentage of total base 20% 19% 37% 19% 6% 100% Renewal rate change 5% 6% 7% 14% 20% 8% Rete
Slide 9: Theoretical Calculation #1: Higher Aggregate Rate, Lower Underwriting Profit
Illustrative Impact of Rate, Retention & Mix on $3 Billion of Premium Available for Renewal Theoretical Calculation #1: Higher Aggregate Rate, Lower Underwriting Profit Lower Loss Ratio Higher ------------------ Segmentation Bands ------------------ 1 2 3 4 5 Total Baseline Percentage of total base
Slide 10: Theoretical Calculation #2: Lower Aggregate Rate, Higher Underwriting Profit
Illustrative Impact of Rate, Retention & Mix on $3 Billion of Premium Available for Renewal Theoretical Calculation #2: Lower Aggregate Rate, Higher Underwriting Profit Lower Loss Ratio Higher ------------------ Segmentation Bands ------------------ 1 2 3 4 5 Total Baseline Percentage of total base
Slide 11: Illustrative Impact on $12 Billion of Premium: Simplistic View
Illustrative Impact of Rate, Retention & Mix on $12 Billion of Premium Available for Renewal Simplistic View of Change in Underwriting Profit (before expenses) ($ in millions) Lower Loss Ratio Higher ------------------ Segmentation Bands ------------------ 1 2 3 4 5 Total Renewal rate change 9% 9% 9
Slide 12: Illustrative Impact on $12 Billion of Premium: Segmentation View
Illustrative Impact of Rate, Retention & Mix on $12 Billion of Premium Available for Renewal View With Segmentation of Change in Underwriting Profit (before expenses) Lower Loss Ratio Higher ------------------ Segmentation Bands ------------------ 1 2 3 4 5 Total Renewal rate change 6% 7% 8% 13% 17%
Slide 13: Business Insurance (Ex. National Accounts)
Business Insurance (Ex. National Accounts) Illustrative Business Statistics Renewal Pricing Results 14% ▲ Renewal Premium Change (RPC)1 % ♦ Renewal Rate Change %2 12% • Exposure/Other % 10% 8% 7.8% 7.1% 7.2% 7.3% 7.1% 6% 6.8% 7.2% 4% 2% - (2%) 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 QTD 3 ($ in
Slide 14: Business Insurance: Commercial Accounts
Business Insurance: Commercial Accounts Illustrative Business Statistics Renewal Pricing Results 14% ▲ Renewal Premium Change (RPC)1 % ♦ Renewal Rate Change % 2 12% • Exposure/Other % 9.6% 10% 8.4% 8.2% 7.8% 8% 8.7% 8.3% 8.4% 6% 4% 2% - (2%) 3 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 QTD ($ in mi
Slide 15: Business Insurance Conclusion
Business Insurance Conclusion • Segmentation is critical in making sure pricing and retention actions have the desired effect on profitability. • We utilize segmentation (either by class or by account) as we seek to optimize our results while minimizing disruption to insureds or agents. • A simplist
Slide 16: Overview
Overview • Business Insurance − Impact of rate, retention and mix • Personal Insurance − Impact of comparative rating technology − Introduction of Quantum Auto 2.0 16
Slide 17: Changing Personal Auto Insurance Marketplace
Changing Personal Auto Insurance Marketplace • Direct writer advertising is extraordinarily visible Carriers and significantly focused on saving money for consumers. • Responding with a meaningfully increased, but not Consumers exclusive, focus on price regardless of channel. Independent • Increased
Slide 18: Impact of Comparative Rating Technology
Impact of Comparative Rating Technology How Comparative Raters Work Comparative Rater Independent Agency Process Comparison & Consumer Collection of Simultaneous, reports customer multi-carrier preliminary Bindable carrier ordered; information quoting selection quote selection confirmed 18
Slide 19: Increased Adoption of Comparative Rating Technology
Increased Adoption of Comparative Rating Technology How Comparative Raters Work Agents generally sort by price, driving selection of carrier placement 19
Slide 20: Impact of Comparative Rating Technology: Changing Agency Dynamics
Impact of Comparative Rating Technology Changing Independent Agency Dynamics Travelers Agency Auto: Quote Volume 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 2008 2009 2010 2011 2012 Proprietary TRV Quote System Comparative Raters Comparative raters account for approximately 80% of our
Slide 21: Response to Changing Personal Auto Insurance Market
Personal Insurance Response to Changing Personal Auto Insurance Market Travelers Agency Auto: Renewal Premium Change1 12% 10% 8% 6% 4% 2% - 1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 ($ in millions) New Business $171 $166 $161 $142 $135 $107 $103 $85 $86 $90 YOY % Change -% (16%) (2
Slide 22: Personal Insurance Expense Reductions Announced July 2013
Personal Insurance Expense Reductions Announced July 2013 • Reduction in unallocated claim and other insurance expenses of $140 million pre-tax when fully realized as expected by 2015. • Savings primarily driven by staff reductions, majority through attrition. Notice given to approximately 450 emplo
Slide 23: Introduction of Quantum Auto 2.0
Introduction of Quantum Auto 2.0 Objective: Be a low cost manufacturer of a highly sophisticated and segmented auto insurance product that successfully competes in the marketplace and generates an appropriate return • Updates underwriting with 8 years of data and experience from Quantum Auto 1.0: •
Slide 24: Personal Auto Expense Actions – Order of Magnitude
Personal Auto Expense Actions – Order of Magnitude Pro forma Annual Current Annual $ in millions Run Rate Once Fully Run Rate Implemented Other insurance expenses1 $381 $347 Unallocated loss adjustment 362 300 expenses Commissions 386 3332 Taxes, Licenses & Fees 76 76 Total $1,205 $1,056 12.4% reduc
Slide 25: Quantum Auto 2.0 Price
Introduction of Quantum Auto 2.0 • Significant cost reductions will enable us to both lower price and improve margins. The product is being priced to achieve target returns over time. Market Basket Premium Comparison 5,000 Sample Quotes Quantum Auto 2.0 Price1 Quantum Auto 1.0 Price1 • We conducted
Slide 26: Auto Insurance: Competing Beyond Price
Personal Insurance Auto Insurance: Competing Beyond Price Agent Value Proposition Consumer Brand Recognition Advice & Counsel Ease of Doing Business Breadth of Products Superior Claims Service While we believe having a market-relevant price is important, there are other factors a
Slide 27: Wrap Up
Wrap Up . . Commercial Insurance1 Personal Insurance • Approximately $16 billion in annual • Approximately $7.5 billion in annual premiums. premiums: ~½ auto and ½ homeowners. • Significant success in homeowners • Continue to seek improved profitability business – combined ratio average of through t
Slide 28: 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 29: Disclosure
Disclosure In this presentation, we may refer to some non-GAAP financial measures. For a reconciliation of these measures to the most comparable GAAP measures and a glossary of financial measures, we refer you to the press releases and financial supplements that we have made available in connection
Slide 30: Additional Information
The Travelers Companies, Inc. Additional Information Additional Information 30
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