The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Bank of America Merrill Lynch Insurance Conference 2013
28 slides from The Travelers Companies's conference presentation, Feb 13, 2013
Slide 1: Brian W. MacLean, President and Chief Operating Officer
Brian W. MacLean President and Chief Operating Officer Bank of America Merrill Lynch Insurance Conference February 13, 2013 1
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: Operating Return on Equity
Operating Return on Equity 9.6% 17.9% 17.7% 12.4% 14.0% 12.5% 6.1% 11.0% 11.1% 11.0% 10.6% 1.4% 1.6% 1.4% 9.4% 9.3% 0.8% 0.7% 8.1% 9.0% 0.5% 0.9% 0.9% 0.4% 8.2% 0.9% 1.3% 0.9% 0.1% 0.1% 6.8% 6.7% 5.8% 8.7% 8.9% 8.7% 8.3% 8.3% 8.3% 8.0% 8.1% 4.3% 3.2% 1.6% (0.6%) (0.1%) (0.6%) (1.0%) (2.9%) 2005 2006
Slide 4: Travelers Enterprise Key Differentiators
Travelers Enterprise Key Differentiators Product breadth and specialization Leadership position with distribution Industry leading data and analytics Industry leading claim and risk control capabilities 4
Slide 5: Travelers Business Segments
Travelers Business Segments 2012 Net Written Premiums: $22.4 Billion Personal Insurance 34% Business Insurance 53% Financial, Professional & International Insurance 13% 5
Slide 6: Business Insurance
Business Insurance 2012 Net Written Premiums: $11.9 Billion By Market By Product Line Specialized Distribution Commercial National 8% Property Accounts 14% 8% Commercial Workers’ Accounts Compensation 26% General 29% Target Risk Liability Underwriting 15% 14% Select Commercial Industry‐Focused Autom
Slide 7: Business Insurance (Ex. National Accounts) Pricing
Business Insurance (Ex. National Accounts) Pricing Renewal Pricing Results 10% Renewal Premium Change (RPC)1 % 8% Renewal Rate Change2 % 6% • Exposure/Other % 4% 2% - (2%) (4%) Rate on Rate (6%) 2007 2008 2009 2010 1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 ($ in millions) Retention 82% 83% 8
Slide 8: Business Insurance: Illustrative Book of Business 2010 vs 2012
Business Insurance Comparison of an Illustrative Book of Business Written in 2010 & 2012 Combined ratio improvement Return on allocated capital was essentially from 2011 & 2012 renewal rate increases unchanged from 2010 due to ‐‐However‐‐ of approximately 3 points increased catastrophe assumptions &
Slide 9: Business Insurance: Account by Account Underwriting
Business Insurance Account by Account Underwriting Commercial Accounts: Renewal Pricing Results 100% 20% 4Q’12 Renewal Rate Change1 % 4Q’12 Retention % 90% 16% Renewal Rate Change1 Retention Rate 80% 12% 70% 8% 60% 4% 50% 0% < 60% 60% ‐ 90% > 90% Long‐Term Loss Ratio Bands2 – All Lines of Business A
Slide 10: Business Insurance: Underlying GAAP Combined Ratio
Business Insurance Underlying GAAP Combined Ratio1 Underlying loss & loss adjustment ratio Underwriting expense ratio 95.6% 97.9% 94.6% 90.4% 93.9% 93.8% 66.3% 61.4% 61.6% 63.4% 63.1% 59.7% 30.7% 32.5% 32.2% 32.2% 31.6% 31.5% 2007 2008 2009 2010 2011 2012 Impact of: Catastrophe losses ‐ 6.3 pts 1.6
Slide 11: Financial, Professional & International Insurance (FP&II)
Financial, Professional & International Insurance (FP&II) 2012 Net Written Premiums: $3.0 Billion Bond & Financial Products 63% ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ Management Liability: $1.2 Billion Surety: $0.7 Billion International 37% Operations Syndicate 5000 11
Slide 12: FP&II: Bond & Financial Products
FP&II: Bond & Financial Products 2012 Net Written Premiums: $1.9 Billion Crime / Fidelity Construction Surety Directors & Officers Commercial Errors & Omissions Surety Management Liability Surety Employment Practices Property/ Liabilities Casualty1 Fiduciary Diversified risk profile / Largest writer
Slide 13: FP&II: Bond & Financial Products Pricing
FP&II: Bond & Financial Products Pricing Management Liability: Renewal Pricing Results 10% Renewal Premium Change (RPC)1 % 8% Renewal Rate Change2 % 6% • Exposure/Other % 4% 2% - (2%) Significant rate improvement (4%) over last 6j quarters (6%) 2007 2008 2009 2010 1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'
Slide 14: FP&II: Retention and Renewal Rate by ROAC Tier
FP&II: Bond & Financial Products Business Unit within Management Liability Retention and Renewal Rate by Prospective ROAC Tier Retention Rate Renewal Rate Change1 100% 1Q’12 4Q’12 4Q’12 • 1Q’12 4Q’12 4Q’12 24% 20% 90% Renewal Rate Change1 16% Retention Rate 80% 12% 70% 8% 60% 4% 50% 0% >20% 10%
Slide 15: FP&II: International
FP&II: International 2012 Net Written Premiums: $1.1 Billion 24% Major Lines of Business: • Business Insurance – Middle Market • Professional Risks 42% • Surety Syndicate 5000 Principal Business Units: • Marine • Global Property • Accident & Special Risk • Power & Utilities • Aviation 34% Major Line
Slide 16: FP&II: Underlying GAAP Combined Ratio
Financial, Professional & International Insurance Underlying GAAP Combined Ratio1 Underlying loss & loss adjustment ratio Underwriting expense ratio 93.1% 93.1% 95.4% 92.7% 90.3% 92.2% 56.7% 57.1% 56.3% 56.0% 53.5% 50.9% 39.4% 41.3% 36.8% 36.0% 36.0% 36.8% 2007 2008 2009 2010 2011 2012 Impact of: Ca
Slide 17: Personal Insurance
Personal Insurance 2012 Net Written Premiums: $7.6 Billion Homeowners & Other 53% Automobile 47% Third‐largest writer of U.S. personal insurance through independent agents1 17 1Source: SNL Statutory Filings. Based on 2011 Direct Written Premium.
Slide 18: Personal Insurance: Agency Automobile Pricing
Personal Insurance: Agency Automobile1 Pricing Renewal Premium Change2 10% 8% 6% 4% 2% - 2007 2008 2009 2010 1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 ($ in millions) Retention3 83% 82% 81% 83% 83% 83% 83% 83% 82% 81% 80% 81% RPC2 2.3% 2.1% 3.9% 2.3% 2.9% 3.4% 3.8% 4.1% 5.8% 6.9% 8.3% 9.1% New
Slide 19: Automobile Industry Observations
Automobile Industry Observations Loss Trends Automobile Industry Frequency & Severity Trends 20% $3,500 Percentage of Policies with Claims Average Loss per Claim 15% $2,750 10% 1Q 2Q 3Q $2,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Frequency Severity Favorable frequency trends experi
Slide 20: Personal Insurance: Agency Automobile Combined Ratio
Personal Insurance: Agency Automobile1 Underlying GAAP Combined Ratio2 Underlying loss & loss adjustment ratio Underwriting expense ratio 97.3% 97.7% 96.5% 99.5% 99.2% 94.3% 73.4% 73.5% 69.8% 70.9% 69.8% 68.2% 26.1% 27.5% 26.8% 26.7% 26.1% 25.7% 2007 2008 2009 2010 2011 2012 Impact of: Catastrophe l
Slide 21: Personal Insurance: Agency Homeowners & Other Pricing
Personal Insurance: Agency Homeowners & Other1 Pricing Renewal Premium Change2 14% 12% 10% 8% 6% 4% 2% - 2007 2008 2009 2010 1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 ($ in millions) Retention3 86% 86% 85% 86% 86% 86% 86% 86% 85% 84% 84% 84% RPC2 8.6% 6.0% 7.1% 7.7% 8.6% 8.4% 8.0% 8.2% 9.5% 10
Slide 22: Catastrophes
Catastrophes Uncertain Weather Patterns Industry: Catastrophes as Percentage of Premium 7.60% 3.39% 3.52% 1.31% 1.04% 0.85% 1960s 1970s 1980s 1990s 2000s 2010s Given the ongoing volatility of weather patterns, we will continue to seek improved pricing, terms and conditions within Homeowners Source I
Slide 23: Personal Insurance: Homeowners Initiatives
Personal Insurance Homeowners Initiatives TRV Actions Implemented Since October 2011 States Impacted Rate up 10% or more Rate up between 5% & 10% Risk sharing provisions modified Underwriting guidelines changes Roof inspections Age of roof rating Notice of loss limitations 23
Slide 24: Personal Insurance: Agency Homeowners & Other Combined Ratio
Personal Insurance: Agency Homeowners & Other1 Underlying GAAP Combined Ratio2 Underlying loss & loss adjustment ratio Underwriting expense ratio 81.7% 86.7% 83.7% 78.7% 81.0% 77.6% 57.4% 54.2% 52.1% 47.7% 49.5% 46.9% 33.3% 30.7% 29.5% 29.6% 29.3% 29.2% 2007 2008 2009 2010 2011 2012 Impact of: Catas
Slide 25: 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 26: Explanatory Note
Explanatory Note This presentation contains, and management may make, “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,” “will,” “s
Slide 27: 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 28: The Travelers Companies, Inc. Additional Information
The Travelers Companies, Inc. Additional Information Additional Information 28
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