The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Investor Day (May 2010)
114 slides from The Travelers Companies's investor day presentation, May 20, 2010
Slide 1: The Travelers Companies, Inc Investor Day 2010
The Travelers Companies, Inc Investor Day 2010 May 20, 2010
Slide 2: 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. Specifically, earnings
Slide 3: Agenda
AGENDA Jay Fishman, Chairman & Chief Executive Officer Bill Heyman, Vice Chairman & Chief Investment Officer Jay Benet, Vice Chairman & Chief Financial Officer Brian MacLean, President & Chief Operating Officer Q&A Break Doreen Spadorcia, Executive Vice President, Claim Services & Chief Executive Of
Slide 4: Jay S. Fishman
Jay S. Fishman Chairman & Chief Executive Officer Investor Day May 20, 20103
Slide 5: Create Shareholder Value
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 Create Shareholder Shareholder Value Value Obj
Slide 6: 2006 Investor Day Financial Objectives
2006 Investor Day Financial Financial Objectives Objectives ¾ Target ¾ Target mid-teens mid-teens return return on on equity equity over over the the long long term. term. ¾ Grow ¾ Grow market market share share over over time, time, with with focus focus on on organic organic growth. growth. ¾ Focu
Slide 7: Returns Consistent With Financial Targets
Returns Consistent With Financial Targets ($ in billions) $4.6 $4.5 $4.2 $4.2 Income from Continuing Operations $3.6 $3.6 Operating Income $3.2 $2.9 $2.1 $2.0 $0.6 $0.6 1 2005 2006 2007 2008 2009 1Q'10 ROE 9.5% 17.9% 18.0% 11.4% 13.5% 9.6% Operating ROE 9.6% 17.9% 17.7% 12.4% 14.0% 10.1% From From J
Slide 8: Grow Market Share Over Time: Top Line Growth Versus Competitor Group
Grow Market Share Over Time: Top Line Growth Versus Competitor Group Net Written Premium Trends 12% 9% 6% 3% 0% -3% -6% -9% -12% 1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'07 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09 4Q'09 1Q'10 Travelers1 Competitor Group2 Outperformed Outperformed competitor com
Slide 9: Very Strong Financial Position
Very Strong Financial Position ($ and shares in millions, except per share amounts) March 31, December 31, Capital 2010 2009 ¾ At or above target levels for all rating agencies Debt $ 6,525 $ 6,527 • June 2008: Moody’s upgraded financial strength ratings to Aa2 Preferred equity 77 79 • August 2009:
Slide 10: Return Excess Capital to Shareholders
Return Excess Capital to Shareholders ($ in millions) Common Share Repurchases and Dividends $3,990 $3,685 $2,834 $1,817 $1,568 $622 2005 2006 2007 2008 2009 1Q'10 Common Share Repurchases and Dividends as a Percentage of Net Income 38.3% 43.2% 80.1% 96.9% 110.2% Cumulative Cumulative share share re
Slide 11: Return to Shareholders - Annual Cash Yield
Return to Shareholders - Annual Cash Yield Common Share Repurchases and Dividends as a Percentage of Market Capitalization1 15.1% 10.1% 8.4% 5.9% 2.5% 2005 2006 2007 2008 2009 1Market capitalization as of the beginning of each calendar year. 710
Slide 12: Growing Book Value Per Share
Growing Book Value Per Share Book Value Per Share G R: 12.9% $52.54 $53.50 CA $42.22 $43.12 $36.86 $31.94 2005 2006 2007 2008 2009 1Q'10 Adjusted Book Value Per Share1 $48.96 $49.60 G R: 11.3% CA $43.37 $41.23 $36.20 $31.47 2005 2006 2007 2008 2009 1Q'10 1 Adjusted book value per share is total comm
Slide 13: Returning to a higher short-term yield
Investments: Illustrative Impact of Higher Short-Term and Non-Fixed Income Yields on Operating Return on Equity Illustrative Impact on Full Year 2010 Operating Return on Equity Embedded in Guidance Returning to a higher short-term yield of 2.5% after-tax +0.3% Returning to a higher yield of 7% after
Slide 14: Investing in Meaningful and Sustainable Competitive Advantages
Investing in Meaningful and Sustainable Competitive Advantages – Well Positioned for the Present and Future SM Travelers 1st Choice+ ® Risk Management PLUS+ Online® Wrap+ ® Direct TravComp to e-CARMA Consumer Surety Peer Analysis Tool Claim U ConciergeCLAIM TravelersExpress SM CAT Response Travelers
Slide 15: Superior Execution: Submission Flow
Superior Execution: Submission Flow Select Accounts1 Commercial Accounts C AGR % CAG R 19 31% 2006 2007 2008 2009 2006 2007 2008 2009 Other Business Insurance2 Management Liability AGR C AGR 15% C 12 % 2006 2007 2008 2009 2006 2007 2008 2009 1 Quote flow 2 Includes all other groups within Business I
Slide 16: Superior Execution: Indicators of Customer Growth
Superior Execution: Indicators of “Customer” Growth Commercial Accounts Standard Account Identifier 5% CAGR Well Well positioned positioned for for the the future future 2007 2008 2009 1Q'10 Select Personal Insurance Accounts In- In-Force Policies In- In-Force GR 11% CA 2% CAGR 2007 2008 2009 1Q'10
Slide 17: Superior Execution: Retention and New Business
Superior Execution: Retention and New Business Business Insurance Financial, Professional & International Insurance (Excluding National Accounts) Management Liability 82% 82% 83% 82% 82% 83% 84% 82% 80% 81% 19% 19% 21% 19% 20% 19% 19% 15% 15% 14% 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Ret
Slide 18: Superior Execution: Renewal Premium Change Rate Versus Exposure/Other
Superior Execution: Renewal Premium Change Rate Versus Exposure/Other Business Insurance (Excluding National Accounts) ♦ Renewal Rate Change1 % • Exposure/Other % ▲ Renewal Premium Change2 % 0% 2005 2006 2007 2008 1Q 2Q 3Q 4Q 1Q April 2009 2009 2009 2009 2010 2010 1 Each percentage represents the es
Slide 19: Total Return: Largest S&P Financial Companies
Total Return: 20 Largest S&P Financial Companies1 and Other Selected Financial Companies (as of April 30, 2010) 5 Year + 2 82.8% Franklin Resources 78.7% Charles Schwab 70.5% Simon Property Group 56.0% The Chubb Companies 55.3% 53.9% Travelers CME Group 46.4% Goldman Sachs Group 40.8% Aflac 38.7% PN
Slide 20: William H. Heyman
William H. Heyman Vice Chairman & Chief Investment Officer Investor Day May 20, 2010 19
Slide 21: Investments: Portfolio Mix
Investments: Portfolio Mix ($ in millions) December 31, 2007 2008 2009 1Q'10 Total invested assets $ 74,818 $ 70,738 $ 74,965 $ 74,041 Taxable fixed maturities 35% 32% 33% 33% Tax-exempt fixed maturities 52% 55% 55% 55% Total fixed maturities 87% 87% 88% 88% Mortgage loans -% -% -% -% Short-term sec
Slide 22: Historical Credit Spread
Historical Credit Spread Spread by Asset Class 2,500 2,000 Option Adjusted Spread 1,500 1,000 500 0 Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- -500 04 04 05 05 06 06 07 07 08 08 09 09 10 U.S. Investment Grade Corporates Emerging Markets (USD) U.S. High Yield Residential Mortgag
Slide 23: Travelers Investment Portfolio
Travelers Investment Portfolio ($ in millions) March 31, 2010 1 3/31/10 Potential 1 3/31/10 3/31/10 Market Potential Invested 1 Market Unfunded Value Allocation Potential Estimated Asset Value Commitment % % Allocation Unfunded Increase Fixed income investments Short-term investments $ 4,648 U.S. Go
Slide 24: Considerations
Considerations ¾ Our current view is that, to alter our asset allocations to the extent shown on the previous page, we would want the expected incremental “Net Investment Income” from the higher risk assets to have a pre-tax yield of 800 bps in excess of our lower risk assets. (Of course, this view
Slide 25: Jay S. Benet
Jay S. Benet Vice Chairman & Chief Financial Officer Investor Day May 20, 2010 24
Slide 26: Very Strong Financial Position
Very Strong Financial Position ($ and shares in millions, except per share amounts) March 31, December 31, Capital 2010 2009 ¾ At or above target levels for all rating agencies Debt $ 6,525 $ 6,527 • June 2008: Moody’s upgraded financial strength ratings to Aa2 Preferred equity 77 79 • August 2009:
Slide 27: Recent Drivers of Favorable Reserve Development
Recent Drivers of Favorable Reserve Development ¾ External environment • Favorable frequency trends Workers’ Comp Frequency Trend: 1926 – 2008 Manufacturing – Total Recordable Cases Rate of Injury and Illness Cases per 100 Full-Time Workers 30 25 20 15 10 5 0 '26 '29 '32 '35 '39 '42 '45 '48 '52 '55
Slide 28: Recent Drivers of Favorable Reserve Development
Recent Drivers of Favorable Reserve Development ($ in billions) ¾ External environment • Favorable frequency trends • Better than expected severity U.S. Tort Costs* $300 $250 $200 $150 $100 $50 $0 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 * Excludes the tobacco settlement and medical malpractice
Slide 29: Recent Drivers of Favorable Reserve Development
Recent Drivers of Favorable Reserve Development ¾ External factors • Favorable frequency trends • Better than expected severity ¾ Internal factors Claim Department Initiatives ConciergeCLAIM Catastrophe response Shortening general liability Enhanced subrogation through claim cycle aggregate strategi
Slide 30: Reserve Comparisons
Reserve Comparisons ¾ The following exhibits 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 2009 combined annual statutory statement of the company’s domestic insurance
Slide 31: Net Paid to Incurred Ratios – 2009 Industry Comparison
Net Paid to Incurred Ratios – 2009 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 2000 76.6% 72.4% 85.2% 2000 99.7% 99.5% 99.6% 2000 98.5% 98
Slide 32: IBNR to Incurred Ratios – 2009 Industry Comparison
IBNR to Incurred Ratios – 2009 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 2000 12.1% 11.3% 6.5% 2000 0.3% 0.3% 0.2% 2000 0.4% 1.2% 0.4
Slide 33: 2010 Annual Guidance
2010 Annual Guidance ¾ Travelers continues to expect that its full year 2010 operating income per diluted share will be in the range of $5.20 to $5.55, unchanged from the previously announced guidance range ¾ This guidance includes the reported results for the first quarter 2010 and estimates for th
Slide 34: Brian MacLean
Brian MacLean President & Chief Operating Officer Investor Day May 20, 2010 33
Slide 35: Travelers Foundation for Success
Travelers Foundation for Success Mid-Teens Mid-Teens ROE ROE Over Over Time Time Underwriting Underwriting Claim Claim Sophistication Effectiveness Sophistication Effectiveness Product Product Local Local Strong Strong Customer Customer Quality Quality Access Access Distribution Distribution Focus F
Slide 36: Continual Process Focused on Front Line Execution
Travelers Superior Marketplace Execution People People Continual Process Focused on Front Line Execution Culture Culture Technology Technology Data Data 235
Slide 37: Business Intelligence & Analytics Framework
Business Intelligence & Analytics Framework Influence & Optimize Anticipate Understand Measure 336
Slide 38: Industry Leading Business Intelligence & Analytics
Industry Leading Business Intelligence & Analytics Examples of Travelers’ Successes ¾ Portfolio Management: Individually Underwritten Business New Business 1st Renewal 2nd Renewal Mature Business ¾ Evolution of Reporting: Account Executive Dashboard ¾ Understanding Causality: Homeowners Property Sev
Slide 39: Portfolio Management: Underwriting Selection and Pricing Continuum
Portfolio Management Underwriting Selection and Pricing Continuum Business Insurance Personal Insurance Small Middle Large Flow Business Individually Underwritten ¾ High volume, low transaction size ¾ Tools support underwriter in pricing and risk assessment decision ¾ Ease of use and efficiency are
Slide 40: Portfolio Management: Account Executives' Focus
Portfolio Management Account Executives’ Focus I. Retention Retain the majority of the book II. Renewal Price Change Optimize the profitability on the retained book III. New Business Write new business for long term profitable growth Giving Giving every every Account Account Executive Executive the
Slide 41: Portfolio Management: Importance of Retention
Portfolio Management Importance of Retention Business Insurance (Excluding National Accounts) 82% 82% 83% 82% 80% 19% 19% 21% 19% 20% 2005 2006 2007 2008 2009 Retention New business as a percentage of expiring premium Renewal Renewal business business isis critical critical for for near -term profit
Slide 42: Portfolio Management: Product Profitability Life Cycle
Portfolio Management Product Profitability Life Cycle Illustrative Product Profitability Life Cycle Return on Allocated Capital New Business 1st Renewal 2nd Renewal Mature Business Drivers of Improvement over Time: Quickly identifying underperforming accounts allows us to: Use claim & risk control
Slide 43: Portfolio Management: Long-Term View of Customer - Example
Portfolio Management Long-Term View of Customer - Example Commercial Accounts 2007 New Business 500 + ps 0 b +20 s Return on Allocated bp Capital New Business 1st Renewal 2nd Renewal Rate Change: 2007 New Business -2.7% 1.7% Rate Change: Remainder of Book -4.3% 0.5% Retention: 2007 New Business 85%
Slide 44: Portfolio Management: Optimizing the Portfolio - Example
Portfolio Management Optimizing the Portfolio - Example Renewal Pricing – Business Office Expiring Premium Retention Rate Change Countrywide $202 million 87.0% 0.6% Office $15 million 90.8% 1.6% Highest 95.6% 1.3% High 96.0% -4.3% Medium 81.8% -1.6% Low 86.7% 1.2% Lowest 93.5% 6.3% Ability Ability t
Slide 45: Portfolio Management: Product Profitability Life Cycle
Portfolio Management Product Profitability Life Cycle Illustrative Product Profitability Life Cycle 15% Return on Allocated ? Capital New Business 1st Renewal 2nd Renewal Mature Business Understanding Understanding both both target target & & actual actual returns returns on on new new business busi
Slide 46: Portfolio Management: Optimizing the Portfolio - Example
Portfolio Management Optimizing the Portfolio - Example New and Renewal Pricing – Middle Market Line X New Business Est. ROAC Est. ROAC Policy Period Retention% Rate% Renewal New % Jan. 2010 84.3% 2.8% 33.6% 15% 7% Feb. 2010 76.9% 2.1% 29.6% 15% 8% March 2010 79.8% 2.3% 29.5% 17% 6% 1Q 2010 82.0% 2.
Slide 47: Portfolio Management: The Critical Takeaways
Portfolio Management The Critical Takeaways ¾ Travelers has created tools that enable Account Executives to: • Segment their renewals relative to retention & pricing benchmarks • Clearly see the expected profitability of their new & renewal business • Monitor & manage the life cycle of that new busi
Slide 48: Industry Leading Business Intelligence & Analytics
Industry Leading Business Intelligence & Analytics Examples of Travelers’ Successes ¾ Portfolio Management: Individually Underwritten Business ¾ Evolution of Reporting: Account Executive Dashboard ¾ Understanding Causality: Homeowners Property Severity 14 47
Slide 49: Portfolio Management: Reporting Evolution
Portfolio Management Reporting Evolution Interactive real- time individualized Account Executive dashboards Continuing granularity of information to line & individual underwriter level d ay Basic financial To results by business & office: Controllable Income Statements Anecdotal information & person
Slide 50: Evolution of Reporting: Dashboard Home Screen
Evolution of Reporting Dashboard Home Screen Account Executive (BU) Account Name 1 XXXXXXXX SUB AGENT NUMBER 1 - XXXXX XXXX Account Name 2 XXXXXXXX SUB AGENT NUMBER 2 - XXXXX XXXX Account Name 3 XXXXXXXX SUB AGENT NUMBER 3 - XXXXX XXXX Account Name 4 XXXXXXXX SUB AGENT NUMBER 4 - XXXXX XXXX SUB AGEN
Slide 51: Evolution of Reporting: Key Renewal Information
Evolution of Reporting Key Renewal Information Account Executive (BU) 3 Year Rate History for COMPANY XXX Account Name 1 XXXXXXXX Account Name 2 XXXXXXXX Account Name 3 XXXXXXXX Account Name 4 XXXXXXXX SUB AGENT NUMBER 6- XXXXX Account Name 6 XXXXXXXX SUB AGENT NUMBER 7 - XXXXX Account Name 7 XXXXXX
Slide 52: Evolution of Reporting: Modeling an Account Executives' Portfolio
Evolution of Reporting Modeling an Account Executives’ Portfolio 18 51
Slide 53: Evolution of Reporting: The Critical Takeaways
Evolution of Reporting The Critical Takeaways ¾ All information is available & organized in one tool • Links to all underwriting tools & manuals ¾ Account Executives spend less time searching & organizing data and more time executing on the data in the marketplace ¾ Account Executives can model the
Slide 54: Industry Leading Business Intelligence & Analytics
Industry Leading Business Intelligence & Analytics Examples of Travelers’ Successes ¾ Portfolio Management: Individually Underwritten Business ¾ Evolution of Reporting: Account Executive Dashboard ¾ Understanding Causality: Homeowners Property Severity Actual Wind & Hail Expected Wind & Hail Actual
Slide 55: Understanding Causality: Severity – Macro view
Understanding Causality Severity – Macro view Personal Insurance Homeowners Property Severity Travelers Actual Industry Actual Travelers Expected 1Q 2006 4Q 2009 Identifies Identifies macro macro issue; issue; No No actionable actionable response response facilitated facilitated 21 54
Slide 56: Understanding Causality: Homeowners Property Severity – Detailed Claim Data
Understanding Causality Homeowners Property Severity – Detailed Claim Data Ex- Catastrophe PI Severity by Cause of Loss Hail Hail severity severity attributable attributable to to material material cost, cost, not not average average size size of of repair repair or or labor labor cost cost Actual W
Slide 57: Understanding Causality: Asphalt Roof Shingles
Understanding Causality: Asphalt Roof Shingles Deeper Understanding – Driver of Material Cost Asphalt Price Compared to PPI Asphalt Shingle PPI Oil PPI Asphalt Asphalt shingle shingle price price increase increase due due to to improvements improvements in in the the crude crude oil oil refining ref
Slide 58: Understanding Causality: The Critical Takeaways
Understanding Causality The Critical Takeaways ¾ Consistent pursuit to uncover “True” causality through the use of granular data with numerous attribution characteristics ¾ Broad ability to align and incorporate external data ¾ Accurate linking of data throughout policy, underwriting and claim envir
Slide 59: Continual Process Focused on Front Line Execution
Travelers Superior Marketplace Execution People People Continual Process Focused on Front Line Execution Culture Culture Technology Technology Data Data 25 58
Slide 60: Sustainable Competitive Advantage: Breadth, Depth, and Perseverance
Sustainable Competitive Advantage Breadth, Depth, and Perseverance To compete in this game you need to: 1. Have a large quantity of data 2. Have the will & ability to invest in technology and people 3. Have the culture to ensure that the data & tools are appropriately used 4. Understand that this is
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Slide 62: Doreen Spadorcia
Doreen Spadorcia Executive Vice President, Claim Services & Chief Executive Officer, Personal Insurance Investor Day May 20, 2010 61
Slide 63: Claim Services Organizational Principles
Claim Services Organizational Principles 13,000 Claim Employees ¾ Deep expertise leveraged across lines of business ¾ Resolution-focused ¾ Processes designed around customer experience ¾ Information Advantage Leveraging Leveraging expertise expertise across across aa broad broad footprint footprint
Slide 64: Claim Services: A Sustainable Travelers Competitive Advantage
Claim Services A Sustainable Travelers Competitive Advantage Outcomes Claim Contribution ¾ New business and retention ¾ Information advantage for customer insights, product development, risk selection and pricing – accelerating data certainty ¾ Optimal payout ¾ Resolution excellence compressing clai
Slide 65: Claim Services: Examples of Competitive Advantages
Claim Services Examples of Competitive Advantages ¾ ConciergeCLAIM ¾ Catastrophe Management and Response ¾ Shortening General Liability Claim Cycle ¾ Enhanced Subrogation Through Aggregate Strategy 364
Slide 66: ConciergeCLAIM Program Overview - Automobile
ConciergeCLAIM Program Overview - Automobile Concierge mindset: bringing higher levels of service that drive better outcomes ¾ Seamless management of repair process ¾ Priority vehicle repair ¾ Quality repair and lifetime guarantee ¾ Flexible model ¾ 68 locations Growth of ConciergeCLAIM Program Aver
Slide 67: ConciergeCLAIM Program Overview - Property
ConciergeCLAIM Program Overview - Property Concierge mindset: bringing higher levels of service that drive better outcomes After a catastrophe: ¾ Damaged roofs covered with tarps to prevent further damage ¾ Tree removal program ¾ Direct dispatch of cleaning and restoration ¾ Immediate lodging assist
Slide 68: Claim Services: Examples of Competitive Advantages
Claim Services Examples of Competitive Advantages ¾ ConciergeCLAIM ¾ Catastrophe Management and Response ¾ Shortening General Liability Claim Cycle ¾ Enhanced Subrogation Through Aggregate Strategy 667
Slide 69: Catastrophe Management and Response Results
Catastrophe Management and Response Results Travelers Catastrophe Response – Hurricane Ike vs. Hurricane Rita 100% 75% Hurricane Rita - 2005 Ike was 4X larger 50% than Rita, but Hurricane Ike - 2008 Travelers closed 25% claims 4X faster 0% Contact @ 10 Inspect @ 29 Close @ 29 Days Days Days Since 20
Slide 70: Catastrophe Management and Response
Catastrophe Management and Response Travelers responds with our employees by leveraging our size, technology and workflow flexibility Preparation Response ¾ 1,600 property specialists ¾ Capacity to handle multiple/concurrent ¾ 30% of claim cross-trained catastrophe events ¾ Enterprise resources ¾ Co
Slide 71: Claim Services: Examples of Competitive Advantages
Claim Services Examples of Competitive Advantages ¾ ConciergeCLAIM ¾ Catastrophe Management and Response ¾ Shortening General Liability Claim Cycle ¾ Enhanced Subrogation Through Aggregate Strategy 970
Slide 72: Shortening General Liability Claim Cycle
Shortening General Liability Claim Cycle Resolution Excellence ¾ Speed – Fair and prompt investigations/settlements lead to claims closing faster, and reduced litigation ¾ Settle the right claims, try the right cases ¾ Handle resulting litigation more effectively ¾ Use of Staff Counsel (in–house tri
Slide 73: Shortening General Liability Claim Cycle
Shortening General Liability Claim Cycle Resolution Excellence ¾ Investigation / Evaluation / Settlements • 24-hour contact • Early on-site investigations • Pay promptly what Travelers owes with first call settlements • Deny / resolve non-meritorious claims • Utilize appropriate specialized resource
Slide 74: Shortening General Liability Claim Cycle
Shortening General Liability Claim Cycle Resolution Excellence General Liability Staff Counsel Utilization – a Differentiator • Staff Counsel Utilization 30% ♦ Legal Expense ¾ 27% increase in use of Staff Counsel 10% ¾ 21% reduction in legal expense -10% across General Liability -30% 2006 2007 2008
Slide 75: Shortening General Liability Claim Cycle
Shortening General Liability Claim Cycle Resolution Excellence General Liability Notices & Litigated Files Suits • Notices ¾ Slight increase in general liability notices (2005 – 2009) ¾ Suit volume down 26% ¾ Suit duration down greater than 10% 2005 2006 2007 2008 2009 Summary Claim resolution time
Slide 76: Shortening General Liability Claim Cycle
Shortening General Liability Claim Cycle Resolution Excellence 14 75
Slide 77: Enhanced Subrogation Through Aggregate Strategy
Claim Services Examples of Competitive Advantages ¾ ConciergeCLAIM ¾ Catastrophe Management and Response ¾ Shortening General Liability Claim Cycle ¾ Enhanced Subrogation Through Aggregate Strategy 15 76
Slide 78: Enhanced Subrogation Through Aggregate Strategy
Enhanced Subrogation Through Aggregate Strategy Information Advantage Coupled with Specialized Expertise and Process Subrogation Aggregate Subrogation Advantages ¾ What is an Aggregate Strategy? ¾ Achieve greater recovery at lower cost (often faster) • Identify and pursue, as a group, losses involvi
Slide 79: Enhanced Recoveries Through Aggregate Strategy
Enhanced Recoveries Through Aggregate Strategy Information Advantage Coupled with Specialized Expertise and Process Sample Products ¾ Currently pursuing 27 different products involving 31 manufacturers ¾ To date, Travelers has 4 global agreements with 4 manufacturers • Aquarium light • Refrigerators
Slide 80: Claim Services – Going Forward
Claim Services – Going Forward Customer Experience Investments to Grow Business ¾ Deep analytical approach Æ retention • Highly satisfied customers are twice as likely to renew their policy ¾ End-to-end technology • I-phone app & mobile web ¾ Comprehensive approach that complements Travelers’ deep t
Slide 81: Claim Services: Key Points
Claim Services Key Points ¾ Shortening claim cycles good for both customers and Travelers ¾ Another critical outcome of claims closing faster -- provides greater certainty around Travelers loss cost estimates ¾ Customers are increasingly becoming advocates • www.Travelers.com/claim/customers.aspx 19
Slide 82: Greg Toczydlowski
Greg Toczydlowski Executive Vice President & President, Personal Insurance Investor Day May 20, 2010 81
Slide 83: Personal Insurance Topics of Discussion
Personal Insurance Topics of Discussion Investments to date Financial and operational results On-going initiatives 182
Slide 84: Travelers Reporting Segments
Travelers Reporting Segments ($ in billions) Travelers 2009 Net Written Premium: $21.3 Personal Insurance Business Insurance Net Written Premium: $7.1 Net Written Premium: $10.9 ¾ Offers automobile, homeowners, umbrella, tenant, boat and yacht and other products for individuals ¾ Distributes product
Slide 85: Travelers Personal Insurance Performance
Travelers Personal Insurance Performance 2004-2008 Total Personal Insurance Industry (Auto & Home) USAA Less than 98% Progressive 2004-2008 MetLife GEICO Allstate Erie Combined Ratio Mercury Hartford Liberty Farmers More than 98% Nationwide 1999-2003 AIG State Farm American Family - Market Share Cha
Slide 86: Invest in People, Skill Sets & Culture
Travelers Personal Insurance Blueprint Priorities Invest in people, skill sets & culture 2002 485
Slide 87: Invest in People, Skill Sets & Culture
Invest in People, Skill Sets & Culture Manufacturing ¾ Developed advanced analytical talent 9 PhD’s: 17 9 Actuaries: 33 9 Masters in math / statistics: 17 ¾ Established dedicated risk management unit 9 Dedicated staff managing multiple models ¾ Established state specific product management organizat
Slide 88: Invest in Agency Distribution
Travelers Personal Insurance Blueprint Priorities Next generation Invest in agency Claim of products distribution investments 2004 Invest in people, skill sets & culture 2002 687
Slide 89: Next Generation of Products
Next Generation of Products PL Auto Marketplace 2000 2002 2004 2006 ¾ Rolled out: 2005 – 2007 1X 12X 100X 1000X 1X 12X 100X Q U ¾ Multivariate pricing approach, one of the more $143 Preferred A sophisticated in the industry and N Billion and T Standard U M ¾ Currently available in 38 states and D.C
Slide 90: Invest in Agency Distribution
Invest in Agency Distribution ¾ Systematic strategy of agency appointments • 11,500 agents at year-end 2009 compared to 7,800 at year-end 2005 PA ¾ Enhanced geographic diversification strategy • Western agency appointments comprise 40% of Travelers agency plant compared West East to 31% at year-end
Slide 91: Claim Investments
Claim Investments ¾ Example Auto Notice Issue Estimate Auto 189 189 Hours Hours Countrywide March 2004 60 60 Hours Hours Countrywide Countrywide December 2009 67% inspected within 48 hours Best office 52 52 Hours Hours 71% inspected within 48 hours Best Office December 2009 Re-engineered claim Re-en
Slide 92: Personal Insurance Results
Personal Insurance Results ($ in millions) Net Written Premium A G R : 7% C $6,995 $7,149 $6,711 $6,835 $6,228 $5,929 $5,082 $4,575 2002 2003 2004 2005 2006 2007 2008 2009 10 91 CAGR = Compound Annual Growth Rate
Slide 93: Personal Insurance Results: Personal Automobile
Personal Insurance Results Personal Automobile Combined Ratio 120% Industry 100% 80% 2002 2003 2004 2005 2006 2007 2008 2009 ¾ Travelers averaged 4 points better than the industry ¾ Travelers net written premium compound annual growth rate over this period was 2 points better than the industry Indus
Slide 94: Personal Insurance Results: Personal Property
Personal Insurance Results Personal Property Combined Ratio 140% Industry 120% 100% 80% 60% 2002 2003 2004 2005 2006 2007 2008 2009 ¾ Travelers averaged 17 points better than the industry ¾ Travelers net written premium compound annual growth rate over this period was 5 points better than the indust
Slide 95: Travelers Personal Insurance Blueprint: Priorities
Travelers Personal Insurance Blueprint Invest in digital commerce & customer experience Priorities 2007 Next generation Invest in agency Claim of products distribution investments 2004 Invest in people, skill sets, & culture 2002 13 94
Slide 96: Invest in People, Skill Sets & Culture
Invest in People, Skill Sets & Culture Manufacturing ¾ Developed advanced analytical talent 9 PhD’s: 17 9 Actuaries: 33 9 Masters in math / statistics: 17 ¾ Established dedicated risk management unit 9 Dedicated staff managing multiple models ¾ Established state specific product management organizat
Slide 97: Invest in Digital Commerce & Customer Experience
Invest in Digital Commerce & Customer Experience Launched Launchedmobile mobileapplications applicationstotoprovide provide functionality functionality relevant relevant to to smartphone smartphone usage usage 15 96
Slide 98: Invest in Digital Commerce & Customer Experience
Invest in Digital Commerce & Customer Experience Personal Automobile Insurance Market Share by Channel 1989 2008 32% 34% 41% 63% 5% 25% Captive Agency Independent Agency Direct Direct Direct channel channel is is growing growing at at the the expense expense of of the the captive captive agency agen
Slide 99: Direct to Consumer Initiative
Invest in Digital Commerce & Customer Experience Travelers Personal Insurance Direct to Consumer Initiative Goal: Generate calls and clicks at a competitive rate Marketing Marketing Progress: • Attribution of media type and spend to brand awareness, quotes and sales • Significantly improved cost per
Slide 100: Travelers Personal Insurance Blueprint: Priorities
Travelers Personal Insurance Blueprint Agency & customer “Demand Based” investments 2010 Invest in digital commerce & customer experience Priorities 2007 Next generation Invest in agency Claim of products distribution investments 2004 Invest in people, skill sets & culture 2002 18 99
Slide 101: Identification of Target Personal Auto Market
Agency & Customer “Demand Based” Investments Identification of Target Personal Auto Market Low ¾ Underwriting characteristics combined with customer demographic characteristics Underwriting Risk ¾ Sources: • Underwriting data = Travelers information + survey data • Customer data = industry leading c
Slide 102: Identification of Target Personal Auto Market
Agency & Customer “Demand Based” Investments Identification of Target Personal Auto Market Low Underwriting Risk $160 Billion Personal Auto Market High Complex Asset Protection Needs Simple 20 101
Slide 103: Identification of Target Personal Auto Market
Agency & Customer “Demand Based” Investments Identification of Target Personal Auto Market Low $83 billion $24 billion Underwriting Risk $38 billion $15 billion High Complex Asset Protection Needs Simple More Moreresponsible responsibleand andcomplex complexasset assetprotection protectionneed need
Slide 104: Identification of Target Personal Auto Market
Agency & Customer “Demand Based” Investments Identification of Target Personal Auto Market Low $24 billion Underwriting Risk $83 billion $38 billion $15 billion High Complex Asset Protection Needs Simple Target Targetmarket market expects expectsvalue, value,advice adviceand andservices, services, w
Slide 105: Personal Insurance – Building Upon Our Success
Personal Insurance – Building Upon Our Success ¾ Develop next generation of product • Target market features: safe driver advantage, new car discount, annual automobile policy, green endorsement ¾ Enhance agent distribution • Advanced agent segmentation ¾ Leverage claim investments • Leveraging all
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Slide 107: Annex
Annex Investor Day May 20, 2010 106
Slide 108: Glossary of Financial Measures
Glossary of Financial Measures Glossary of Financial Measures The following measures are used by the company’s management to evaluate financial performance against historical results and establish targets on a consolidated basis. In some cases, these measures are considered non-GAAP financial measur
Slide 109: Glossary of Financial Measures - Continued
Glossary of Financial Measures - Continued Gross written premiums reflect the direct and assumed contractually determined amounts charged to the policyholders for the effective period of the contract based on the terms and conditions of the insurance contract. Gross written premiums are a measure of
Slide 110: Reconciliation of Operating Income to Net Income
Reconciliation of Operating Income to Net Income and Reconciliation of Adjusted Common Shareholders’ Equity to Common Shareholders’ Equity Three Months Ended March 31, Twelve Months Ended December 31, ($ in millions; after-tax) 2010 2009 2008 2007 2006 2005 2004 Reconciliation of operating income to
Slide 111: Book Value Per Share Reconciliations
Book Value Per Share Reconciliations of Adjusted Book Value per Share to Book Value per Share ($ in millions, except per share amounts) 1Q Book Value Reconciliation 2010 2009 2008 2007 2006 2005 Adjusted common shareholders' equity $ 24,656 $ 25,475 $ 25,374 $ 25,884 $ 24,553 $ 21,823 Net unrealized
Slide 112: Reconciliation of Tangible and Adjusted Common Shareholders' Equity
Reconciliation of Tangible and Adjusted Common Shareholders’ Equity to Common Shareholders’ Equity ($ in millions, except per share amounts) As of March 31, December 31, ($ in millions; except per share amounts) 2010 2009 Reconciliation of tangible and adjusted common shareholders' equity to common
Slide 113: Disclosure
Disclosure ¾ 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). ¾ Copies of the presentation materials, and the accompanying webcast, are publicly available on the Travelers
Slide 114: End Slide
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