The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Investor Day (June 2011)
127 slides from The Travelers Companies's investor day presentation, Jun 10, 2011
Slide 1: 2011 Investor Day
The Travelers Companies, Inc. 2011 Investor Day June 10, 2011
Slide 2: Agenda
AGENDA AGENDA Introduction Jay Benet, Vice Chairman & Chief Financial Officer Jay Fishman, Chairman & Chief Executive Officer Bill Cunningham, Executive Vice President, Business Insurance Bill Malugen, President, National Break Break Michael Klein, President, Middle Market Marc Schmittlein, Presiden
Slide 3: Jay S. Benet
Jay S. Benet Vice Chairman & Chief Financial Officer Investor Day June 10, 20112
Slide 4: Jay S. Fishman
Jay S. Fishman Chairman & Chief Executive Officer Investor Day June 10, 20113
Slide 5: Create Shareholder Value: 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 6: Our Theme – Differentiation
Our Theme – Differentiation A significant number of our businesses, generating a substantial percentage of our premiums, are meaningfully differentiated We have a unique breadth of successful U.S. businesses that continuously share expertise As a result we have leading market positions with most of
Slide 7: Travelers Portfolio of Businesses
Travelers Portfolio of Businesses 2010 Net Written Premiums: $21.6 Billion ($ in billions) Select : $2.7 Commercial Accounts: $2.6 Personal Automobile: $3.8 Construction Technology Industry- Industry-Focused Underwriting: Public Sector $2.3 Oil & Gas Agribusiness National Property Inland Marine Home
Slide 8: Our View of Significant Large Competitors in U.S. Independent Agencies / Brokers
Our View of Significant Large Competitors1 in U.S. Independent Agencies / Brokers it y ac ap C d En ty e ic y i li ile h- rv lit ab ob ig al bi Se Li H ci ia om er lt y – y l ty tL t rt ke ut m rs rs ua ua pe en A om ne ne ar as as em ro al M w w lC C P C on eo eo ty ag e e e dl al e re rs om rg om
Slide 9: Travelers Businesses to be Discussed Today
Travelers Businesses to be Discussed Today ($ 2010 Net Written Premiums) Select $2.7 $2.7 Billion Billion Commercial Accounts & Industry-Focused $4.9 $4.9 Billion Billion National $0.8 $0.8 Billion Billion Homeowners $3.8 $3.8 Billion Billion 58
Slide 10: Travelers Differentiation Drives Superior Returns
Travelers Differentiation Drives Superior Returns Operating Return on Equity 9.6% 17.9% 17.7% 12.4% 14.0% 12.5% 10.1% 14.1% 10.6% 11.1% 11.0% From January 1, 1.4% 1.4% 1.6% 9.3% 0.5% 0.8% 0.7% 8.1% 0.1% 8.7% 9.6% 2005 through 0.4% 8.2% 0.9% 1.5% 0.6% March 31, 2011, 6.8% 6.7% 5.8% average annual 8.1
Slide 11: Travelers Differentiation Drives Superior Returns
Travelers Differentiation Drives Superior Returns 17.9% 18.0% 14.5% 13.5% 11.9% 12.1% 11.4% 9.5% 8.9% 8.7% 8.9% 7.7% 2005 2006 2007 2008 2009 2010 TRV Return on Equity1 TRV Estimated Cost of Equity2 1 Continuing operations, return on equity. Excludes equity ownership in Nuveen Investment which was c
Slide 12: Consistently Growing Book Value Per Share
Consistently Growing Book Value Per Share Book Value Per Share % AG R: 12.7 $58.47 $59.91 C $52.54 $42.22 $43.12 $36.86 $31.94 2005 2006 2007 2008 2009 2010 March 31, 2011 Adjusted Book Value Per Share1 G R: 11.4% $54.19 $55.59 CA $48.96 $43.37 $41.23 $36.20 $31.47 2005 2006 2007 2008 2009 2010 Marc
Slide 13: Total Return: Largest S&P Financial Companies
Total Return 20 Largest S&P Financial Companies1 & Other Selected Financial Companies 5+ Years2 3+ Years2 7 5 .2 % S imo n Pr o p e r ty G r o u p 4 4 .3 % S imo n Pr o p e r ty G r o u p 5 7 .0 % TRAVELERS 2 9 .3 % Ch u b b 5 0 .8 % Ch u b b 2 4 .7 % TRAVELERS 4 0 .9 % Fr a n klin Re s o u r c e s
Slide 14: Quote on industry cyclicality and accounting standards
13 10 fewthings areaafew are reallyare thatreally thingsthat different.” quitedifferent. arequite ” ––Jay Fishman JayFishman dangerous always dangerous to say, always to are different things are say, ‘‘things now’, different now dothink ’, IIdo there thinkthere dealwith deal asan withas mayin indust
Slide 15: Property & Casualty Market Cycles Have Changed
Property & Casualty Market Cycles Have Changed • Improvement in analytics and management information • Better governance and industry leadership • Capital adequacy • Data supports hypothesis 11 14
Slide 16: Market Cycles: Improvement in Analytics and Management Information
Property & Casualty Market Cycles Have Changed Improvement in Analytics and Management Information • Travelers example: portfolio management - optimizing the portfolio Illustration - New and Renewal Pricing – Middle Market Line X Policy New Estimated ROAC Period Retention Rate Business % New Renewal
Slide 17: Market Cycles: Better Governance and Industry Leadership
Property & Casualty Market Cycles Have Changed Better Governance and Industry Leadership • Fewer “multi-line” organizations • Financially minded leadership • Sarbanes Oxley - 2002 – Robust requirements – Focus on internal controls – CFO & CEO personal responsibility • Board responsibility & accounta
Slide 18: Market Cycles: Capital Adequacy
Property & Casualty Market Cycles Have Changed Capital Adequacy Industry Net Premium-to-Surplus Ratio 1.3 1.2 1.1 1.1 1.1 1.1 1.0 1.0 0.9 0.9 0.9 0.8 0.8 0.9 0.8 0.8 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Premium-to-surplus ratio in 2010 implies that P&C insurers held $1 in
Slide 19: Market Cycles: Premium to Surplus Limitations
Property & Casualty Market Cycles Have Changed Capital Adequacy Premium to Surplus Limitations • Insurance mix - Property vs. Casualty - Long vs. Short • Investment risk • Catastrophe exposure • Prospective CAT model changes • Rating agency capital requirement changes • Runoff blocks of business 15
Slide 20: Market Cycles: Catastrophe Model Changes
Property & Casualty Market Cycles Have Changed Capital Adequacy RMS Catastrophe Model Changes – 1 : 250 Industry Event1 ($ in billions) 2005 2006 Change Hurricane: Florida $98 $132 35% Earthquake: California $36 $47 31% • Consider the impact of model changes on capital and management outlook Rating
Slide 21: Market Cycles: Premium to Surplus vs. Best's Capital Adequacy
Property & Casualty Market Cycles Have Changed Capital Adequacy Premium to Surplus vs. Best’ Best’s Capital Adequacy Ratio Premium / Best’s Capital Surplus Adequacy Rating 1 = Least Leveraged 1 = Highest 10 = Most Leveraged 10 = Lowest Carrier A 1 4 Carrier B 2 2 Carrier C 3 5 Carrier D 4 8 Carrier
Slide 22: Market Cycles: Share Repurchases
Property & Casualty Market Cycles Have Changed Capital Adequacy ($ in billions) Share Repurchases 1996 2010 2006 - 2010 ACE $0.07 $0.30 $0.30 Allstate 0.30 0.16 6.80 Arch Capital 0.06 0.76 2.30 Chubb 0.08 2.00 7.80 Travelers 0.07 5.00 14.50 XL Group 0.00 0.52 1.60 Total $0.58 $8.74 $33.30 18 21 Sour
Slide 23: Data Supports Hypothesis: Retention
Property & Casualty Market Cycles Have Changed Data Supports Hypothesis Travelers Commercial Accounts: Retention 86% 86% 86% 85% 85% 82% 82% 80% 79% 79% 79% 79% 77% 73% 72% 70% '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Stability 19 22 Note: Statistics are subject to change base
Slide 24: Data Supports Hypothesis: New Business Premium
Property & Casualty Market Cycles Have Changed Data Supports Hypothesis Travelers Commercial Accounts: New Business Premium as a Percentage of Expiring Base 28% 26% 25% 25% 24% 21% 20% 19% 18% 18% 17% 16% 16% 13% 13% 13% '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Stability 20 23
Slide 25: Data Supports Hypothesis: Renewal Rate Change
Property & Casualty Market Cycles Have Changed Data Supports Hypothesis Travelers Commercial Accounts: Renewal Rate Change1 22% 21% 16% 10% 4% 2% 0% 0% - 2% - 2% - 4% - 4% - 4% - 4% - 4% - 7% '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Less 1 Represents the estimated change in av
Slide 26: What We Are Thinking About…
What We Are Thinking About… • Change in real risk • Change in the perception of risk • Investment environment We are not waiting for some change in the mythical cycle to seek improved returns 22 25
Slide 27: Bill Cunningham
Bill Cunningham Executive Vice President, Business Insurance Investor Day June 10, 2011 26
Slide 28: Successful Businesses With Significant Differentiation
Successful Businesses With Significant Differentiation Travelers Business Differentiation • Workers’ compensation claim management • Industry-leading risk control National • Scale allows significant investment across business insurance • Broad product capability Commercial Accounts • Specialized exp
Slide 29: Business Insurance Businesses With Significant Differentiation
Business Insurance Businesses With Significant Differentiation ($ Gross Written Premiums - 2010) Account Size Small Middle Large Commercial Accounts Select National & Industry-Focused $2.8 $2.8 Billion Billion $5.2 $5.2 Billion Billion $2.9 Billion11 $2.9 Billion Capabilities leveraged across Busine
Slide 30: Differentiated Position With Distribution
Business Insurance Differentiated Position With Distribution… Distributors Want We Deliver Solutions for a wide range of Broadest capabilities customers Carriers that understand their Specialization/expertise customers Risk improvement services Superior risk control/ Claim management Efficiency & re
Slide 31: Distribution Position – Why it Matters
Differentiated Results Distribution Position – Why it Matters Booz Allen Hamilton Analysis1 Agency Book of Business #1 Carrier 42% 42% 80% Top 3 23% 23% Carriers #2 Carrier #3 Carrier 15% 15% All Other 20% 20% Average 15-20 carriers within an agency Top 3 carriers receive the best business 1 June 20
Slide 32: Distribution Position – Why it Matters
Differentiated Results Distribution Position – Why it Matters Booz Allen Hamilton Analysis1 IIABA Study2 - 2010 Agency Book of Business How Often In Top 3 49% #1 Carrier 42% 42% 80% Top 3 32% 23% 23% Carriers #2 Carrier #3 Carrier 15% 15% 14% 13% 11% 10% All Other 20% 20% TRV Hartford CNA Zurich AIG
Slide 33: Leadership Position With Distribution
Differentiated Results Leadership Position With Distribution Goldman Sachs Agent Survey1: 2007-2011 How Often In Top 5 75% 50% 25% 0% 2007 2008 2009 2010 2011 TRV Hartford CNA Liberty Mutual Chubb Zurich AIG Unique distribution position over time 6 32 1 Bi-Annual Goldman Sachs Property & Casualty Pr
Slide 34: Success With New Agents
Differentiated Results Success With New Agents ($ in millions) Total Appointed Agents New Agency Production 12,000 $ 500 Bond & Financial Products Business Insurance – All Other 400 Middle Market Select Accounts 300 8,000 200 100 4,000 0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 We have incr
Slide 35: Differentiated Capabilities & Leading Distribution Position Results
Business Insurance Differentiated Capabilities & Leading Distribution Position Results In… Consistent historically high retention Increased new business opportunities Sustained account growth …growing market share combined with top tier returns 8 34
Slide 36: Consistent Historically High Retention
Differentiated Results Total Business Insurance: Annual Customer Retention 90% 85% 80% 75% 70% 65% 60% 2006 2007 2008 2009 2010 Consistent historically high retention 9 35
Slide 37: Increased New Business Opportunities
Differentiated Results Total Business Insurance: New Business Quote Requests 1,400 (In thousands) 1,200 A GR : 20% C 1,000 800 600 400 200 0 2007 2008 2009 2010 Increased new business opportunities 10 36 CAGR = Compound Annual Growth Rate.
Slide 38: Sustained Account Growth
Differentiated Results Total Business Insurance: Total Number of Accounts 1, 0 0 0 (In thousands) GR : 8.3% 900 CA 800 700 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2008 2009 2010 2011 Sustained account growth 11 37 CAGR = Compound Annual Growth Rate.
Slide 39: Commercial Insurance Market Share Trend
Differentiated Commercial Insurance Results Market Share Trend ($ in billions) $300 8% $262 $262 $252 $234 $228 $150 6.3% 6.3% 7% 6.0% 6.0% 5.9% $15.6 $15.6 $15.2 $14.7 $14.4 $0 5% 2006 2007 2008 2009 2010 • U.S. Commercial Industry Direct Written Premium 1 ▲ TRV Direct Written Premium2 ♦ TRV Market
Slide 40: Commercial Insurance Market Share Trend
Differentiated Commercial Insurance Results Market Share Trend ($ in billions) $300 8% $262 $262 $252 $234 $228 $150 6.3% 6.3% 7% 6.0% 6.0% 5.9% $15.6 $15.6 $15.2 $14.7 $14.4 $0 5% 2006 2007 2008 2009 2010 • U.S. Commercial Industry Direct Written Premium 1 ▲ TRV Commercial Lines Direct Written Prem
Slide 41: Commercial Insurance Market Share Trend
Differentiated Commercial Insurance Results Market Share Trend ($ in billions) $300 8% $262 $262 $252 $234 $228 $150 6.27% 6.33% 7% 6.03% 5.93% 5.96% $15.6 $15.6 $15.2 $14.7 $14.4 $0 5% 2006 2007 2008 2009 2010 • U.S. Commercial Industry Direct Written Premium 1 ▲ TRV Commercial Lines Direct Written
Slide 42: U.S. Commercial Lines Growth & Profitability
Business Insurance U.S. Commercial Lines Growth & Profitability Top 8 Business Insurance Carriers Nationwide Profit vs. Growth 2006 - 2010 Lower 5 Year Trend Chubb TRV ACE Average Combined Ratio Hartford Industry Average Zurich CNA Liberty AIG Mutual Industry Average Higher Lower Average Annual Prem
Slide 43: U.S. Commercial Lines Growth & Profitability
Business Insurance U.S. Commercial Lines Growth & Profitability Top 8 Business Insurance Carriers Nationwide Top 8 Business Insurance Carriers Nationwide Profit vs. Growth 2006 - 2010 Profit vs. Growth 2008 - 2010 Lower Lower 5 Year Trend 3 Year Trend TRV Chubb TRV ACE ACE Chubb Average Combined Rat
Slide 44: Businesses With Significant Differentiation: Not Easily Replicated
Business Insurance Businesses With Significant Differentiation Commercial Accounts Select National & Industry-Focused • Decades of significant investments • Decades of knowledge and experience • Significant scale within each and across all businesses Not easily replicated 17 43
Slide 45: Bill Malugen
Bill Malugen President, National Investor Day June 10, 2011 44
Slide 46: National: Where We Focus
National Account Size Small Middle Large Commercial Accounts National Select & Industry-Focused Where We Focus Where We Don’t • Companies Fortune 501 and beyond • Fortune 500 • Loss responsive – customers retain • Guaranteed cost – customers pay a fixed significant amounts of their risk of loss prem
Slide 47: National Profile
National Profile Product Mix Customer Cost of Risk 8% 9% Service General 15% Auto Fees Liability 22% Insurance Above Retention 70% Customer 76% Retained Losses Worker’ Worker’s Compensation • Customers typically retain first $250,000 to $2 million per loss • Manage $1.8 billion of losses on behalf o
Slide 48: Workers' Compensation Environment
Workers’ Compensation Environment 2009 Industry Losses1 Indemnity Medical 42% 58% Helping insureds reduce their medical and wage replacement costs are keys to success 3 47 1 Source: 2009 NCCI.
Slide 49: Claim Services Scale
Claim Services Scale Workers’ Compensation Claim Locations: Workers’ Compensation • 40 locations • 1,900 claim professionals • 500+ registered nurses • Dedicated specialists in fraud detection, legal and subrogation • 295,000 claims/year • 15+ years of robust managed care data Getting injured worker
Slide 50: Comprehensive Claim Management
Comprehensive Claim Management Workers’ Compensation Claim Event Mandatory Medicare Reporting Experts 1-800 Nurse Assistance Medicare Set-Aside Experts Claim Reporting 24/7 Chronic Pain Early Intervention Compensability Investigation Medical Case Management Preferred Provider Network Second Injury F
Slide 51: Effective Medical Cost Management
Workers’ Compensation Effective Medical Cost Management 2009 Industry Losses1 Travelers Results 95% In Network Utilization 85% (Percent of Medical $) 75% 65% Indemnity 55% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2 0 10 Medical 42% 58% 70% Medical Bill Savings 65% (Percent Saved Per $ Billed) 60
Slide 52: Workers' Compensation Results vs. Industry
Workers’ Compensation Results vs. Industry Paid Loss & ALAE as % of Premium Stat Combined Ratio (2006 – 2010)2 45% 40% 35% 104% 30% Payout % 25% 96% 20% Average Payout Advantage 15% 2006 - 2010 10% Travelers1 5% Industry2 0% 12 mos 24 mos 36 mos 48 mos 60 mos Industry Accident Year Development Outpe
Slide 53: Risk Control Services
Risk Control Services Unmatched Capabilities • 700+ local experts • Specialized resources - Accredited industrial hygiene lab - Certified ergonomists - Behavioral safety consulting • Customer tailored risk mitigation strategies • On-going loss analysis, loss prevention Successful in reducing custome
Slide 54: Risk Management Information System
Risk Management Information System Comprehensive Suite of Services • e-CLAIM reporting • Claim status • OSHA reporting Industry leading claim management information 9 53
Slide 55: National Retention
National Retention 100% 95% 90% 85% 80% 75% 2006 2007 2008 2009 2010 1Q 2011 Strong retention reflects Travelers value proposition 10 54
Slide 56: National: A Successful Business Leveraged Across Travelers
National Account Size Small Middle Large Commercial Accounts National Select & Industry-Focused • Strong earnings historically, with consistent returns at or above internal benchmarks over time • Provides critical scale which allows significant investments in claim and risk control A successful busi
Slide 57: Michael Klein
Michael Klein President, Middle Market Investor Day June 10, 2011 56
Slide 58: Overview of Industry Specialization
Business Insurance Overview of Industry Specialization Account Size Small Middle Large Commercial Accounts Select & Industry-Focused National IndustryEdge® Profile1 • 45+ Industry-specific offerings • Focused on mid-sized businesses • ~$100,000 average premium • Nearly 50,000 accounts IndustryEdge®
Slide 59: IndustryEdge: Challenging Conventional Wisdom
IndustryEdge® Challenging Conventional Wisdom Conventional Wisdom IndustryEdge® Reality ••Travelers Travelers product breadth is product breadth is delivered delivered •• Breadth Breadth Equals Undifferentiated: You Equals Undifferentiated: You through through aa differentiated differentiated array
Slide 60: IndustryEdge: Challenging Conventional Wisdom
IndustryEdge® Challenging Conventional Wisdom Conventional Wisdom IndustryEdge® Reality •• Travelers Travelers product breadth is product breadth is delivered delivered •• Breadth Breadth Equals Undifferentiated: You Equals Undifferentiated: You through through aa differentiated differentiated array
Slide 61: IndustryEdge: Challenging Conventional Wisdom
IndustryEdge® Challenging Conventional Wisdom Conventional Wisdom IndustryEdge® Reality •• Travelers Travelers product breadth is product breadth is delivered delivered •• Breadth Breadth Equals Undifferentiated: You Equals Undifferentiated: You through through aa differentiated differentiated array
Slide 62: IndustryEdge: Challenging Conventional Wisdom
IndustryEdge® Challenging Conventional Wisdom Conventional Wisdom IndustryEdge® Reality •• Travelers Travelers product breadth is product breadth is delivered delivered •• Breadth Breadth Equals Undifferentiated: You Equals Undifferentiated: You through through aa differentiated differentiated array
Slide 63: Business Insurance Industry Specialization
Business Insurance Industry Specialization Account Size Small Middle Large Commercial Accounts Select & Industry-Focused National Conventional Wisdom IndustryEdge® Reality •• Travelers Travelers product breadth is product breadth is delivered delivered •• Broad Broad Equals Undifferentiated: You Equ
Slide 64: IndustryEdge Position in the U.S. Commercial P&C Market
IndustryEdge® Position in the U.S. Commercial P&C Market ($ in billions) Top 75 U.S. Commercial Lines Insurers1 Company DWP Company DWP Company DWP 1 American International Group $ 20.2 26 Arch Capital Group Ltd. $ 1.7 51 AmTrust Financial Services Inc. $ 0.8 2 Travelers Companies 14.4 27 Bank of Am
Slide 65: Product Breadth: IndustryEdge Offerings
Product Breadth Travelers IndustryEdge® Offerings Commercial CommercialAccounts Accounts Construction Construction Public PublicSector Sector • Architects & Engineers • General Building • American Indian Nations • Automobile Dealers • Highway, Street & Road • K-12 Public Schools • Building Service C
Slide 66: Wide & Growing Array of Industry Specialties
Wide & Growing Array of Industry Specialties Continued Investment in New Products • Launched 29 new or enhanced New Business Quote Requests1 industry offerings since 2006 - Expanded on an already broad 102k 104k portfolio 91k - Generated additional opportunities to quote in new and existing industri
Slide 67: Business Insurance Industry Specialization
Business Insurance Industry Specialization Account Size Small Middle Large Commercial Accounts Select & Industry-Focused National Conventional Wisdom IndustryEdge® Reality •• Travelers selects risks, Travelers selects segments prices, risks, segments prices, •• Insurance Insurance is Commodity: The
Slide 68: Disciplined Risk Selection
Disciplined Risk Selection Deep Industry Knowledge to Select the ‘Right Risks’ Percentage of New Requests Quoted1 • Underwriters have industry expertise to assess all new opportunities 29.4% 28.9% 28.0% 26.8% • ~75% of new opportunities are evaluated by Risk Control experts prior to quote - 75,000+
Slide 69: Pricing Segmentation
Pricing Segmentation Continued Investment in Improving Models Example: Commercial Accounts Property Pricing Model • Predictive models enable pricing high Loss Ratio Relativity – Index 1.0 segmentation by: Model Price 2.5 - Industry - Product Modeled Price - Risk complexity - Risk quality 1.14 1.08 1
Slide 70: Tailored Solutions
Tailored Solutions Specialized Products Tailored to Customer Needs 2010 Retention By Number of Lines1 • Core lines of business include 88% industry-specific coverage: 86% - Automobile 7+ pt - General Liability 84% Difference - Property in 82% Retention - Umbrella - Workers’ Compensation 80% • Tailor
Slide 71: Business Insurance Industry Specialization
Business Insurance Industry Specialization Account Size Small Middle Large Commercial Accounts Select & Industry-Focused National Conventional Wisdom IndustryEdge® Reality •• Travelers Travelers risk risk control control and and claim claim services services •• Services Services DoDo Not Matter: Ser
Slide 72: Focused Risk Control and Claim Services
Focused Risk Control and Claim Services Differentiated Risk Control Services Add Value Customer Retention Improvement Based on Core Services Utilized • Risk Control services align to customer 2.2pts Better needs Retention • Many core services available at low/no 1.8pts Better cost: Retention - Websi
Slide 73: Comprehensive Claim Management Drives Differentiated Results
Focused Risk Control and Claim Services Comprehensive Claim Management Drives Differentiated Results Workers’ Compensation • Enterprise claim capabilities support industry Combined Ratio (2006 – 2010)1 specialization • Claim services include: 104% - Preferred provider network - Pharmacy program mana
Slide 74: Business Insurance Industry Specialization
Business Insurance Industry Specialization Account Size Small Middle Large Commercial Accounts Select & Industry-Focused National Conventional Wisdom IndustryEdge® Reality •• National National Carriers Carriers are Remote: Only are Remote: Only •• Travelers Travelers delivers delivers the the streng
Slide 75: Specialized, Responsive, Local Experts With National Capabilities
Specialized, Responsive, Local Experts With National Capabilities Local Resources • Specialized: Number of Number of - 13 years average underwriter tenure at Employees Locations Travelers Underwriting 1,100+ 69+ - 285 investigative professionals, 75% former law enforcement Claim 7,500+ 100+ - 600+ t
Slide 76: Case Study: Individual Risk
Case Study: Individual Risk Texas-Based Highway, Street & Road Contractor 1 Account Profile •• Texas -based highway, Texas-based highway, street street && road road contractor contractor •• $42 $42 million million in in annual annual sales sales •• ~$6 ~$6 million+ million+ inin total total payroll
Slide 77: Case Study: Individual Risk
Case Study: Individual Risk Texas-Based Highway, Street & Road Contractor 1 Account Profile 2 Risks Identified •• Texas -based highway, Texas-based highway, street street && road road •• Inconsistent Inconsistent safety safety management management and and contractor contractor limited limited contr
Slide 78: Case Study: Individual Risk
Case Study: Individual Risk Texas-Based Highway, Street & Road Contractor 1 Account Profile 2 Risks Identified •• Texas -based highway, Texas-based highway, street street && road road •• Inconsistent Inconsistent safety safety management management and and contractor contractor limited limited contr
Slide 79: Case Study: Individual Risk
Case Study: Individual Risk Texas-Based Highway, Street & Road Contractor 1 Account Profile 2 Risks Identified •• Texas -based highway, Texas-based highway, street street && road road •• Inconsistent Inconsistent safety safety management management and and contractor contractor limited limited contr
Slide 80: Case Study: Industry Performance
Case Study: Industry Performance Travelers Highway, Street & Road Contractors IndustryEdge® Profile: Key Outcomes: Highway, Street & Road Contractors Travelers Highway, Street & Road Contractors •• Travelers Travelers Construction Construction industry industry specialists specialists •• Travelers T
Slide 81: Industry Specialization Delivers Value
Business Insurance Industry Specialization Delivers Value Conventional Wisdom IndustryEdge® Reality •• Travelers Travelers product breadth is product breadth is delivered delivered •• Breadth Breadth Equals Undifferentiated: You Equals Undifferentiated: You through through aa differentiated differen
Slide 82: Marc Schmittlein
Marc Schmittlein President, Select Investor Day June 10, 2011 81
Slide 83: Select
Business Insurance Select Account Size Small Middle Large Commercial Accounts Select National & Industry-Focused • Capability to quote and issue small premium accounts without underwriter intervention • Industry-leading data analytics/pricing segmentation • Ease of use small commercial platform / te
Slide 84: Select: Premium Size Relative to Top U.S. Commercial Insurers
Select: Premium Size Relative to Top U.S. Commercial Insurers ($ in billions) Top 75 U.S. Commercial Lines Insurers1 Company DWP Company DWP Company DWP 1 American International Group $ 20.2 26 Arch Capital Group Ltd. $ 1.7 51 AmTrust Financial Services Inc. $ 0.8 2 Travelers Companies 14.4 27 Bank
Slide 85: Select Snapshot
Select Snapshot Express Express Plus Total Select 2010 Gross Written Premium $1.5 Billion $1.3 Billion $2.8 Billion 2010 Policies In Force 698,000 875,000 177,000 Average Premium per Policy In Force $2,200 $7,200 $3,200 Average Commission per Policy $355 $1,241 $534 Express Success Drivers: • Automa
Slide 86: Solving for Inefficiencies in the Small Commercial Marketplace
Select Solving for Inefficiencies in the Small Commercial Marketplace Broadened Consistent Risk Ease of Use Underwriting Capability Efficiency Delivering the Small Commercial Value Proposition 4 85
Slide 87: Inefficient Platform for Small Premium Accounts
Problem Inefficient Platform for Small Premium Accounts TravelersExpress® : PRE-LAUNCH (2006 & Prior) Refer to Low Underwriter Touch 83% F L O W 3 Days CMP BOP Agency Authority Issue 17% No Touch 5 86 Note: CMP = Commercial Multi-Peril; BOP = Business Owners Policy
Slide 88: Efficient Platform For Small Premium Accounts
Solution Efficient Platform For Small Premium Accounts Leads to a Paradigm Shift TravelersExpress® : POST-LAUNCH Refer to Low Underwriter Touch 21% 1 Day F L TravelersExpress® CMP O WC W Available For Issue Auto 79% Issue No Touch Streamlined Streamlined process process in in all all three three lin
Slide 89: Automated Business and Underwriting Rules
Automated Business and Underwriting Rules Risk Selection & Pricing Product/Eligibility Rules Underwriting Rules Coverage Rules + Predictive Model • Risk profile • Automated • Product • Loss ratio reclassify or decline rules configuration multivariate decline rules coverage and • Exposure based limit
Slide 90: Automated Business and Underwriting Rules: Restaurant Segment Review
Automated Business and Underwriting Rules Profitability, Monitoring, Analysis & Execution Example: Restaurant Segment Review Strong Growth in Restaurant Segment Diagnostics and Action Followed by Spike in Loss Ratio Restaurants with short tenure in business Restaurant Express (especially 0 - 1 years
Slide 91: Automated Business and Underwriting Rules: Results
Automated Business and Underwriting Rules Profitability, Monitoring, Analysis & Execution Example: Restaurant Segment Review Results Restaurant Express 100% 30,000 • Loss ratio improvement 80% 25,000 Loss Ratio Policies 60% • Growth rate sustained 40% 20,000 20% • Achieved desired mix – 0% 15,000 Ye
Slide 92: Pricing and Rating Sophistication
Pricing and Rating Sophistication Master Pac CMP 3.0 Loss Ratio Relativity – Index 1.0 2.8 Model Price 1.6+ 2.6 high 2.4 2006-2010 2.2 Express 2.0 Actual Experience 1.8 Modeled Price 1.6 1.4 Loss Ratio Relativity Compares actual loss 1.2 1.06 ratio to expected loss 1.05 0.93 1.04 0.91 1.04 1.02 0.97
Slide 93: Low/No Underwriter Intervention (Available For Issue)
Low/No Underwriter Intervention (Available For Issue) Example: All Lines Express AFI Trend 17% in 2006 79% in 2010 800,000 90% Available for Issue 700,000 80% (AFI) Bindable quote 70% 600,000 without underwriter 60% intervention 500,000 Quotes AFI % 50% 400,000 40% 300,000 30% 200,000 20% 100,000
Slide 94: Express Growth Trends
Express Growth Trends Quote Growth Hit Ratio 00 50 00 50 00 50 00 50 50 00 50 00 00 50 00 50 00 50 00 50 50 00 00 Decrease 50 00 00 50 of 8.2 poin GR 00 50 50 00 50 00 50 50 00 ts CA 50 00 50 00 50 00 50 00 50 50 00 29% 50 00 00 50 50 00 50 00 50 00 50 00 00 50 00 50 00 50 50 00 50 00 50 50 00 00 50
Slide 95: Analytics: Select AE / SE Dashboard
Analytics Select AE / SE Dashboard Key Features and Capabilities • Profile & tools for book 2 3 and agency management 1 1. New business queue 1 2. Tomorrow’s new 2 business 3. Account rounding 3 • Real-time daily refresh • Data driven down to agent & account level detail * Display for illustrative p
Slide 96: The Future: Total Account Solutions
The Future: Continued investments to widen Travelers competitive advantage Total Account Solutions 14 95
Slide 97: Platform & Product Enhancements
Platform & Product Enhancements Improving speed, efficiency and innovation drive platform and product capabilities Master Pac 2nd Generation Pilot – July 2011 Smart Classification Automatically ID’s an applicant’s business operations using 3rd party data, and properly classifies the risk Find a Cove
Slide 98: Customized Coverage
Customized Coverage Example Debunking the myth of Small Commercial product being a commodity offering ith s m k L oc Total Account Solutions 16 97
Slide 99: Customized Coverage Example
Customized Coverage Example Debunking the Myth of Small Commercial Product Being a Commodity Offering i th BENEFITS BENEFITS ksm c Improved Improved Lo Embedded Customer • Green Building & Business Customer Service Service Coverages Personal Property (no charge) Reduced Reduced E&O E&O Exposure Expo
Slide 100: Brian MacLean
Brian MacLean President & Chief Operating Officer Investor Day June 10, 2011 99
Slide 101: Travelers Portfolio of Businesses
Travelers Portfolio of Businesses 2010 Net Written Premiums: $21.6 Billion ($ in billions) Select : $2.7 Commercial Accounts: $2.6 Personal Automobile: $3.8 Construction Technology Industry- Industry-Focused Underwriting: Public Sector $2.3 Oil & Gas Agribusiness National Property Inland Marine Home
Slide 102: Top 10 Homeowners Carriers
Top 10 Homeowners Carriers ($ in billions) Home as a % of 2010 Home 2005- 2005-2010 Home Rank Company 2010 Home DWP Total1 2010 Market Share Combined Ratio Personal DWP 1 State Farm $15.7 21.9% 105.4% 33.5% 2 Allstate 6.9 9.6 105.5 28.8 3 Farmers 4.7 6.6 98.6 32.1 4 Liberty Mutual 3.7 5.2 99.0 33.2
Slide 103: Top Homeowners Carriers: Performance 2005-10
Top 10 Homeowners Carriers Homeowners Performance: 2005 - 2010 80% Chubb TRV Target 2005-2010 Year Combined Ratio Combined Ratio Hartford USAA Farmers Liberty 103% Industry Average Nationwide Combined Ratio Allstate State Farm American 120% Family -2.5 pts 0 pts +2.5 pts 2005-2010 Year Market Share
Slide 104: Why Travelers Homeowners is Successful
Why Travelers Homeowners is Successful Strong manufacturing: • Sophisticated pricing and risk selection • Dedicated risk management team that models and manages catastrophic risk • High quality claims responsiveness and effectiveness • Robust analytics Unique positioning in independent agent distrib
Slide 105: Sophisticated Pricing and Risk Selection
Sophisticated Pricing and Risk Selection Traditional industry approach to homeowners pricing: • Pricing established using composite loss results • Wide variation in statistical credibility by territory Connecticut: 24 Pricing Territories 5 104
Slide 106: Sophisticated Pricing and Risk Selection
Sophisticated Pricing and Risk Selection • Pricing based on the cross section of peril exposure • High degree of statistical credibility for each peril • Continual update of sophisticated statistical methodologies • Dedicated risk management team that models & manages CAT risk Hurricane Fire Additio
Slide 107: Data Integrity Is Critical to Accurate Pricing and Risk Selection
Data Integrity Is Critical to Accurate Pricing and Risk Selection One example Insurance to Value (ITV) Initiatives Time in Place • At time of loss, claim staff re-assesses insured value 10+ Years • Replacement cost estimator integrated in quote process 8 Years • Renewal inspection programs 5 Years •
Slide 108: Distribution Strength
Distribution Strength Personal Lines Carrier’s Rank Within Agencies Travelers Progressive Safeco (LMG) Hartford Auto Owners MetLife State Auto Encompass/Allstate Unitrin/Kemper Foremost 0% 10% 20% 30% #1 Carrier #2 Carrier Travelers is #1 in more Personal Lines agencies than any other carrier 8 107
Slide 109: Distribution Strength: New Appointments
Distribution Strength New Appointments ($ in millions) Personal Insurance Existing Agents & New Agent Appointments New Appointments Since 2007 - Totals by Region New Agent Appointments Existing Agents 8,484 10,623 5,662 2,086 12,864 Legend: Less than 500 appointments 500-1000 appointments 1001-1,500
Slide 110: Property Claim Effectiveness
Property Claim Effectiveness Claim Critical Success Factors • Maintain control of claim • Prompt engagement 2010 Property Claim Volume Normal Property Volume Significant Catastrophe Events High Claims Average with CATs Average ‘Normal’ Low Jan. Dec.. Property claim count volatility creates staffing
Slide 111: Property Claim Effectiveness
Property Claim Effectiveness Historical Industry Response: Manage volatility by using independent adjusters to cover peaks in claim volume • Travelers 2005 independent adjuster usage: • ‘Normal’ claims: 15% • CAT claims: 50-75% Travelers Solution: A claim model that allows Travelers to respond to vi
Slide 112: Property Claim Effectiveness
Property Claim Effectiveness Executing the Travelers Solution: • Cross-train staff for peak demand • Claim triage (right claim, right skill) • Sophisticated capacity management • Attract and retain the right talent • Industry leading training This results in improved customer service and financial o
Slide 113: Property Response Improvement
Property Response Improvement Travelers Response Metrics 100% Hurricane Rita 75% Hurricane Ike 50% April 22-28, 2011 Tornados 25% 0% Contact @ 5 Days Inspected @ 4 weeks Closed @ 4 weeks 13 112
Slide 114: Property Claim Effectiveness: Outcomes
Property Claim Effectiveness Outcomes • Differentiates our franchise with customers and agents - Increased customer satisfaction - Higher retention - Price becomes secondary • Creates economic value for Travelers - Less leakage (e.g. living expenses, storage costs etc.) - Less Litigation - Greater c
Slide 115: Our Theme – Differentiation
Our Theme – Differentiation A significant number of our businesses, generating a substantial percentage of our premiums, are meaningfully differentiated We have a unique breadth of successful U.S. businesses that continuously share expertise As a result we have leading market positions with most of
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Slide 117: Annex
Annex Investor Day June 10, 2011 116
Slide 118: 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 119: 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 120: Description of Reportable Business Segments
Description of Reportable Business Segments Travelers has organized its businesses into the following reportable business segments: Business Insurance: The Business Insurance segment offers a broad array of property and casualty insurance and insurance- related services to its clients primarily in t
Slide 121: Glossary of Financial Measures and Reconciliations of Non-GAAP Measures
Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP 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 considere
Slide 122: Reconciliation of Adjusted Shareholders' Equity
Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures RECONCILIATION OF ADJUSTED SHAREHOLDERS’ EQUITY TO SHAREHOLDERS’ EQUITY Average shareholders’ equity is (a) the sum of total shareholders’ equity excluding preferred stock at the beginning and end of each of the
Slide 123: Calculation of Return on Equity
Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures Return on equity is the ratio of annualized net income (loss) less preferred dividends to average shareholders’ equity for the periods presented. Operating return on equity is the ratio of annualized operating i
Slide 124: Reconciliation to Book Value Per Share
Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO BOOK VALUE PER SHARE AND SHAREHOLDERS’ EQUITY Book value per share is total common shareholders’ equity divided by the number of common shares outstanding. Adjusted
Slide 125: Other Definitions
Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures OTHER DEFINITIONS Underwriting gain is net earned premiums and fee income less claims and claim adjustment expenses and insurance-related expenses. In the opinion of the company’s management, it is important to
Slide 126: 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
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