The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Investor Day (June 2014)
110 slides from The Travelers Companies's investor day presentation, Jun 6, 2014
Slide 1: The Travelers Companies, Inc. 2014 Investor Day
The Travelers Companies, Inc. 2014 Investor Day June 6, 2014 1
Slide 2: Agenda
Agenda Welcome Jay Fishman – Chairman & Chief Executive Officer Travelers Medical Advantage Vinny Armentano - Senior Vice President, Business Insurance Claim Break Select Accounts Marc Schmittlein – Executive Vice President, Select Accounts & Agribusiness Personal Insurance Greg Toczydlowski – Execu
Slide 3: Jay Fishman
Jay Fishman Chairman & Chief Executive Officer 2014 Investor Day June 6, 2014
Slide 4: 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 Operati
Slide 5: Overview
Overview • Return focused company. • Thoughtful capital allocators. • Return excess capital to shareholders. 3
Slide 6: Return Focused Company
Return Focused Company Components of Operating Return on Equity 9.6% 17.9% 17.7% 12.4% 14.0% 12.5% 6.1% 11.0% 15.5% 17.8% 11.1% 11.0% 10.6% 1.4% 1.6% 1.4% 9.4% 9.3% 9.0% 8.8% 9.0% 0.8% 0.5% 0.7% 8.1% 0.9% 0.9% 8.5% 0.4% 8.2% 0.9% 0.1% 0.9% 1.3% 1.3% 0.1% 1.2% 1.7% 7.0% 6.8% 6.7% 5.8% 8.7% 8.9% 8.7%
Slide 7: Operating Return on Equity vs. Estimated Cost of Capital
Return Focused Company Operating Return on Equity vs. Estimated Cost of Capital1 17.9% 17.7% 15.5% 14.0% 12.4% 12.5% 11.9% 10.8% 11.0% 9.6% 9.8% 8.3% 8.4% 7.9% ` 7.4% 6.6% 6.1% 6.4% 2005 2006 2007 2008 2009 2010 2011 2012 2013 TRV operating return on equity TRV estimated cost of capital1 1 Cost of c
Slide 8: TRV Return on Equity vs. Other Financials: 2005-2013
Return Focused Company TRV Return on Equity vs. Other Financials: 2005-2013 Average Return on Equity: 2005-2013 12.3% 9.7% 9.7% 7.6% 6.5% 6.5% ` (7.3%) S&P Property & S&P S&P Diversified S&P S&P S&P Multi-line Casualty Life & Health Financials Banks Financials Insurance Return on capital focus has r
Slide 9: TRV Return on Equity vs. Other Financials: 2013
Return Focused Company TRV Return on Equity vs. Other Financials: 2013 Return on Equity: 2013 14.6% 13.2% 11.8% 9.0% 8.4% 7.0% 6.3% ` TRV S&P Property & S&P S&P Diversified S&P S&P S&P Multi-line Casualty Life & Health Financials Banks Financials Insurance Return on capital focus has resulted in top
Slide 10: Overview
Overview • Return focused company. • Thoughtful capital allocators. • Return excess capital to shareholders. 8
Slide 11: Thoughtful Capital Allocators
Thoughtful Capital Allocators • Consistently invest in the development of competitive advantages. • Strategic decisions and the resulting capital allocations are driven by projected returns. • Manage the business to where and when we believe competitive advantages provide opportunities. 9
Slide 12: Travelers View Versus Conventional Wisdom
Thoughtful Capital Allocators Travelers View Versus Conventional Wisdom Conventional • In the P&C industry, the only way to achieve organic growth is to lower price and accept lower returns. Wisdom • Growth and superior returns over time are driven more by risk selection premised on competitive adva
Slide 13: Volume is a Result, Not a Goal
Thoughtful Capital Allocators Travelers Philosophy: Volume is a Result, Not a Goal Consolidated Net Written Premiums ($ in billions) $22.8 $22.2 $22.4 $21.6 $21.7 $21.6 $21.2 $21.3 $20.4 ` 2005 2006 2007 2008 2009 2010 2011 2012 2013 Travelers has actively grown businesses where competitive advantag
Slide 14: Selected Lines of Business: Growth
Thoughtful Capital Allocators: Selected Lines of Business Net Written Premiums ($ in millions) CAGR Commercial Accounts (2005-2013) 2005: $2,330 2013: $3,197 4% Construction Business Insurance 2005: $916 2013: $1,190 3% (2005-2013) National Property (2005-2013) 2005: $487 2013: $662 4% Select – Expr
Slide 15: Selected Lines of Business: Reduced Exposure
Thoughtful Capital Allocators: Selected Lines of Business Net Written Premiums ($ in millions) Business Insurance Select – Plus (2008-2013) 2008: $1,453 2013: $1,023 Northland 2007: $614 2013: $469 (2007-2013) National Accounts (2005-2011) 2005: $1,230 2011: $782 Surety (2008-2013) 2008: $896 2013:
Slide 16: Overview
Overview • Return focused company. • Thoughtful capital allocators. • Return excess capital to shareholders. 14
Slide 17: Return Excess Capital to Shareholders
Return Excess Capital to Shareholders ($ in millions) Share Repurchases1 and dividends $5,670 $3,990 $3,685 $3,569 $3,134 $2,834 2nd Quarter to Date ` Share Repurchase1 (as of May 31, 2014) $2,150 $587 million $1,817 $622 $827 2005 2006 2007 2008 2009 2010 2011 2012 2013 1Q 2014 Share Repurchases an
Slide 18: Dividends Per Share
Return Excess Capital to Shareholders Dividends Per Share $1.96 $1.79 $1.59 $1.41 $1.23 $1.13 $1.19 $1.01 $1.05 $0.91 ` 1 2005 2006 2007 2008 2009 2010 2011 2012 2013 1H 2014 Travelers has increased quarterly dividend per share for 10 consecutive years 16 1 Includes regular quarterly dividend of $0.
Slide 19: Consistent Growth of Book Value Per Share
Consistent Growth of Book Value Per Share Book Value Per Share $70.15 $73.06 $67.31 $62.32 $58.47 $52.54 $42.22 $43.12 $36.86 ` $31.94 2005 2006 2007 2008 2009 2010 2011 2012 2013 Mar. 31, 2014 Adjusted Book Value Per Share1 $66.41 $68.25 $55.01 $59.09 $54.19 $48.98 $41.25 $43.37 $36.21 ` $31.47 200
Slide 20: Agenda
Agenda Travelers Medical Advantage Vinny Armentano - Senior Vice President, Business Insurance Claim Select Accounts Marc Schmittlein – Executive Vice President, Select Accounts & Agribusiness Personal Insurance Greg Toczydlowski – Executive Vice President & President, Personal Insurance 18
Slide 21: Travelers Medical Advantage
Agenda: Travelers Medical Advantage • Legacy of innovation (TravComp, Predictive Modeling, Nurse Triage Patent, and Concierge Claim Nurse). • Decades of experience as a premier national accounts servicing carrier in workers’ compensation. • Differentiating expertise in risk management, medical manag
Slide 22: Select Accounts
Agenda: Select Accounts • Market leading position in small commercial with history of innovation and investment. • Clear understanding of the factors for success in the segment, including product breadth of Travelers property casualty franchise. • Differentiated technology at the agents’ desktop cri
Slide 23: Personal Insurance
Agenda: Personal Insurance • Premier company within independent agent channel. • Full account solution provider with industry leading property results and strong position in the preferred auto market. • Analytical skill to quickly identify challenges and opportunities. • Commitment to competing in a
Slide 24: Additional Information
The Travelers Companies, Inc. Additional Information Additional Information
Slide 25: Vinny Armentano
Vinny Armentano Senior Vice President, Business Insurance Claim 2014 Investor Day June 6, 2014 25
Slide 26: TravComp
TravComp® A Significant Competitive Advantage Since 1998 TravComp Specialized Workers Compensation Claim Handling Model • Compensability determination • Return-to-work • State specialty desk • Catastrophic claim resolution • Reduced loss costs on Travelers claims by 8-10%1 2 1Savings based on compos
Slide 27: Scale and Expertise
Scale and Expertise • National footprint • Functional specialization • National insights • Leading results - Claim analytics 1,200 Workers’ Compensation Claim Professionals 500+ Nurses 60+ Subrogation Professionals 480+ Legal 100+ Investigative Professionals Professionals 900+ Product Support 460+ R
Slide 28: Scale and Expertise: Market Share
Scale and Expertise Market Share Top 5 Workers Compensation Carriers1 Rank Company 2007 2008 2009 2010 2011 2012 2013 1 5.4% 6.1% 6.7% 7.1% 7.3% 7.8% 8.0% 2 Liberty Mutual 11.0% 11.7% 10.9% 10.2% 9.3% 8.6% 7.0% 3 Hartford 5.0% 5.6% 6.1% 6.6% 7.1% 6.8% 6.5% 4 AIG 11.8% 9.6% 9.4% 9.0% 7.9% 6.1% 5.5% 5
Slide 29: Scale and Expertise: Claim Volume
Scale and Expertise ($ in millions) $ 5,000 4,000 3,000 Workers’ Compensation Claim Volume Under Administration 2,000 1,000 Workers’ Compensation Net Losses and Loss Adjustment Expenses - 2009 2010 2011 2012 2013 Our significant workers’ compensation scale powers our industry leading data and analyt
Slide 30: Local Presence for a Local Product
Local Presence for a Local Product • Local delivery of services – 40 Claim locations • Modified approach to each state-based system • Deeper understanding of jurisdictional nuances • Local data and analytics Our size and scale allow us to have local insights 6
Slide 31: Workers' Compensation Results Outperforms Industry
Workers’ Compensation Results Outperforms Industry Statutory Combined Ratio: 2007-20111 Statutory Combined Ratio: 2009-20131 108% 110% 99% 97% Industry Industry Claim and Risk Control combined with informed underwriting and pricing has led to consistently outperforming the industry over time 7 1Sour
Slide 32: Proven Results For Our Workers' Compensation Customers
Proven Results For Our Workers’ Compensation Customers Return-to-work • 67% of injured workers return to work within 30 days1 Medical Savings • Average 60 cents saved per dollar billed2 • Approximately 80% medical provider network penetration3 Medical Network • 84% pharmacy network penetration3 • 47
Slide 33: Capabilities valued by our customers
• Business Insurance 2013 Buyer’s Choice Award Travelers Workers Compensation Claim received top rating for service, excellence and expertise in both Workers’ Compensation and Auto Capabilities valued by our customers – Recognized by the marketplace 9
Slide 34: Industry Leading Capabilities Sustain Competitive Advantages
Industry Leading Capabilities Sustain Competitive Advantages • Improving combined ratio performance vs. industry • # 1 market share • Customer recognition for expertise and service • Industry-leading medical capabilities • Results delivered for our customers Superior outcomes support continued inves
Slide 35: The U.S. Spends $3 Trillion on Healthcare
The U.S. Spends $3 Trillion on Healthcare Private Healthcare Federal Healthcare Property Casualty Source: Centers for Medicare & Medicaid Services. (2012-13) National Health Expenditure Data 11
Slide 36: Medical Loss Cost Trends
Medical Loss Cost Trends Workers Compensation (NCCI industry results) Medical Medical Medical Indemnity 47% 59% 67% 53% Indemnity Indemnity 41% 33% 1989 2011 2019 Estimate General Liability / Auto General Liability Auto (2011 Travelers Actuals) Medical General & Medical General & 20-30% Other 30-40%
Slide 37: Impact of the Affordable Care Act
Americans expected to Affordable 32m enter the system1 Care Act 15% Increase in healthcare demand projected1 Impact Healthcare System Employers Property & Casualty 13 1Source: Congressional Budget Office Long-term Budget Outlook – April 2014 Update
Slide 38: Every day will be 55+
Every day for the next 19 years 10,000 Americans will turn 651 25% of the U.S. Workforce will be 55+ by 20222 1U.S. Dept. of Commerce, Economics and Statistics Administration. U.S. Census Bureau (May 2010) The Next Four Decades – The Older Population in the United States: 2010-2050. 14 2Bureau Labor
Slide 39: What are Businesses Worried About?
What are Businesses Worried About? Medical Cost Inflation 34% 32% 66% Increasing Employee Benefit Costs 33% 27% 60% Broad Economic Uncertainty 35% 22% 57% Legal Liability 34% 23% 57% Compliance With Government Regulations 29% 21% 50% Technology & Data Concerns 34% 16% 50% Talent Management 31% 17% 4
Slide 40: What are Businesses Worried About?
What are Businesses Worried About? Least Prepared For Medical CostCost Medical Inflation Inflation 34% 32% 66% 38% Increasing Employee Benefit Costs 33% 27% 60% 25% Broad Economic Uncertainty 35% 22% 57% 36% Legal Liability 34% 23% 57% 15% Compliance With Government Regulations 29% 21% 50% 22% Techn
Slide 41: Travelers' Focus on Medical
Travelers’ Focus on Medical • P&C is 5% of healthcare spend. • Medical is 50% of customer casualty losses. • There is uncertainty with cost and availability of healthcare. • Customers’ #1 concern is medical cost inflation. • Customers are looking for help understanding and managing medical in this u
Slide 42: Travelers Medical Advantage
TravComp® specialized claim handling 12,000+ claim professionals | model medical fraud protection | Not- 500+ nurses in all casualty lines for-profit Modified Duty Program | of business | National and regional Innovation Patented ConciergeCLAIM® Nurse Expertise medical directors, chiropractic expert
Slide 43: Leveraging Analytics to Monitor Changes in the Marketplace
Leveraging Analytics to Monitor Changes in the Marketplace Internal 79% 80% External 14.5% 15% General Liability – Bodily Injury Only Automobile Robust medical management database 19
Slide 44: Innovation: ConciergeCLAIM Nurse
Innovation: ConciergeCLAIM® Nurse • Travelers nurse is on-site in a local healthcare clinic to meet with injured employees face to face. Answer questions and set expectations about the claim process. Discuss the employee’s medical needs after each clinic visit. Make sure the employee understands and
Slide 45: Expertise: Unique Auto & General Liability Medical Solutions
Expertise: Unique Auto & General Liability Medical Solutions • Focus on mitigating medical component of third party claim. • Auto Liability / General Liability units locally supported by Liability Nurses. • Medical damage analysis tools are used to compare medical bills to usual and customary reimbu
Slide 46: Data & Analytics: Advancing Medical Fraud Detection
Data & Analytics: Advancing Medical Fraud Detection • Over 300 Travelers investigators. − Over 90% local. • Leverage expertise and rich medical data sets for fraud predictive models. • Geospatial capabilities to identify potential fraud “hot spots”. • Only P&C carrier invited on Federal Healthcare F
Slide 47: Data & Analytics: Pharmacy Improvements
Data & Analytics: Pharmacy Improvements • Chronic pain predictive models. • Shaping public policy. • Investment in pharmacy capabilities. – Staffing, training, analytics • Appropriate administration of the right medications. 28% lower pharmaceutical spend than Workers Compensation industry1 23 1NCCI
Slide 48: Risk Control: Wellness
Risk Control: Wellness • Wellness focus • Partnership with Virginia Tech Transportation Institute (VTTI) − Eating healthy − Cognitive ability • Virtual Risk Experience - Behavioral modification Going beyond traditional risk control methods 24
Slide 49: Turning Challenges into Opportunities
Turning Challenges into Opportunities • American business owners are concerned. • We understand the environment and are out in front of the industry providing solutions. • We stay committed to developing industry-leading capabilities. Leveraging integrated medical capabilities and insights 25
Slide 50: Anticipating Emerging Risks
Anticipating Emerging Risks Continued Investment Transforming Capabilities Over Time A real advantage for our customers and Travelers 26
Slide 51: Additional Information
The Travelers Companies, Inc. Additional Information Additional Information 51
Slide 52: Marc Schmittlein
Marc Schmittlein Executive Vice President, Select Accounts & Agribusiness 2014 Investor Day June 6, 2014 52
Slide 53: How We Manage the Business
How We Manage the Business • Consistently invest in the development of competitive advantages. • Strategic decisions and the resulting capital allocations are driven by projected returns. • Manage the business where and when we believe competitive advantages provide opportunities. − Growth where we
Slide 54: Business Insurance: Distribution Advantage
Business Insurance Distribution Advantage Business Insurance Agent Survey1 2013 Net Written Premiums: $12.2 Billion Top 5 Carriers Agents Do Business With National Accounts Specialized Select Distribution How Often in Top 5 Boiler & 75% Machinery Ocean Marine Excess Casualty 50% Inland Marine 25% Na
Slide 55: Business Insurance: Select Position
Business Insurance Select Position Business Insurance Select 2013 Net Written Premiums: $12.2 Billion Net Written Premiums National Accounts Group Specialized Select: 22% Distribution ($ in billions) $3.0 Boiler & Machinery Express Ocean Marine Excess Casualty $2.0 Plus Inland Marine $1.0 National P
Slide 56: The Landscape of Select
The Landscape of Select Managing Complexity and Investing in Opportunities Express Plus Premium $1.7 Billion $1.0 Billion Policies in force 680,000 125,000 Accounts 530,000 80,000 Average account size $3,000 $13,000 Annual submission flow 580,000 160,000 5 Data as of year-end 2013.
Slide 57: The Landscape of Select: Market Summaries
The Landscape of Select Managing Complexity and Investing in Opportunities Express Market Summary Plus Market Summary Premium $1.7 Billion Premium $1.0 Billion Policies in force 680,000 Policies in force 125,000 Accounts 530,000 Accounts 80,000 Average account size $3,000 Average account size $13,00
Slide 58: Select Competitive Advantages
Select Competitive Advantages A Legacy of Innovation & Investment Over Time Technology Leading Scale & Data & Platform & Distribution Talent Efficiency Analytics Service Position Execution Excellence 7
Slide 59: Select Competitive Advantages
Select Competitive Advantages A Legacy of Innovation & Investment Over Time Technology Leading Scale & Data & Platform & Distribution Talent Efficiency Analytics Service Position Execution Excellence 2nd Gen WC Auto Payroll Platform for Model 2.0 Model 2.5 Kemper Partnership Umbrella Renewal Rights
Slide 60: Select Express: Identifying Growth Opportunities in 2006
Select Express Identifying Growth Opportunities in 2006 Express Market Opportunity Invest in Select Business • Agencies challenged with the • Platform cost of selling & servicing low premium policies • Sophisticated pricing model • Strong retention and • Scaled data & analytics appropriate returns o
Slide 61: Select Express: Rate-Quote-Issue Process 2006 & Prior
Select Express Rate-Quote-Issue Process: 2006 & Prior Agency Flow Available for Issue Refer to 83% or Underwriter Decline Agency Authority Available for Issue 17% Straight Through or Processing Decline Agent need for technology platform to streamline rate-quote-issue process 10
Slide 62: Select Express: Rate-Quote-Issue Process 2013
Select Express Rate-Quote-Issue Process: 2013 Refer to Available for Issue 20% Underwriter or Agency Decline Flow Agency Authority Available for Issue Straight Through 80% Processing or Decline Strategic investment to create efficient, scalable business model 11
Slide 63: Select Express Results
Select Express Identifying Growth Opportunities Select Express Results 800,000 600,000 400,000 200,000 - 2006 2013 2006 2013 New Business Quotes Policies in Force 12
Slide 64: Commercial Multi-Peril (CMP)
Commercial Multi-Peril (CMP) Investment & Disciplined Execution 2006-2013 CMP: Premiums 2006 2013 Express CMP 68% Express CMP 52% Plus CMP 48% Plus CMP 32% Different opportunities in CMP between Express and Plus markets 13 Commercial Multi-Peril (CMP) represents business owner policies in Select Acc
Slide 65: Plus CMP
Plus CMP Disciplined Execution Plus CMP: Policies in Force 80,000 60,000 1 2 40,000 20,000 - 2006 2007 2008 2009 2010 2011 2012 2013 Aggregate returns challenged by: 1 • Competitor dynamics as to new Underwriting expertise & broad business appetite remain competitive • Weather volatility advantages
Slide 66: Express CMP
Express CMP Investment, Learnings & Disciplined Execution Express CMP: Policies in Force 400,000 350,000 300,000 250,000 200,000 2006 2007 2008 2009 2010 2011 2012 2013 2011 rate & underwriting actions initiated due to: • New product learnings for Express CMP Opportunity to grow due to investment •
Slide 67: CMP Segmentation
CMP Segmentation Disciplined Execution Across Express & Plus Most Profitable Segmentation Factors 1 • Propensity for loss • Risk characteristics 2 • Actual loss 3 • State • Financial score 4 • Industry segment 5 Least Profitable 16 Commercial Multi-Peril (CMP) represents business owner policies in S
Slide 68: CMP Segmentation
CMP Segmentation Disciplined Execution Across Express & Plus Most Profitable Fourth Quarter 2011 First Quarter 2014 1 Renewal Premium Change (RPC)1 Renewal Premium Change (RPC)1 Retention 2 Retention Retention Retention RPC RPC 3 1 2 3 4 5 1 2 3 4 5 Retention % Quintile RPC % Retention % Quintile RP
Slide 69: Workers' Compensation: Identifying Growth Opportunities
Workers’ Compensation Identifying Growth Opportunities in 2006 Premium Mix by Line of Business 2006 Workers’ Compensation Opportunity • Leveraging competitive advantages Workers’ Comp. 15% − Risk selection − Enterprise expertise − Claim handling • Attractive returns • Generally favorable view of sta
Slide 70: Workers' Compensation: Successful Growth Outcome
Workers’ Compensation Successful Growth Outcome Workers’ Compensation Results 250,000 200,000 150,000 100,000 50,000 - 2006 2013 2006 2013 New Business Quotes Policies in Force Maintained aggregate returns at or above targeted levels 19
Slide 71: Select: Premium Mix by Line of Business
Select Premium Mix by Line of Business 2006 2013 Workers’ Comp. 15% Workers’ Comp. 29% CMP 67% CMP 56% CMP Workers’ Compensation Auto Umbrella Commercial Multi-Peril (CMP) represents business owner policies in Select Accounts. 20 Note: Statistics are subject to change based on a number of factors, i
Slide 72: Future Focus in a Changing Landscape
Future Focus in a Changing Landscape Relentless focus on assisting agent in the small business buying and servicing process (Prospecting, Selling, Servicing and Streamlined Data exchange) Products and services (Technology Segment, TravPay, Employment Practices Liability) Ease of use technology platf
Slide 73: Small Business Advocacy
Small Business Advocacy • Thirteen “Small Business - Big Opportunity” Symposia across the country. • Committed to small businesses by • Discuss access to capital, business continuity supporting American Express’ Small planning, cyber risks, and regulatory relief. Business Saturday® • Partners includ
Slide 74: Execution Excellence
Select Has Distinct Competitive Advantages Scale & Efficiency Agent Survey1 Top 5 Carriers Agents Do Business With Technology Platform & How Often in Top 5 Service Execution Excellence 75% 50% Data & Analytics 25% Leading 0% Distribution 2007 2008 2009 2010 2011 2012 2013 2014 Position Leading distr
Slide 75: Additional Information
The Travelers Companies, Inc. Additional Information Additional Information 75
Slide 76: Greg Toczydlowski
Greg Toczydlowski Executive Vice President & President, Personal Insurance 2014 Investor Day June 6, 2014 76
Slide 77: Personal Insurance: Competitive Advantages
Personal Insurance Competitive Advantages • Premier personal lines company in the independent agency channel. • Premier property writer with industry leading results & leading preferred auto writer. • Account solution provider: Auto, Homeowners & Other Property with capacity to grow. • Relentless ex
Slide 78: Personal Insurance: 2013 Net Written Premiums
Personal Insurance 2013 Net Written Premiums: $7.2 Billion Homeowners: 45% Auto: 47% Other: 8% Second-largest writer of U.S. Auto & Homeowners insurance through independent agents1 3 1Source: 2012 A.M. Best data.
Slide 79: Personal Insurance: Customer Profile
Personal Insurance Customer Profile Preferred Customer Profile • Customers need full account solution: 42% of our customers have more than one product1. • Preferred customer base: percentage of our 2013 new business customers with: − Excellent credit-based insurance score2: auto 66% & homeowners 72%
Slide 80: Agency Homeowners & Other 2004 – 2010 Results
Agency Homeowners & Other 2004 – 2010 Results Net Written Premium ($ in billions) $4.0 $3.8 $3.5 $3.3 $3.5 $3.2 $3.0 $3.0 $2.8 $2.5 $2.5 $2.0 2004 2005 2006 2007 2008 2009 2010 GAAP Combined Ratio 72.0% 93.0% 73.9% 81.4% 94.7% 86.8% 95.1% 2004-2010 average combined ratio - Travelers: 85.3% vs. Indus
Slide 81: Agency Homeowners & Other: Pricing & Underwriting Actions
Agency Homeowners & Other Pricing & Underwriting Actions In 2010, we recognized a changing environment and took actions to improve profitability Changes in Environment Key Actions • Renewal premium change1 • Increased volatility of weather increases. patterns. − 2013: 10.7% • Historically low intere
Slide 82: Agency Homeowners & Other: Impact of Actions
Agency Homeowners & Other Impact of Pricing & Underwriting Actions Net Written Premiums $4.2 ($ in billions) $3.9 $4.0 $3.9 $3.8 $3.8 $3.6 $3.4 $3.2 2011 2012 2013 GAAP Combined Ratio 118.4% 96.4% 77. 0% 2013 combined ratio - Travelers: 77.0% vs. Industry1: 83.2% Actions successfully improved profit
Slide 83: Agency Auto 2004 – 2010 Results
Agency Auto 2004 – 2010 Results Net Written Premiums ($ in billions) $4.0 $3.7 $3.7 $3.7 $3.6 $3.6 $3.4 $3.5 $3.5 $3.0 $2.5 $2.0 2004 2005 2006 2007 2008 2009 2010 GAAP Combined Ratio 90.8% 86.1% 90.4% 91.4% 98.0% 98.7% 97.0% 2004-2010 average combined ratio - Travelers: 93.2% vs. Industry1: 97.4% T
Slide 84: Agency Auto: Pricing Actions
Agency Auto Pricing Actions In 2010, we recognized a changing environment and took actions to improve profitability Changes in Environment Key Actions • Increased bodily injury severity. • Renewal premium change1 increases. • Weather related physical damage − 2013: 8.5% pressures. − 2012: 7.7% • His
Slide 85: Agency Auto: Impact of Actions
Agency Auto Impact of Pricing & Underwriting Actions Net Written Premiums ($ in billions) $3.7 $3.5 $3.6 $3.3 $3.2 $2.8 2011 2012 2013 GAAP Combined Ratio 103.4% 103.1% 98 .9% 2013 combined ratio1 - Travelers: 98.9% vs. Industry1: 102.6% Actions successfully improved profitability…but the impact on
Slide 86: Auto Driven Changing Consumer Marketplace
Personal Insurance Auto Driven Changing Consumer Marketplace • Empowered with information and demonstrated willingness to shop (in 2013, 23% shopping rate within the last 12 months1). Consumers • Pressured to save money and making decisions based on price across channels without compromising on serv
Slide 87: Impact of Comparative Rating Technology
Impact of Comparative Rating Technology Changing Independent Agency Dynamics Travelers Independent Agency Auto: Quote Volume 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 2008 2009 2010 2011 2012 2013 Proprietary TRV Quote System Comparative Raters Comparative raters account fo
Slide 88: Impact of Comparative Rater Technology
Agency Auto Impact of Comparative Rater Technology Agency Comparative Rater 74% 79% 83% Quote % 10% New Business Policies Renewal Price Change1 5% 0% 2011 2012 2013 Agency auto new business production was significantly impacted by the usage of comparative raters and our pricing strategy 1 Represents
Slide 89: Quantum Auto 2.0: Market Competitive Product
Quantum Auto 2.0® Market Competitive Product Redesigned product structure to be responsive to consumer buying patterns • Incorporates $140 million in expense reductions. − Approximately $90 million achieved to date; remaining $50 million planned to be achieved by end of 2014. − Savings primarily dri
Slide 90: Quantum Auto 2.0: Competitive Position
Quantum Auto 2.0® Market Competitive Product Quantum Auto 2.0® – Competitive Position Lower expense base plus enhanced pricing segmentation generating increased new business volume while targeting a mid-teens ROE over time 15
Slide 91: Quantum Auto 2.0: Pre- vs. Post-Rollout Results
Quantum Auto 2.0® Market Competitive Product Pre-Rollout vs. Post-Rollout Metric Comparison Results1 Range Quoted policies +10% to +15% Close rate change +150% to +200% New business policies issued +165% to +230% Average new business premium per policy 0% to +6% • Key profile changes align t
Slide 92: Homeowners: Industry Leading Position
Homeowners Industry Leading Position Significant Competitive Advantages • Granular underwriting risk selection – Focused on optimized underwriting of risks utilizing advanced models and individual reviews. • Superior pricing segmentation − Industry leading multivariate, by-peril rating methodology.
Slide 93: Uniquely Positioned to Provide Full Account Solutions
Personal Insurance Uniquely Positioned to Provide Full Accounts Solutions to Customers • Successful cross selling products. − 42% of our customers have more than one product1. − Continue to capitalize on homeowners capacity and expertise to address complete consumer account needs. • Advantages of cr
Slide 94: Investing in Competitive Advantages
Personal Insurance Investing in Competitive Advantages Auto: Homeowners: Full Account Market Competitive Product Industry Leading Product Solution + = Supporting Capabilities Across Distribution Channels Agent Technology Consumer Digital Superior Analytics 200 80 150 60 100 40 50 20 0 0 1 2 3 4 5 •
Slide 95: Additional Information
The Travelers Companies, Inc. Additional Information Additional Information 95
Slide 96: Jay Fishman
Jay Fishman Chairman & Chief Executive Officer 2014 Investor Day June 6, 2014 96
Slide 97: Travelers
Travelers • Premier independent agency company – important for agents’ success. • Analytical skill. Long history of analytical innovation. • Focus on granular results. • Philosophy of volume being a result rather than a goal. • Large national carrier executing with local expertise. • Return on capit
Slide 98: 9 Year Total Return Through December 31, 2013
9 Year Total Return Through December 31, 2013 20 Largest S&P Financial Companies & Other Selected Financials Total Return1 January 1, 2005 – December 31, 2013 396.9% BlackRock 226.2% Simon Property 225.0% Cigna 211.3% Chubb 206.5% 206.5% 195.9% TRAVELERS Franklin Resources 192.9% ACE 130.9% Aetna 11
Slide 99: Additional Information
The Travelers Companies, Inc. Additional Information Additional Information 99
Slide 100: Annex
Annex 2014 Investor Day June 6, 2014 100
Slide 101: 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 102: 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 th
Slide 103: Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to 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 104: Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures
Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures RECONCILIATION OF ADJUSTED SHAREHOLDERS’ EQUITY TO SHAREHOLDERS’ EQUITY AND OPERATING RETURN ON EQUITY TO RETURN ON EQUITY Average shareholders’ equity is (a) the sum of total shareholders’ equity excluding pref
Slide 105: Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures
Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures Return on equity is the ratio of annualized net income less preferred dividends to average shareholders’ equity for the periods presented. Operating return on equity is the ratio of annualized operating income l
Slide 106: Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures
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 107: Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures
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 108: Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures
Glossary of Financial Measures and Reconciliations of Non-GAAP Measures to GAAP Measures OTHER DEFINITIONS CONTINUED Combined ratio (SAP and GAAP) For SAP, it is the sum of the SAP loss and LAE ratio and the SAP underwriting expense ratio as defined in the statutory financial statements required by
Slide 109: Disclosure
Disclosure In this presentation or in the discussion that follows, 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 Annex of this presentation and our most recent an
Slide 110: Additional Information
The Travelers Companies, Inc. Additional Information Additional Information 110