The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Q2 2014 Earnings Presentation
25 slides from The Travelers Companies's earnings presentation, Jul 22, 2014
Slide 1: Second Quarter 2014 Results
The Travelers Companies, Inc. Second Quarter 2014 Results July 22, 2014 1
Slide 2: Long-Term Financial Strategy
Long-Term Financial Strategy Balanced Generation of approach to Meaningful and top tier earnings rightsizing capital sustainable and capital and competitive substantially in growing book advantages excess of growth value per share needs over time CREATE SHAREHOLDER VALUE Objective: Mid-Teens Operati
Slide 3: Second Quarter 2014 Overview
Second Quarter 2014 Overview Net income of $683 million or $1.95 per diluted share including catastrophe losses of $284 million or $0.82 per diluted share Return on equity and operating return on equity of 10.7% and 11.4%, respectively • Operating income of $673 million or $1.93 per diluted share. •
Slide 4: Analysis of Second Quarter Operating Income
Analysis of Second Quarter Operating Income ($ in millions, after-tax) Second Quarter 2014 2013 Change TRV operating income $ 673 $ 816 $ (143) Included the following items: Catastrophe losses (284) (221) Resolution of prior year tax matters - 63 Settlement of legal proceeding - 59 Total items $ (28
Slide 5: Analysis of Second Quarter Operating Income
Analysis of Second Quarter Operating Income ($ in millions, except per share amounts, after-tax) Second Quarter 2014 TRV operating income per diluted share - as reported $ 1.93 Consensus estimate 1 $ 2.07 Remove: Consensus catastrophe losses (as estimated by TRV 2 ) $ 0.57 Add: TRV catastrophe losse
Slide 6: Consolidated Performance
Consolidated Performance ($ in millions, except per share amounts, after-tax) Second Quarter Year-to-Date Fourth Quarter Full Year 2014 2013 Change 2014 2013 Change Operating income $ 673 $ 816 (18) % $ 1,725 $ 1,703 1 % per diluted share $ 1.93 $ 2.13 (9) % $ 4.89 $ 4.44 10 % Included the following
Slide 7: Very Strong Financial Position
Very Strong Financial Position ($ and shares in millions, except per share amounts) Capital • At or above target levels for all rating agencies. June 30, December 31, 2014 2013 • Repurchased 9.5 million shares during the second quarter Debt $ 6,347 $ 6,346 2014 and 18.0 million shares year-to-date a
Slide 8: Net Investment Income
Net Investment Income ($ in millions, after-tax) Total Second Quarter 2014 Commentary • Net investment income from the long-term fixed income $579 $582 $553 portfolio declined modestly from the prior year quarter due to $546 $542 $551 $531 $562 lower reinvestment rates, as expected. ` • Short-term p
Slide 9: Components of Operating Return on Equity
Components of Operating Return on Equity 9.6% 17.9% 17.7% 12.4% 14.0% 12.5% 6.1% 11.0% 15.5% 15.0% 14.6% 11.1% 11.0% 10.6% 1.4% 1.6% 1.4% 9.4% 9.3% 0.8% 0.7% 8.1% 9.0% 0.5% 0.9% 8.5% 8.7% 8.6% 0.4% 8.2% 0.9% 1.3% 0.1% 0.1% 1.2% 1.1% 1.6% 7.0% 6.8% 6.7% 6.3% 5.8% 6.0% 8.7% 8.9% 8.7% 8.3% 8.3% 8.3% 8.
Slide 10: Business Insurance
Business Insurance Performance ($ in millions) Second Quarter Year-to-Date Third Quarter Year-to-Date 2014 2013 Change 2014 2013 Change Operating income $ 409 $ 579 (29) % $ 1,062 $ 1,169 (9) % Loss and loss adjustment ratio 68.2 % 65.3 % 64.0 % 61.6 % Underw riting expense ratio 30.8 30.9 29.4 31.3
Slide 11: Business Insurance (Ex. National Accounts)
Business Insurance (Ex. National Accounts) Illustrative Business Statistics Renewal Pricing Results 14% ▲ Renewal Premium Change1 % Renewal Rate Change2 % 12% • Exposure/Other % 10% 8% 7.5% 6.8% 6.8% 6% 5.6% 5.0% 3.9% 4% 2% - (2%) 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 ($ in millions) Retention 80% 7
Slide 12: Business Insurance: Select Accounts
Business Insurance: Select Accounts Illustrative Business Statistics Renewal Pricing Results 16% ▲ Renewal Premium Change1 % Renewal Rate Change2 % 14% • Exposure/Other % 12% 10% 8% 6.8% 6.6% 6.6% 6.0% 6% 4.6% 4.4% 4% 2% - (2%) 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 ($ in millions) Retention 77% 76%
Slide 13: Business Insurance: Commercial Accounts
Business Insurance: Commercial Accounts Illustrative Business Statistics Renewal Pricing Results 14% ▲ Renewal Premium Change1 % Renewal Rate Change2 % 12% • Exposure/Other % 10% 9.2% 8% 7.7% 7.2% 6% 5.5% 5.7% 4% 4.5% 2% - (2%) 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 ($ in millions) Retention 82% 81%
Slide 14: Business Insurance: Other Business Insurance
Business Insurance: Other Business Insurance1 Illustrative Business Statistics Renewal Pricing Results 14% ▲ Renewal Premium Change2 % Renewal Rate Change3 % 12% • Exposure/Other % 10% 8% 6% 6.7% 6.6% 5.4% 6.3% 4% 4.8% 3.4% 2% - (2%) 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 ($ in millions) Retention 80
Slide 15: Commercial Accounts Renewal Rate by Band
Business Insurance: Commercial Accounts Renewal Rate by Band: Second Quarter 2014 2,000 1,750 1,500 Number of Accounts 1,250 1,000 ` 750 500 250 - < -5% -5% to < 0% 0% to 5% 5% to 10% 10% to 15% > 15% 15
Slide 16: Financial, Professional & International Insurance
Financial, Professional & International Insurance Performance ($ in millions) Second Quarter Year-to-Date Third Quarter Year-to-Date 2014 2013 Change 2014 2013 Change Operating income $ 254 $ 154 65 % $ 449 $ 317 42 % Loss and loss adjustment ratio 38.7 % 43.9 % 42.2 % 42.4 % Underw riting expense r
Slide 17: Financial, Professional & International Insurance
Financial, Professional & International Insurance ($ in millions) Illustrative Business Statistics 2013 2014 1Q 2Q 3Q 4Q 1Q 2Q Surety Gross written premium $195 $235 $225 $197 $216 $229 Management Liability 1 Retention 85% 83% 85% 84% 85% 84% Renewal premium change 2 8.0% 6.7% 6.4% 4.7% 7.2% 3.7% Ne
Slide 18: Personal Insurance
Personal Insurance Performance ($ in millions) Second Quarter Year-to-Date Third Quarter Year-to-Date 2014 2013 Change 2014 2013 Change Operating income $ 75 $ 142 (47) % $ 343 $ 339 1 % Loss and loss adjustment ratio 71.1 % 64.9 % 63.4 % 62.4 % Underw riting expense ratio 28.7 29.6 28.3 29.5 Combin
Slide 19: Personal Insurance
Personal Insurance Performance Second Quarter Year-to-Date 2014 2013 Change 2014 2013 Change Agency Automobile 1 Loss and loss adjustment ratio 74.3 % 71.6 % 71.0 % 71.0 % Underw riting expense ratio 26.5 26.2 26.1 25.9 Combined ratio2 100.8 % 97.8 % (3.0) pts 97.1 % 96.9 % (0.2) pts Net unfavorable
Slide 20: Personal Insurance
Personal Insurance ($ in millions) Illustrative Business Statistics 2013 2014 1Q 2Q 3Q 4Q 1Q 2Q Agency Automobile 1 Retention 2 79% 80% 80% 80% 82% 82% Renewal premium change 3 9.8% 9.2% 7.9% 7.5% 6.2% 6.4% PIF growth over prior year quarter (11%) (12%) (12%) (11%) (9%) (7%) New business $79 $81 $82
Slide 21: Appendix
Appendix Additional Information Additional Information 21
Slide 22: 2014 - 2015 Catastrophe Reinsurance
2014 - 2015 Catastrophe Reinsurance • The following table summarizes the company’s coverage under its General Catastrophe Reinsurance Treaty, effective for the period July 1, 2014 through June 30, 2015, as well as certain other catastrophe-related coverages: Layer of Loss Reinsurance Coverage In-For
Slide 23: 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 24: Disclosure
Disclosure In this presentation, we may refer to some non-GAAP financial measures. For a reconciliation of these measures to the most comparable GAAP measures and a glossary of financial measures, we refer you to the press release and financial supplement that we have made available in connection wi
Slide 25: The Travelers Companies, Inc.
The Travelers Companies, Inc. Additional Information Additional Information 25
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