The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Investor Day (May 2008)
128 slides from The Travelers Companies's investor day presentation, May 22, 2008
Slide 1: The Travelers Companies, Inc. Investor Day
The Travelers Companies, Inc. Investor Day May 22, 2008
Slide 2: Agenda
Agenda Time Topic Presenter 12:15 pm Safe Harbor Statement Mike Connelly, Vice President of Investor Relations 12:20 pm Creating Shareholder Value Jay Fishman, Chairman and Chief Executive Officer 12:40 pm Financial Performance & Strength Jay Benet, Vice Chairman and Chief Financial Officer Q&A 1:15
Slide 3: 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 4: Creating Shareholder Value
Creating Shareholder Value Jay S. Fishman Chairman and Chief Executive Officer
Slide 5: Mission: Create Shareholder Value
Mission: Create Shareholder Value Aspiration: To Be A Great Company 1
Slide 6: Long-term Financial Strategy
Long-term Financial Strategy Balanced Generation of approach to Meaningful and top tier earnings rightsizing sustainable and capital competitive substantially in capital and advantages excess of growth growing book needs value per share over time Create Shareholder Create Shareholder Value Value Obj
Slide 7: Investor Day Overview
Investor Day Overview ¾ Creating Shareholder Value – Jay Fishman ¾ Financial Performance & Strength – Jay Benet Q&A ¾ Competitive Advantages – Brian MacLean ¾ Executing on the Competitive Advantages – Joe Lacher & Patrick Kinney Q&A Break ¾ Independent Agent Panel – Moderator: Patrick Kinney ¾
Slide 8: Northeast Field Management Team
Northeast Field Management Team BillTeed Bill Teed RegionalPresident, Regional President,Northeast Northeast 21Years 21 Yearswith withTravelers Travelers MylesGibbons Myles Gibbons RegionalVice Regional VicePresident, President,Middle MiddleMarket Market 20Years 20 Yearswith withTravelers Travelers
Slide 9: Current Market Conditions Still Attractive
Current Market Conditions Still Attractive Expected Current Expected Current Business Business Unit Unit Returns Returns for New for New ++ Renewal Business11 Renewal Business 95% of current 42% Above Target new and renewal business at or 18% above target 53% Within Target return levels 13% 5% Below
Slide 10: Executing Successfully
Executing Successfully Commercial Accounts Business Unit 6.0% 4.0% Renewal Price Change Travelers 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% 1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'07 1Q'08 92% Retention Travelers 87% 82% 77% 72% 1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'07 1Q'08 Note: Renewal price
Slide 11: Executing Successfully
Executing Successfully Commercial Accounts Business Unit 6.0% 4.0% Renewal Price Change Travelers Peer 1 Peer 2 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% 1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'07 1Q'08 92% Retention Travelers Peer 1 Peer 2 87% 82% 77% 72% 1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'0
Slide 12: Executing Successfully: Quote and Hit Ratios
Executing Successfully Commercial Accounts Business Unit Submissions Submissions Quote & Quote & Hit Hit Ratios Ratios 60,000 55% 30% 50,000 45% 20% Quote Ratio Hit Ratio 40,000 35% 10% Hit Ratio Quote Ratio 30,000 25% 0% 2005 2006 2007 1Q 2008 2005 2006 2007 1Q 2008 Annualized Annualized ¾ Submissi
Slide 13: Long-term Financial Strategy
Long-term Financial Strategy Balanced Generation of approach to Meaningful and top tier earnings rightsizing sustainable and capital competitive substantially in capital and advantages excess of growth growing book needs value per share over time Create Shareholder Create Shareholder Value Value 9
Slide 14: Financial Performance & Strength
Financial Performance & Strength Jay S. Benet Vice Chairman & Chief Financial Officer
Slide 15: Consistency of Book Value Growth
Consistency of Book Value Growth TRV Adjusted TRV Adjusted Book Book Value Value Per Share11 Per Share $45.00 1Q05––1Q08 1Q05 1Q08CAGR: CAGR: 12.1% 12.1% $42.36 $41.23 Excluding Share Repurchases22 : 13.2% Excluding Share Repurchases : 13.2% $40.20 $40.00 $38.76 $37.26 $36.20 $35.10 $35.00 $33.83 $3
Slide 16: Travelers Diluted Operating Earnings Per Share
Travelers Diluted Operating Earnings Per Share $2.00 $1.81 $1.69 $1.73 $1.63 $1.61 $1.55 $1.41 $1.46 $1.50 $1.38 $1.34 $1.23 $1.00 $0.50 $0.22 $0.07 $0.00 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 Significantearnings Significant earningsg
Slide 17: Components of Operating Return on Equity
Components of Operating Return on Equity 17.9% 17.7% 15.6% ¾ Investment income from our high 12% 11.1% 11.0% quality fixed income portfolio net of 1.4% interest expense on holding 10% 1.6% 9.2% company debt produced an 0.2% operating return on equity > 9%; a 8% “passage of time” return 6.8% 6.7% 6.4
Slide 18: Very Strong Financial Position
Very Strong Financial Position ($ and shares in millions, except per share amounts) Capital ¾ At or above target levels for all rating agencies ¾ Under review for upgrade from Moody’s (11/20/2007) Mar 31 Dec 31 ¾ Continue to generate excess capital and repurchase shares 2008 2007 • $1.0 billion of s
Slide 19: Successfully Issued New Debt in May 2008
Successfully Issued New Debt in May 2008 ¾ On May 8, priced a $500 million public offering of 5.80% 10-year senior notes ¾ Replaces $400 million of senior notes that matured in March 2008 ¾ On a pro-forma basis, increased March 31, 2008 debt to total capital ratio from 18.5% to 19.7%, consistent wit
Slide 20: Consistent High Quality Investment Portfolio
Consistent High Quality Investment Portfolio ($ in millions) Dec 31 Dec 31 Dec 31 Dec 31 Mar 31 2004 2005 2006 2007 2008 Taxable fixed maturities 43% 41% 38% 35% 35% Tax-exempt fixed maturities 41% 46% 49% 52% 52% Total fixed maturities 84% 87% 87% 87% 87% Mortgage loans -% -% -% -% -% Short-term se
Slide 21: Financial Strength Unaffected by Recent Market Disruption
Financial Strength Unaffected by Recent Market Disruption Areas of Market Disruption Status Subprime mortgage-backed securities Negligible exposure Collateralized debt obligations None Collateralized loan obligations None Monoline insurer guarantee of municipal Municipal bond portfolio AAA- with bon
Slide 22: 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 2007 combined annual statutory statement of the company’s domestic insurance
Slide 23: Net Paid to Incurred Ratios
Net Paid to Incurred Ratios – 2007 Industry Comparison Accident Workers' Compensation Accident Private Passenger Auto Liability Accident Commercial Auto Year Peer1 Travelers Industry Year Peer1 Travelers Industry Year Peer 1 Travelers Industry 1998 81.8% 77.9% 85.5% 1998 99.7% 99.8% 99.6% 1998 98.1%
Slide 24: Net IBNR to Incurred Ratios
Net IBNR to Incurred Ratios – 2007 Industry Comparison Accident Workers' Compensation Accident Private Passenger Auto Liability Accident Commercial Auto Year Peer1 Travelers Industry Year Peer1 Travelers Industry Year Peer 1 Travelers Industry 1998 6.4% 8.8% 5.1% 1998 0.3% 0.1% 0.2% 1998 0.5% 0.3% 0
Slide 25: Very Modest Increases in Modeled Operating Company Surplus
Very Modest Increases in Modeled Operating Company Surplus ($ in billions) ¾ These capital levels are calculated $23.5 $24.0 using simulations of existing rating $22.9 $23.0 agency models and factor in, for illustrative purposes, a 5% annual growth rate for net written premiums, among many other ass
Slide 26: Generating Very High Level of Additional Capital
Generating Very High Level of Additional Capital ¾ Operating companies generated $4.9 billion of statutory net income in 2007 Statutory net income of $4.9 billion in 2007 $4.9 billion 12
Slide 27: Generating Very High Level of Additional Capital
Generating Very High Level of Additional Capital ¾ Operating companies generated $4.9 billion of statutory net income in 2007 Statutory net income of $4.9 billion ¾ $500 million was earmarked for operating in 2007 company surplus $4.4 billion available for distribution to holding company Earmarked f
Slide 28: Generating Very High Level of Additional Capital
Generating Very High Level of Additional Capital ¾ Operating companies generated $4.9 billion of statutory net income in 2007 Statutory net income of $4.9 billion ¾ $500 million was earmarked for operating in 2007 company surplus ¾ $232 million was earmarked for payment of interest on holding compan
Slide 29: Generating Very High Level of Additional Capital
Generating Very High Level of Additional Capital ¾ Operating companies generated $4.9 billion of statutory net income in 2007 Statutory net income of $4.9 billion ¾ $500 million was earmarked for operating in 2007 company surplus ¾ $232 million was earmarked for payment of interest on holding compan
Slide 30: Beneficial Impact of Share Repurchase Program
Beneficial Impact of Share Repurchase Program Adjusted Book Value Per Share1 $45.00 $43.61 $42.43 As reported $42.36 40.00 $41.23 $36.62 Adjusted to exclude impact of 35.00 $36.20 share repurchases 2 30.00 ¾ Since the inception of the share Dec 31 2006 Dec 31 2007 Mar 31 2008 repurchase program in 2
Slide 31: Beneficial Impact of Share Repurchase Program
Beneficial Impact of Share Repurchase Program Adjusted Book Value Per Share1 $45.00 $43.61 $42.43 As reported $42.36 40.00 $41.23 $36.62 Adjusted to exclude impact of 35.00 $36.20 share repurchases 2 30.00 ¾ Since the inception of the share Dec 31 2006 Dec 31 2007 Mar 31 2008 repurchase program in 2
Slide 32: Long-term Financial Strategy
Long-term Financial Strategy Balanced Generation of approach to Meaningful and top tier earnings rightsizing sustainable and capital competitive substantially in capital and advantages excess of growth growing book needs value per share over time Create Shareholder Create Shareholder Value Value 18
Slide 33: 2008 Annual Guidance
2008 Annual Guidance ¾ Operating income per diluted share range of $5.55 to $5.85 ¾ This range equates approximately to an operating return on equity of 13% to 14% ¾ Primarily due to the fine tuning of our investment income outlook for the remainder of the year, we now have a bias toward the lower e
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Slide 35: Competitive Advantages
Competitive Advantages Brian MacLean Chief Operating Officer
Slide 36: Long-term Financial Strategy
Long-term Financial Strategy Balanced Generation of approach to Meaningful and top tier earnings rightsizing sustainable and capital competitive substantially in capital and advantages excess of growth growing book needs value per share over time Create Shareholder Create Shareholder Value Value 1
Slide 37: Meaningful and Sustainable Competitive Advantages
Meaningful and Sustainable Competitive Advantages Underwriting Specialization & Focus Breadth Execution Through Of Information Products & Analytics Size & Scale of Franchise 2
Slide 38: Underwriting Specialization & Focus
Underwriting Specialization & Focus – Fundamental to Profitability $21.6 Billion $21.6 Billion Net Net Written Written Premiums Premiums Full Year Full Year 2007 2007 Homeowners and Other Select Accounts Auto ¾ Understanding customers’ needs Personal ¾ Focused underwriting by industry, Insurance Com
Slide 39: Underwriting Specialization & Focus
Underwriting Specialization & Focus – Fundamental to Profitability Auto Dealers Printers / Publishers Homeowners Educational Institutions Hotels / Motels Select Restaurants Metals uto Food Commercial Wood Accounts Plastic & Rubber Goods Wholesale Mineral Products Construction Technology Textiles Pub
Slide 40: Underwriting Specialization & Focus
Underwriting Specialization & Focus – Fundamental to Profitability ($ in millions) ¾ Successful launch of five new programs New Business Premium Auto Dealers, Printers/Publishers, Educational Institutions, Hotel/Motels and Restaurants 5% 11 $84 $39 2006 2007 Specializationdriving Specialization driv
Slide 41: Underwriting Specialization & Focus
Underwriting Specialization & Focus – Fundamental to Profitability Expected Current Expected Current Business Business Unit Unit Returns Returns for New for New ++ Renewal Business11 Renewal Business 95% of current 42% Above Target new and renewal business at or 18% above target 53% Within Target re
Slide 42: Breadth of Products
Breadth of Products – Leading Range of Products & Capabilities $21.6 Billion $21.6 Billion Net Net Written Written Premiums Premiums Full Year Full Year 2007 2007 ¾ Comprehensive array of Homeowners and Other products Select Accounts ¾ Abundance of related products Auto across markets Commerical ¾ S
Slide 43: Breadth of Products: Large Account Capabilities
Breadth of Products – Leading Range of Products & Capabilities Large Account Capabilities ¾ Casualty products Market leader in loss sensitive primary casualty bundled and unbundled products Recognized top-tier workers’ compensation claim service provider ¾ National property Significant presenc
Slide 44: Breadth of Products
Breadth of Products – Leading Range of Products & Capabilities Personal Business Insurance Insurance Small Middle Auto z z z Home z n/a n/a Commerical Multi-peril n/a z z Property n/a z z Liability n/a z z Workers' Compensation n/a z z Inland Marine n/a z z Ocean Marine n/a z z Farmowners/Agri n/a z
Slide 45: Breadth of Products: Market Position
Breadth of Products – Leading Range of Products & Capabilities Travelers Market Position Personal Product Breadth – delivering Auto - Ind. agents Top 5 what competitors cannot: Home Top 5 Commercial ¾ Increased cross-sell Commerical Multi-peril #1 Property Top 5 opportunities among related Liability
Slide 46: Benefits of Travelers Product Breadth
Breadth of Products – Leading Range of Products & Capabilities Benefits of Travelers Product Breadth: ¾ To Our Customers Ability to bundle purchase of products due to comprehensive breadth More appropriate price due to enhanced information and analytics ¾ To Agents & Brokers Improved efficienc
Slide 47: Execution through Information & Analytics
Execution through Information & Analytics – Enhanced Decision Making & Performance Metrics Produced Views Views Accessible by: Accessible by: Company-wide: Region ¾ Region ¾ ¾ Profitability Office ¾ Office ¾ ¾ Production Line of ¾ Line of Business Business ¾ ¾ Pricing Industry // Program ¾ Industry
Slide 48: Results: Distribution Depth Advantage
Results: Distribution Depth Advantage Agency Preference Agency Preference –– Commercial Commercial 70.0% Travelers 60.0% 50.0% 40.0% Hartford 30.0% AIG Zurich 20.0% Chubb 10.0% 0.0% Jan '07 July '07 Jan '08 Travelers identified Travelers identified as as top top five five partner partner by by 60% 6
Slide 49: Results: Distribution Depth Advantage
Results: Distribution Depth Advantage Agency Preference Agency Preference –– Personal Personal 50.0% 45.0% Travelers 40.0% Progressive 35.0% Chubb 30.0% Safeco 25.0% 20.0% Hartford 15.0% Jan '07 July '07 Jan ‘08 Travelers identified Travelers identified as as top top five five partner partner by by
Slide 50: Results: Distribution Depth Advantage
Results: Distribution Depth Advantage Top Commercial Top Commercial Lines Lines Carriers Carriers Ranking Ranking Among All Among All Agencies Agencies Surveyed Surveyed 66% Top 3 Number 1 80% of an Agent’s Book is placed 29% 31% with three carriers 16% 15% 15% 10% 5% 5% 3% Travelers Next Closest Ot
Slide 51: Results: Competitive Advantages Driving Premium Growth
Results: Competitive Advantages Driving Premium Growth Percentage Growth in Net Written Premiums 9% 6% 3% 0% 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 -3% -6% -9% Travelers Peer Group Average Travelers Advantage 4.2% Travelers excludes run-off operations; 2Q07-1Q08 growth rate
Slide 52: Results: Competitive Advantages Driving Profitability
Results: Competitive Advantages Driving Profitability Expected Current Expected Current Business Business Unit Unit Returns Returns for New for New ++ Renewal Business11 Renewal Business 95% of current 42% Above Target new and renewal business at or 18% above target 53% Within Target return levels 1
Slide 53: Agenda for the Balance of the Afternoon
Agenda for the Balance of the Afternoon ¾ Specialization, breadth and analytics matter – three examples 1. Select - breakthrough changes expanding the lead in small commercial 2. Workers’ compensation - capitalizing on & creating opportunities from loss management expertise 3. Middle market industry
Slide 54: Executing On the Competitive Advantages
Executing On the Competitive Advantages Joseph P. Lacher, Jr. Executive Vice President
Slide 55: Specialized Expertise Fueled by Breadth and Analytics
Specialized Expertise Fueled by Breadth and Analytics ¾ Three examples 1. Select Accounts - Breakthrough changes expanding a lead in small commercial 2. Workers’ Compensation - Capitalizing on & creating opportunities from loss management expertise 3. Middle Market - Individual account underwriting
Slide 56: Select Accounts Specialization
Select Accounts Specialization – Industry Leading Market Share and Profitability ¾ Travelers is the market leader in Top Commercial Top Commercial Multi-Peril Multi-Peril Small Commercial Direct Written Written Premium Premium Writers Writers Direct #1 Market Share (Commercial Multi-Peril) Commerc
Slide 57: Select Accounts - Leader in Small Commercial Insurance
Select Accounts - Leader in Small Commercial Insurance Diverse Underwriting Breadth SM SM TravelersExpress TravelersExpress Plus Total 2007 Direct Written Premium ($’s in billions) $1.3 $1.5 $2.8 Average $3,500 $16,000 $6,000 Account Size Travelersexcels Travelers excelsat atboth both“ends” “ends”of
Slide 58: Select Accounts - Expanding a Lead
Select Accounts - Expanding a Lead Diverse Underwriting Breadth ¾ Clear leading specialization in small Line commercial Industry Worker’s Segment CMP Comp. Auto Other ¾ But…historic concentrations “B.O.B.S.” Business Office Historical Over 2/3rds of written premium in nd commercial multi-peril, pr
Slide 59: Select Accounts – TravelersExpress Pre-Launch
Select Accounts – TravelersExpresssm- Pre-Launch Speed is Differentiating Factor Representation of pre-launch business process Submissions Decisioning Bindable Quotes & Results Avg. Avg. Time Time = = 15 15 min. min. Automated Underwriting Issued 17% 17% Policy Avg. Avg. Time Time = =33 days days 83
Slide 60: Select Accounts – TravelersExpress: Rating Sophistication
Select Accounts – TravelersExpresssm Rating Sophistication Unlocks Efficiency ¾ Historical flow business pricing control at individual Balance of Model & account level – not optimal for this small transaction size Judgment Basic pricing grid set countrywide with local market Historically adjustmen
Slide 61: Select Accounts – TravelersExpress: Rating Sophistication
Select Accounts – TravelersExpresssm Rating Sophistication Unlocks Efficiency ¾ Historical Flow Business pricing control at individual Balance of Model & account level – not optimal for this small transaction size Judgment ¾ Predictive modeling and multivariate analysis enable Historically broader a
Slide 62: Select Accounts – TravelersExpress Post Launch
Select Accounts – TravelersExpresssm – Post Launch Speed is Differentiating Factor Representation of post-launch business process Submissions Decisioning Bindable Quotes & Results Avg. Time Avg. Time Automated Automated Decline Decline =5 min. =5 min. approx. approx. 10% 10% of of submissions submis
Slide 63: Select Accounts – TravelersExpress: How is it working?
Select Accounts – TravelersExpresssm How is it working? ¾ Strengthened rating and underwriting consistency driven by automation Leading application of predictive modeling and multivariate analysis Automated best-in-class underwriting Optimized utility of underwriters ¾ Ease of doing business i
Slide 64: Select Accounts – TravelersExpress Results
Select Accounts – TravelersExpresssm Results Agents Quoting 14 0000 Submission Flow % % 78 129,782 2 8 000 41 12 0000 Up Up 2 3 000 26,088 1 00000 8 0000 1 8 000 18,573 6 0000 73,110 1 3 000 4 0000 8 000 2 0000 Legacy TE Legacy TE 6 .5 Quotes Per Agent ¾ Increased ¾ Increased flow flow ¾ Ease 6 5 .5
Slide 65: TravelersExpress Results: Broader Reach Across Industry Segments
Select Accounts – TravelersExpresssm Results Broader Reach Across Industry Segments Pre-Launch Pre-Launch Post-Launch Post-Launch ¾ B.O.B.S. concentration reduced from 70% to 46% post launch All Other 30% All B.O.B.S. B.O.B.S. Other 46% 70% 54% Premium Increased Premium Increased 41% 41% %Δ ¾ Writte
Slide 66: TravelersExpress Results: Broader Reach Across Industry Lines
Select Accounts – TravelersExpresssm Results Broader Reach Across Industry Lines Pre-Launch Pre-Launch Post-Launch Post-Launch ¾ Commercial multi-peril Auto Auto 10% 13% concentration reduced from WC 70% to 60% post launch 20% WC CMP CMP 27% 60% 70% Premium Increased Premium Increased 41% 41% %Δ ¾ W
Slide 67: Select Accounts - TravelersExpress
Select Accounts - TravelersExpresssm ¾ Building upon market leading position and expertise ¾ Leveraging enterprise breadth and Underwriting Specialization analytics & Focus ¾ Quantum like predictive model based rating Breadth Execution Through Of ¾ Automated underwriting via personal lines Informati
Slide 68: Specialized Expertise Fueled by Breadth and Analytics
Specialized Expertise Fueled by Breadth and Analytics ¾ Three examples 1. Select Accounts - Breakthrough changes expanding a lead in small commercial 2. Workers’ Compensation - Capitalizing on & creating opportunities from loss management expertise 3. Middle Market - Individual account underwriting
Slide 69: Workers’ Compensation Specialization
Workers’ Compensation Specialization – Industry Leading Profitability and Market Share ¾ Travelers has a top tier specialization Top Workers’ Top Workers’ Compensation Compensation in workers’ compensation Direct Written Direct Written Premium Premium Writers Writers ¾ Identified opportunities to: W
Slide 70: Workers’ Compensation: A few definitions
Workers’ Compensation A few definitions… ¾ Market Segments / Funding Types Guaranteed Cost products: an insurance policy where the premiums charged will not be adjusted for actual loss experience during the covered period. In a guaranteed cost policy, the only variable affecting premium is payroll
Slide 71: Workers’ Compensation – Experience Matters
Workers’ Compensation – Experience Matters Expertise and Claim Handling ¾ Historical strength and scale National Accounts ($2.0 billion in premium equivalents) Residual markets servicing carrier – large player (36% of market) Guaranteed cost business ¾ Superior loss severity management Trave
Slide 72: Workers’ Compensation: Capitalizing on Targeted Growth Opportunities
Workers’ Compensation Capitalizing on Targeted Guaranteed Cost Growth Opportunities Workers' Compensation Net Written Premium 1Q Growth 2008 (1Q08/1Q07) National Accounts $ 157 -4% Select 138 10% Commercial Accounts 193 15% All Other 186 19% Business Insurance Total $ 674 10% ¾ Travelers is not exec
Slide 73: Workers’ Compensation – Leveraging Expertise
Workers’ Compensation – Leveraging Expertise Example – Select Accounts ¾ Historically, Select under concentrated in worker’s compensation ¾ Analytics revealed opportunities for profitable growth ¾ TravelersExpresssm predictive modeling and automated underwriting unlocked opportunity Pre-Launch Pre-L
Slide 74: Select Accounts - Workers’ Compensation Segmentation
Select Accounts - Workers’ Compensation Identifying Opportunity Through Segmentation ¾ Analytics allow us to identify growth opportunities WC Written Premium Growth Excluding Rate Change 1 State Environment Better Average Worse Total Combination of Account Size & Industry Segment Better Average Very
Slide 75: Select Accounts - Workers’ Compensation Segmentation
Select Accounts - Workers’ Compensation Identifying Opportunity Through Segmentation ¾ Analytics allow us to identify growth opportunities ¾ Sometimes summary data does not clearly highlight opportunities ¾ Surgical examination & granular execution allow access Yields Yields WC Written Premium Growt
Slide 76: Select Accounts - Workers’ Compensation Segmentation
Select Accounts - Workers’ Compensation Identifying Opportunity Through Segmentation ¾ Analytics allow us to identify growth opportunities ¾ Sometimes summary data does not clearly highlight opportunities ¾ Surgical examination & granular execution allow access ¾ Segment optimization allows for diff
Slide 77: Workers’ Compensation – Leveraging Multi-Line Advantage
Workers’ Compensation Leveraging Multi-Line Advantage Proper Payment • Medical bill re-pricing • Fraud detection Workers’ Triggers Triggers Compensation Medical Involvement 350k injuries • Nurse oversight All • Medical equipment review Automobile 100k injuries Injury • Pharmaceutical management Clai
Slide 78: Workers’ Compensation Leveraging Breadth Yields High Impact
Workers’ Compensation Leveraging Breadth Yields High Impact ¾ Travelers Personal Insurance Auto experiencing bodily injury (BI) severity trends out of pattern with the industry Major personal auto players reporting BI severity trends in the mid to high single digits Travelers reporting nearly fl
Slide 79: Personal Auto - Severity Trends
Personal Auto - Severity Trends 3rd Party Bodily Injury ¾ Industry bodily injury severity 1.20 trend is evident 1.15 ¾ Workers’ compensation loss Index of Average Claim Payment 1.10 management fueled claim 1.05 initiatives 1.00 ¾ Analytics identified greatest 0.95 opportunities 0.90 ¾ Competitive ad
Slide 80: Workers’ Compensation Capitalizing on and Creating Opportunities
Workers’ Compensation Capitalizing on and Creating Opportunities ¾ Building upon specialization Underwriting Top tier market position Specialization Leading loss management expertise & Focus ¾ Superior analytics and leveraging Breadth Execution breadth through Of Information Capitalizing on op
Slide 81: Specialized Expertise Fueled by Breadth and Analytics
Specialized Expertise Fueled by Breadth and Analytics ¾ Three examples 1. Select Accounts - Breakthrough changes expanding a lead in small commercial 2. Workers’ Compensation - Capitalizing on & creating opportunities from loss management expertise 3. Middle Market - Individual account underwriting
Slide 82: Executing on the Competitive Advantages
Executing on the Competitive Advantages Patrick Kinney President – Field Management
Slide 83: Meaningful and Sustainable Competitive Advantages
Meaningful and Sustainable Competitive Advantages Industry Focused ¾ Underwriting specialization & focus Underwriting Specialization By line & Focus By industry By customer size Breadth Execution Of ¾ Breadth of products Through Products Expand number of lines and classes Analytics of busine
Slide 84: Core Multi-line Middle Market Businesses
Core Multi-line Middle Market Businesses Commercial Select Accounts Accounts Industry Focused Underwriting Homeowners & Other Target Risk Underwriting Bond & Personal Automobile Financial Products Specialized Dist. National Int'l Accounts 2 Note: Percentage of 2007 net written premiums excluding Bus
Slide 85: Key Success Drivers for Individually Underwritten Accounts
Keys Success Drivers for Individually Underwritten Accounts ¾ Leading agency position across a broad distribution plant ¾ Market leading management information and analytic capabilities leveraged by size and scale ¾ Specialized industry focused products and underwriting ¾ Continuous new product deve
Slide 86: Underwriting Specialization & Focused Resources
Underwriting Specialization & Focused Resources Expertise for Companies in High Potential Industries Printers / Publishers Auto Dealers ¾ Opportunity Printers / Publishers Educational Institutions $500 million in premium Hotels / Motels Under penetrated Restaurants Metals Profitable Food Wood
Slide 87: Underwriting Specialization & Focused Resources
Underwriting Specialization & Focused Resources Expertise for Companies in High Potential Industries Product and Marketing Plan - Printers / Publishers Auto Dealers ¾ Tailored product to printer / publisher exposure Printers / Publishers Educational Institutions Example: E&O form Hotels / Motels
Slide 88: ABC Printing Company
Competitive Scenario: The Example ABC Printing Company ¾ $150 million in sales ¾ $20 million exports ¾ 2 printing facilities ¾ $12 million property values ¾ 5 vehicles ¾ 75 employees 6
Slide 89: The Example: Advantages of Integrated Execution
The Example: Advantages of Integrated Execution Coverages Requested Umbrella Historical Auto General Property Liability Bond Crime Additional Boiler Coverage Opportunities Umbrella International Today Auto Cargo General Property Printers E&O Liability 7
Slide 90: Printers / Publishers Results
Printers / Publishers Results FullYear Full Year2007 2007Results Results Auto Dealers Printers / Publishers Educational Institutions ¾ Submission flow up 37% Hotels / Motels Restaurants Metals ¾ Written premium growth: +21% Food Wood Plastic & Rubber Goods Wholesale ¾ Retention: 89% Mineral Products
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Slide 92: Independent Agent Panel
Independent Agent Panel Moderator: Patrick Kinney President – Field Management
Slide 93: Independent Agent Panel
Independent Agent Panel Lewis Bernstein Rob Bouvier Bruce Rogers Bouvier, Beckwith B&B Coverage & Lennox Pierson & Smith Valley Stream, NY West Hartford, CT Norwalk, CT 1
Slide 94: Local Execution
Local Execution Patrick Kinney & Northeast Field Management Team
Slide 95: Travelers Agency Value Equation
Travelers Agency Value Equation Sustainable Competitive Advantages Benefits to Agents Industryleading Industry leadingspecialization specialization Customtailored Custom tailoredsolutions solutions Broadproduct Broad productbreadth breadth Salesopportunities Sales opportunities Actionableanalytics A
Slide 96: Merge Core Strength With Field Execution
Merge Core Strength With Field Execution Results in: Local Localleaders leaders Superior local execution Enterprise Enterpriseteam teamownership ownership Leading agency position Local Localdecision decisionmaking making Market leading distribution knowledge Integrated Integratedbusiness businesssys
Slide 97: Northeast Field Management Team
Northeast Field Management Team BillTeed Bill Teed RegionalPresident, Regional President,Northeast Northeast 21Years 21 Yearswith withTravelers Travelers MylesGibbons Myles Gibbons RegionalVice Regional VicePresident, President,Middle MiddleMarket Market 20Years 20 Yearswith withTravelers Travelers
Slide 98: Meaningful and Sustainable Local Competitive Advantages
Meaningful and Sustainable Local Competitive Advantages Underwriting Specialization & Focus ¾ Broadest product mix Execution ¾ Tailored sales solutions Breadth Through Of Information Products & Analytics ¾ Leverage all opportunities ¾ Think and act as one team Size & Scale of Franchise 4
Slide 99: Northeast Region At a Glance
Northeast Region At a Glance $2.8 Billion Net Written Premiums Full Year 2007 Bond & Financial Products Select Accounts ¾ Delivering national capabilities Homeowners & at the local level Other Commercial Accounts ¾ Identify and maximize all Construction opportunities across the Technology Public Sec
Slide 100: Northeast Region At a Glance
Northeast Region At a Glance $2.8 Billion Net Written Premiums Full Year 2007 Bond & Financial Products Select Accounts Homeowners & Other Commercial Accounts Construction Execute as one team Technology Public Sector Agribusiness National Property Inland Marine Ocean Marine Excess Casualty Boiler &
Slide 101: Northeast Region At a Glance
Northeast Region At a Glance ¾ Full service region, including: Risk control Claim services ¾ 300 account executives ¾ 9 field offices ¾ Partner with 1000 agents Westbrook NewEngland New England ProfitCenter Profit Center Syracuse Boxboro Boston Braintree Rochester Albany Springfield Hartford Ups
Slide 102: Northeast Region Local Management Strategy
Northeast Region Local Management Strategy ¾ Local management responds to diverse economic, regulatory, demographic and competitive Westbrook landscapes ¾ Local management responsible Syracuse Boxboro for profit centers, distribution Boston Braintree plans and product integration Rochester Albany Sp
Slide 103: Northeast Region Local Management Strategy
Northeast Region Local Management Strategy ¾ Delivering national capabilities at the local level Personal Business Insurance Insurance Small Middle Auto z z z Home z n/a n/a Commerical Multi-peril n/a z z Property n/a z z Liability n/a z z Workers' Compensation n/a z z Inland Marine n/a z z Ocean Ma
Slide 104: Discussion Topics
Discussion Topics ¾ What is our execution advantage? ¾ How does specialization and product breadth help us write and retain more business? ¾ How do we use our analytic and information advantage to manage our business? 10
Slide 105: Local Execution Business Planning
Local Execution Business Planning Creating local Performance opportunities through Agency Metrics specialization and Segmentation product breadth Distribution Analytics 11
Slide 106: 2008 Northeast Region Business Plan
2008 Northeast Region Business Plan 2008Northeast 2008 NortheastRegion RegionPlan Plan Newbusiness New business $500+million $500+ million Retention Retention 85% 85% Growth Growth 3% 3% ¾ Business plans built by region, profit center and state ¾ Develop target strategies locally by business unit ¾
Slide 107: Agency Segmentation
Agency Segmentation National Select Commercial Agency Accounts Construction Accounts Accounts Inland Marine Bond Technology No No Agency A Growth Growth Growth Growth Growth Relationship Opportunity Agency B Growth Growth Growth Growth Growth Mature Growth Agency C Growth Mature Growth Growth Mature
Slide 108: Individual Agency Plan
Individual Agency Plan New Business YTD Growth Variance ¾ Matching ¾ Matching our our products products and and capabilities capabilities with with their their expertise expertise ¾ Customized ¾ Customized marketing marketing plan plan ¾ Individual ¾ Individual agency agency plan plan rollups rollup
Slide 109: Discussion Topics
Discussion Topics ¾ What is our execution advantage? ¾ How does specialization and product breadth help us write and retain more business? Customer = tailored solutions Agent = customer satisfaction Underwriter = knowledge and market place edge ¾ How do we use our analytic and information adva
Slide 110: Underwriting Specialization & Focused Resources
Underwriting Specialization & Focused Resources Auto Dealers Printers / Publishers ¾ Local underwriting expertise and knowledge edge Educational Institutions Hotels / Motels Restaurants ¾ Superior risk selection Metals Food ¾ Industry specific pricing Wood Plastic & Rubber Goods Wholesale ¾ Tailored
Slide 111: Opportunity in Connecticut
Underwriting Specialization & Focused Resources The Connecticut Result Opportunity in Connecticut $73 million in premium 303 auto dealers Connecticut Auto Dealers Results Since 1/1/07 Inception $3 million in written premium 28 new auto dealer accounts 17
Slide 112: Product Breadth – Growing Flow Business
Product Breadth – Growing Flow Business Massachusetts Industry Line Worker’s Segment CMP Comp. Auto Other “B.O.B.S.” Business ¾ Massachusetts Double digit market share Office Historical Building “Sweet Industry leading position in CMP Stores Spot” Under weighted in workers Apartments compensat
Slide 113: TravelersExpress Workers’ Compensation
TravelersExpressSM Workers’ Compensation Massachusetts Building Building Contractors Contractors Exampleof Example of “B.O.B.S.” “B.O.B.S.”segment segment Exampleof Example of“non-B.O.B.S.” “non-B.O.B.S.”segment segment Auto Auto Workers' Comp CMP CMP Workers' Comp Enhancedworkers’ Enhanced workers’
Slide 114: TravelersExpress Workers’ Compensation
TravelersExpressSM Workers’ Compensation Massachusetts % Increase in Submission Flow Increased Submission Flow “B.O.B.S.” vs. Non-”B.O.B.S.” 4 000 1 .5 5% 35 00 7 3 000 Up 1 .3 3,239 1 .1 130% 25 00 0.9 2 000 0.7 15 00 1,850 0.5 1 000 0.3 5 00 0.1 31% 0 -0.1 Pre-launch Post-launch "B.O.B.S." Non-"B.
Slide 115: Discussion Topics
Discussion Topics ¾ What is our execution advantage? ¾ How does specialization and product breadth help us write and retain more business? ¾ How do we use our analytic and information advantage to manage our business? 21
Slide 116: Flow Analytics and Metrics
Flow Analytics and Metrics Northeast Region ¾¾ Drill Drilldown downcapability capability ¾¾ Analytic Analyticadvantage advantage Region / profit center / state Drives behavior at point of sale Region / profit center / state Drives behavior at point of sale Agency Agency management Agen
Slide 117: Plan vs Actual: Agent View
Plan vs Actual: Agent View Northeast Region Over Over ¾¾ Manage Manageagency agencyresults resultsversus versusplan plan ¾¾ Monitor Monitorenterprise enterpriseand andbusiness businessunit unitresults results ¾¾ Continuous Continuousperformance performancefeedback feedback 23 Data for illustrative p
Slide 118: Financial Measurement
Financial Measurement Northeast Region ¾¾ Strong Strongfinancial financialmanagement managementtools tools ¾¾ Financial Financialresults resultsat atregional, regional,profit profitcenter, center,state, state, businessunit business unitand andline lineof ofbusiness businesslevels levels ¾¾ Disciplin
Slide 119: Northeast Region 1st Quarter 2008 Results
Northeast Region st Quarter 2008 Results 11st Quarter 2008 Results ¾ Submission flow up 12% ¾ Written premium growth: +2% ¾ Retention: 86% ¾ Combined ratio: 89.7% Verysuccessful Very successfulregion region 25
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Slide 121: Closing Remarks
Closing Remarks Jay S. Fishman Chairman and Chief Executive Officer
Slide 122: Total Return Since Merger Through 5/20/08
Total Return1 Since Merger Through 5/20/08 81.2% 81.2% GoldmanSachs Goldman SachsGroup Group 67.6% 67.6% TheChubb The ChubbCompanies Companies 52.8% 52.8% ACELtd. ACE Ltd. 37.0% 37.0% TheTravelers The TravelersCompanies, Companies,Inc. Inc. 32.2% 32.2% Travelers Berkshire Berkshire Insurance Hathawa
Slide 123: Annex
TRAVELERS) Annex
Slide 124: 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 measures under applicable SEC rules b
Slide 125: Glossary of Financial Measures - Continued
Glossary of Financial Measures - Continued Book value per share is total common shareholders’ equity divided by the number of common shares outstanding. Adjusted book value per share is total common shareholders’ equity excluding the after-tax impact of net unrealized investment gains and losses (i.
Slide 126: Statutory Net Income to GAAP Net Income Reconciliations
Statutory Net Income to GAAP Net Income and Tangible Book Value Per Share Reconciliations ($ in millions, except per share amounts) Statutory Net Income to GAAP Net Income Reconciliation 2007 Statutory net income $ 4,857 GAAP adjustments Non insurance income 21 Premiums 44 Net investment income (85)
Slide 127: Book Value and Earnings Per Share Reconciliations
Book Value and Earnings Per Share Reconciliations ($ in millions, except per share amounts) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Book Value Reconciliation 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 Adjusted common shareholders' equity $ 20,276 $ 21,234 $ 21,776 $ 21,823 $ 22,
Slide 128: Reconciliations of the Impact of Share Repurchases
Reconciliations of the Impact of Share Repurchases ($ in millions, except per share amounts) 1Q 2006 2007 2008 Book Value Reconciliation-Adjusted to Exclude the Impact of Share Repurchases Adjusted common shareholders' equity $ 24,553 $ 25,884 $ 25,704 Cumulative cost of share repurchases 1,121 4,06