The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Barclays Capital Global Financial Services Conference 2009
32 slides from The Travelers Companies's conference presentation, Sep 15, 2009
Slide 1: Jay S. Fishman, Chairman & Chief Executive Officer
Jay S. Fishman Chairman & Chief Executive Officer The Travelers Companies, Inc September 15, 2009
Slide 2: Explanatory Note
Explanatory Note This presentation contains, and management may make, certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Specifically, earnings
Slide 3: One Year Ago at This Conference...
One Year Ago at This Conference... 2
Slide 4: Create Shareholder Value
Long-term Financial Strategy Balanced Generation of Meaningful approach to top tier earnings and rightsizing capital and capital sustainable and substantially in competitive growing book excess of growth advantages value per share needs over time Create Shareholder Create Shareholder Value Value Obj
Slide 5: Long-term Financial Strategy
Long-term Financial Strategy Financial Company Employees Community 4
Slide 6: Rightsizing Capital
Rightsizing Capital ($ in millions) Share Repurchases $2,947 Cumulative share repurchases since initial authorization granted by the Board in 2Q’06: $7.8 billion $1,121 $1,000 $860 $750 $750 $272 $100 $0 2006 2007 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09 QTD1 Stillon Still ontrack trackfor for$3.0
Slide 7: Continuing to Grow Book Value Per Share
Continuing to Grow Book Value Per Share Book Value Per Share % $47.29 : 11.9 CAGR $43.12 $42.22 $36.86 $31.94 2005 2006 2007 2008 2Q'09 Adjusted Book Value Per Share1 G R : 11.3% $45.76 CA $43.37 $41.23 $36.20 $31.47 2005 2006 2007 2008 2Q'09 1 Adjusted book value per share is total common sharehold
Slide 8: Returns Consistent With Long-Term Financial Targets
Returns Consistent With Long-Term Financial Targets Operating Return on Equity 9.6% 17.9% 17.7% 12.4% 14.9% 11.9% 11.1% 11.0% 10.6% 1.4% 1.6% 1.4% 9.1% 8.1% 0.3% 7.1% 6.8% 6.7% From January 1, 2005 through 5.8% June 30, 2009, average 9.2% 8.1% 4.8% annual operating return on 9.7% 9.4% 8.7% 8.7% 8.8%
Slide 9: Travelers Rating Activities
Travelers Rating Activities ¾ Moody’s - June 6, 2008 – FSR Aa2 • Upgraded financial strength ratings to Aa2 from Aa3, debt ratings to A2 from A3, commercial paper to Prime-1 from Prime-2 ¾ S&P - August 11, 2009 – FSR AA- • Revised outlook on financial strength and debt ratings to positive from stabl
Slide 10: Top Tier Underwriting Results Through Active Management
Top Tier Underwriting Results Through Active Management Account Underwriting Evaluation of Active Pricing Claims, Trends Strategy and Reserves Industry Leading Analytics Claim Experience / Initial Reserving Claim Management Process 9
Slide 11: Specialized Distribution
Underwriting Selection and Pricing Continuum Select Middle Market Distribution Specialized Accounts Accounts Financial Products National Bond & Commercial Target Risk Personal Accounts Focused Industry Express Plus Insurance Class Based Pricing Individual Account Underwriting Flow Business Individua
Slide 12: Active Pricing Strategy
Active Pricing Strategy Flow Business: Select Accounts - TravelersExpresssm Examples of Variables to Establish Premium Attributes • Class of Business Class • Territory • Construction Type • Protection Class • Occupancy (use) • Limits (contents, liability) Predictive Models • Based on sophisticated a
Slide 13: Active Pricing Strategy: Legacy Platform
Active Pricing Strategy Flow Business: Select Accounts – Legacy Platform Low Touch 83% Refer to Underwriter F L 3 Days O W 17% Agency Authority No Touch Only 17% Only 17% automatically automatically generated generated bindable bindable quotes; quotes; Inefficient quote Inefficient quote to to issua
Slide 14: Active Pricing Strategy: TravelersExpress
Active Pricing Strategy Flow Business: Select Accounts – TravelersExpresssm Refer to Low Underwriter Touch 18% 1 Day F TravelersExpressSM CMP L O WC Straight-thru Processing W Auto 82% No Touch Response time Response time on on business business referred referred cut cut from from 33 days days to to
Slide 15: TravelersExpress Results
TravelersExpresssm Results Agents Quoting Quotes Per Agent e c rease I nc reas I n 28% 17% Legacy TravelersExpresssm Legacy TravelersExpresssm Submission Flow ea se I ncr 50% Legacy TravelersExpresssm Results for TravelersExpressSM for MasterPac product in states launched December 2006 through April
Slide 16: Active Pricing Strategy: Florist Shop Pricing Example
Active Pricing Strategy Flow Business: Select Accounts - TravelersExpresssm Pricing example: Florist shop - Commercial Multi-Peril Rate Plan State: Connecticut Segment: Store Building limit: $50,000 Business personal property limit: $150,000 General liability limit: $1 million / $2 million Deductibl
Slide 17: Active Pricing Strategy: Individually Underwritten Accounts
Active Pricing Strategy Individually Underwritten Accounts Homogenous Grouping Individual Account Characteristics • Class of Business • Past loss experience • Territory • Safety programs • Construction Type • Credit history • Protection Class • Limits/deductibles/client retention • Occupancy (use) •
Slide 18: Pricing Example: Natural Gas Distributor & Equipment Wholesaler
Active Pricing Strategy Individually Natural GasUnderwritten Accounts:Wholesaler Distributor & Equipment Middle Market Pricing Example: Natural Gas Distributor & Equipment Wholesaler - General Liability Predictive Modeling Rate Plan • D&B analytics • Loss experience Subline: Prem/Ops & Products • Ra
Slide 19: Positive Rate Change in Each Business Segment
Positive Rate Change in Each Business Segment Rate Change1 0% 1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'07 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09 QTD 2 ♦ Business Insurance ▲ Personal Insurance3 • Financial, Professional & International Insurance4 1 Each percentage represents the estimated cha
Slide 20: Renewal Pricing Data
Renewal Pricing Data Select Accounts Commercial Accounts 0% 0% 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09 QTD 1 QTD 1 Other Business Insurance2 ♦ Rate3 % 0% • Exposure/Other % ▲ Renewal Premium Change4 % 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09 QTD1 1 3Q’09
Slide 21: Renewal Pricing – Commercial Accounts Rate
Renewal Pricing – Commercial Accounts Rate 2Q’09 Renewal Rate by Band - Commercial Accounts1 2,000 1,600 Number of Accounts 1,200 800 400 0 < -10% -10% to -5% -5% to 0% 0% to 5% 5% to 10% >10% 61% of 61% of accounts accounts had had positive positive rate rate 1 Guaranteed cost only 20
Slide 22: Monthly Reserving Process
Monthly Reserving Process Illustrative Loss Ratio Rollforward Business Insurance - Core Plan Loss Ratio Development Base Year Loss Ratio Normalized 53.0% Earned Rate 0.5% Earned Exposure / Inflation -0.8% New Business Effect 0.3% Frequency Trend -0.9% Severity Trend 3.5% Other Change -0.4% Mix -0.2%
Slide 23: Risk Selection and Underwriting Qualitative Controls
Risk Selection and Underwriting Qualitative Controls ¾ Pre-qualification • Underwriting guidance • Target prospects • Geographic / jurisdiction focus • Financial underwriting • Loss prevention and risk control ¾ Collaboration • Authority triggers by class, size and underwriter experience • Coverage
Slide 24: New Business Pricing: Points of Difference New Versus Renewal
New Business Pricing New Business Versus Renewal Pricing - Commercial Accounts 10% Points of Difference New Versus Renewal 6% Indexed to 1Q’08 2% Relative Baseline (2%) (6%) (10%) 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 23
Slide 25: Claims Experience / Claims Management
Claims Experience / Claims Management Claims Practices Impacting Loss Trend ¾ Notice of loss Æ Contact Æ Triage Æ Assignment Æ Monitoring Æ Information Loop ¾ Claim handling process ¾ Pricing/underwriting ¾ Loss prevention programs Claim effectiveness Claim effectiveness provides provides significan
Slide 26: Structure Designed to Ensure Connectivity Between Claim and Underwriting
Structure Designed to Ensure Connectivity Between Claim and Underwriting Operations ¾ Joint reporting into business heads ¾ 44 major claim offices co-located with underwriting operations ¾ “Matrix” reporting embedded in company culture 25
Slide 27: Claims Experience / Claims Management Example
Claims Experience / Claims Management Example Travelers is a leading writer and service provider of workers’ compensation ¾ Claim effectiveness results in lower lost costs, which provides a competitive advantage ¾ Claim effectiveness sustained through: • Scale - provides cost effective local presenc
Slide 28: Claims Experience / Claims Management Example
Claims Experience / Claims Management Example ¾ Redesigned catastrophe response process a competitive advantage • Reduced dependence on independent adjusters • Improved response time • Eliminated inefficiencies • Concierge approach for customers with roof damage – Tarp Program • Improved customer sa
Slide 29: Monitoring Frequency and Severity
Monitoring Frequency and Severity Workers’ Compensation Frequency Severity Claims per $1MM On-Level EP L+ALAE $ per Claim Rolling 4 Accident Quarters Ending Rolling 4 Accide nt Quarte rs Ending Closed Reported Ultimate Closed Reported Ultimate Loss Cost L+ALAE $ vs. On-Level EP Rolling 4 Accident Qu
Slide 30: Top Tier Underwriting Results Through Active Management
Top Tier Underwriting Results Through Active Management Account Underwriting Evaluation of Active Pricing Claims, Trends Strategy and Reserves Industry Leading Analytics Claim Experience / Initial Reserving Claim Management Process 29
Slide 31: 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 related financial supplement are publicly available on the Travelers website
Slide 32: End Slide
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