The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Barclays Capital Global Financial Services Conference 2010
29 slides from The Travelers Companies's conference presentation, Sep 14, 2010
Slide 1: Jay S. Benet, Vice Chairman & CFO
Jay S. Benet Vice Chairman & Chief Financial Officer Barclays Capital Global Financial Services Conference September 14, 2010
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: Agenda
• Very strong financial position • Capital management – Economic conditions – Interest rate environment • Convergence of U.S. GAAP & International Financial Reporting Standards (IFRS) 2
Slide 4: Very Strong Financial Position
Very Strong Financial Position ($ and shares in millions, except per share amounts) Capital June 30, December 31, 2010 2009 • At or above target levels for all rating agencies Debt $ 6,276 $ 6,527 • Continued to generate excess capital and repurchase Preferred equity 72 79 common shares Common equit
Slide 5: Consistent High Quality Investment Portfolio
Consistent High Quality Investment Portfolio ($ in millions) December 31, June 30, 2005 2006 2007 2008 2009 2010 Total invested assets $ 68,287 $ 72,268 $ 74,818 $ 70,738 $ 74,965 $ 73,129 Taxable fixed maturities 41% 38% 35% 32% 33% 33% Tax-exempt fixed maturities 46% 49% 52% 55% 55% 56% Total fixe
Slide 6: Reserve Comparisons
Reserve Comparisons • The following two slides 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 2009 combined annual statutory statement of the company’s domestic insuranc
Slide 7: Reserve Comparisons: Net Paid to Incurred Ratios
Reserve Comparisons Net Paid to Incurred Ratios – 2009 Industry Comparison Accident Workers' Compensation Accident Private Passenger Auto Liability Accident Commercial Auto Liability Year Peer(1) TRV Industry Year Peer(1) TRV Industry Year Peer(1) TRV Industry 2000 76.6% 72.4% 85.2% 2000 99.7% 99.5%
Slide 8: Reserve Comparisons: IBNR to Incurred Ratios
Reserve Comparisons IBNR to Incurred Ratios – 2009 Industry Comparison Accident Workers' Compensation Accident Private Passenger Auto Liability Accident Commercial Auto Liability Year Peer (1) TRV Industry Year Peer (1) TRV Industry Year Peer (1) TRV Industry 2000 12.1% 11.3% 6.5% 2000 0.3% 0.3% 0.2
Slide 9: Agenda
• Very strong financial position • Capital management – Economic conditions – Interest rate environment • Convergence of U.S. GAAP & International Financial Reporting Standards (IFRS) 8
Slide 10: The Economy
The Economy Economic Economic conditions conditions are are impacting impacting the the P&C P&C insurance insurance industry …. industry…. 9
Slide 11: Economic Environment
Economic Environment Impact on Insured Exposures Travelers Business Insurance (Excluding National Accounts) ♦ Renewal Rate Change1 % • Exposure/Other % ▲ Renewal Premium Change2 % 0% 2005 2006 2007 2008 2009 1Q 2Q 2010 2010 ..…but …but to to aa lesser lesser extent extent than than other other indus
Slide 12: Interest Rate Environment: Net Investment Income
Interest Rate Environment: Net Investment Income ($ in millions, after-tax) Total Total $2,915 • Long-term fixed income portfolio returns have $2,712 $2,438 $2,299 $2,290 been steady • Net investment income from short-term $1,227 portion of fixed income portfolio impacted by very low interest rates
Slide 13: Treasury Yields, AA Industrial Spreads & Yields
Interest Rate Environment 10 Year – Treasury Yields, AA Industrial Spreads & Yields 8% 8% 6% 6% Spread/Yield Spread/Yield 4% 4% 2% 2% 0% 0% Jan. 3, Jul. 3, Jan. 1, Jul. 2, Jan. 1, Jul. 1, Jan. 1, Jul. 1, Jan. 1, Jul. 1, Jan. 3, Jul. 1, Jan. 3, Jul. 3, Jan. 1, Jul. 2, Jan. 1, Jul. 1 Jan. 1, Jul. 1, J
Slide 14: Interest Rate Environment
Interest Rate Environment ($ in millions) Illustration of an Impact on Net Investment Income if Today’s Interest Rate Environment Persists for Next 3 Years Long- Long-Term Fixed Income Maturities 2011 2012 2013 Amounts in dollars $ 5,900 $ 5,400 $ 5,000 Percentage of fixed income portfolio 9.6% 8.8%
Slide 15: Capital Management: Dividends Per Common Share
Capital Management Dividends Per Common Share : 7.8% CAGR $1.23 $1.19 $1.13 $1.01 $0.91 rease 9 % I nc $0.33 $0.36 2005 2006 2007 2008 2009 1Q 2010 2Q 2010 Travelers Travelers has has paid paid cash cash dividends dividends without without interruption interruption for for 138 138 years years -- cur
Slide 16: Capital Management
Capital Management ($ in billions) 2005 2006 2007 2008 2009 2010 YTD1 Statutory: Net income $2.9 $4.3 $4.9 $4.1 $3.9 $1.2 Dividends paid to parent company2 1.0 1.4 3.2 3.7 3.6 3.4 Surplus 17.8 20.9 22.9 21.5 23.2 21.1 1 Year-to-date through June 30, 2010. 2 Dividends paid from operating companies to
Slide 17: Capital Management
Capital Management ($ in billions) 2005 2006 2007 2008 2009 2010 YTD1 Statutory: Statutory: Net income $2.9 $4.3 $4.9 $4.1 $3.9 $1.2 Dividends paid to parent company2 1.0 1.4 3.2 3.7 3.6 3.4 Surplus 17.8 20.9 22.9 21.5 23.2 21.1 GAAP: Net income $1.6 $4.2 $4.6 $2.9 $3.6 $1.3 Debt-to-capital ratio3 2
Slide 18: Capital Management: Cash Returned to Shareholders
Capital Management ($ in billions) 2005 2006 2007 2008 2009 2010 YTD1 Statutory: Statutory: Net income $2.9 $4.3 $4.9 $4.1 $3.9 $1.2 Dividends paid to parent company2 1.0 1.4 3.2 3.7 3.6 3.4 Surplus 17.8 20.9 22.9 21.5 23.2 21.1 GAAP: GAAP: Net income $1.6 $4.2 $4.6 $2.9 $3.6 $1.3 Debt- to-capital r
Slide 19: Consistently Growing Book Value Per Share
Capital Management Consistently Growing Book Value Per Share Book Value Per Share $55.67 G R: 13.1% $52.54 CA $42.22 $43.12 $36.86 $31.94 2005 2006 2007 2008 2009 June 30, 2010 Adjusted Book Value Per Share1 11.0% excluding the $50.62 impact of % $48.96 share AG R: 11.1 C repurchases2 $43.37 $41.23
Slide 20: Impact of Common Share Repurchase Program
Capital Management Impact of Common Share Repurchase Program Diluted Operating Income Per Share Operating Return on Equity + 0.1% + 4.9% + 10.7% + 17.1% + 27.9% + 0.1 pts + 1.2 pts +1.6 pts +2.4 pts + 2.0 pts $6.70 17.8% 17.9% 17.7% $6.39 $6.29 16.5% $5.85 $5.88 $5.26 $5.37 14.0% $4.75 12.4% 11.6% 1
Slide 21: Agenda
• Very strong financial position • Capital management – Economic conditions – Interest rate environment • Convergence of U.S. GAAP & International Financial Reporting Standards (IFRS) 20
Slide 22: TRV 10K Disclosure on Convergence and IFRS
TRV 10K Disclosure on Convergence and IFRS Page 154 - “Future Application of Accounting Standards” to,adopt requiredto, required IFRSor adoptIFRS howthe orhow adoptionof theadoption IFRS(or ofIFRS convergenceof theconvergence (orthe GAAP ofGAAP Item 7: Financial Condition and Results of Operations S
Slide 23: Convergence of U.S. GAAP and IFRS: FASB Activity
Convergence of U.S. GAAP and International Financial Reporting Standards (IFRS) FASB Accounting Standards Activity • Accounting for Financial Instruments (exposure draft issued in May) Requires most financial instruments to be measured at fair value. value. The proposed effective date is no sooner t
Slide 24: Accounting for P&C Insurance Contracts
Accounting for P&C Insurance Contracts The following is a comparison to current U.S. GAAP of some of the more significant provisions of the recently issued IASB exposure draft: Current U.S. GAAP (ASC 944) IASB Premiums • Premiums from short-duration insurance contracts • Premiums would be recognized
Slide 25: Accounting for P&C Insurance Contracts
Accounting for P&C Insurance Contracts The following is a comparison to current U.S. GAAP of some of the more significant provisions of the recently issued IASB exposure draft: Current U.S. GAAP (ASC 944) IASB Liability for • A liability for unpaid claims costs, including the • The liability for cla
Slide 26: Potential Issues for Users of IFRS Based Financial Statements
Potential Issues for Users of IFRS Based Financial Statements • Comparability among reporting enterprises – Increased use of judgment – Layering of assumptions – Impact of company size on risk margins • Variability in reported results – Changes in interest rates and liquidity premiums – Revaluation
Slide 27: Agenda and Q&A
• Very strong financial position • Capital management – Economic conditions – Interest rate environment • Convergence of U.S. GAAP & International Financial Reporting Standards (IFRS) • Q&A 26
Slide 28: 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). • This presentation should be read with accompanying discussion and Travelers SEC filings. • From time to time
Slide 29: Travelers
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