The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Barclays Financial Services Conference 2012
26 slides from The Travelers Companies's conference presentation, Sep 11, 2012
Slide 1: Jay Fishman, Chairman & Chief Executive Officer
Jay Fishman Chairman & Chief Executive Officer Barclays Financial Services Conference September 11, 2012 1
Slide 2: Overview
Overview • Components of operating ROE • Interest rate environment • Weather • Improving underwriting margin • Capital management 2
Slide 3: 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% 11.8% 11.1% 11.0% 10.6% 1.4% 1.4% 1.6% 9.7% 9.3% 0.8% 0.7% 8.1% 9.0% 0.5% 0.9% 1.5% 0.4% 8.2% 0.1% 0.9% 0.1% 6.8% 6.7% 5.8% 8.7% 8.9% 8.7% 8.3% 8.3% 8.3% 8.0% 8.2% 4.3% 3.2% 2.1% (0.6%) (0.1%) (1.0%) (2.9%) 2005 2006 20
Slide 4: Operating Return on Equity - Underwriting
Operating Return on Equity - Underwriting (1.0%) 6.8% 6.7% 4.3% 5.8% 3.2% (2.9%) 2.1% 1.0% 1.3% 3.5% 3.2% 3.1% 3.0% 6.3% 6.1% 5.8% 1.9% 4.1% 3.7% 2.9% 3.1% 2.0% (0.3%) (0.4%) (0.9%) (1.1%) (3.3%) (2.8%) (4.0%) (6.8%) (6.4%) 2005 2006 2007 2008 2009 2010 2011 2012 Full Year Year- to-Date1 Year-to- Un
Slide 5: Overview
Overview • Components of operating ROE • Interest rate environment • Weather • Improving underwriting margin • Capital management 5
Slide 6: Consistent High Quality Investment Portfolio
Consistent High Quality Investment Portfolio ($ in millions) June 30, December 31, Investment Investment Strategy Strategy 2012 2011 - High quality Total invested assets $ 72,944 $ 72,701 Taxable fixed maturities 36% 35% Tax-exempt fixed maturities 53% 53% Total fixed maturities 89% 88% - Discipline
Slide 7: Interest Rate Environment
Interest Rate Environment Estimate of Impact on Net Income if Today’s Interest Rate Environment Persists Through 2015 Projected Projected maturities maturities of of long-term long-term fixed fixed income securities11:: income securities 2013: 2013: $7.3 $7.3 billion billion 2014: 2014: $9.9 $9.9 bi
Slide 8: Overview
Overview • Components of operating ROE • Interest rate environment • Weather • Improving underwriting margin • Capital management 8
Slide 9: Changing Weather?
Changing Weather? U.S. Historical Catastrophes Industry Industry Insured Insured Losses Losses ($ in billions) $62 40 2005 Hurricanes Katrina, Rita, Wilma $ 35 30 25 20 15 10 5 - 1 2005 2006 2007 2008 2009 2010 2011 2012 YTD Tornado / Hail Hurricane Winter Storm Fire Earthquake Other 1 Year-to-date
Slide 10: Catastrophe Risk Management
Catastrophe Risk Management • Strong management focus on tail risk perils - Hurricane, earthquake, terror • Proprietary view of risk that evaluates risk/reward - Leverage multiple industry models and Travelers experience Single Single U.S. U.S. Hurricane Hurricane Single Single U.S. U.S. & & Canadia
Slide 11: Catastrophe Risk Management
Catastrophe Risk Management Travelers U.S. Single Hurricane 1-in-250 Year Loss Estimate ($ in billions, after-tax) 1 U.S. U.S. Hurricane Hurricane Likelihood Likelihood of of Exceedance Exceedance1 $6 Adjustment for inflation (2012 dollars) Loss estimate adjustment reflecting TRV view of RMS 11 $5 E
Slide 12: Catastrophe Risk Management
Catastrophe Risk Management • Expanded focus on non-tail risk perils - Tornado/hail, winter storm, wildfire • Ongoing improvement in risk/reward evaluation of tornado/hail exposure - Enhancing internal metrics - Developed proprietary view of tornado/hail risk, benchmarked against frail industry mode
Slide 13: Overview
Overview • Components of operating ROE • Interest rate environment • Weather • Improving underwriting margin • Capital management 13
Slide 14: Improving Underwriting Margin
Improving Underwriting Margin Renewal Pricing Results Business Business Insurance Insurance ex. ex. National National Accounts Accounts 10% ▲ Renewal Premium Change1 % ♦ Renewal Rate Change2 % 8% • Exposure/Other % 7.2% 7.7% 7.5% 6% 4% 2% - (2%) 3 1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3QTD'12 Retentio
Slide 15: Improving Underwriting Margin
Improving Underwriting Margin Retention and Renewal Pricing Results Business Business Insurance: Insurance: Commercial Commercial Accounts Accounts 100% 20% 2Q’ 2Q’12 Retention ♦ 2Q’ 2Q’12 Renewal Rate Change % 1 90% 16% Renewal Rate Change1 Retention 80% 12% 70% 8% 60% 4% 50% -% <60% 60% - 90% >90%
Slide 16: Improving Underwriting Margin
Improving Underwriting Margin Renewal Rate by Band 1 Business Business Insurance: Insurance: Commercial Commercial Accounts Accounts1 1,800 1,800 2Q’11 2Q’12 1,500 1,200 1,200 Number of Accounts 900 600 600 300 300 - < 0% 0% 0% to 5% 5% to 10% 10% to 15% > 15% Rate increases of 10% or more on 35% of
Slide 17: Improving Underwriting Margin
Improving Underwriting Margin Business Insurance – Illustration of Impact of Rate Increases ($ in millions) 1H 2012 3Q 2012E 4Q 2012E FY 2012E Impact of earned rate increases on $191 $143 $161 $495 premiums Estimate of direct variable costs 34 26 29 89 Subtotal 157 117 132 406 Assumed annual loss co
Slide 18: Improving Underwriting Margin
Improving Underwriting Margin Renewal Pricing Results – Personal Insurance Agency Agency Automobile Automobile Agency Agency Homeowners Homeowners && Other Other 1 1 Renewal Renewal Premium Premium Change Change1 Renewal Renewal Premium Premium Change Change1 10% 15% 8% 10% 6% 4% 5% 2% -% -% 1Q’11 2
Slide 19: Overview
Overview • Components of operating ROE • Interest rate environment • Weather • Improving underwriting margin • Capital management 19
Slide 20: Capital Management
Capital Management Return Excess Capital to Shareholders Common Common Share Share Repurchases Repurchases and and Dividends Dividends ($ in millions) $5,670 $3,990 $3,685 $3,569 $2,834 $1,817 $1,043 $622 2005 2006 2007 2008 2009 2010 2011 2012 YTD1 Common Share Repurchases and Dividends as a Percen
Slide 21: Capital Management
Capital Management Impact of Common Share Repurchase Program Diluted Diluted Operating Operating Income Income Per Per Share Share Operating Operating Return Return on on Equity Equity + 0.5% + 4.9% + 10.7% + 17.1% + 31.8% + 27.6% + 55.0% + 0.1 pts + 1.2 pts +1.6 pts +2.4 pts +3.0 pts + 1.2 pts + 4.
Slide 22: Consistent Growth of Book Value Per Share
Capital Management Consistent Growth of Book Value Per Share Book Book Value Value Per Per Share Share $64.90 % R: 11.5 $58.47 $62.32 CAG $52.54 $42.22 $43.12 $36.86 $31.94 2005 2006 2007 2008 2009 2010 2011 June 30, 2012 1 Adjusted Adjusted Book Book Value Value Per Per Share Share1 8.9% excluding
Slide 23: Total Return (Through September 10, 2012)
Total Return (Through September 10, 2012) 20 Largest S&P Financial Companies1 & Other Selected Financial Companies Long- Long-Term: Since Long-Term: Since Jan. Jan. 1, 1, 2005 2005 Short- Short-Term: Since Short-Term: Since Jan. Jan. 1, 1, 2011 2011 168.0% BlackRock, Inc. 37.6% American Express Comp
Slide 24: Explanatory Note
Explanatory Note This presentation contains, and management may make, “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,” “will,” “s
Slide 25: 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 releases and financial supplements that we have made available in connection
Slide 26: The Travelers Companies, Inc.
The Travelers Companies, Inc. Additional Information Additional Information 26
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