The Travelers Companies, Inc. · NYSE:TRV
The Travelers Companies — Q4 2013 Earnings Presentation
28 slides from The Travelers Companies's earnings presentation, Jan 21, 2014
Slide 1: Fourth Quarter and Full Year 2013 Results
The Travelers Companies, Inc. Fourth Quarter and Full Year 2013 Results January 21, 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: Fourth Quarter and Full Year 2013 Overview
Fourth Quarter and Full Year 2013 Overview Record fourth quarter net and operating income per diluted share of $2.70 and $2.68, respectively, compared to $0.78 and $0.72 in the prior year quarter. • Net and operating income of $988 million and $981 million, respectively. • Return on equity and opera
Slide 4: Consolidated Performance
Consolidated Performance ($ in millions, after-tax) Underlying Underwriting Gain1 Net Investment Income $1,457 $2,915 $1,277 $995 $2,468 $866 $888 $2,330 $2,316 $2,299 $2,290 $715 ` $2,186 ` $451 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 4 1 Excludes prior year reserve de
Slide 5: Expected Economic Product Returns
Expected Economic Product Returns 1Q’14 vs.1Q’13 Percentage of Premiums & Fees 3% 19% 34% 69% 63% 12% 1st Quarter 2013 Outlook 1st Quarter 2014 Outlook Above 20% 10% to 20% Below 10% Return on Allocated Capital Substantial improvement in expected economic product returns See important explanatory no
Slide 6: Expected Economic Product Returns Explanatory Notes
Expected Economic Product Returns Explanatory Notes The chart on slide 5 presents expected economic product returns (“product returns”) on allocated statutory surplus, indicating the percentage of aggregate product line premium and fees that have estimated returns within the indicated bands. Product
Slide 7: Consolidated Performance
Consolidated Performance ($ in millions, except per share amounts, after-tax) Fourth Quarter Full Year Fourth Quarter Full Year 2013 2012 Change 2013 2012 Change Operating income $ 981 $ 278 253 % $ 3,567 $ 2,441 46 % per diluted share $ 2.68 $ 0.72 272 % $ 9.46 $ 6.21 52 % Included the following it
Slide 8: Very Strong Financial Position
Very Strong Financial Position ($ and shares in millions, except per share amounts) Capital December 31, December 31, 2013 2012 • At or above target levels for all rating agencies. Debt $ 6,346 $ 6,350 • Total capital returned to shareholders of $1.2 billion in the Common equity 1 23,474 22,302 quar
Slide 9: Net Investment Income
Net Investment Income ($ in millions, after-tax) Total Fourth Quarter 2013 Commentary • Net investment income from the long-term fixed income $593 $589 $578 $583 $579 $556 $542 $551 $562 portfolio declined modestly from the prior year quarter due to $531 lower reinvestment rates, as expected. ` • Sh
Slide 10: Investment Yields Have Risen Over Time
Investment Yields Have Risen Over Time TRV Long-Term Fixed Income Portfolio: Average Quarterly Reinvestment Yields Tax-Exempt 4.5% 4.0% • Taxables 3.5% After-tax Book Yield 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Average Duration of Purchases Tax-Exempt 11.9 11.6 11.8 11.5
Slide 11: Components of Operating Return on Equity
Components of Operating Return on Equity 9.6% 17.9% 17.7% 12.4% 14.0% 12.5% 6.1% 11.0% 15.5% 11.1% 11.0% 10.6% 1.4% 1.6% 1.4% 9.4% 9.3% 0.8% 0.7% 8.1% 9.0% 0.5% 0.9% 0.9% 8.5% 8.2% 1.3% 0.4% 0.1% 0.9% 0.1% 1.2% 6.8% 6.7% 7.0% 5.8% 8.7% 8.9% 8.7% 8.3% 8.3% 8.3% 8.0% 8.1% 7.3% 4.3% 3.2% 1.6% (0.1%) (0
Slide 12: Business Insurance
Business Insurance Performance ($ in millions) Fourth Quarter Full Year Third Quarter Year-to-Date 2013 2012 Change 2013 2012 Change Operating income $ 634 $ 326 94 % $ 2,329 $ 1,843 26 % Loss and loss adjustment ratio 58.6 % 72.2 % 61.2 % 65.9 % Underw riting expense ratio 30.3 31.3 30.7 31.5 GAAP
Slide 13: 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% 7.1% 7.3% 7.7% 6.9% 7.2% 7.0% 7.0% 6% 5.9% 4% 2% - (2%) 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 ($ in mil
Slide 14: Business Insurance: Select Accounts
Business Insurance: Select Accounts Illustrative Business Statistics Renewal Pricing Results 14% ▲ Renewal Premium Change1 % Renewal Rate Change2 % 12% • Exposure/Other % 10% 8% 6.7% 6.9% 6.7% 6.7% 6.7% 5.7% 6.0% 6.1% 6% 4% 2% - (2%) 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 ($ in millions)
Slide 15: 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% 9.5% 8.8% 8.4% 8.3% 8.2% 8.0% 8% 7.4% 6% 5.9% 4% 2% - (2%) 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 ($ in millio
Slide 16: 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% 6.7% 6.9% 6.7% 6.8% 6.5% 6.9% 6.6% 5.8% 6% 4% 2% - (2%) 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 ($ in
Slide 17: Business Insurance: Middle Market
Business Insurance: Middle Market Renewal Rate Change: Poorer Performing Segmentation Bands 2pts 2pts Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Retention 79% 78% 82% 78% 77% 74% 76% 80% 17 Note: Statistics are subject to change based on a number of factors, including changes in actuarial estim
Slide 18: Financial, Professional & International Insurance
Financial, Professional & International Insurance Performance ($ in millions) Fourth Quarter Full Year Third Quarter Year-to-Date 2013 2012 Change 2013 2012 Change Operating income $ 171 $ 131 31 % $ 648 $ 642 1 % Loss and loss adjustment ratio 45.7 % 46.6 % 43.2 % 42.8 % Underw riting expense ratio
Slide 19: Financial, Professional & International Insurance
Financial, Professional & International Insurance ($ in millions) Illustrative Business Statistics 2012 2013 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Surety Gross written premium $202 $223 $219 $194 $195 $235 $225 $197 Management Liability 1 Retention 87% 86% 85% 85% 85% 83% 85% 84% Renewal premium change 2 5.2% 6.1
Slide 20: Personal Insurance
Personal Insurance Performance ($ in millions) Fourth Quarter Full Year Third Quarter Year-to-Date 2013 2012 Change 2013 2012 Change Operating income (loss) $ 237 $ (114) NM % $ 838 $ 217 286 % Loss and loss adjustment ratio 57.0 % 85.0 % 59.1 % 72.3 % Underw riting expense ratio 29.9 30.2 29.8 29.6
Slide 21: Personal Insurance
Personal Insurance Performance Fourth Quarter Full Year 2013 2012 Change 2013 2012 Change Agency Automobile 1 Loss and loss adjustment ratio 77.8 % 89.0 % 72.8 % 77.4 % Underw riting expense ratio 26.2 26.5 26.1 25.7 2 GAAP combined ratio 104.0 % 115.5 % 11.5 pts 98.9 % 103.1 % 4.2 pts Net unfavorab
Slide 22: Personal Insurance
Personal Insurance ($ in millions) Illustrative Business Statistics 2012 2013 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Agency Automobile 1 Retention 2,3 82% 81% 79% 79% 79% 80% 80% 81% Renewal premium change 3,4 5.7% 6.7% 9.1% 9.7% 9.9% 9.3% 7.3% 6.9% PIF growth over prior year quarter (1%) (3%) (6%) (9%) (11%) (12%
Slide 23: Appendix
Appendix Additional Information Additional Information 23
Slide 24: Estimate of Impact on Net Income if Interest Rate Environment Persists
Estimate of Impact on Net Income if Today’s Interest Rate Environment Persists Through 2016 Projected maturities of long-term fixed income securities1: 2014 $10.5 Billion 2015 $ 9.4 Billion 2016 $ 6.0 Billion Estimated reduction in annual net income2: 2014 vs. 2013 ~$100 Million 2015 vs. 2014 ~$ 90
Slide 25: Reconciliation of After-tax Underwriting Gain
Reconciliation of After-tax Underwriting Gain (Excluding the Impact of Catastrophes and Net Favorable Development) to Net Income ($ in millions, after-tax) 2013 2012 2011 2010 2009 2008 2007 Underwriting gain excluding the impact of catastrophes and net favorable prior year loss reserve development
Slide 26: 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 27: 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 28: The Travelers Companies, Inc.
The Travelers Companies, Inc. Additional Information Additional Information 28
The Travelers Companies — Q4 2013 Earnings Presentation on 6ix