Business Insurance 2014 LEADERSHIP CONFERENCE Proprietary and Confidential
PROPRIETARY AND CONFIDENTIAL: TRAVELERS HAS SHARED THIS MATERIAL WITH YOU SOLELY FOR THE PURPOSE OF HELPING YOU UNDERSTAND OUR PERSPECTIVES AND STRATEGIES, SO THAT YOU CAN BETTER SERVICE OUR MUTUAL CUSTOMERS AND PROSPECTS. YOU MAY NOT USE THIS MATERIAL WITHIN YOUR ORGANIZATION FOR ANY OTHER PURPOSE, OR DISTRIBUTE IT TO ANYONE OUTSIDE YOUR COMPANY, WITHOUT OUR ADVANCED WRITTEN CONSENT. WITHOUT LIMITING THE FOREGOING, UNDER NO CIRCUMSTANCES MAY YOU SHARE THIS MATERIAL WITH ANY COMPETITOR OF TRAVELERS OR WITH ANYONE ACTING ON BEHALF OF A TRAVELERS COMPETITOR. Proprietary and Confidential
Business Insurance Middle First National Specialized Small Commercial Market Party Accounts Distribution Record 2013 Net Written Premium = $12.2 B Proprietary and Confidential
Today’s Focus The environment The progress we’ve made Our 2014 execution plans Opportunity to Deliver Value Together Proprietary and Confidential
The Challenging Environment Continues 10-Year Treasury Yields P&C Industry Catastrophes 9% 8% Losses as Percentage of Premium 8% 6.6% 6.1% 7% 6.0% 6% 6% 4.3% 5% 3.5% 4% 3.2% 3.4% 4% 2.8% 2.4% 3% 1.8% 2% 2% 1.3% 1.0% 0.9% 1% 0% 0% 1960's 1970's 1980's 1990's 2000's 2010's 1995 2000 2005 2010 2011 2012 2013 Note: 2010’s represent 2010 -2013 P&C Industry Combined Ratio P&C Industry Return on Equity 115.0% 15% 14.4% 110.0% 108.0% 105.1% 12.4% 8.6% 10% 105.0% 102.7% 103.0% 6.6% 5.9% 98.9% 5.9% 100.0% 95.5% 100.5% 3.5% 5% 92.9% 95.0% 0.6% 90.0% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 2013 CAT Source: ISO (1960-2011); AM Best (2012E) Insurance Information Institute CR & ROE Source: 2014 III Factbook (2006-2012); Conning 4Q’13 Forecasts (2013) Proprietary and Confidential 10-Year Treasury Source: http://www.federalreserve.gov/releases/H15/data.htm, 10-year nominal treasury
Our Progress 106.9% 2013 108% Relatively 106% Moderate Weather Accident Year Combined Ratio 104% Year 101.4% 102% 100.2% 99.7% 100% 98.0% 98% 98.0% 96% 94.6% 95.4% 95.4% 94% 94.2% 92% BI Combined Ratio, ex. PYD 92.8% 92.5% BI CR for a 15% ROE 90% 2008 2009 2010 2011 2012 2013 Need for Continued Margin Improvement GAAP combined ratios excluding PYD as reported at year-end. ROE equivalents: Represents economic return and not a GAAP ROE. Proprietary and Confidential Statistics are subject to change based on a number of factors, including changes in actuarial estimates.
P&C Industry CATs Losses as a Percentage of Premium 10 8.9 8.8 8.7 9 8.1 8 Combined Ratio Points 7 5.9 5.4 6 5 5 3.6 3.6 3.4 3.4 4 3.3 3.3 3.3 2.9 2.8 3 2.7 2.6 3 2.3 2.1 1.8 2 2 1.6 1.6 1.6 1.5 2 1.4 1.3 1.3 1.2 1.2 1.1 1.1 1.1 0.9 0.8 0.8 0.7 1 0.7 0.7 1 0.6 0.5 0.5 0.4 0.4 0.4 0.4 0.4 1 0.3 0.1 0 2010s represent 2010-2013. Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted for losses ultimately paid by foreign insurers and reinsurers. Source: ISO (1960-2011); AM Best (2012E) Insurance Information Institute Proprietary and Confidential
P&C Industry CATs Losses as a Percentage of Premium 10 9 8 Combined Ratio Points 7 6.10 6 5 4 3.52 3.39 3 2 1 1.31 1.04 0.85 0 Avg. CAT Loss Component of the Combined Ratio 2010s represent 2010-2013. Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted for losses ultimately paid by foreign insurers and reinsurers. Source: ISO (1960-2011); AM Best (2012E) Insurance Information Institute Proprietary and Confidential
Continued Thoughtful Execution Commercial Accounts Example 2013 90% 20% 18% 85% 16% Rate Change 14% Retention 80% 12% 75% 10% 8% 70% 6% 4% 4% 65% 2% 60% 0% Most Profitable Least Profitable Proprietary and Confidential
Loss Cost Trends Flat Renewal = Rate That Covers Loss Trend Proprietary and Confidential
Challenging Small Commercial Environment CMP Industry Combined Ratio 116% 113.2% 112% 108% Combined Ratio 105.0% 104.1% 104% 100% 101.0% 100.1% 96% 93.0% 96.9% 92% 92.1% 88% 2006 2007 2008 2009 2010 2011 2012 2013 Source: Conning 4Q’13 Proprietary and Confidential
Challenging Small Commercial Environment Travelers Plans: More Consistent Pricing = More Stability for You Thoughtfully Improve Margins Continued Investments in Small Commercial Platform Our Investment = Your Opportunity Proprietary and Confidential
National Accounts Overview 2013 Product Line Mix $3 Billion Business General Liability Focus: $1-10M Account Size 7% – 60% of accounts <$2M Auto Workers’ – Typically retain first $250K of loss 11% Comp 78% Umbrella/ Broad Industry Appetite Other 2% Note: $3 Billion Direct Written Premium & Equivalents YE 2013; excludes Residual Markets and losses under management. Source: TM1 Proprietary and Confidential
National Accounts Retention & New Business Bundled & Service $350 100% 95% $300 90% $250 (Amounts in Millions) New Business P&E 85% Retention $200 80% $150 75% $100 70% $50 65% $0 60% 2008 2009 2010 2011 2012 2013 New Business P&E Retention Customers Realizing Value Proprietary and Confidential
BI Risk Survey Businesses believe the world is becoming riskier Companies that focus on risk prevention and management are more likely to outperform their peers Medical Cost Inflation is the Top Concern for Business Decision Makers Proprietary and Confidential
Medical Costs Will Continue to Rise 50% of Our Casualty Loss Costs Are Medical – WC projected to increase from 60% today to over 67% by 2020 Increased Demand - Affordable Care Act and Aging Population – Every day for the next 20 years 10,000 Americans will turn 65 – > 25% of the US Workforce will be 55+ by 2020 Reduced Supply - Fewer Doctors in the System – Shortage of 45,000 PCPs and 46,000 surgeons / specialists by 2020* Medical costs will be ~ 20% of GDP in 2020 Travelers Has Unmatched Capabilities to Help Manage Costs *Source: The Association of American Medical Colleges Proprietary and Confidential
Travelers Client Advantage Leveraging Travelers Value Proposition Across Business Insurance Claim Proprietary and Confidential
Customers Rely on Their Agent and Carrier As Best Sources to Mitigate Risk Delivering Value & Offering Solutions Together Proprietary and Confidential
2014 Travelers Leadership Conference Proprietary and Confidential
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