Business Insurance 2014 LEADERSHIP CONFERENCE Proprietary and - - PowerPoint PPT Presentation

Business Insurance

2014 LEADERSHIP CONFERENCE Proprietary and Confidential

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.

Business Insurance

Record 2013 Net Written Premium = $12.2 B

Middle Market First Party Specialized Distribution Small Commercial National Accounts

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• The environment
• The progress we’ve made
• Our 2014 execution plans

Today’s Focus

Opportunity to Deliver Value Together

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The Challenging Environment Continues

1.0% 0.9% 1.3% 3.4% 3.5% 6.1% 0% 2% 4% 6% 8% 1960's 1970's 1980's 1990's 2000's 2010's

P&C Industry Catastrophes Losses as Percentage of Premium

Note: 2010’s represent 2010-2013

92.9% 95.5% 105.1% 100.5% 102.7% 108.0% 103.0% 98.9% 90.0% 95.0% 100.0% 105.0% 110.0% 115.0% 2006 2007 2008 2009 2010 2011 2012 2013

P&C Industry Combined Ratio

6.6% 6.0% 4.3% 3.2% 2.8% 1.8% 2.4% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

1995 2000 2005 2010 2011 2012 2013

10-Year Treasury Yields

CAT Source: ISO (1960-2011); AM Best (2012E) Insurance Information Institute CR & ROE Source: 2014 III Factbook (2006-2012); Conning 4Q’13 Forecasts (2013) 10-Year Treasury Source: http://www.federalreserve.gov/releases/H15/data.htm, 10-year nominal treasury

14.4% 12.4% 0.6% 5.9% 6.6% 3.5% 5.9% 8.6% 0% 5% 10% 15% 2006 2007 2008 2009 2010 2011 2012 2013

P&C Industry Return on Equity

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Our Progress

98.0% 98.0% 95.4% 94.2% 92.5% 92.8% 100.2% 95.4% 99.7% 106.9% 101.4% 94.6% 90% 92% 94% 96% 98% 100% 102% 104% 106% 108% 2008 2009 2010 2011 2012 2013

Accident Year Combined Ratio

Need for Continued Margin Improvement

2013 Relatively Moderate Weather Year

GAAP combined ratios excluding PYD as reported at year-end. ROE equivalents: Represents economic return and not a GAAP ROE. Statistics are subject to change based on a number of factors, including changes in actuarial estimates.

BI CR for a 15% ROE BI Combined Ratio, ex. PYD Proprietary and Confidential

P&C Industry CATs

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

0.8 1.1 1.1 0.1 0.9 3.6 0.4 1.2 0.4 0.8 1.3 0.3 0.4 0.7 1.5 1 0.4 0.4 0.7 1.8 1.1 0.6 1.4 2 1.3 2 0.5 0.5 0.7 3 1.2 2.1 8.8 2.3 5.9 3.3 2.8 1 3.6 2.9 1.6 5.4 1.6 3.3 3.3 8.1 2.7 1.6 5 2.6 3.4 8.7 8.9 3.4

1 2 3 4 5 6 7 8 9 10

Combined Ratio Points

Losses as a Percentage of Premium

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P&C Industry CATs

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

1 2 3 4 5 6 7 8 9 10

Combined Ratio Points 1.04 0.85 1.31 3.39 3.52 6.10

• Avg. CAT Loss Component of the Combined Ratio

Losses as a Percentage of Premium

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Continued Thoughtful Execution

Commercial Accounts Example

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 60% 65% 70% 75% 80% 85% 90%

Rate Change

Retention Most Profitable Least Profitable 4%

2013

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Loss Cost Trends

Flat Renewal = Rate That Covers Loss Trend

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CMP Industry Combined Ratio

Challenging Small Commercial Environment

93.0% 92.1% 104.1% 96.9% 100.1% 113.2% 105.0% 101.0%

88% 92% 96% 100% 104% 108% 112% 116%

2006 2007 2008 2009 2010 2011 2012 2013

Combined Ratio

Source: Conning 4Q’13

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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

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National Accounts Overview

• $3 Billion Business
• Focus: $1-10M Account Size

– 60% of accounts <$2M – Typically retain first $250K of loss

• Broad Industry Appetite

Auto 11% General Liability 7% Workers’ Comp 78% Umbrella/ Other 2%

2013 Product Line Mix

Note: $3 Billion Direct Written Premium & Equivalents YE 2013; excludes Residual Markets and losses under management. Source: TM1

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National Accounts Retention & New Business

Bundled & Service

60% 65% 70% 75% 80% 85% 90% 95% 100% $0 $50 $100 $150 $200 $250 $300 $350 2008 2009 2010 2011 2012 2013 Retention New Business P&E (Amounts in Millions) New Business P&E Retention

Customers Realizing Value

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• Businesses believe the world is

becoming riskier

• Companies that focus on risk prevention and

management are more likely to outperform their peers

BI Risk Survey

Medical Cost Inflation is the Top Concern for Business Decision Makers

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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

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Travelers Client Advantage

Leveraging Travelers Value Proposition Across Business Insurance Claim

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Delivering Value & Offering Solutions Together

Customers Rely on Their Agent and Carrier As Best Sources to Mitigate Risk

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2014 Travelers Leadership Conference

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