Travelers 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Hit a 15.2% ROE

“as demonstrated by our operating returning on equity of 15.2%. In addition to posting very strong financial results, the underlying dynamics in our businesses are showing very solid performance and give us continued optimism about our future financial results.’

Have reduced shares outstanding by 51% in last 8 years

“he Board of Directors initiated the current share repurchase program on May 2nd, 2006 a little over 8 years ago. On May 1st, 2006 the day before the board authorization Travelers market capital was $30.2 billion and we had approximately 696 million shares outstanding. Since that time, we’ve repurchased over 416 million shares at an average price of $56.50 per share issued a net amount of approximately 51 million shares mostly in connection with share-based incentive comp awards, and now have 331 million shares outstanding at the end of the current quarter, a 52% reduction in our common shares.”

Since returns are strong, can start to grow the top line

“as overall returns have become more consistent with our long-term objective, we have begun to see improving top line trends. We have said many times that volume is never our goal, but that we always seek opportunities to add business that meets our target returns.”

You can’t always depend on the kindness of strangers

“I have also been asked whether we would be interested in building a book of business and in effect arbitraging it against the reinsurance opportunity. And I am always mindful that when you take on a risk on the right side of your balance sheet, there is some permanence to it; and the reinsurance profile on the left may or may not be permanent. And you’ve got to be very cautious and careful about not finding yourself in an unreinsured position or in a mismatch, which can happen and has happened.”

I am hopeful that this business will prove to be less cyclical than it was in the past

“I am hopeful, maybe even cautiously optimistic, that we will not – and I said this by the way 10 years ago – maybe not 10, maybe 8 years ago. I personally believe that the property and casualty business will have a meaningfully lower level of cyclicality. Never said zero, but always said a less, lower amplitude of that cyclicality. There are a host of reasons why I believe that. Analytics and data are just one, but a very important one.

And I think it has proven on the way down before we entered into this cycle. I think it has been proven here on the way up. I am hopeful, maybe even optimistic, that that will turn out to be true on the way down. We don’t see anything in the way in which business is done at the point of sale in the market that would suggest that we are at a precipice, that would suggest that something fundamentally is going to change next month, next quarter, or frankly even next year.”

Wild cyclicality is bad for everyone

“Wild cyclicality up or down is actually bad for everybody. And better insight, better data, better analytics is actually better for everybody. You get better analysis, you get better, more thoughtful pricing related to risk.”