Travelers 4Q15 Earnings Call Notes

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The Travelers Companies’ (TRV) CEO Alan Schnitzer on Q4 2015 Results

Commercial marketplace remains remarkably stable

“Broadly speaking, the market dynamics in the commercial insurance marketplace continued to be remarkably stable.”

New CEO

“Let me take just a minute to comment on the leadership transition. What I suspect many of you want to hear from me is where do go from here? As I’ve explained to our leadership team, our challenge is this, to take today’s summit and make it tomorrow’s base camp.”

There are a lot of things that could change insurance markets over the coming years

“I guess what I would share with you is that we are very aware and deeply engaged in all of those things. So whether that’s – what’s going on with any of our competitors or what’s going on with technology or big data or driverless cars, consolidation among distribution, you could go on and on. I think what I would share with you is we’re very aware and deeply engaged…but as we think of everything that’s got the potential to change in this marketplace, nothing is going to change overnight. These are things that are all going to evolve and develop overtime.”

We think that the industry will continue to be focused on returns on products

“I’m not going to overly segment the portfolio. I think the backdrop to this is really the view of, do we think the industry is going to continue to fundamentally be focused on the returns on the products. And we think that’s the right way to be thinking about the business and we’re optimistic that the majority of the marketplace is actually looking at that.”

Focused on learning the personal lines business better

“So I had experienced managing essentially all of our commercial business and our businesses outside the U.S. what I haven’t had experienced with is, the personalized business on a relative basis not as much, personalized business in some of our functions like claim and IT and ops and things like that, risk control, so, I’m trying to spend a lot of time in those businesses and areas that I haven’t had the experience with, trying to spend a lot of time on the road out in the field with distribution and our employees in the field which has always been a priority of mine.”

Jay Benet

Continue to generate much more capital than we need to support our business

“We continue to generate much more capital than we need to support our businesses and consistent with our ongoing capital management strategies as you heard from Alan. We returned to almost $1.2 billion of excess capital to our shareholders this quarter through dividends of $183 million and common share repurchases of a little over $1 billion.’

Premium to surplus ratios are not really relevant anymore

“The premium to surplus ratio, I would view as not being relevant at all. I mean that was a ratio that was used at a time when rating agencies and regulators didn’t have the sophisticated models they have today.”

Brian MacLean

Pricing trends remained consistent

“Pricing trends remained relatively consistent with renewal rate change still slightly positive at the end of the year, while new business volume in our domestic business saw a modest increase.”

Conversations are tilting towards price declines

“A couple of years ago, almost every conversation was starting with some form of price increase even for the best accounts, because everybody saw where the trends were and that is gradually mitigated overtime. But even with those better accounts, the conversation start somewhere with trying to renew it at a modest decline or flat.”

Bill Heyman

We think funds have marked down their energy portfolios enough that there shouldn’t be a lot more downside

“During the year most funds wrote down their holdings and in some cases after the write-downs the price of petroleum rose but nothing was written up again. So we think a lot of these portfolios have been marked pretty hard. That said, if we had to predict either way, there is probably a little downside left in the portfolio but the portfolio isn’t that big that the amount are to be material then the aggregate.”

Doreen Spadorcia

Haven’t seen anything to suggest that higher miles driven is leading to more accidents

“So let me just talk a little bit about miles driven. The data shows that probably year-to-date the miles driven are up about 2.5% per capita and there is still a lot of debate about whether that makes a difference if it’s a long trip, a short trip, whether there is unemployment, whether you have safety features in your vehicles, and so you know we watch that closely but our long term trend of 3% anticipate that and we really haven’t seen anything that that particular item is causing us to view frequency differently today.”