Travelers 4Q14 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

Returned $4 B to shareholders

“we returned over $4 billion in capital to our shareholders through dividends and buybacks, while still maintaining our significant balance sheet strength.”

Industry is much more stable than it used to be

“We remain optimistic about our ability to successfully execute these strategies. Our own observation is that the markets in which we do business remained fairly stable. For the last several years, we have shared with you that while we recognize that we could be wrong, we were skeptical of the concept of the old-fashioned severe insurance pricing cycle, where a bell to go off and it would be a few years of very high price increases and then another bell would go off and there would be significant price declines.”

Advanced analytics have contributed

“Advanced analytics and a more demanding regulatory and oversight environment have also meaningfully contributed. While there will always be changes in pricing both, increases and decreases in response to changes in loss costs, expense , interest rates or changes in real or perceived risk, as there are in many industries, we continue to believe that the amplitude of the cycle has narrowed substantially.”

Underwrite the account, don’t just blindly price to trend

“We have not issued an edict to the field that says get trend on every account. That would be a dumb thing to do. We say to them manage the long-term return given everything you know about the agent, the account, profile of that account and manage it thoughtfully and if that means that account is going to renew flat for a year or two, that is okay, so that is really the comment about stair step that I was speaking to.”

We really have no interest in the reinsurance business

“We really have no interest in the reinsurance business in the broadest sense, so to the extent that there are the things happening in the arena Bermuda or otherwise, we largely do not pay attention to it and I do not really have a view on the value that has created there. I am not knowledgeable I am not close enough to it to have a thoughtful view.”

We are a return driven organization

“We have always said about acquisitions and this hasn’t changed. It is very, very much the same. We are a return-driven organization, the principal view that we would take for looking at anything is what would it do to our return profile over time. Would it potentially improve our return dynamics and that could be either in magnitude or in volatility. To the extent there is diversification, geographic expansion and providing lower volatility returns that could meet the threshold also.”

We are big enough, we don’t need to be any bigger

“We are big enough, we do not need to be any bigger, but we are driven about returns, driven by them.”

If you tell your underwriters to grow, you’ll get growth

“Underwriters will do, good ones, will do with precision what you ask them to do, so you better be really good at knowing what you are asking of them….If you tell an underwriter grow, they will. We don’t tell them that, we tell them to find thoughtful ways to deploy capital. If they cannot, it is okay. It’s okay. No one will ever be asking you why they did not meet their volume budget, because first time you asked them that they will meet at the next quarter and all of us understand that you would never speak to loan officer that way at the back”

The feedback loop is so much faster than it was 20 years ago

“I can’t overstate how different that is than it was 20 years ago. It is just quite different. I think most importantly is that the feedback loop between what goes on in the field and what is really – knowledge at the home office to ways going on is stunningly shorter than it was 20 years ago, so the ability to act and react to changes not just cyclical big time changes, but local changes on offices, on market, on company in a local place is just that much better.”