Over the last decade, we have been confronted with a challenging economy, low interest rates, and severe weather — conditions that are demanding even for the best property and casualty insurance companies. So, it is of particular note that, despite these challenges, Travelers consistently delivered a very strong performance throughout this period.
The roots of our success lie in a discussion the senior management team began almost a decade ago. We asked ourselves perhaps the most basic question of all for a publicly listed company: Why would anyone want to own stock in Travelers?
Ultimately, this led us to the decision to be a return-focused company. We understood that, by delivering superior returns over time, we would create real value for our shareholders.
While we were confident in our ability to deliver, we have, in fact, been successful even beyond our expectations. From an investment perspective, our thoughtful approach to risk has enabled us to avoid almost all of the issues that other financial services companies have faced over this time. From an insurance underwriting perspective, we benefit from meaningful and sustainable competitive advantages that have enabled us to deliver top-tier earnings. As a result, we have generated substantially more capital than we have needed to support our business. We have returned this excess capital to shareholders while simultaneously growing book value per share.
Our long-term track record means everything to us, which is why our emphasis is on generating superior returns over time. Our cumulative operating income for the past decade has been approximately $31.6 billion. Since May 2006, we have returned $30.7 billion to shareholders through share repurchases and dividends — more than the market capitalization of the company when we initiated this strategy. Along the way, we have made important investments in our businesses and opportunistic acquisitions that fit our return profile. All of this has contributed to returns in the top tier of our industry, with an average annual operating return on equity over the past decade of approximately 13.3 percent. Our 10-year total return to shareholders ranks us among the top performers in financial services.
We maintained our successful track record in 2014 with another year of strong performance. We posted record levels of net and operating income per diluted share, with year-over-year increases of 10 and 12 percent, respectively. Our operating return on equity was 15.5 percent, and our return on equity was 14.6 percent. Operating income of $3.641 billion and net income of $3.692 billion were strong and consistent with our 2013 results. We ended the year with book value per share of $77.08, an increase of 10 percent over the prior year-end. Our results benefited from strong underwriting and investment performance, and from our ongoing strategy of returning excess capital to shareholders.
We could not be more pleased with how we have executed on our business strategies. We posted record net written premiums in Business and International Insurance. In domestic business insurance, our competitive advantages in data and analytics enabled us to continue our granular pricing strategy and make steady improvements in product returns. Our international footprint is evolving well, and we are very pleased with our progress on the integration of the Dominion business in Canada. The introduction of Quantum Auto 2.0® helped Personal Insurance improve our competitive position in the marketplace and deliver solid returns in the second half of the year. Bond & Specialty Insurance generated record underwriting and operating income in 2014. We maintained our market leadership position in surety and continued to grow our profitable management liability business with private companies and nonprofit organizations.
We remained steadfast in our diligent capital management strategy. Last year, we returned more than $4 billion in capital to our shareholders through share repurchases and dividends — nearly $900 million more than in 2013 — while still maintaining our significant balance sheet strength.
In an environment that sometimes encourages short-term thinking, we achieved these results by executing consistently on our long-term strategy, a strategy that has created substantial value for you, our shareholders.
The way we conduct our business and the people we employ are also critical drivers of our success.
We approach the business understanding that insurance is complex and that we are fallible — in this industry, in particular, overconfidence increases the risk of failure. So, we don’t just hire the best and brightest people; we listen to them. Our collaborative culture ensures that their diverse experiences, deep knowledge, and expertise are applied to the decisions we make, giving our customers the very best of Travelers.
We are particularly attentive to our responsibility to develop the next generation of leaders with the knowledge and skills they need to ensure the company continues to thrive. The organizational changes we announced last June demonstrate the exceptionally strong bench of talent we have nurtured over many years.
Our employees care deeply about our customers and go out of their way to exceed expectations. They deliver exceptional customer service. They help people and businesses prepare for what could go wrong. They handle claims sensitively, with urgency, and with integrity. They also care about each other and their communities, dedicating many thousands of volunteer hours each year.
Travelers and the Travelers Foundation contributed almost $22 million in 2014, primarily to education, community development, and arts and culture programs through a variety of initiatives, bringing our total corporate philanthropy to more than $100 million over the last five years.
Last year, the Travelers Institute® hosted a consumer insurance education symposia series to provide communities with the information they need to improve their understanding of insurance. The Travelers Institute also hosted the fourth annual Disaster Preparedness Symposium to highlight the importance of disaster preparation and enhanced resiliency for individuals and businesses.
We have consistently demonstrated our commitment to implementing leading environmental sustainability and diversity programs. All Travelers-owned campuses are ENERGY STAR® Certified, and in 2014, for the eighth consecutive year, we were named to the Dow Jones Sustainability North America Index in recognition of our community impact. Travelers is also one of DiversityInc.’s 25 Noteworthy Companies for Diversity. We have been on the G.I. Jobs® list of Top 100 Military Friendly Companies since 2007, and were named “Best for Vets” by Military Times in 2014.
We have done very well over the past decade thanks to our commitment to our financial strategy, our intense focus on long-term planning, the way we conduct our business, and the talented people we attract and retain. Our long-term focus also means anticipating how the world will look in the future. We are not deferential to the decisions and behaviors that made our past achievements possible. Rather, we are acutely aware of the dangers of paying homage to conventional wisdoms that may, or may not, continue to deliver success. I am mindful of New York City Ballet co–founder George Balanchine’s advice to his successor, Peter Martins: “Don’t be reverent. Be relevant.” So, while we certainly feel pride in our performance, we are attuned to the future, and we are more than willing to challenge our assumptions.
Over the last year, we have demonstrated our ability to be relevant by capitalizing on opportunities and leveraging our strengths in many areas of our business. Two examples illustrate this dynamic well.
We are building on nearly two decades of cyber coverage experience to develop flexible products that meet the rapidly changing cyber liability needs of our small business and middle market customers. And, continuing our long-standing commitment to develop expertise and products in response to the constantly evolving world of healthcare delivery, we have significantly expanded our ConciergeCLAIM® Nurse program. A part of our growing workers compensation business — we became the nation’s largest carrier last year — the program connects our nurses with injured employees to guide them through the recovery process, and helps them return to work as soon as medically appropriate. Since its launch in 2010, the program, now available in 30 sites across the United States, has reduced the average number of days out of work for injured employees by more than 40 percent in those areas where we have measured, and cut by a third the number of days it takes to close a claim.
We have discussed for a few years now how the increased use of comparative rating technologies by independent agents has compelled us to become more price-competitive in personal auto insurance. This led us to develop Quantum Auto 2.0, which we rolled out across the country in 2014. The marketplace results have been excellent: new business premiums in the fourth quarter of 2014 were almost 90 percent higher than in the same quarter of 2013. We believe the success of Quantum Auto 2.0 is due not only to competitive pricing, but also to the recognition our brand commands and, above all, to the strength of our long-term relationships with independent agents.
We are pleased with the terrific progress made in the integration of the Dominion business in 2014, and we are grateful to our employees in Canada for their remarkable support, high level of engagement, and hard work right from the start. Overall, we have strengthened our ability to export our deep competitive advantages to our businesses in Canada, the United Kingdom, Ireland, and Brazil.
No matter what opportunities or challenges the marketplace and economy bring in the coming years, the foundation of our business is our commitment to analytics and executing thoughtful, data-driven strategies. We will use these competitive advantages — as well as our knowledge, our technology, our people, and our prudent capital allocation — to continue to compete effectively.
Executing our long-term strategy tests our ability to anticipate and manage the environments in which we do business. While we believe the markets in which we operate remain relatively stable, things can change quickly. We are confident that, as one of the best-performing property and casualty insurance companies, we are positioned to navigate whatever the world around us may throw our way.
I want to thank everyone who helped make 2014 such a success. I greatly appreciate the guidance and leadership of our Board of Directors. I thank the wonderful Travelers team for their continued dedication, and I am grateful to our agents and brokers for their partnership. I am as optimistic as ever about the successes we will deliver in the years ahead.
At and for the year ended December 31. Dollar amounts in millions, except per share amounts.
|Earned Premiums||$ 23,713||$ 22,637||$ 22,357||$ 22,090||$ 21,432|
|Total Revenues||$ 27,162||$ 26,191||$ 25,740||$ 25,446||$ 25,112|
|Operating Income||$ 3,641||$ 3,567||$ 2,441||$ 1,390||$ 3,043|
|Net Income||$ 3,692||$ 3,673||$ 2,473||$ 1,426||$ 3,216|
|Net Income Per Diluted Common Share||$ 10.70||$ 9.74||$ 6.30||$ 3.36||$ 6.62|
|Total Investments||$ 73,261||$ 73,160||$ 73,838||$ 72,701||$ 72,722|
|Total Assets||$ 103,078||$ 103,812||$ 104,938||$ 104,575||$ 105,631|
|Shareholders' Equity||$ 24,836||$ 24,796||$ 25,405||$ 24,477||$ 25,475|
|Return On Equity||14.6%||14.6%||9.8%||5.7%||12.1%|
|Operating Return On Equity||15.5%||15.5%||11.0%||6.1%||12.5%|
|Book Value Per Share||$ 77.08||$ 70.15||$ 67.31||$ 62.32||$ 58.47|
|Dividends Per Share||$ 2.15||$ 1.96||$ 1.79||$ 1.59||$ 1.41|
The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of property casualty insurance for auto, home, and business. The company's diverse business lines offer its global customers a wide range of coverage sold primarily through independent agents and brokers. A component of the Dow Jones Industrial Average, Travelers has approximately 30,000 employees and operations in the United States and selected international markets.
* Management Committee Member
+ Operating Committee Member