Travelers - 2014 Annual Report

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To our shareholders

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.

A year of strong performance

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.

A culture of collaboration

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.

Committed to our communities

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.

Being relevant

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.

Jay S. Fishman

Chairman and Chief Executive Officer

Financial highlights

At and for the year ended December 31. Dollar amounts in millions, except per share amounts.

2014 2013 2012 2011 2010
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.


  • Scott C. Belden+

    Senior Vice President,
  • D. Keith Bell

    Senior Vice President,
    Accounting Standards
  • Jay S. Benet*+

    Vice Chairman and
    Chief Financial Officer
  • Diane D. Bengston+

    Senior Vice President,
    Enterprise Human Resources
  • Andy F. Bessette*+

    Executive Vice President and
    Chief Administrative Officer
  • Robert C. Brody*+

    Executive Vice President,
    Claim Services
  • Lisa M. Caputo*+

    Executive Vice President,
    Marketing and Communications
  • James W. Chapman+

    Senior Vice President,
    Property and Marine Practice
  • John P. Clifford Jr.*+

    Executive Vice President,
    Human Resources
  • Renee H. Davis+

    Vice President and
    Chief Corporate Actuary
  • Behram M. Dinshaw+

    Senior Vice President,
    Product Management,
    Personal Insurance
  • Fred R. Donner*+

    Executive Vice President,
    Enterprise Risk Management and
    Chief Financial Officer, Business
    and International Insurance
  • Irwin R. Ettinger*+

    Vice Chairman
  • Jay S. Fishman*+

    Chairman and
    Chief Executive Officer
  • Marlyss J. Gage*+

    Executive Vice President and
    Enterprise Chief
    Underwriting Officer
  • Myles P. Gibbons+

    Senior Vice President and
    President, Select Accounts
  • Martin J. Henry+

    Senior Vice President,
    Risk Control
  • William H. Heyman*+

    Vice Chairman and
    Chief Investment Officer
  • Scott F. Higgins+

    Senior Vice President and
    President, Commercial
    Accounts Group
  • Bruce R. Jones*+

    Executive Vice President and
    Chief Risk Officer
  • Christine Kucera Kalla

    Senior Vice President,
    Chief Compliance Officer and
    Group General Counsel
  • Patrick J. Kinney*+

    Executive Vice President,
    Field Management and
    Chief Operating Officer,
    Business Insurance
  • Michael F. Klein*+

    Executive Vice President and
    Co-President, Business
  • Jeffrey P. Klenk+

    Senior Vice President,
    Management Liability, Bond &
    Specialty Insurance
  • Thomas M. Kunkel*+

    Executive Vice President and
    President, Bond & Specialty Insurance
  • Madelyn J. Lankton*+

    Executive Vice President and
    Chief Information Officer
  • Patrick L. Linehan+

    Vice President,
    Corporate Communications
  • Brian W. MacLean*+

    President and
    Chief Operating Officer
  • William C. Malugen Jr. *+

    Executive Vice President and
    Co-President, Business
  • Gabriella Nawi+

    Senior Vice President,
    Investor Relations
  • Maria Olivo*+

    Executive Vice President,
    Strategic Development and Corporate Treasurer
  • Brian P. Reilly

    Senior Vice President and
    Chief Auditor
  • Ellen M. Rizzo+

    Senior Vice President,
    Claim Shared Services and
    Chief Financial Officer, Claim
  • David D. Rowland+

    Executive Vice President,
    Fixed Income Investments
  • Douglas K. Russell+

    Senior Vice President,
    Corporate Controller
  • Scott W. Rynda

    Senior Vice President,
    Corporate Tax
  • Marc E. Schmittlein*+

    Executive Vice President and
    Co-President, Business
  • Alan D. Schnitzer*+

    Vice Chairman and
    Chief Executive Officer, Business
    and International Insurance
  • Richard D. Schug+

    Senior Vice President and
    Actuary, Business and
    International Insurance
  • Peter Schwartz

    Senior Vice President and
    Group General Counsel, Corporate Litigation
  • Wendy C. Skjerven

    Vice President,
    Corporate Secretary and
    Associate Group Counsel
  • Kevin C. Smith*+

    Executive Vice President and
    President, International
  • Doreen Spadorcia*+

    Vice Chairman and
    Chief Executive Officer,
    Personal Insurance and
    Bond & Specialty Insurance
  • Kenneth F. Spence III*+

    Executive Vice President and
    General Counsel
  • William A. Teed II+

    Senior Vice President and
    President, Field Management
  • Gregory C. Toczydlowski*+

    Executive Vice President and
    President, Personal Insurance
  • Julie A. Trowbridge-Dillman*+

    Executive Vice President,
    Operations, Enterprise Business
    Intelligence and Analytics
    and eBusiness
  • Glenn E. Westrick

    Senior Vice President,
    Government Relations
  • Joan K. Woodward*+

    Executive Vice President,
    Public Policy and President, The
    Travelers Institute
  • Daniel T. H. Yin+

    Executive Vice President,
    Alternative Investments

* Management Committee Member

+ Operating Committee Member

Board of Directors

  • Allen L. Beller

    Senior Counsel, Cleary Gottlieb Steen & Hamilton LLP
    Director since 2007
  • John H. Dasburg

    Chairman and CEO, ASTAR USA, LLC
    Director since 1994
    (Lead Independent Director)
  • Janet M. Dolan

    President, Act 3 Enterprises, LLC
    Retired President and CEO, Tennant Company
    Director since 2001
  • Kenneth M. Duberstein

    Chairman and CEO, The Duberstein Group, Inc.
    Director since 1998
  • Jay S. Fishman

    Chairman and CEO, Travelers
    Director since 2001
  • Patricia L. Higgins

    Retired President and CEO,
    Switch and Data Facilities, Inc.
    Director since 2007
  • Thomas R. Hodgson

    Retired President and COO, Abbott Laboratories
    Director since 1997
  • William J. Kane

    Retired Audit Partner, Ernst & Young
    Director since 2012
  • Cleve L. Killingsworth Jr.

    Retired President and CEO,
    Blue Cross Blue Shield of Massachusetts, Inc.
    Director since 2007
  • Philip T. Ruegger III

    Retired Chairman, Simpson Thacher
    & Bartlett LLP
    Director since 2014
  • Donald J. Shepard

    Retired Chairman of the Executive Board
    and CEO, AEGON N.V.
    Director since 2009
  • Laurie J. Thomsen

    Retired Partner and Co-Founder,
    Prism Venture Partners
    Director since 2004

Board committees

  • Audit
  • Dasburg (Chair)
  • Beller
  • Dolan
  • Higgins
  • Hodgson
  • Kane
  • Compensation
  • Shepard (Chair)
  • Duberstein
  • Killingsworth
  • Thomsen
  • Executive
  • Fishman (Chair)
  • Dasburg
  • Duberstein
  • Hodgson
  • Shepard
  • Thomsen
  • Investment and Capital Markets
  • Thomsen (Chair)
  • Duberstein
  • Killingsworth
  • Shepard
  • Nominating and Governance
  • Duberstein (Chair)
  • Killingsworth
  • Shepard
  • Thomsen
  • Risk
  • Hodgson (Chair)
  • Beller
  • Dasburg
  • Dolan
  • Higgins
  • Kane
  • Ruegger

Shareholders’ information

Your dividends

The Travelers Companies, Inc. has paid cash dividends without interruption for 143 years. Our most recent quarterly dividend of $0.55 per share was declared on January 22, 2015, payable March 31, 2015, to shareholders of record as of March 10, 2015.

Automatic dividend reinvestment program

This program provides a convenient opportunity for our shareholders to increase their holding of Travelers common stock. An explanatory brochure and enrollment card may be obtained by calling our stock transfer agent, Wells Fargo Bank, N.A., at 888.326.5102, or by mailing a request to the address below.

Stock transfer agent and registrar

For address changes, dividend checks, direct deposits of dividends, account consolidations, registration changes, lost stock certificates and general stock holding questions, please contact:

Wells Fargo Bank, N.A.
Shareowner Services
P.O. Box 64854
Saint Paul, MN 55164-0854

Toll Free: 888.326.5102
Outside U.S. and Canada: 651.450.4064

Financial information available

Travelers makes available, free of charge on its website, all of its filings that are made electronically to the SEC, including Forms 10-K, 10-Q, and 8-K. To access these filings, go to > For Investors > SEC Filings.

Requests for additional information may be directed to:

The Travelers Companies, Inc.
One Tower Square
Hartford, CT 06183

Shareholder Relations, 6PB
Attn: Marc Parr

Annual Meeting of Shareholders

The Annual Meeting of Shareholders will be held on May 20, 2015, at The Hartford Marriott Downtown, 200 Columbus Boulevard, Hartford, CT 06103. In April, we plan to send proxy materials, or a notice of internet availability of proxy materials, to shareholders of record as of the close of business on March 23, 2015. The notice will provide instructions on where to access our Proxy Statement and Annual Report, as well as how to vote your shares electronically. The notice also includes instructions on how to request a printed copy of our proxy materials.

Stock price and dividend rate

The Travelers Companies, Inc. common stock is listed on the New York Stock Exchange (NYSE) and is publicly traded under the ticker symbol “TRV”.

The following tables set forth the quarterly high and low closing sales prices of The Travelers Companies, Inc. common stock, as well as the amount of quarterly cash dividends declared per share for years 2014 and 2013.

2014 High Low Cash Dividend Declared
First Quarter $89.33 $80.26 $0.50
Second Quarter 95.60 84.39 0.55
Third Quarter 95.95 89.12 0.55
Fourth Quarter 106.95 91.81 0.55
2013 High Low Cash Dividend Declared
First Quarter $84.19 $72.86 $0.46
Second Quarter 87.90 77.85 0.50
Third Quarter 86.90 79.42 0.50
Fourth Quarter 90.99 82.35 0.50

Additional information

We have included the tables below to provide a reconciliation of the following items used in this Annual Report: (i) operating income less preferred dividends to net income, (ii) adjusted shareholders’ equity to shareholders’ equity, which are components of the operating return on equity and return on equity ratios for the ten-year period ending December 31, 2014, and (iii) operating earnings per share to net income per share on a basic and diluted basis.

Twelve months ended December 31,

(Dollars in millions, after-tax) 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Reconciliation of operating income less preferred dividends to net income
Operating income, less preferred dividends $3,641 $3,567 $2,441 $1,389 $3,040 $3,597 $3,191 $4,496 $4,195 $2,020
Preferred dividends 1 3 3 4 4 5 6
Operating income 3,641 3,567 2,441 1,390 3,043 3,600 3,195 4,500 4,200 2,026
Net realized investment gains (losses) 51 106 32 36 173 22 (271) 101 8 35
Income from continuing operations 3,692 3,673 2,473 1,426 3,216 3,622 2,924 4,601 4,208 2,061
Discontinued operations (439)
Net income $3,692 $3,673 $2,473 $1,426 $3,216 $3,622 $2,924 $4,601 $4,208 $1,622

As of December 31,

(Dollars in millions) 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Reconciliation of adjusted shareholders’ equity to shareholders’ equity
Adjusted shareholders’ equity $22,819 $23,368 $22,270 $21,570 $23,375 $25,458 $25,647 $25,783 $24,545 $22,227 $20,087
Net unrealized investment gains (losses), net of tax 1,966 1,322 3,103 2,871 1,859 1,856 (146) 620 453 327 866
Net realized investment gains (losses), net of tax 51 106 32 36 173 22 (271) 101 8 35 (28)
Preferred stock 68 79 89 112 129 153 188
Discontinued operations (439) 88
Shareholders’ equity $24,836 $24,796 $25,405 $24,477 $25,475 $27,415 $25,319 $26,616 $25,135 $22,303 $21,201

Twelve months ended December 31,

(Dollars in millions) 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Calculation of average annual operating return on equity
Operating income, less preferred dividends $3,641 $3,567 $2,441 $1,389 $3,040 $3,597 $3,191 $4,496 $4,195 $2,020
Adjusted average shareholders’ equity 23,447 23,004 22,158 22,806 24,285 25,777 25,668 25,350 23,381 21,118
Operating return on equity 15.5% 15.5% 11.0% 6.1% 12.5% 14.0% 12.4% 17.7% 17.9% 9.6%
Average annual operating return on equity for the period Jan. 1, 2005–Dec. 31, 2014 13.3%

Twelve months ended December 31,

2014 2013
Reconciliation of operating earnings per share to net income per share on a basic and diluted basis
Basic earnings per share
Operating income $10.67 $9.56
Net realized investment gains 0.15 0.28
Net income $10.82 $9.84
Diluted earnings per share
Operating income $10.55 $9.46
Net realized investment gains 0.15 0.28
Net income $10.70 $9.74

Average shareholders’ equity is: (a) the sum of total shareholders’ equity excluding preferred stock at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.

Adjusted shareholders’ equity is shareholders’ equity excluding net unrealized investment gains (losses), net of tax, net realized investment gains (losses), net of tax, for the period presented, preferred stock and discontinued operations. Adjusted average shareholders’ equity is average shareholders’ equity excluding net unrealized investment gains (losses), net of tax, and that period’s net realized investment gains (losses), net of tax.

Average annual operating return on equity over a period is the ratio of: (a) the sum of operating income less preferred dividends for the periods presented, to (b) the sum of the adjusted average shareholders’ equity for all years in the period presented.

Definitions of other terms used in this Annual Report are included in the Glossary of Selected Insurance Terms portion of the attached Form 10-K.