Travelers 2003 Annual Report Download - page 4

2
The St. Paul – Travelers Merger
When we began our discussions with respect to the merger in the summer of 2003, we
quickly became enthusiastic at the prospect of bringing our companies together. Looking
broadly at the property casualty insurance landscape, we saw a window of opportunity to
combine two strong carriers with exceptional talent and complementary product offerings,
geographic reach and corporate cultures. We anticipated that, with careful planning and
disciplined execution, we would have the potential to realize $350 million in annualized
expense savings, as well as significant economies of scale, following the merger’s close.
Also, in the near term, we knew that we could expand existing distribution relationships to
realize revenue gains. Early evidence confirms our initial optimism on both points.
Longer term, we have the opportunity to demonstrate the value of our franchise to our agents
and brokers. We believe that our distributors’ businesses will become more productive and
profitable as they expand their relationship with St. Paul Travelers. This should ultimately help
us gain market share in a disciplined and profitable manner.
St. Paul Travelers Competitive Advantages
• On a pro forma basis, St. Paul Travelers had total revenues of $23.7 billion for 2003, which
place us among the 100 largest U.S. companies. Based on 2002 direct written premium
data published by A.M. Best, we are the second-largest writer of commercial insurance in
the United States, with a No. 1 or No. 2 position in 35 of 50 states. Based on the same
data, we are also the second-largest writer of personal insurance through independent
agents countrywide. That said, we still have ample opportunity to grow. In an industry where
size matters, we believe that our capitalization and geographic reach place us at a distinct
advantage relative to smaller competitors due to our increased ability to diversify risk across
industries, products and geographic regions.
Our increased size and our level of combined earnings potential will also better position us
to absorb the shocks to which our industry is prone, both natural and man-made. They will
also allow us to make increased investments in the technology, training and people that
provide us the opportunity to maintain the leading-edge competitive advantages that we
deliver to agents and brokers. Finally, our size and strength should allow us to rely less
on reinsurance, which we believe to be a meaningful competitive advantage.
• We believe that insurance carriers’ success will increasingly be driven by their ability to
build effective partnerships with key agents and brokers, and we believe St. Paul Travelers
is well-positioned to be the market of choice for our distribution force. As a result of our
merger, we are able to bring together the best of two outstanding organizations to offer
agents superior expertise in underwriting, risk management and claims management for a
wide variety of both standard and specialty commercial risks. Coupled with a strong field
management staff, strong brand names and award-winning systems, we have a great deal
to offer our key distributors.
Most importantly, we believe long-term success in our industry comes from listening to
our distributors, working closely with them, and investing in processes that help them grow
their businesses. Our intention is not to use our size to leverage our agency partners, but
to create new opportunities for them to leverage our resources and grow their share of
business with us.