Travelers 2006 Annual Report Download - page 3

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“As an insurer, we provide a safety net for
our customers by absorbing the volatility that
individuals and businesses cannot afford. Our
company is in a great financial and competitive
position to respond to evolving risks effectively
and to seize the resulting opportunities.”
Jay S. Fishman
Chairman & Chief Executive Officer
To Our Shareholders:
In 2006, Travelers demonstrated its ability to deliver
profitable growth and solidified its position as a lead-
ing U.S. property casualty insurer in the independent
agency channel. Our focus this year has been on
increasing our importance to our distributors and
customers, through improving our responsiveness
and accessibility.
For the year, Travelers recorded $4.2 billion of net
and operating income, producing approximately
an 18 percent return on equity. While some of this
year’s strong financial performance can be attributed
to benign weather, underlying underwriting results
contributed prominently by sustaining attractive
margins. Investment income was also a major con-
tributor to our results, driven by increased invested
assets and higher short-term interest rates.
We achieved these results through the persistent,
focused efforts of our employees and distributors,
and we appreciate all they have done to produce
such a positive outcome.
The hard work of the last three years to integrate
two complex organizations is now complete. We
have talented and experienced insurance profes-
sionals in the right positions, and we are single-
mindedly focused on what matters: maintaining the
confidence of our distributors and the satisfaction
of our customers.
This year also marked an important turning point
in our company’s evolution. We are now in a position
to produce attractive returns and at the same time
continue to make the necessary investments to
maintain and enhance our competitive position
and provide improved service to our distributors
and customers.
When suitable, profitable opportunities to utilize
capital are not present, we have committed to
return capital to our shareholders. To that end, in
May 2006, we announced a 13 percent increase
in our quarterly dividend to 26 cents per share,
as well as a $2 billion share repurchase program.
As of year-end 2006, the company had repurchased
$1.1 billion of its stock under the program, or
approximately 3 percent of outstanding common
shares. Most recently, our Board approved an
additional $3 billion increase to our share repur-
chase program. These actions reflect our financial
strength and disciplined underwriting, which are
the hallmarks of our company.
The Winds of Change
Our business and the businesses and lives of
our customers are never static. Fundamentally,
there will always be change, generating new risks
that require our response – that is the nature of
insurance. As an insurer, we provide a safety net
for our customers by absorbing the volatility that
individuals and businesses cannot afford. Our
company is in a great financial and competitive
position to respond to evolving risks effectively
and to seize the resulting opportunities.
Our obligation to shareholders is to earn appropriate
returns while assuming our customers’ exposures.
In a year without a major catastrophe event, we
are expected to thrive. It is incumbent upon us to
build and maintain our financial strength, so that
we possess the resources to respond when signif-
icant events do occur. In fact, we operate under
the assumption that it is not a matter of if a major
event will happen but when.