Travelers 2007 Annual Report Download - page 4

2007 Annual Report
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At the same time, we strive to generate a consistent return
to our shareholders. In the period between the April 1,
2004 merger of Travelers Property Casualty Corp. and
The St. Paul Companies, Inc., and December 31, 2007, we
generated a total return to shareholders of 46.9 percent.
Over the same period, we grew book value per share by 57
percent.* In addition, to the extent that our capital is above
a level where we believe we can produce sufficient current
returns and invest in our business for the long term, we
return it to shareholders through share repurchases and
dividends. Since we began our share repurchase program
in the second quarter of 2006, we have repurchased
approximately 78.8 million shares for approximately $4.1
billion, and we have a long-standing record of uninterrupted
dividends to shareholders.
The path to growth
An important aspect of our long-term success is the growth
of our business – again with the mindset that we are only
going to grow when we believe we can generate appropriate
returns. The levers to generate growth in the property casu-
alty insurance business are similar to those of any business:
increase brand awareness; introduce new products and
services to deliver what customers need and want; increase
the number of distributors and improve product position;
and provide more products to individual customers. So,
where do we see some of our best opportunities for growth?
Personal Insurance – We are a major force in the personal
insurance market, and we continue to make significant
investments in that marketplace. In 2007, we added 1,600
new personal lines agent locations and introduced new
agency prospecting tools.
We have continued the roll-out of our Quantum Auto®
product, through which we currently generate about one
in three Travelers personal auto insurance policies. Also,
as the market leader in homeowners insurance through
independent agents, we are proceeding with the roll-out
of Quantum HomeSM
. The Quantum products employ
easy-to-use technology that allows us to underwrite and
price policies with greater sophistication, which expands
our ability to offer products to a wider range of risks with
appropriately differentiated pricing.
Within Personal Insurance, we have also worked to broaden
our geographic balance. While we have historically been
strong in the Eastern United States, today well over half of
our growth in Personal Insurance net written premium is
in non-East Coast states.
Business Insurance – The growth formula for each of our
commercial businesses is as different as the customers we
serve, and we continue to work very hard to understand
what our customers need and want and what is important
to our agents and brokers in writing particular lines of busi-
ness. As a result, we match the potential growth tactics to
the unique circumstances in our respective businesses.
In Select Accounts, currently representing almost
$3 billion of small commercial premium, our approach
is three-pronged: appointing approximately 800 new
agencies in 2007; continuing to roll out TravelersExpressSM
,
our innovative quote-to-issue process; and expanding our
target markets from our historical “sweet spot” of offices,
buildings and stores to additional small commercial indus-
tries. TravelersExpress is the quintessential example of a
successful application of technology to a business need.
In the past decade, we have improved our ability to model
and predict losses – and therefore appropriately underwrite
accounts – through the use of technology. This means that
we can process this business with an extremely low-touch
model, which gives us a competitive advantage with agents
and brokers who handle this high volume business.
In 2007, Commercial Accounts appointed approximately 500
new agents to help us provide the local presence that is so
important to this business of individually underwritten mid-
sized accounts. One key strategy for growth in Commercial
Accounts is to offer highly tailored coverage and services
for specific industries through our IndustryEdgeSM products.
So far, products have been developed for several industries,
including auto dealers, printers, publishers, restaurants and
hotels. While these industries themselves are hardly new,
their risk management needs are evolving, and these special-
ized offerings are fueling growth by providing up-to-date
products to provide risk management solutions attractive
to both agents and policyholders.
Financial, Professional & International Insurance – Our
Financial, Professional and International Insurance segment
produced strong results in 2007, with operating income
up 11 percent for the year. The management group of our
U.S.-based surety and management liability businesses
successfully integrated what had been separate business
unit operations, enhancing analytics, refining our portfolio
risk management and implementing meaningful cross-sell
strategies with the Business Insurance units. Against the
backdrop of the disruption in the financial markets, the
performance of our businesses and the credit profile of our
portfolio continued to be solid.
* Ex FAS 115 (Excludes unrealized investment gains and losses, net of tax)