Travelers 2010 Annual Report Download - page 5

2010 ANNUAL REPORT 5
LETTER TO SHAREHOLDERS
While these are two very different ends of the spectrum,
we are positioning ourselves to execute in either environment,
as well as along the spectrum.
To position the company for a low-growth environment, we
continue to manage closely our cost structure at the same
time that we invest in our businesses to improve our effi ciency,
effectiveness and risk selection capabilities, with the
objective of reducing volatility in our results and improving
performance relative to the insurance industry broadly.
With respect to the second scenario, infl ation presents its own
challenges for property and casualty insurance companies.
Loss costs on existing claims tend to go up — potentially
more than is refl ected in our claim reserves. In addition,
interest rates tend to rise in this environment, positively
impacting investment yields but negatively impacting
the value of our existing investments in our fi xed income
portfolio. To address the possibility of infl ation, we have
further shortened the duration of our fi xed income
investment portfolio. In any event, we generally hold
our fi xed income investments to maturity and, to that
extent, temporary decreases in value of our fi xed maturity
investments should not become realized.
In either scenario, we believe that the creditworthiness of our fi xed
income portfolio is paramount, and we have adhered strictly to
our strategy of maintaining a high-quality investment portfolio.
Finally, our business depends to a signifi cant degree on our
relationships. When economic times are tough, relationships
are more important than ever. We continue to provide
responsive, caring and focused service to our agents and
brokers and to our policyholders. This dedication has been
rewarded through agent and customer loyalty and enhanced
reputation in the marketplace.
Commitment to community
As always, our commitment to the greater community
extends beyond selling insurance. In 2010, we provided
more than $21 million in community support in the
form of grants, sponsorships and other giving, including
through the Travelers Foundation. Our commitment and
our efforts related to education and career opportunities
Resseguros S.A., Brazil’s market leader in surety. This joint
venture provides a signifi cant opportunity for us to leverage
our leading U.S. surety franchise to enter the Brazilian
market and to do so with a local market leader. The joint
venture also provides an exceptional platform for expanding
beyond the surety business and into the growing property
and casualty market in Brazil. The transaction is expected to
close in the fi rst half of 2011.
• Personal Insurance — We continued to grow our Personal
Insurance business in 2010, which was quite an achievement
in a marketplace that is crowded with competitors and
advertising messages. Net written premiums for the year
were approximately $7.6 billion, a meaningful increase over
the prior year. We are very pleased with our performance
in both our agency auto and homeowners businesses,
where we added policies while achieving pricing gains.
Our success in these areas was due to several competitive
advantages, including our sophisticated pricing and risk
management, focused product delivery, superior claim
performance and strong agency relationships. In our new
direct-to-consumer business, we have made signifi cant
progress in our infrastructure and technology, positioning
us to offer auto and homeowners products and services to
those consumers who desire to do business directly with an
insurance company. Additionally, these improvements have
enhanced the services we provide to customers who come to
us through independent agents.
Looking ahead
As we enter 2011, we ask ourselves what the new year and
beyond will have in store for business in general, as well as for
the property and casualty industry and Travelers specifi cally.
We believe that, among others, two very different scenarios
are possible:
• The foreseeable future could present similar or even
more challenging conditions to those we are experiencing
today — high unemployment, low economic growth, low
investment returns and an insurance cycle with soft pricing.
• Alternatively, the foreseeable future could present a more
robust outlook, although potentially including infl ation.
* Total return to shareholders is measured as the change in stock price plus
the cumulative amount of dividends, assuming dividend reinvestment.
Total return to shareholders* from
January 1, 2005 to December 31, 2010
74.1%
Travelers has paid cash dividends without
interruption for 139 years.
139 years