Running a business is a risk The Travelers Companies will insure. While it does offer personal auto and homeowners insurance, the company's largest segment is commercial property/casualty insurance to businesses big and small. It is one of the largest business insurers in the US, providing commercial auto, property, workers' compensation, marine, and general and financial liability coverage to companies in North America (the largest percentage of business) and the UK. The company also offers surety and fidelity bonds as well as professional and management liability coverage for commercial operations.
Travelers' business insurance segment, serving all sizes of businesses, has traditionally accounted for more than half of the company's annual premiums earned. In 2014 the company realigned its reporting segments combining its international and business units into the Business and International Insurance segment. The segment offers property/casualty insurance and related services to clients primarily in the US, as well as in the UK, Canada, Ireland, and throughout other parts of the world as a corporate member of Lloyd's. In 2014, Business and International Insurance accounted for more than 40% of net earned premiums.
As part of the structural reorganization, the bond and financial products group joined with specialty coverages to form the Bond & Specialty Insurance segment. It writes fidelity and surety, general liability and property, workers' compensation, commercial automobile, and commercial multi-peril lines. The segment accounted for more than 15% of net earned premiums in 2014.
Personal insurance, which was unchanged by the realignment, accounts for a third of the company's premiums. It is slowly growing through geographic expansion. Offerings include homeowners, auto, flood, and umbrella policies.
Travelers also offers reinsurance.
While the vast majority (about 95%) of the company's business is in the US, it does have a presence in the UK, where it operates through two arms: Travelers Insurance Company and Travelers Syndicate Management within Lloyd's of London. The two businesses offer commercial property/casualty and risk management services. Travelers also has modest operations in Canada, Brazil, and Ireland. It's looking to expand in Latin America as well as in India and China.
The company employs field claim management teams in 21 centers and 53 satellite and specialty-only offices in 45 states.
Sales and Marketing
Customers include commercial businesses, government agencies, associations, and individuals.
Travelers' offerings are distributed through about 13,000 independent agents and brokers across the US. In business and international, some 11,400 agents are supported by three customer service centers and more than 130 field offices.
The personal products are distributed through some 11,000 independent agents, employee and affinity groups, and direct marketing. Meanwhile, the bond & specialty insurance segment distributes products through more than 6,000 independent agents and brokers.
Despite general market turmoil, Travelers' revenues have maintained a slow-but-steady growth rate in recent years -- a sign that the company has spread itself smoothly across industries and took no significant hits to its premiums. In 2014 the company reported a 4% increase in revenues to some $27.2 billion due to higher premiums earned in the business and international insurance segment (primarily due to the acquisition of Dominion) and growth in the bond & specialty segment (reflecting the impact of lower reinsurance costs). Fee income also grew 10%, due to higher serviced premium volume in workers' compensation residual market pools and higher claims in the large deductible business. Those gains were partially offset by a decline in the personal insurance business.
Net income levels have been more volatile for the company. Investment income recovered from stock market woes just in time for an uptick of catastrophe claims in 2010 and 2011 due to harsh weather events, and Travelers' net income dropped both years following common share repurchases. In 2012 net income returned to growth, rising some 73% to nearly $2.5 billion in 2012 and 49% to $3.7 billion in 2013. The increases were attributed to decreased claims from catastrophe losses. In 2014, net income grew marginally (by less than 1%) due to higher revenues but partially offset by increases in operating expenses.
Cash from operations decreased by $123 million to $3.7 billion due to higher levels of claims and claims adjustment expenses, general and administrative expenses, commission expenses, and higher income tax payments.
The company launched a restructuring program in 2013 to reduce operating expenses in the personal insurance division. The program aims to improve Travelers' competitive position in the private passenger auto insurance market. The program, which aims to cut $140 million in annual expenses by 2015, includes a workforce reduction of about 450 jobs (less than 2% of total employees) and facility consolidation efforts.
Though Travelers has reduced its international holdings in recent years, the company is pursuing opportunities in emerging markets such as Brazil; for example, it is buying a 95% stake in the property/casualty operations of its J. Malucelli joint venture in that country. The firm is also considering expansion in high-growth countries such as India and China.
The company's claims management strategy is focused on segmentation of claims and appropriate technical specialization to drive effective claim resolution practices.
Mergers and Acquisitions
Travelers expanded in North America through the $1.1 billion purchase of The Dominion of Canada General Insurance from E-L Financial in late 2013. The move improves Travelers position with brokers and customers across Canada; the acquired business is being combined with existing Canadian operations (Travelers Canada) headquartered in Toronto.