The Travelers Companies Inc. Q1 2010 Earnings Call Transcript
The Travelers Companies Inc. (TRV)
Q1 2010 Earnings Call
April 23, 2010; 09:00am ET
Executives
Jay Fishman - Chairman & Chief Executive Officer
Jay Benet - Chief Financial Officer
Brian MacLean - President & Chief Operating Officer
Gabriella Nawi - Senior Vice President of Investor Relations
Analysts
Jay Gelb - Barclays Capital
Brian Meredith - UBS
Keith Walsh - Citi
Larry Greenburg - Langen McAlenney
Michael Nannizzi - Oppenheimer
Ninea Mesquite - Credit Swiss
Matthew Heimermann - JP Morgan
Jay Cohen - Bank of America/Merrill Lynch
Josh Shanker - Deutsche Bank
Ian Gutterman - Adage Capital
Robin Bobbin - Capital Returns
Presentation
Operator
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The Travelers Companies Q2 2009 Earnings Transcript
Good morning ladies and gentlemen, and welcome to the first quarter earnings review for Travelers. We ask that you hold all questions until the completion of formal remarks, at which time you’ll be given instructions for the question-and-answer session. As a reminder, this conference is being recorded on Friday, April 23, 2010.
At this time, I would like to turn the call over to Ms. Gabriella Nawi, Senior Vice President of Investor Relations. Ms. Nawi, you may begin.
Gabriella Nawi
Thank you. Good morning and welcome to the Travelers discussion of our first quarter 2010 results. Hopefully all of you have seen our press release, financial supplements and webcast presentation released earlier this morning. All of these materials can be found on our website at
under the investor section.
Speaking today will be Jay Fishman, Chairman and CEO; Jay Benet, Chief Financial Officer; and Brian MacLean, President and Chief Operating Officer. Other members of senior management are also in the room available for the question-and-answer period. They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks, and then we will open it up for questions.
Before I turn it over to Jay, I’d like to draw your attention to the following on page one of the webcast. Our presentation today includes certain forward-looking information as defined in the Private Securities Litigation Reform Act of 1995.
All statements other than statements of historical facts maybe forward-looking statements. Specifically, our earnings guidance is forward-looking and we may make other forward-looking statements about the company’s results of operations, financial condition and liquidity, the sufficiency of the company’s reserves and other topics.
The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from our current expectations due to a variety of factors. These factors are described in our earnings press release, and in our most recent 10-Q and 10-K filed with the SEC. We do not undertake any obligation to update forward-looking statements.
Also in our remarks or responses to questions, we may mention Travelers operating income, which we use as a measure of profit and other measures that maybe non-GAAP financial measures. Reconciliations are included in our recent earnings press release, financial supplement and other materials that are available in the investor section on our website.
With that out of the way, here is a Jay Fishman.
Jay Fishman
Thank you, Gabby. Good morning everyone and thank you for joining us today. All in, given the magnitude of catastrophes we experienced this quarter, we were quite pleased with our performance, reporting net income of $1.25 per diluted share, an increase of 13% from last year’s quarter and a return on equity of nearly 10%.
Included in this number was $0.61 a share in catastrophes, arising out of the multiple storms in the Eastern United States as well as the earthquake in Chile. Just to put this number in context, the estimate for catastrophes for the first quarter included in our previously provided guidance was about $0.13 a share.
Offsetting the cats we benefited from favorable prior year development, and our underlying performance from both underwriting and net investment income was a bit better than our expectations. The net result was operating income, which was in line with our expectations going into the quarter, allowing us to reaffirm our previously issued fully year 2010 operating earnings per share guidance.
Also it’s reflective of our continuing strong earnings power. In an environment which remains similar to last quarter in terms of both economic and insurance market conditions, our business dynamics from a solid and we are generally consistent with recent operating experience.
Renewal rate gains remained positive in each of our business segments, retention was strong and the business in total remained on par with last year’s quarter. We repurchased $1.4 billion of our common stock in the quarter, and announced the increase in our regularly quarterly dividend by 9% to $0.36 per share. As these actions demonstrate, we continue to execute successfully in the marketplace, generate solid earnings and return excess capital to our shareholders.
Given that our operating dynamics this quarter were generally consistent with recent quarters, our call this morning is going to be somewhat different than in the past. We are still providing all of the same information in our presentation as we have previously, but we will not be going page by page with you, so as to have more time for questions.
Before turning over to Jay, I want to take just a minute to acknowledge and thank our claim department for all of their exceptional work, not only this quarter but over the last couple of years. In 2008, we had Ike Gustav in Dally, and while there were no major storms in 2009 it was still a quite active cat year. Of course, in the first quarter of 2010 we were again faced with an exceptional number of claims due to the multiple storms on the East Coast.
[Inaudible] and her entire claim team have been remarkably busy providing industry meeting customer service to our insureds, and again demonstrating our commitment to providing high quality service to all of our insureds during their greatest time of need.
With that, let me turn it over to Jay.
Jay Benet
Thanks Jay. There are several points that I’d like to highlight relating to pages zero to seven, many of which you’ve heard me say repeatedly over many quarters. First, our balance sheet remained extremely strong. All capital leverage and liquidity measures were half or better than target level.
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