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The Travelers Cos. (TRV) Alan D. Schnitzer on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Call

April 21, 2016 9:00 am ET

Executives

Gabriella Nawi - Senior Vice President-Investor Relations

Alan D. Schnitzer - Chief Executive Officer & Director

Jay S. Benet - Vice Chairman & Chief Financial Officer

Brian W. MacLean - President & Chief Operating Officer

Doreen Spadorcia - Vice Chairman & Chief Executive Officer, Personal Insurance and Bond & Specialty Insurance

Analysts

Kai Pan - Morgan Stanley & Co. LLC

Ryan J. Tunis - Credit Suisse Securities (NYSE:USA) LLC (Broker)

Charles Joseph Sebaski - BMO Capital Markets (United States)

Vinay Misquith - Sterne Agee CRT

Jay Gelb - Barclays Capital, Inc.

Michael Nannizzi - Goldman Sachs & Co.

Paul Newsome - Sandler O'Neill & Partners LP

Sarah E. DeWitt - JPMorgan Securities LLC

Brian Robert Meredith - UBS Securities LLC

Meyer Shields - Keefe, Bruyette & Woods, Inc.

Jay Cohen - Bank of America Merrill Lynch

Operator

Good morning, ladies and gentlemen. Welcome to the First Quarter Results Teleconference for Travelers. We ask that you hold all questions until the completion of formal remarks, at which time you will be given instructions for the question-and-answer session.

As a reminder, this conference is being recorded on April 21, 2016.

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 now begin.

Gabriella Nawi - Senior Vice President-Investor Relations

Thank you. Good morning and welcome to Travelers' discussion of our 2016 first quarter results. Hopefully, all of you have seen our press release, financial supplement and webcast presentation released earlier this morning. All of these materials can be found on our website at www.travelers.com, under the Investor section.

Speaking today will be: Alan Schnitzer, CEO; Jay Benet, Vice Chairman and Chief Financial Officer; Brian MacLean, President and Chief Operating Officer; and Doreen Spadorcia, Vice Chairman, Chief Executive Officer of Claim, Personal Insurance and Bond & Specialty Insurance. 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 take questions. In addition, Jay Fishman and other members of senior management team are in the room.

Before I turn it over to Alan, I'd like to draw your attention to the explanatory note included at the end of the webcast. Our presentation today includes forward-looking statements. 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 these projected in the forward-looking statements 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 any update forward-looking statements.

Also, in our remarks and responses to questions, we may mention some 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.

And now, Alan Schnitzer.

Alan D. Schnitzer - Chief Executive Officer & Director

Thank you, Gabby. Good morning, everyone, and thank you for joining us today.

This morning, we reported first quarter operating income of $698 million, or $2.33 per share, and operating return on equity of 12.5%. Especially in light of a relatively high level of catastrophe losses in the quarter, our underwriting results across the board remain strong, as reflected in our combined ratio of 92.3%.

To put the weather in some context, our catastrophe losses were about $100 million, after tax, higher in the quarter than they were last year, and these are the highest first quarter cat losses we've had since 2010. The timing of catastrophes is, of course, unpredictable, but this level of weather volatility is certainly within our playbook. We're confident in our ability to model and manage our exposures and that we're pricing appropriately for the risk. In this case, it just so happens that, by design, we have a healthy market share in the Dallas/Fort Worth Metroplex, where severe hailstorms were concentrated. Doreen will have more to say about the severity and about our claim analytics.