On Thursday, Travelers Companies, Inc. (NYSE:TRV) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Reserve Release Breakout
Randy Binner – FBR Capital Markets & Co.: I was wondering if you could provide a breakout of the reserve release by business line within the commercial line, so the $208 million outside of the A&E, just wondering where that broke out and especially with workers comp; wanting to see if that was net redundant especially in recent accident years.
Jay S. Benet – VC and CFO: So if we look at what’s taken place in terms of reserve development in Business Insurance, as we said its net about $41 million, and if we look at the components of that, property is a big component. If we look at the favorable loss developments, where did they come from, the recent accident years 2011 was a big driver of that, and we also had some better salvage and subrogation recoveries in some of the older year than we had expected. Some other areas of CMP, same sort of thing in terms of the property related items. Workers comp actually developed a little favorably, mostly due to some of the tabular claims that we had for accident years 2010 and prior. We had some strengthening of commercial auto given some of the claim severity that we’ve been seeing in recent accident years that we’ve been talking about, but net-net as you saw everything was favorable.
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Randy Binner – FBR Capital Markets & Co.: And I appreciate the color. So the workers comp was stable, which is I think unique to Travelers, but can I kind of step back, how should we think about where the reserve trend is going overall? For the industry overall I think the expectation is that redundancies would diminish. Travelers has had an excellent reserve result, but as this goes forward, should we think of this redundancy as winding down?
Jay S. Benet – VC and CFO: We don’t make any predictions whatsoever about where reserve development is going. We make our best estimate every quarter and we stand by that and then as the data develops, more information comes in, we adjust the reserves accordingly.
Randy Binner – FBR Capital Markets & Co.: And just one more on comp. in the accident year ’11 was that also favorable or was that deficient?
Jay S. Benet – VC and CFO: In the quarter it was essentially breakeven. It was a tiny bit – we had a tiny bit of strengthening in the 2011 accident year in the third quarter. It was under $10 million, so this is kind of the quarterly analysis that we do to get things right and effectively given the size of the reserves, we talk about rounding them.
Margin Improvement in the BI Segment
Michael Zaremski – Credit Suisse: The underlying combined ratio improvements within the BI segment are clearly very healthy. Can you provide any color on which lines of business within the segment are exhibiting the most and/or least margin improvement?
Brian W. MacLean – President and COO: This is Brian, Mike. I would say it’s pretty broad-based. As we’ve said, comp in auto have been getting the most rate increases, but the range across the lines is 6 to 10, so everybody is getting some significant rate. As Jay Benet just mentioned, auto is one of the lines we are seeing a little more heat, so we need the rate there. But I think that by and large it’s been a really across the board with our products.
Michael Zaremski – Credit Suisse: In terms of the – if you are getting – what kind of rate increases are we getting in commercial auto then? Because it seems like you guys have been getting healthy rate increases for a while now and you are still talking about margins not being that great in that line?
Brian W. MacLean – President and COO: I think that’s about 9 points in auto and comp was around 10, so those were at the top end of the spectrum, which I think is consistent with what we’ve shown in the past. We’ve talked about and others have talked about the bodily injury trends in the auto business, both commercial and personal, so that’s been one of the reasons why we are getting those increases.
Michael Zaremski – Credit Suisse: Then as a follow-up in regards to rate increases across all the segments, is there a dynamic of stronger momentum in some of the longer tail lines that are more impacted by the (indiscernible) environment? And are you at all surprised that (HOBO) retention is holding up in the face of the rate increases? Thanks.
Brian W. MacLean – President and COO: Obviously as anybody looks at the economics of the product of longer tail lines which should be more significantly impacted by the investment yields that factors into how we think about it. I’m not sure that factors into how the customers think about it, so we work at it and on the retention thing I would go back to our comments on Slide 13, so we’re obviously pleased that aggregate retention is going up, but it’s really the texture underneath that we obsess about. We’re keeping the right accounts, so honestly I’m not really surprised that we’ve been able to execute it in a way where we’re keeping the best business.
Jay S. Fishman – Chairman and CEO: While the interest rate environments certainly plays a meaningful role in the evaluation, it is just one factor and I’d make an observation that our workers’ comp portfolio broadly and of course you can get different conclusions and different businesses, but broadly speaking has actually been doing better. I am not sure Brian how you might characteristic it better than what we pursued the rest of the industry to be or it just hasn’t been – it hasn’t been in a situation where the rate need there has been enormous. I am not sure how to exactly characterize it, but we were starting – we’re started from a position in workers’ comp that was not as problematic as I think sort of conventional wisdom might have thought.
Brian W. MacLean – President and COO: You could look at our line results for a good number of years and our performance in workers’ comp has been significantly better than the industry. We think that’s due to a lot of things, risk selection, we think our claim model around medical management is the best in the business and all that stuff really matters.
Jay S. Fishman – Chairman and CEO: Gabby hosted an Analyst Day where there was a considerable amount of time spent in the nuts and bolts of workers compensation management, and really I think demonstrated clearly or at least attempted to demonstrate clearly the real competitive advantages that we bring to the workers compensation line. So again it’s not that we’re just not all in the same situation or the same environment. So I’d resist the temptation to just lead to the conclusion that long really needs help and short doesn’t. It’s just unfortunately more complicated than that.
Michael Zaremski – Credit Suisse: That’s helpful and I agree that you guys did demonstrate very well that you guys gave a best-in-class workers comp business at Travelers at the Investor Day.