Bloomberg News

Travelers Cut Cash, Boosted Long-Term Holdings, Fishman Says

December 07, 2011

Dec. 6 (Bloomberg) -- Travelers Cos., the lone insurer in the Dow Jones Industrial Average, is drawing down cash holdings to buy longer-term assets as near-record low yields pressure returns on the company’s investment portfolio.

“We did in the third quarter begin a process of reducing our cash balances,” Chief Executive Officer Jay Fishman said at a conference held by Goldman Sachs Group Inc. today in New York. “We really reassessed how much we needed to have on hand and are in the process of actually redeploying some of those cash balances more into our long-term portfolio.”

The operating return on equity for the company’s short-term fixed-investment portfolio is about 0.1 percent this year, compared with the 0.4 percent average annual return on the assets from 2005 to 2010, according to a presentation on Travelers’s website. The New York-based insurer lowered short- term securities holdings 4.5 percent to $4.8 billion in the three months ended Sept. 30, according to regulatory filings.

Fishman, 59, is boosting share buybacks and raising rates for property coverage to improve return on equity after tornadoes and Hurricane Irene contributed to higher-than-average U.S. catastrophe costs, and near-record low interest rates limited returns from bonds. The insurer has said it is emphasizing credit quality as yields decline on its $64 billion fixed-income portfolio.

Fishman said the company plans to buy back $1.1 billion to $1.2 billion of shares in the fourth quarter, compared with a projection of $1 billion in October. The insurer repurchased $803 million in shares this quarter through Dec. 5, according to the presentation.

Travelers rose 1.5 percent to $55.49 at 12:59 p.m. in New York. The insurer had slipped 1.9 percent this year through yesterday, compared with the 4.5 percent gain in the 30-company Dow average.

--Editors: Dan Kraut, Dan Reichl

To contact the reporter on this story: Noah Buhayar in New York at afrye@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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