Travelers Cos. Chief Executive Officer Jay Fishman highlighted the insurer’s history of posting better returns than banks and other large financial companies amid a period of increased Wall Street regulation.
Fishman’s company had an average annual return on equity of 12.3 percent from 2005 through 2013, compared with 6.5 percent for banks in the Standard & Poor’s 500 Index, according to a slide show from New York-based Travelers.
“Investors are going to begin to contemplate, in this new arena of regulation, have relative returns within the financial sector changed?” Fishman, 61, asked at a shareholder presentation today. “I’m not coming to any conclusions here. I’m just sharing data with you, but I do think it’s going to be an increasingly relevant question.”
Banks have reduced leverage and retreated from some trading operations amid new and heightened regulations after the financial crisis. Wall Street firms also had to pay billions of dollars to settle probes into abuses during the housing bubble.
Travelers, the only property-casualty insurer in the Dow Jones Industrial Average, avoided subprime mortgage bonds in 2007 and 2008 and didn’t need a bailout. The company has climbed 4.9 percent this year, compared with the 7 percent slide at Goldman Sachs Group Inc. and a decline of 2.7 percent at JPMorgan Chase & Co., which took government assistance in the crisis and are also in the Dow.
Fishman ran Travelers when it was a part of Citigroup Inc. under CEO Sanford “Sandy” Weill. The insurance executive left in 2001 to run rival St. Paul Cos. and then in 2004 engineered the merger with Travelers.
Weill’s View
Weill, whose creation of Citigroup, ushered in the era of U.S. banking conglomerates, said in 2012 that the biggest financial firms should be broken up to unlock value and avoid future bailouts. Citigroup, once the world’s largest bank, has dropped about 90 percent since the end of 2004 in New York trading while Travelers has more than doubled.
Travelers’ return on equity beat banks last year as well, and Fishman said that shows the advantage wasn’t limited to a period that included the financial crisis. The insurer’s ROE also exceeds results at diversified financial companies and life insurers, he said.