An Empire Built With Two Pennies and an Industry Upset for the Ages


On this day in economic and financial history...

Travelers began doing business in the closing days of the Civil War, on April 1, 1864. On this day, company founder James G. Batterson issued the first Travelers written insurance policy to himself, a ceremonial transaction that nevertheless marked the official beginning of travel insurance in the United States. Several days earlier Batterson had engaged in the first unofficial insurance transaction for the yet-to-be-created accident-insurance company. Travelers recounts the incident on its history timeline:

Travelers was founded more than a century ago through an off-hand transaction of only two cents. The two cent incident occurred on March 24, 1864, when a Hartford businessman, James G. Batterson, met a local banker, James E. Bolter, in the post office. Bolter had heard that Batterson and several fellow townsmen were organizing a company for the purpose of introducing accident insurance to North America.

"I'm on my way home for lunch," Bolter said. "How much would you charge to insure me against accident between here and Buckingham Street?"

"Two cents," Batterson quoted promptly, as he took Bolter' two pennies and tucked them into his vest pocket. Bolter walked the four blocks to his home without mishap. His two cent "premium" is a souvenir treasured by the company Mr. Batterson founded, Travelers.

In the years that followed, Travelers became the go-to source of travel insurance, with a client roster including legendary circus showman P. T. Barnum, department store pioneer John Wanamaker, abolitionist William Lloyd Garrison, and James Harper, co-founder of the Harper Brothers publishing house (the flagship imprint of today's HarperCollins). As transportation opportunities expanded from steamships to railroads to automobiles and finally to aircraft, so too did the travel insurance industry. Today, more than $1 billion in travel insurance premiums are collected by Travelers and other insurers each year.

Travelers went through two notable mergers between the end of the 1990s and the middle of the 2000s. The first, which formed Citigroup , is directly responsible for repealing Glass-Steagall and ushering in a new era of megabanks. Two years after Citi divested the insurer in 2002 (insurance and banking didn't go together quite as harmoniously as chocolate and peanut butter), Travelers and St. Paul Fire and Marine Insurance, another Civil War-era insurer, merged to create the Travelers of today. This merger was completed on April 1, 2004, exactly 140 years after James G. Batterson sold that first Travelers policy to himself and began an insurance empire.

Small beginnings for the biggest of Big Tobacco
Philip Morris & Co, the predecessor of Altria , was incorporated in New York in April of 1902 as the American arm of a London tobacconist with the same name. As the U.S. was then the world's primary tobacco-grower, it made little sense for London's Philip Morris to export there, particularly in light of the U.S.' high tobacco-importation tariffs. In its first full year of operation, Philip Morris sold only 7 million cigarettes, although even then it was already producing its trademark "Marlborough" cigarettes, named for the London street address of its parent's factory.

Philip Morris spent much of its earlier decades in the shadow of the "Tobacco Trust," which was originally an agglomeration of the country's largest cigarette-makers and which remained a group of dominant tobacco companies following its forced dissolution in 1911. Philip Morris was the smallest of the six major U.S. tobacco companies in 1960, shortly before the federal government began to push back against smoking-related health problems. That year, Americans smoked 476 billion cigarettes at a cost of about $6.6 billion and also consumed more than 7 billion cigars and 79 billion pounds of smoking tobacco. That year, Marlboro didn't even crack the list of top brands, which included Reynolds American's Camel and Winston and American Tobacco's Pall Mall and Lucky Strike.

By the 1980s, Philip Morris had grown into the largest cigarette company in the U.S. and had already owned the Miller Brewing Company for a decade. Between 1960 and its ascension to industry leadership in 1983, Philip Morris' earnings had swelled from $21 million to $889 million -- and the 1983 result came despite a massive writedown on its Miller operations. At an annualized net-income growth rate of 17.7%, Philip Morris was arguably the best stock to hold over the latter half of the 20th century. And even then, Philip Morris was just warming up. By 1988, it had merged two of the largest food companies into Kraft , which it would retain for another two decades before spinning it off on the public markets

Just more than 110 years after its inception, Altria and the companies since spun off from it are worth a combined $300 billion, which makes the Philip Morris empire larger in the aggregate than all but one of the companies on the Dow Jones Industrial Average -- an index that Philip Morris, its spinoffs, and its acquisition targets have been a part of on three separate occasions.

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