8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________

FORM 8-K

______________________________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 21, 2021

_______________________________________________

The Travelers Companies, Inc.

(Exact name of registrant as specified in its charter)

_______________________________________________

Minnesota	001-10898	41-0518860
(State or other jurisdiction of<br>incorporation)	(Commission File Number)	(I.R.S. Employer<br>Identification No.)

485 Lexington Avenue

New York, New York 10017

(Address of principal executive offices) (Zip Code)

(917) 778-6000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

_________________________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, without par value	TRV	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Item 2.02.  Results of Operations and Financial Condition.

On January 21, 2021, The Travelers Companies, Inc. (the “Company”) issued a press release announcing the results of the Company’s operations for the quarter ended December 31, 2020, and the availability of the Company’s fourth quarter financial supplement on the Company’s web site.  The press release and the financial supplement are furnished as Exhibits 99.1 and 99.2 to this Report and are hereby incorporated by reference in this Item 2.02.

As provided in General Instruction B.2 of Form 8-K, the information and exhibits contained in this Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01.  Financial Statements and Exhibits.

(d)                                 Exhibits.

Exhibit No.	Description
99.1	Press Release, dated January 21, 2021, reporting results of operations (This exhibit is furnished and not filed.)
99.2	Fourth Quarter 2020 Financial Supplement of The Travelers Companies, Inc. (This exhibit is furnished and not filed.)
101.1	Pursuant to Rule 406 of Regulation S-T, the cover page to this Current Report on Form 8-K is formatted in Inline XBRL.
104.1	Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101.1.)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, The Travelers Companies, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			THE TRAVELERS COMPANIES, INC.
Date:	January 21, 2021	By:	/s/   CHRISTINE K. KALLA
			Name: Christine K. Kalla
			Executive Vice President and General Counsel

Document

                                            Exhibit 99.1

The Travelers Companies, Inc.

485 Lexington Avenue

New York, NY 10017-2630

www.travelers.com

NYSE: TRV

Travelers Reports Record Fourth Quarter 2020 Net Income per Diluted Share of $5.10

and Return on Equity of 18.4%

Record Core Income per Diluted Share of $4.91 and Core Return on Equity of 20.5%

Full Year Net Income of $2.697 billion, up 3%, and Return on Equity of 10.0%

Full Year Core Income of $2.686 billion, up 6%, and Core Return on Equity of 11.3%

•Fourth quarter net income of $1.310 billion and core income of $1.262 billion.

•Consolidated combined ratio improved 5.7 points to a very strong 86.7%; underlying combined ratio improved 3.4 points to a very strong 88.7%.

•Net written premiums of $7.269 billion, up 3% compared to the prior year quarter; full year net written premiums of $29.732 billion, up 2% compared to the prior year.

•Strong renewal rate change in all three segments, including record renewal rate change in Business Insurance and Bond & Specialty Insurance.

•Total capital returned to shareholders of $419 million, including $201 million of share repurchases; full year total capital returned to shareholders of $1.536 billion, including $672 million of share repurchases.

•Book value per share of $115.68, up 14% from year-end 2019; adjusted book value per share of $99.54, up 7% from year-end 2019.

•Board of Directors declares regular quarterly cash dividend of $0.85 per share.

New York, January 21, 2021 — The Travelers Companies, Inc. today reported net income of $1.310 billion, or $5.10 per diluted share, for the quarter ended December 31, 2020, compared to $873 million, or $3.35 per diluted share, in the prior year quarter. Core income in the current quarter was $1.262 billion, or $4.91 per diluted share, compared to $867 million, or $3.32 per diluted share, in the prior year quarter. Core income increased primarily due to a higher underlying underwriting gain (i.e., excluding net prior year reserve development and catastrophe losses), higher net favorable prior year reserve development, higher net investment income and lower catastrophe losses. Net realized investment gains in the current quarter were $50 million pre-tax ($48 million after-tax), compared to $12 million pre-tax ($6 million after-tax) in the prior year quarter. Per diluted share amounts benefited from the impact of share repurchases.

Consolidated Highlights

( in millions, except for per share amounts, and after-tax, except for premiums and revenues)	Three Months Ended December 31,												Twelve Months Ended December 31,
				2019				Change				2020				2019				Change
Net written premiums	$	7,269			$	7,075			3	%			$	29,732			$	29,151			2	%
Total revenues	$	8,397			$	8,063			4				$	31,981			$	31,581			1
Net income	$	1,310			$	873			50				$	2,697			$	2,622			3
per diluted share	$	5.10			$	3.35			52				$	10.52			$	9.92			6
Core income	$	1,262			$	867			46				$	2,686			$	2,537			6
per diluted share	$	4.91			$	3.32			48				$	10.48			$	9.60			9
Diluted weighted average shares outstanding	254.8				259.0				(2)				254.6				262.3				(3)
Combined ratio	86.7		%		92.4		%		(5.7)		pts		95.0		%		96.5		%		(1.5)		pts
Underlying combined ratio	88.7		%		92.1		%		(3.4)		pts		90.7		%		93.2		%		(2.5)		pts
Return on equity	18.4		%		13.5		%		4.9		pts		10.0		%		10.5		%		(0.5)		pts
Core return on equity	20.5		%		14.8		%		5.7		pts		11.3		%		10.9		%		0.4		pts

All values are in US Dollars.

	As of
	December 31,<br>2020		December 31,<br>2019		Change
Book value per share	$	115.68	$	101.55	14	%
Adjusted book value per share	99.54		92.76		7	%

See Glossary of Financial Measures for definitions and the statistical supplement for additional financial data. .

“We are very pleased to report fourth quarter core income of $1.3 billion, or $4.91 per diluted share, and core return on equity of 21%,” said Alan Schnitzer, Chairman and Chief Executive Officer. “The results benefited from strong underlying underwriting income, driven by record net earned premiums of $7.5 billion and an underlying combined ratio which improved 3.4 points from the prior year quarter to an excellent 88.7%. That brings full year core income to $2.7 billion, or $10.48 per diluted share, and full year core return on equity exceeding 11%, a terrific result in a challenging economic and operating environment. Full year core income includes record underlying underwriting profit of $2 billion. Our high-quality investment portfolio also performed well, generating net investment income of $572 million after-tax. Our operating results, together with our strong balance sheet, enabled us to grow adjusted book value per share by 7% during the year, after returning $1.5 billion of excess capital to shareholders, including $672 million of share repurchases, which we resumed in the fourth quarter.

“Our top line remained remarkably resilient this quarter and throughout the year. For the quarter, net written premiums grew 3%, driven by continued strong renewal rate change and retention in each of our three segments. In Business Insurance, we achieved record renewal rate change of 8.4%, nearly 4 points higher than the prior year quarter, while retention remained strong. In Bond & Specialty Insurance, net written premiums increased by 12%, driven by record renewal premium change of 10.9% in our domestic management liability business, including record renewal rate change. In Personal Insurance, net written premiums increased by 7%, driven by strong renewal premium change of 8.2% in our Agency Homeowners business and strong retention and new business in both Agency Auto and Agency Homeowners.

“Our ability to deliver strong results over this past year in the face of an historic pandemic, a record number of PCS catastrophe events and historically low interest rates reflects the value of underwriting excellence, our leading data and analytics, the dedication of our highly engaged and talented workforce and the significant value we bring to our customers and distribution partners. Looking forward, we believe we are well positioned to capitalize on the opportunities ahead as the economy reopens and to continue to deliver meaningful shareholder value over time.”

Consolidated Results

	Three Months Ended December 31,												Twelve Months Ended December 31,
($ in millions and pre-tax, unless noted otherwise)	2020				2019				Change				2020				2019				Change
Underwriting gain:	$	955			$	513			$	442			$	1,302			$	833			$	469
Underwriting gain includes:
Net favorable (unfavorable) prior year reserve development	180				60				120				351				(60)				411
Catastrophes, net of reinsurance	(29)				(85)				56				(1,613)				(886)				(727)
Net investment income	677				616				61				2,227				2,468				(241)
Other income (expense), including interest expense	(66)				(67)				1				(294)				(276)				(18)
Core income before income taxes	1,566				1,062				504				3,235				3,025				210
Income tax expense	304				195				109				549				488				61
Core income	1,262				867				395				2,686				2,537				149
Net realized investment gains after income taxes	48				6				42				11				85				(74)
Net income	$	1,310			$	873			$	437			$	2,697			$	2,622			$	75
Combined ratio	86.7		%		92.4		%		(5.7)			pts	95.0		%		96.5		%		(1.5)			pts
Impact on combined ratio
Net (favorable) unfavorable prior year reserve development	(2.4)			pts	(0.8)			pts	(1.6)			pts	(1.2)			pts	0.2			pts	(1.4)			pts
Catastrophes, net of reinsurance	0.4			pts	1.1			pts	(0.7)			pts	5.5			pts	3.1			pts	2.4			pts
Underlying combined ratio	88.7		%		92.1		%		(3.4)			pts	90.7		%		93.2		%		(2.5)			pts
Net written premiums
Business Insurance	$	3,631			$	3,703			(2)		%		$	15,431			$	15,629			(1)		%
Bond & Specialty Insurance	800				714				12				2,951				2,739				8
Personal Insurance	2,838				2,658				7				11,350				10,783				5
Total	$	7,269			$	7,075			3		%		$	29,732			$	29,151			2		%

Fourth Quarter 2020 Results

(All comparisons vs. fourth quarter 2019, unless noted otherwise)

Net income of $1.310 billion increased $437 million due to higher core income and higher net realized investment gains. Core income of $1.262 billion increased $395 million, primarily due to a higher underlying underwriting gain, higher net favorable prior year reserve development, higher net investment income and lower catastrophe losses. The underlying underwriting gain benefited from higher business volumes and a lower underlying combined ratio. Net realized investment gains were $50 million pre-tax ($48 million after-tax), compared to $12 million pre-tax ($6 million after-tax) in the prior year quarter.

Combined ratio:

•The combined ratio of 86.7% improved 5.7 points due to a lower underlying combined ratio (3.4 points), higher net favorable prior year reserve development (1.6 points) and lower catastrophe losses (0.7 points).

•The underlying combined ratio of 88.7% improved 3.4 points. See below for further details by segment.

•Net favorable prior year reserve development occurred in all segments. See below for further details by segment. Catastrophe losses primarily resulted from Hurricane Zeta.

Net investment income of $677 million pre-tax ($572 million after-tax) increased 10%. Income from the fixed income investment portfolio decreased from the prior year quarter, primarily due to lower interest rates, partially offset by a higher average level of fixed maturity investments. Income from the non-fixed income investment portfolio increased over the prior year quarter, primarily due to higher private equity partnership returns.

Net written premiums of $7.269 billion increased 3%. See below for further details by segment.

Full Year 2020 Results

(All comparisons vs. full year 2019, unless noted otherwise)

Net income of $2.697 billion increased $75 million due to higher core income, partially offset by lower net realized investment gains. Core income of $2.686 billion increased by $149 million, primarily due to a higher underlying underwriting gain and net favorable prior year reserve development in the current year compared to net unfavorable prior year reserve development in the prior year, partially offset by higher catastrophe losses and lower net investment income. The underlying underwriting gain benefited from higher business volumes and a lower underlying combined ratio. Catastrophe and non-catastrophe weather-related losses in 2020 were reduced by the full $280 million of recoveries available under the Company's 2020 Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty in the third quarter of 2020. Catastrophe and non-catastrophe weather-related losses in 2019 were reduced by $135 million of recoveries available under the Company's 2019 Underlying Property Aggregate Catastrophe Excess-of-Loss Reinsurance Treaty in the fourth quarter of 2019. Net realized investment gains were $2 million pre-tax ($11 million after-tax), compared to $113 million pre-tax ($85 million after-tax) in the prior year.

Combined ratio:

•The combined ratio of 95.0% improved 1.5 points due to a lower underlying combined ratio (2.5 points) and net favorable prior year reserve development in the current year compared to net unfavorable prior year reserve development in the prior year (1.4 points), partially offset by higher catastrophe losses (2.4 points).

•The underlying combined ratio of 90.7% improved 2.5 points. See below for further details by segment.

•Net favorable prior year reserve development in Personal Insurance was partially offset by net unfavorable prior year reserve development in Business Insurance. Prior year reserve development in Personal Insurance and Business Insurance included an aggregate $403 million subrogation benefit in the third quarter of 2020 from Pacific Gas and Electric Company (PG&E) related to the 2017 and 2018 California wildfires. Net prior year reserve development in Bond & Specialty Insurance was not significant.

•Catastrophe losses included the fourth quarter event described above, as well as tornado activity in Tennessee and other wind storms and winter storms in several regions of the United States in the first quarter of 2020, severe storms in several regions of the United States and civil unrest in the second quarter of 2020 and the derecho windstorm in the midwestern region of the United States, the Glass wildfire in California, Tropical Storm Isaias, Hurricane Laura and additional wildfires in the United States in the third quarter of 2020.

Net investment income of $2.227 billion pre-tax ($1.908 billion after-tax) decreased 10%. Income from the fixed income investment portfolio decreased from the prior year, primarily due to lower interest rates, partially offset by a higher average level of fixed maturity investments. Income from the non-fixed income investment portfolio decreased from the prior year, primarily due to lower private equity partnership returns which reflected the impact of the disruption in global financial markets in the first quarter of 2020 associated with COVID-19.

Net written premiums of $29.732 billion increased 2%. See below for further details by segment.

Shareholders’ Equity

Shareholders’ equity of $29.201 billion increased 13% over year-end 2019, driven by net income of $2.697 billion and higher net unrealized investment gains resulting from lower interest rates, partially offset by dividends to shareholders and common share repurchases. Net unrealized investment gains included in shareholders’ equity were $5.175 billion pre-tax ($4.074 billion after-tax), compared to net unrealized investment gains of $2.853 billion pre-tax ($2.246 billion after-tax) at year-end 2019. Book value per share of $115.68 increased 14% from year-end 2019, driven by the increase in shareholders' equity and lower common shares outstanding as a result of share repurchases. Adjusted book value per share of $99.54, which excludes net unrealized investment gains, increased 7% from year-end 2019.

The Company repurchased 1.4 million shares during the fourth quarter at an average price of $136.78 per share for a total of $201 million. Capacity remaining under the existing share repurchase authorization was $1.161 billion at the end of the quarter. Also at the end of the quarter, statutory capital and surplus was $22.180 billion, and the ratio of debt-to-capital was 18.3%. The ratio of debt-to-capital excluding after-tax net unrealized investment gains included in shareholders’ equity was 20.7%, within the Company’s target range of 15% to 25%.

The Board of Directors declared a regular quarterly dividend of $0.85 per share. The dividend is payable on March 31, 2021, to shareholders of record at the close of business on March 10, 2021.

Business Insurance Segment Financial Results

	Three Months Ended December 31,												Twelve Months Ended December 31,
($ in millions and pre-tax, unless noted otherwise)	2020				2019				Change				2020				2019				Change
Underwriting gain (loss):	$	382			$	87			$	295			$	(90)			$	(195)			$	105
Underwriting gain (loss) includes:
Net favorable (unfavorable) prior year reserve development	124				8				116				(91)				(258)				167
Catastrophes, net of reinsurance	24				(48)				72				(645)				(470)				(175)
Net investment income	502				451				51				1,633				1,816				(183)
Other income (expense)	(5)				—				(5)				(21)				(6)				(15)
Segment income before income taxes	879				538				341				1,522				1,615				(93)
Income tax expense	166				90				76				213				223				(10)
Segment income	$	713			$	448			$	265			$	1,309			$	1,392			$	(83)
Combined ratio	89.8		%		97.5		%		(7.7)			pts	100.3		%		100.9		%		(0.6)			pts
Impact on combined ratio
Net (favorable) unfavorable prior year reserve development	(3.2)			pts	(0.2)			pts	(3.0)			pts	0.6			pts	1.7			pts	(1.1)			pts
Catastrophes, net of reinsurance	(0.6)			pts	1.3			pts	(1.9)			pts	4.2			pts	3.0			pts	1.2			pts
Underlying combined ratio	93.6		%		96.4		%		(2.8)			pts	95.5		%		96.2		%		(0.7)			pts
Net written premiums by market
Domestic
Select Accounts	$	630			$	675			(7)		%		$	2,821			$	2,911			(3)		%
Middle Market	2,012				2,061				(2)				8,511				8,630				(1)
National Accounts	241				251				(4)				996				1,051				(5)
National Property and Other	471				437				8				2,086				1,965				6
Total Domestic	3,354				3,424				(2)				14,414				14,557				(1)
International	277				279				(1)				1,017				1,072				(5)
Total	$	3,631			$	3,703			(2)		%		$	15,431			$	15,629			(1)		%

Fourth Quarter 2020 Results

(All comparisons vs. fourth quarter 2019, unless noted otherwise)

Segment income for Business Insurance was $713 million after-tax, an increase of $265 million. Segment income increased primarily due to higher net favorable prior year reserve development, a higher underlying underwriting gain, lower catastrophe losses and higher net investment income.

Combined ratio:

•The combined ratio of 89.8% improved 7.7 points due to higher net favorable prior year reserve development (3.0 points), a lower underlying combined ratio (2.8 points) and lower catastrophe losses (1.9 points).

•The underlying combined ratio of 93.6% improved by 2.8 points, impacted by earned pricing that exceeded loss cost trends and the favorable comparison as a result of the re-estimation of losses in the prior year quarter related to the first three quarters of 2019. COVID-19 and related economic conditions had a modest net favorable impact on the underlying combined ratio.

•Net favorable prior year reserve development was primarily driven by better than expected loss experience in the workers' compensation product line for multiple accident years, partially offset by an increase to general liability reserves in our run-off book related to policies issued more than 20 years ago.

Net written premiums of $3.631 billion decreased 2%. The benefits of continued strong retention and higher renewal rate changes were more than offset by a modest reduction in exposures and a decrease in new business volume, both impacted by COVID-19 and related economic conditions.

Full Year 2020 Results

(All comparisons vs. full year 2019, unless noted otherwise)

Segment income for Business Insurance was $1.309 billion after-tax, a decrease of $83 million. Segment income decreased primarily due to lower net investment income and higher catastrophe losses, partially offset by lower net unfavorable prior year reserve development and a higher underlying underwriting gain.

Combined ratio:

•The combined ratio of 100.3% improved 0.6 points due to lower net unfavorable prior year reserve development (1.1 points) and a lower underlying combined ratio (0.7 points), partially offset by higher catastrophe losses (1.2 points).

•The underlying combined ratio of 95.5% improved 0.7 points, impacted by earned pricing that exceeded loss cost trends. COVID-19 and related economic conditions had a modest net unfavorable impact on the underlying combined ratio.

•Net unfavorable prior year reserve development was primarily driven by the following:

•Asbestos reserves - an increase of $295 million;

•General liability (excluding asbestos and environmental) - higher than expected loss experience in the segment's domestic operations for primary and excess coverages for recent accident years, as well as an increase to general liability reserves in our run-off book related to policies issued more than 20 years ago;

•Commercial automobile - higher than expected loss experience in the segment's domestic operations for recent accident years; and

•Commercial multi-peril (excluding PG&E subrogation recoveries and asbestos and environmental) - higher than expected loss experience in the segment's domestic operations for recent accident years.

Partially offset by:

•Workers' compensation - better than expected loss experience in the segment's domestic operations for multiple accident years;

•Commercial property (excluding PG&E subrogation recoveries) - better than expected loss experience in the segment's domestic operations for multiple accident years; and

•PG&E subrogation recoveries - $81 million of recoveries as described above.

Net written premiums of $15.431 billion decreased 1%, driven by the same factors described above for the fourth quarter of 2020.

Bond & Specialty Insurance Segment Financial Results

	Three Months Ended December 31,												Twelve Months Ended December 31,
($ in millions and pre-tax, unless noted otherwise)	2020				2019				Change				2020				2019				Change
Underwriting gain:	$	138			$	142			$	(4)			$	346			$	515			$	(169)
Underwriting gain includes:
Net favorable (unfavorable) prior year reserve development	32				20				12				(1)				65				(66)
Catastrophes, net of reinsurance	(1)				(1)				—				(11)				(5)				(6)
Net investment income	58				60				(2)				213				233				(20)
Other income	8				5				3				21				21				—
Segment income before income taxes	204				207				(3)				580				769				(189)
Income tax expense	40				40				—				107				151				(44)
Segment income	$	164			$	167			$	(3)			$	473			$	618			$	(145)
Combined ratio	80.9		%		78.6		%		2.3			pts	87.4		%		79.5		%		7.9			pts
Impact on combined ratio
Net (favorable) unfavorable prior year reserve development	(4.2)			pts	(2.9)			pts	(1.3)			pts	—			pts	(2.5)			pts	2.5			pts
Catastrophes, net of reinsurance	0.1			pts	0.2			pts	(0.1)			pts	0.4			pts	0.2			pts	0.2			pts
Underlying combined ratio	85.0		%		81.3		%		3.7			pts	87.0		%		81.8		%		5.2			pts
Net written premiums
Domestic
Management Liability	$	463			$	411			13		%		$	1,769			$	1,605			10		%
Surety	202				206				(2)				845				866				(2)
Total Domestic	665				617				8				2,614				2,471				6
International	135				97				39				337				268				26
Total	$	800			$	714			12		%		$	2,951			$	2,739			8		%

Fourth Quarter 2020 Results

(All comparisons vs. fourth quarter 2019, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $164 million after-tax, a decrease of $3 million. Segment income decreased primarily due to a lower underlying underwriting gain, largely offset by higher net favorable prior year reserve development. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

•The combined ratio of 80.9% increased 2.3 points due to a higher underlying combined ratio (3.7 points), partially offset by higher net favorable prior year reserve development (1.3 points) and slightly lower catastrophe losses (0.1 points).

•The underlying combined ratio of 85.0% increased 3.7 points, driven by the impacts of higher loss estimates for management liability coverages, primarily due to the impact of COVID-19 and related economic conditions.

•Net favorable prior year reserve development was primarily driven by better than expected loss experience in the surety product line for multiple accident years.

Net written premiums of $800 million increased 12%, reflecting continued strong retention and increased levels of renewal premium change in management liability.

Full Year 2020 Results

(All comparisons vs. full year 2019, unless noted otherwise)

Segment income for Bond & Specialty Insurance was $473 million after-tax, a decrease of $145 million. Segment income decreased primarily due to a lower underlying underwriting gain, an insignificant amount of net unfavorable prior year reserve development in the current year compared to net favorable prior year reserve development in the prior year and lower net investment income. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

•The combined ratio of 87.4% increased 7.9 points due to a higher underlying combined ratio (5.2 points), the comparison to net favorable prior year reserve development in the prior year (2.5 points) and slightly higher catastrophe losses (0.2 points).

•The underlying combined ratio of 87.0% increased 5.2 points, driven by the impacts of higher loss estimates for management liability coverages, primarily due to the impact of COVID-19 and related economic conditions.

•Net prior year reserve development in the current year was not significant, as higher than expected loss experience in the domestic general liability product line for management liability coverages for recent accident years was offset by better than expected loss experience in the surety product line for multiple accident years.

Net written premiums of $2.951 billion increased 8%, driven by the same factors described above for the fourth quarter of 2020.

Personal Insurance Segment Financial Results

	Three Months Ended December 31,												Twelve Months Ended December 31,
($ in millions and pre-tax, unless noted otherwise)	2020				2019				Change				2020				2019				Change
Underwriting gain:	$	435			$	284			$	151			$	1,046			$	513			$	533
Underwriting gain includes:
Net favorable prior year reserve development	24				32				(8)				443				133				310
Catastrophes, net of reinsurance	(52)				(36)				(16)				(957)				(411)				(546)
Net investment income	117				105				12				381				419				(38)
Other income	23				22				1				76				87				(11)
Segment income before income taxes	575				411				164				1,503				1,019				484
Income tax expense	118				84				34				308				195				113
Segment income	$	457			$	327			$	130			$	1,195			$	824			$	371
Combined ratio	84.1		%		88.5		%		(4.4)			pts	89.7		%		94.2		%		(4.5)			pts
Impact on combined ratio
Net favorable prior year reserve development	(0.8)			pts	(1.2)			pts	0.4			pts	(4.1)			pts	(1.3)			pts	(2.8)			pts
Catastrophes, net of reinsurance	1.8			pts	1.3			pts	0.5			pts	8.8			pts	4.0			pts	4.8			pts
Underlying combined ratio	83.1		%		88.4		%		(5.3)			pts	85.0		%		91.5		%		(6.5)			pts
Net written premiums
Domestic
Agency (1)
Automobile	$	1,277			$	1,253			2		%		$	5,080			$	5,124			(1)		%
Homeowners and Other	1,294				1,145				13				5,185				4,540				14
Total Agency	2,571				2,398				7				10,265				9,664				6
Direct-to-Consumer	107				99				8				433				412				5
Total Domestic	2,678				2,497				7				10,698				10,076				6
International	160				161				(1)				652				707				(8)
Total	$	2,838			$	2,658			7		%		$	11,350			$	10,783			5		%

(1) Represents business sold through agents, brokers and other intermediaries and excludes direct to consumer and international.

Fourth Quarter 2020 Results

(All comparisons vs. fourth quarter 2019, unless noted otherwise)

Segment income for Personal Insurance was $457 million after-tax, an increase of $130 million. Segment income increased primarily due to a higher underlying underwriting gain and higher net investment income, partially offset by higher catastrophe losses and lower net favorable prior year reserve development. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

•The combined ratio of 84.1% improved 4.4 points due to a lower underlying combined ratio (5.3 points), partially offset by higher catastrophe losses (0.5 points) and lower net favorable prior year reserve development (0.4 points).

•The underlying combined ratio of 83.1% improved 5.3 points, primarily driven by lower losses in the automobile product line due to a decrease in miles driven attributable to COVID-19 and related economic conditions, partially offset by higher losses in the homeowners and other product line.

•Net favorable prior year reserve development was driven by better than expected loss experience in the segment's domestic operations in the automobile product line for recent accident years.

Net written premiums of $2.838 billion increased 7%. Agency Automobile net written premiums increased 2%, driven by strong retention and higher levels of new business. Agency Homeowners and Other net written premiums increased 13%, driven by strong retention, renewal premium change of 8% and higher levels of new business.

Full Year 2020 Results

(All comparisons vs. full year 2019, unless noted otherwise)

Segment income for Personal Insurance was $1.195 billion after-tax, an increase of $371 million. Segment income increased primarily due to a higher underlying underwriting gain and higher net favorable prior year reserve development, partially offset by higher catastrophe losses and lower net investment income. The underlying underwriting gain benefited from higher business volumes.

Combined ratio:

•The combined ratio of 89.7% improved 4.5 points due to a lower underlying combined ratio (6.5 points) and higher net favorable prior year reserve development (2.8 points), partially offset by higher catastrophe losses (4.8 points).

•The underlying combined ratio of 85.0% improved 6.5 points, primarily driven by lower losses in the automobile product line due to a decrease in miles driven attributable to COVID-19 and related economic conditions (net of premium refunds) and lower non-catastrophe weather-related losses in the homeowners and other product line.

•Net favorable prior year reserve development was driven by $322 million of PG&E subrogation recoveries described above and better than expected loss experience in the segment's domestic operations in the automobile product line for recent accident years.

Net written premiums of $11.350 billion increased 5%. Agency Automobile net written premiums decreased 1%, driven by premium refunds provided to personal automobile customers, partially offset by strong retention and higher levels of new business. Agency Homeowners and Other net written premiums increased 14%, driven by strong retention, renewal premium change of 8% and higher levels of new business.

Financial Supplement and Conference Call

The information in this press release should be read in conjunction with the financial supplement that is available on our website at www.travelers.com. Travelers management will discuss the contents of this release and other relevant topics via webcast at 9 a.m. Eastern (8 a.m. Central) on Thursday, January 21, 2021. Investors can access the call via webcast at http://investor.travelers.com or by dialing 1.844.895.1976 within the United States and 1.647.689.5389 outside the United States. Prior to the webcast, a slide presentation pertaining to the quarterly earnings will be available on the Company’s website.

Following the live event, replays will be available via webcast for one year at http://investor.travelers.com and by telephone for 30 days by dialing 800.585.8367 within the United States or 416.621.4642 outside the United States. All callers should use conference ID 9075479.

About Travelers

The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of property casualty insurance for auto, home and business. A component of the Dow Jones Industrial Average, Travelers has approximately 30,000 employees and generated revenues of approximately $32 billion in 2020. For more information, visit www.travelers.com.

Travelers may use its website and/or social media outlets, such as Facebook and Twitter, as distribution channels of material Company information. Financial and other important information regarding the Company is routinely accessible through and posted on our website at http://investor.travelers.com, our Facebook page at https://www.facebook.com/travelers and our Twitter account (@Travelers) at https://twitter.com/travelers. In addition, you may automatically receive email alerts and other information about Travelers when you enroll your email address by visiting the Email Notifications section at http://investor.travelers.com.

Travelers is organized into the following reportable business segments:

Business Insurance - Business Insurance offers a broad array of property and casualty insurance and insurance-related services to its customers, primarily in the United States, as well as in Canada, the United Kingdom, the Republic of Ireland and throughout other parts of the world as a corporate member of Lloyd’s.

Bond & Specialty Insurance - Bond & Specialty Insurance provides surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to its customers in the United States and certain specialty insurance products in Canada, the United Kingdom and the Republic of Ireland, as well as Brazil through a joint venture, utilizing various degrees of financially-based underwriting approaches.

Personal Insurance - Personal Insurance writes a broad range of property and casualty insurance covering individuals’ personal risks, primarily in the United States, as well as in Canada. The primary products of automobile and homeowners insurance are complemented by a broad suite of related coverages.

* * * * *

Forward-Looking Statements

This press release contains, and management may make, certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, may be forward-looking statements. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “views,” “estimates” and similar expressions are used to identify these forward-looking statements. These statements include, among other things, the Company’s statements about:

•the Company’s outlook and its future results of operations and financial condition (including, among other things, anticipated premium volume, premium rates, renewal premium changes, underwriting margins and underlying underwriting margins, net and core income, investment income and performance, loss costs, return on equity, core return on equity and expected current returns, and combined ratios and underlying combined ratios);

•the impact of COVID-19 and related economic conditions, including the potential impact on the Company's investments;

•the impact of legislative or regulatory actions or court decisions taken in response to COVID-19 or otherwise;

•share repurchase plans;

•future pension plan contributions;

•the sufficiency of the Company’s asbestos and other reserves;

•the impact of emerging claims issues as well as other insurance and non-insurance litigation;

•the cost and availability of reinsurance coverage;

•catastrophe losses;

•the impact of investment (including changes in interest rates), economic (including inflation, changes in tax law, changes in commodity prices and fluctuations in foreign currency exchange rates) and underwriting market conditions;

•strategic and operational initiatives to improve profitability and competitiveness;

•the Company’s competitive advantages;

•new product offerings;

•the impact of new or potential regulations imposed or to be imposed by the United States or other nations, including tariffs or other barriers to international trade; and

•the impact of developments in the tort environment, such as increased attorney involvement in insurance claims and legislation allowing victims of sexual abuse to file or proceed with claims that otherwise would have been time-barred.

The Company cautions investors that such statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond the Company’s control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Some of the factors that could cause actual results to differ include, but are not limited to, the following:

•high levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas, could materially and adversely affect the Company’s results

of operations, its financial position and/or liquidity, and could adversely impact the Company’s ratings, the Company’s ability to raise capital and the availability and cost of reinsurance;

•if actual claims exceed the Company’s claims and claim adjustment expense reserves, or if changes in the estimated level of claims and claim adjustment expense reserves are necessary, including as a result of, among other things, changes in the legal/tort, regulatory and economic environments in which the Company operates or the impacts of COVID-19, the Company’s financial results could be materially and adversely affected;

•the impact of COVID-19 and related risks, including on the Company's distribution or other key partners, could materially affect the Company's results of operations, financial position and/or liquidity;

•during or following a period of financial market disruption or an economic downturn, such as the current environment, the Company’s business could be materially and adversely affected;

•the Company’s investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses, particularly in the current environment;

•the intense competition that the Company faces, and the impact of innovation, technological change and changing customer preferences on the insurance industry and the markets in which it operates, could harm its ability to maintain or increase its business volumes and its profitability;

•the Company’s business could be harmed because of its potential exposure to asbestos and environmental claims and related litigation;

•disruptions to the Company’s relationships with its independent agents and brokers or the Company's inability to manage effectively a changing distribution landscape could adversely affect the Company;

•the Company is exposed to, and may face adverse developments involving, mass tort claims such as those relating to exposure to potentially harmful products or substances;

•the effects of emerging claim and coverage issues on the Company’s business are uncertain, and court decisions or legislative or regulatory changes that take place after the Company issues its policies, including those taken in response to COVID-19 (such as effectively expanding workers' compensation coverage by instituting presumptions of compensability of claims for certain types of workers or requiring insurers to cover business interruption claims irrespective of terms, exclusions or other conditions included in the policies that would otherwise preclude coverage), can result in an unexpected increase in the number of claims and have a material adverse impact on the Company's results of operations;

•the Company may not be able to collect all amounts due to it from reinsurers, reinsurance coverage may not be available to the Company in the future at commercially reasonable rates or at all and the Company is exposed to credit risk related to its structured settlements;

•the Company is exposed to credit risk in certain of its insurance operations and with respect to certain guarantee or indemnification arrangements that it has with third parties, which risk is heightened in the current environment;

•within the United States, the Company’s businesses are heavily regulated by the states in which it conducts business, including licensing, market conduct and financial supervision, and changes in regulation or regulatory actions (including those taken in response to COVID-19) may reduce the Company’s profitability and limit its growth;

•a downgrade in the Company’s claims-paying and financial strength ratings could adversely impact the Company’s business volumes, adversely impact the Company’s ability to access the capital markets and increase the Company’s borrowing costs;

•the inability of the Company’s insurance subsidiaries to pay dividends to the Company’s holding company in sufficient amounts would harm the Company’s ability to meet its obligations, pay future shareholder dividends and/or make future share repurchases;

•the Company’s efforts to develop new products, expand in targeted markets or improve business processes and workflows may not be successful and may create enhanced risks;

•the Company may be adversely affected if its pricing and capital models provide materially different indications than actual results;

•the Company’s business success and profitability depend, in part, on effective information technology systems and on continuing to develop and implement improvements in technology, particularly as its business processes become more digital;

•if the Company experiences difficulties with technology, data and network security (including as a result of cyber attacks), outsourcing relationships or cloud-based technology, the Company’s ability to conduct its business could be negatively impacted. This risk is heightened in the current environment where a majority of the Company's employees have shifted to a work from home arrangement;

•the Company is also subject to a number of additional risks associated with its business outside the United States, such as foreign currency exchange fluctuations (including with respect to the valuation of the

Company’s foreign investments and interests in joint ventures) and restrictive regulations as well as the risks and uncertainties associated with the United Kingdom’s withdrawal from the European Union;

•regulatory changes outside of the United States, including in Canada, the United Kingdom, the Republic of Ireland and the European Union, could adversely impact the Company’s results of operations and limit its growth;

•loss of or significant restrictions on the use of particular types of underwriting criteria, such as credit scoring, or other data or methodologies, in the pricing and underwriting of the Company’s products could reduce the Company’s future profitability;

•acquisitions and integration of acquired businesses may result in operating difficulties and other unintended consequences;

•the Company could be adversely affected if its controls designed to ensure compliance with guidelines, policies and legal and regulatory standards are not effective;

•the Company’s businesses may be adversely affected if it is unable to hire and retain qualified employees;

•intellectual property is important to the Company’s business, and the Company may be unable to protect and enforce its own intellectual property or the Company may be subject to claims for infringing the intellectual property of others;

•changes in federal regulation could impose significant burdens on the Company, and otherwise adversely impact the Company’s results;

•changes in U.S. tax laws or in the tax laws of other jurisdictions where the Company operates could adversely impact the Company; and

•the Company’s share repurchase plans depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels commensurate with the Company’s desired ratings from independent rating agencies, changes in levels of written premiums, funding of the Company’s qualified pension plan, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions and other factors, including the ongoing level of uncertainty related to COVID-19.

Our forward-looking statements speak only as of the date of this press release or as of the date they are made, and we undertake no obligation to update forward-looking statements. For a more detailed discussion of these factors, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the quarterly report on Form 10-Q filed with the Securities and Exchange Commission (SEC) on October 20, 2020 and in our most recent annual report on Form 10-K filed with the SEC on February 13, 2020, in each case as updated by our periodic filings with the SEC.

*****

GLOSSARY OF FINANCIAL MEASURES AND RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

The following measures are used by the Company’s management to evaluate financial performance against historical results, to establish performance targets on a consolidated basis and for other reasons as discussed below. In some cases, these measures are considered non-GAAP financial measures under applicable SEC rules because they are not displayed as separate line items in the consolidated financial statements or are not required to be disclosed in the notes to financial statements or, in some cases, include or exclude certain items not ordinarily included or excluded in the most comparable GAAP financial measure. Reconciliations of these measures to the most comparable GAAP measures also follow.

In the opinion of the Company’s management, a discussion of these measures provides investors, financial analysts, rating agencies and other financial statement users with a better understanding of the significant factors that comprise the Company’s periodic results of operations and how management evaluates the Company’s financial performance.

Some of these measures exclude net realized investment gains (losses), net of tax, and/or net unrealized investment gains (losses), net of tax, included in shareholders’ equity, which can be significantly impacted by both discretionary and other economic factors and are not necessarily indicative of operating trends.

Other companies may calculate these measures differently, and, therefore, their measures may not be comparable to those used by the Company’s management.

RECONCILIATION OF NET INCOME TO CORE INCOME AND CERTAIN OTHER NON-GAAP MEASURES

Core income (loss) is consolidated net income (loss) excluding the after-tax impact of net realized investment gains (losses), discontinued operations, the effect of a change in tax laws and tax rates at enactment, and cumulative effect of changes in accounting principles when applicable. Segment income (loss) is determined in the same manner as core income (loss) on a segment basis. Management uses segment income (loss) to analyze each segment’s performance and as a tool in making business decisions. Financial statement users also consider core income (loss) when analyzing the results and trends of insurance companies. Core income (loss) per share is core income (loss) on a per common share basis.

Reconciliation of Net Income to Core Income less Preferred Dividends

	Three Months Ended December 31,				Twelve Months Ended December 31,
($ in millions, after-tax)	2020		2019		2020		2019
Net income	$	1,310	$	873	$	2,697	$	2,622
Less: Net realized investment gains	(48)		(6)		(11)		(85)
Core income	$	1,262	$	867	$	2,686	$	2,537
	Three Months Ended December 31,				Twelve Months Ended December 31,
---	---	---	---	---	---	---	---	---
($ in millions, pre-tax)	2020		2019		2020		2019
Net income	$	1,616	$	1,074	$	3,237	$	3,138
Less: Net realized investment gains	(50)		(12)		(2)		(113)
Core income	$	1,566	$	1,062	$	3,235	$	3,025
	Twelve Months Ended December 31,
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
($ in millions, after-tax)	2018	2017	2016	2015	2014	2013	2012	2011	2010	2009	2008	2007	2006	2005
Net income	$2,523	$2,056	$3,014	$3,439	$3,692	$3,673	$2,473	$1,426	$3,216	$3,622	$2,924	$4,601	$4,208	$1,622
Less: Loss from discontinued operations	—	—	—	—	—	—	—	—	—	—	—	—	—	(439)
Income from continuing operations	2,523	2,056	3,014	3,439	3,692	3,673	2,473	1,426	3,216	3,622	2,924	4,601	4,208	2,061
Adjustments:
Net realized investment (gains) losses	(93)	(142)	(47)	(2)	(51)	(106)	(32)	(36)	(173)	(22)	271	(101)	(8)	(35)
Impact of TCJA at enactment (1)	—	129	—	—	—	—	—	—	—	—	—	—	—	—
Core income	2,430	2,043	2,967	3,437	3,641	3,567	2,441	1,390	3,043	3,600	3,195	4,500	4,200	2,026
Less: Preferred dividends	—	—	—	—	—	—	—	1	3	3	4	4	5	6
Core income, less preferred dividends	$2,430	$2,043	$2,967	$3,437	$3,641	$3,567	$2,441	$1,389	$3,040	$3,597	$3,191	$4,496	$4,195	$2,020

(1) Tax Cuts and Jobs Act of 2017 (TCJA)

Reconciliation of Net Income per Share to Core Income per Share on a Basic and Diluted Basis

	Three Months Ended December 31,				Twelve Months Ended December 31,
	2020		2019		2020		2019
Basic income per share
Net income	$	5.13	$	3.37	$	10.56	$	10.01
Adjustments:
Net realized investment gains, after-tax	(0.19)		(0.02)		(0.04)		(0.32)
Core income	$	4.94	$	3.35	$	10.52	$	9.69
Diluted income per share
Net income	$	5.10	$	3.35	$	10.52	$	9.92
Adjustments:
Net realized investment gains, after-tax	(0.19)		(0.03)		(0.04)		(0.32)
Core income	$	4.91	$	3.32	$	10.48	$	9.60

Reconciliation of Segment Income to Total Core Income

	Three Months Ended December 31,				Twelve Months Ended December 31,
($ in millions, after-tax)	2020		2019		2020		2019
Business Insurance	$	713	$	448	$	1,309	$	1,392
Bond & Specialty Insurance	164		167		473		618
Personal Insurance	457		327		1,195		824
Total segment income	1,334		942		2,977		2,834
Interest Expense and Other	(72)		(75)		(291)		(297)
Total core income	$	1,262	$	867	$	2,686	$	2,537

RECONCILIATION OF SHAREHOLDERS’ EQUITY TO ADJUSTED SHAREHOLDERS’ EQUITY AND CALCULATION OF RETURN ON EQUITY AND CORE RETURN ON EQUITY

Adjusted shareholders’ equity is shareholders’ equity excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity, net realized investment gains (losses), net of tax, for the period presented, the effect of a change in tax laws and tax rates at enactment (excluding the portion related to net unrealized investment gains (losses)), preferred stock and discontinued operations.

Reconciliation of Shareholders’ Equity to Adjusted Shareholders’ Equity

	As of December 31,
($ in millions)	2020	2019	2018	2017	2016	2015	2014	2013	2012	2011	2010	2009	2008	2007	2006	2005
Shareholders’ equity	$29,201	$25,943	$22,894	$23,731	$23,221	$23,598	$24,836	$24,796	$25,405	$24,477	$25,475	$27,415	$25,319	$26,616	$25,135	$22,303
Adjustments:
Net unrealized investment (gains) losses, net of tax, included in shareholders’ equity	(4,074)	(2,246)	113	(1,112)	(730)	(1,289)	(1,966)	(1,322)	(3,103)	(2,871)	(1,859)	(1,856)	146	(620)	(453)	(327)
Net realized investment (gains) losses, net of tax	(11)	(85)	(93)	(142)	(47)	(2)	(51)	(106)	(32)	(36)	(173)	(22)	271	(101)	(8)	(35)
Impact of TCJA at enactment	—	—	—	287	—	—	—	—	—	—	—	—	—	—	—	—
Preferred stock	—	—	—	—	—	—	—	—	—	—	(68)	(79)	(89)	(112)	(129)	(153)
Loss from discontinued operations	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	439
Adjusted shareholders’ equity	$25,116	$23,612	$22,914	$22,764	$22,444	$22,307	$22,819	$23,368	$22,270	$21,570	$23,375	$25,458	$25,647	$25,783	$24,545	$22,227

Return on equity is the ratio of annualized net income (loss) less preferred dividends to average shareholders’ equity for the periods presented. Core return on equity is the ratio of annualized core income (loss) less preferred dividends to adjusted average shareholders’ equity for the periods presented. In the opinion of the Company’s management, these are important indicators of how well management creates value for its shareholders through its operating activities and its capital management.

Average shareholders’ equity is (a) the sum of total shareholders’ equity excluding preferred stock at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two. Adjusted average shareholders’ equity is (a) the sum of total adjusted shareholders’ equity at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.

Calculation of Return on Equity and Core Return on Equity

	Three Months Ended December 31,						Twelve Months Ended December 31,
($ in millions, after-tax)	2020			2019			2020			2019
Annualized net income	$	5,236		$	3,490		$	2,697		$	2,622
Average shareholders’ equity	28,525			25,775			26,892			24,922
Return on equity	18.4		%	13.5		%	10.0		%	10.5		%
Annualized core income	$	5,044		$	3,468		$	2,686		$	2,537
Adjusted average shareholders’ equity	24,558			23,472			23,790			23,335
Core return on equity	20.5		%	14.8		%	11.3		%	10.9		%

Average annual core return on equity over a period is the ratio of: (a) the sum of core income less preferred dividends for the periods presented to (b) the sum of: (1) the sum of the adjusted average shareholders’ equity for all full years in the period presented and (2) for partial years in the period presented, the number of quarters in that partial year divided by four, multiplied by the adjusted average shareholders’ equity of the partial year.

Calculation of Core Return on Equity

	Twelve Months Ended December 31,
($ in millions)	2020	2019	2018	2017	2016	2015	2014	2013	2012	2011	2010	2009	2008	2007	2006	2005
Core income, less preferred dividends	$2,686	$2,537	$2,430	$2,043	$2,967	$3,437	$3,641	$3,567	$2,441	$1,389	$3,040	$3,597	$3,191	$4,496	$4,195	$2,020
Adjusted average shareholders’ equity	23,790	23,335	22,814	22,743	22,386	22,681	23,447	23,004	22,158	22,806	24,285	25,777	25,668	25,350	23,381	21,118
Core return on equity	11.3%	10.9%	10.7%	9.0%	13.3%	15.2%	15.5%	15.5%	11.0%	6.1%	12.5%	14.0%	12.4%	17.7%	17.9%	9.6%

RECONCILIATION OF PRE-TAX UNDERWRITING GAIN EXCLUDING CERTAIN ITEMS TO NET INCOME

Underwriting gain (loss) is net earned premiums and fee income less claims and claim adjustment expenses and insurance-related expenses. In the opinion of the Company’s management, it is important to measure the profitability of each segment excluding the results of investing activities, which are managed separately from the insurance business. This measure is used to assess each segment’s business performance and as a tool in making business decisions. Pre-tax underwriting gain, excluding the impact of catastrophes and net favorable (unfavorable) prior year loss reserve development, is the underwriting gain adjusted to exclude claims and claim adjustment expenses, reinstatement premiums and assessments related to catastrophes and loss reserve development related to time periods prior to the current year. In the opinion of the Company’s management, this measure is meaningful to users of the financial statements to understand the Company’s periodic earnings and the variability of earnings caused by the unpredictable nature (i.e., the timing and amount) of catastrophes and loss reserve development. This measure is also referred to as underlying underwriting margin or underlying underwriting gain.

A catastrophe is a severe loss designated a catastrophe by internationally recognized organizations that track and report on insured losses resulting from catastrophic events, such as Property Claim Services (PCS) for events in the United States and Canada. Catastrophes can be caused by various natural events, including, among others, hurricanes, tornadoes and other windstorms, earthquakes, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions and other naturally-occurring events, such as solar flares. Catastrophes can also be man-made, such as terrorist attacks and other intentionally destructive acts including those involving nuclear, biological, chemical and radiological events, cyber events, explosions and destruction of infrastructure. Each catastrophe has unique characteristics and catastrophes are not predictable as to timing or amount. Their effects are included in net and core income and claims and claim adjustment expense reserves upon occurrence. A catastrophe may result in the payment of reinsurance reinstatement premiums and assessments from various pools.

The Company’s threshold for disclosing catastrophes is primarily determined at the reportable segment level. If a threshold for one segment or a combination thereof is exceeded and the other segments have losses from the same event, losses from the event are identified as catastrophe losses in the segment results and for the consolidated results of the Company. Additionally, an aggregate threshold is applied for international business across all

reportable segments. The threshold for 2020 ranges from approximately $20 million to $30 million of losses before reinsurance and taxes.

Net favorable (unfavorable) prior year loss reserve development is the increase or decrease in incurred claims and claim adjustment expenses as a result of the re-estimation of claims and claim adjustment expense reserves at successive valuation dates for a given group of claims, which may be related to one or more prior years. In the opinion of the Company’s management, a discussion of loss reserve development is meaningful to users of the financial statements as it allows them to assess the impact between prior and current year development on incurred claims and claim adjustment expenses, net and core income (loss), and changes in claims and claim adjustment expense reserve levels from period to period.

Components of Net Income

	Three Months Ended December 31,				Twelve Months Ended December 31,
($ in millions, after-tax except as noted)	2020		2019		2020		2019
Pre-tax underwriting gain excluding the impact of catastrophes and net prior year loss reserve development	$	804	$	538	$	2,564	$	1,779
Pre-tax impact of catastrophes	(29)		(85)		(1,613)		(886)
Pre-tax impact of net favorable (unfavorable) prior year loss reserve development	180		60		351		(60)
Pre-tax underwriting gain	955		513		1,302		833
Income tax expense on underwriting results	214		117		292		179
Underwriting gain	741		396		1,010		654
Net investment income	572		525		1,908		2,097
Other income (expense), including interest expense	(51)		(54)		(232)		(214)
Core income	1,262		867		2,686		2,537
Net realized investment gains	48		6		11		85
Net income	$	1,310	$	873	$	2,697	$	2,622

COMBINED RATIO AND ADJUSTMENTS FOR UNDERLYING COMBINED RATIO

Combined ratio: For Statutory Accounting Practices (SAP), the combined ratio is the sum of the SAP loss and LAE ratio and the SAP underwriting expense ratio as defined in the statutory financial statements required by insurance regulators. The combined ratio, as used in this earnings release, is the equivalent of, and is calculated in the same manner as, the SAP combined ratio except that the SAP underwriting expense ratio is based on net written premiums and the underwriting expense ratio as used in this earnings release is based on net earned premiums.

For SAP, the loss and LAE ratio is the ratio of incurred losses and loss adjustment expenses less certain administrative services fee income to net earned premiums as defined in the statutory financial statements required by insurance regulators. The loss and LAE ratio as used in this earnings release is calculated in the same manner as the SAP ratio.

For SAP, the underwriting expense ratio is the ratio of underwriting expenses incurred (including commissions paid), less certain administrative services fee income and billing and policy fees and other, to net written premiums as defined in the statutory financial statements required by insurance regulators. The underwriting expense ratio as used in this earnings release, is the ratio of underwriting expenses (including the amortization of deferred acquisition costs), less certain administrative services fee income, billing and policy fees and other, to net earned premiums.

The combined ratio, loss and LAE ratio, and underwriting expense ratio are used as indicators of the Company’s underwriting discipline, efficiency in acquiring and servicing its business and overall underwriting profitability. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.

Underlying combined ratio represents the combined ratio excluding the impact of net prior year reserve development and catastrophes. The underlying combined ratio is an indicator of the Company’s underwriting discipline and underwriting profitability for the current accident year.

Other companies’ method of computing similarly titled measures may not be comparable to the Company’s method of computing these ratios.

Calculation of the Combined Ratio

	Three Months Ended December 31,						Twelve Months Ended December 31,
($ in millions, pre-tax)	2020			2019			2020			2019
Loss and loss adjustment expense ratio
Claims and claim adjustment expenses	$	4,341		$	4,640		$	19,123		$	19,133
Less:
Policyholder dividends	10			10			41			47
Allocated fee income	41			42			161			174
Loss ratio numerator	$	4,290		$	4,588		$	18,921		$	18,912
Underwriting expense ratio
Amortization of deferred acquisition costs	$	1,215		$	1,181		$	4,773		$	4,601
General and administrative expenses (G&A)	1,142			1,085			4,509			4,365
Less:
Non-insurance G&A	67			56			234			201
Allocated fee income	65			71			268			285
Billing and policy fees and other	28			27			97			108
Expense ratio numerator	$	2,197		$	2,112		$	8,683		$	8,372
Earned premium	$	7,480		$	7,250		$	29,044		$	28,272
Combined ratio (1)
Loss and loss adjustment expense ratio	57.3		%	63.3		%	65.1		%	66.9		%
Underwriting expense ratio	29.4		%	29.1		%	29.9		%	29.6		%
Combined ratio	86.7		%	92.4		%	95.0		%	96.5		%

(1)  For purposes of computing ratios, billing and policy fees and other (which are a component of other revenues) are allocated as a reduction of underwriting expenses.  In addition, fee income is allocated as a reduction of losses and loss adjustment expenses and underwriting expenses. In addition, G&A include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio.

RECONCILIATION OF BOOK VALUE PER SHARE AND SHAREHOLDERS’ EQUITY TO CERTAIN NON-GAAP MEASURES

Book value per share is total common shareholders’ equity divided by the number of common shares outstanding. Adjusted book value per share is total common shareholders’ equity excluding net unrealized investment gains and losses, net of tax, included in shareholders’ equity, divided by the number of common shares outstanding. In the opinion of the Company’s management, adjusted book value per share is useful in an analysis of a property casualty company’s book value per share as it removes the effect of changing prices on invested assets (i.e., net unrealized investment gains (losses), net of tax), which do not have an equivalent impact on unpaid claims and claim adjustment expense reserves. Tangible book value per share is adjusted book value per share excluding the after-tax value of goodwill and other intangible assets divided by the number of common shares outstanding. In the opinion of the Company’s management, tangible book value per share is useful in an analysis of a property casualty company’s book value on a nominal basis as it removes certain effects of purchase accounting (i.e., goodwill and other intangible assets), in addition to the effect of changing prices on invested assets.

Reconciliation of Shareholders’ Equity to Tangible Shareholders’ Equity, Excluding Net Unrealized Investment Gains, Net of Tax

	As of
($ in millions, except per share amounts)	December 31,<br>2020		December 31,<br>2019
Shareholders’ equity	$	29,201	$	25,943
Less: Net unrealized investment gains, net of tax, included in shareholders’ equity	4,074		2,246
Shareholders’ equity, excluding net unrealized investment gains, net of tax, included in shareholders’ equity	25,127		23,697
Less:
Goodwill	3,976		3,961
Other intangible assets	317		330
Impact of deferred tax on other intangible assets	(59)		(51)
Tangible shareholders’ equity	$	20,893	$	19,457
Common shares outstanding	252.4		255.5
Book value per share	$	115.68	$	101.55
Adjusted book value per share	99.54		92.76
Tangible book value per share	82.77		76.17

RECONCILIATION OF TOTAL CAPITALIZATION TO TOTAL CAPITALIZATION EXCLUDING NET UNREALIZED INVESTMENT GAINS, NET OF TAX

Total capitalization is the sum of total shareholders’ equity and debt. Debt-to-capital ratio excluding net unrealized gain on investments, net of tax, included in shareholders’ equity, is the ratio of debt to total capitalization excluding the after-tax impact of net unrealized investment gains and losses included in shareholders’ equity. In the opinion of the Company’s management, the debt-to-capital ratio is useful in an analysis of the Company’s financial leverage.

	As of
($ in millions)	December 31,<br>2020			December 31,<br>2019
Debt	$	6,550		$	6,558
Shareholders’ equity	29,201			25,943
Total capitalization	35,751			32,501
Less: Net unrealized investment gains, net of tax, included in shareholders’ equity	4,074			2,246
Total capitalization excluding net unrealized gain on investments, net of tax, included in shareholders’ equity	$	31,677		$	30,255
Debt-to-capital ratio	18.3		%	20.2		%
Debt-to-capital ratio excluding net unrealized investment gains, net of tax, included in shareholders’ equity	20.7		%	21.7		%

OTHER DEFINITIONS

Gross written premiums reflect the direct and assumed contractually determined amounts charged to policyholders for the effective period of the contract based on the terms and conditions of the insurance contract. Net written premiums reflect gross written premiums less premiums ceded to reinsurers.

For Business Insurance and Bond & Specialty Insurance, retention is the amount of premium available for renewal that was retained, excluding rate and exposure changes. For Personal Insurance, retention is the ratio of the expected number of renewal policies that will be retained throughout the annual policy period to the number of available renewal base policies. For all of the segments, renewal rate change represents the estimated change in average premium on policies that renew, excluding exposure changes. Exposure is the measure of risk used in the pricing of an insurance product. The change in exposure is the amount of change in premium on policies that renew attributable to the change in portfolio risk. Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes. New business is the amount of written premium related to new policyholders and additional products sold to existing policyholders. These are operating statistics, which are in part dependent on the use of estimates and are therefore subject to change. For Business Insurance, retention, renewal premium change and new business exclude National Accounts. For Bond & Specialty

Insurance, retention, renewal premium change and new business exclude surety and other products that are generally sold on a non-recurring, project specific basis.

Statutory capital and surplus represents the excess of an insurance company’s admitted assets over its liabilities, including loss reserves, as determined in accordance with statutory accounting practices.

Holding company liquidity is the total funds available at the holding company level to fund general corporate purposes, primarily the payment of shareholder dividends and debt service. These funds consist of total cash, short-term invested assets and other readily marketable securities held by the holding company.

For a glossary of other financial terms used in this press release, we refer you to the Company’s most recent annual report on Form 10-K filed with the SEC on February 13, 2020, and subsequent periodic filings with the SEC.

Contacts

Media:	Institutional Investors:
Patrick Linehan	Abbe Goldstein
917.778.6267	917.778.6825

20

Document

The Travelers Companies, Inc.                                                

Financial Supplement - Fourth Quarter 2020

	Page Number
Consolidated Results
Financial Highlights	1
Reconciliation to Net Income (Loss) and Earnings Per Share	2
Statement of Income (Loss)	3
Net Income (Loss) by Major Component and Combined Ratio	4
Core Income (Loss)	5
Selected Statistics - Property and Casualty Operations	6
Written and Earned Premiums - Property and Casualty Operations	7
Business Insurance
Segment Income (Loss)	8
Segment Income (Loss) by Major Component and Combined Ratio	9
Selected Statistics	10
Net Written Premiums	11
Bond & Specialty Insurance
Segment Income	12
Segment Income by Major Component and Combined Ratio	13
Selected Statistics	14
Net Written Premiums	15
Personal Insurance
Segment Income	16
Segment Income by Major Component and Combined Ratio	17
Selected Statistics	18
Net Written Premiums	19
Selected Statistics - Domestic Agency Automobile	20
Selected Statistics - Domestic Agency Homeowners and Other	21
Supplemental Detail
Interest Expense and Other	22
Consolidated Balance Sheet	23
Investment Portfolio	24
Investment Portfolio - Fixed Maturities Data	25
Investment Income	26
Net Realized and Unrealized Investment Gains (Losses) included in Shareholders’ Equity	27
Reinsurance Recoverables	28
Net Reserves for Losses and Loss Adjustment Expense	29
Asbestos and Environmental Reserves	30
Capitalization	31
Statutory Capital and Surplus to GAAP Shareholders’ Equity Reconciliation	32
Statement of Cash Flows	33
Statement of Cash Flows (continued)	34
Glossary of Financial Measures and Description of Reportable Business Segments	35-36

The information included in the Financial Supplement is unaudited.  This document should be read in conjunction with the Company’s Form 10-K which will be filed with the Securities and Exchange Commission.

Index

The Travelers Companies, Inc.                                                 

Financial Highlights

($ and shares in millions, except for per share data)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Net income (loss)	$	796		$	557		$	396		$	873		$	600		$	(40)		$	827		$	1,310		$	2,622		$	2,697
Net income (loss) per share:
Basic	$	3.01		$	2.11		$	1.52		$	3.37		$	2.34		$	(0.16)		$	3.24		$	5.13		$	10.01		$	10.56
Diluted	$	2.99		$	2.10		$	1.50		$	3.35		$	2.33		$	(0.16)		$	3.23		$	5.10		$	9.92		$	10.52
Core income (loss)	$	755		$	537		$	378		$	867		$	676		$	(50)		$	798		$	1,262		$	2,537		$	2,686
Core income (loss) per share:
Basic	$	2.85		$	2.04		$	1.45		$	3.35		$	2.64		$	(0.20)		$	3.13		$	4.94		$	9.69		$	10.52
Diluted	$	2.83		$	2.02		$	1.43		$	3.32		$	2.62		$	(0.20)		$	3.12		$	4.91		$	9.60		$	10.48
Return on equity	13.5		%	9.0		%	6.2		%	13.5		%	9.4		%	(0.6)		%	12.1		%	18.4		%	10.5		%	10.0		%
Core return on equity	13.0		%	9.2		%	6.5		%	14.8		%	11.5		%	(0.8)		%	13.5		%	20.5		%	10.9		%	11.3		%
Total assets, at period end	$	107,246		$	108,572		$	110,241		$	110,122		$	109,436		$	113,337		$	116,384		$	116,764		$	110,122		$	116,764
Total equity, at period end	$	24,340		$	25,321		$	25,607		$	25,943		$	25,204		$	26,943		$	27,849		$	29,201		$	25,943		$	29,201
Book value per share, at period end	$	92.94		$	97.26		$	99.21		$	101.55		$	99.69		$	106.42		$	109.94		$	115.68		$	101.55		$	115.68
Less: Net unrealized investment gains, net of tax	3.85			7.21			9.12			8.79			7.06			14.41			15.05			16.14			8.79			16.14
Adjusted book value per share, at period end	$	89.09		$	90.05		$	90.09		$	92.76		$	92.63		$	92.01		$	94.89		$	99.54		$	92.76		$	99.54
Weighted average number of common shares outstanding (basic)	262.9			261.3			259.2			256.8			254.4			251.6			253.3			253.4			260.0			253.5
Weighted average number of common shares outstanding and common stock equivalents (diluted)	264.8			263.7			261.8			259.0			255.9			251.6			254.3			254.8			262.3			254.6
Common shares outstanding at period end	261.9			260.3			258.1			255.5			252.8			253.2			253.3			252.4			255.5			252.4
Common stock dividends declared	$	204		$	217		$	215		$	212		$	210		$	218		$	218		$	218		$	848		$	864
Common stock repurchased:
Under Board of Directors authorization
Shares	2.9			2.6			2.5			2.8			3.5			—			—			1.4			10.8			4.9
Cost	$	375		$	375		$	375		$	375		$	425		$	—		$	—		$	200		$	1,500		$	625
Other
Shares	0.3			—			—			0.1			0.3			—			—			—			0.4			0.3
Cost	$	46		$	1		$	—		$	1		$	46		$	—		$	—		$	1		$	48		$	47

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Reconciliation to Net Income (Loss) and Earnings per Share

($ and shares in millions, except earnings per share)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Net income (loss)
Net income (loss)	$	796	$	557	$	396	$	873	$	600	$	(40)	$	827	$	1,310	$	2,622	$	2,697
Adjustments:
Net realized investment (gains) losses, after-tax	(41)		(20)		(18)		(6)		76		(10)		(29)		(48)		(85)		(11)
Core income (loss)	$	755	$	537	$	378	$	867	$	676	$	(50)	$	798	$	1,262	$	2,537	$	2,686
Basic earnings per share
Net income (loss)	$	3.01	$	2.11	$	1.52	$	3.37	$	2.34	$	(0.16)	$	3.24	$	5.13	$	10.01	$	10.56
Adjustments:
Net realized investment (gains) losses, after-tax	(0.16)		(0.07)		(0.07)		(0.02)		0.30		(0.04)		(0.11)		(0.19)		(0.32)		(0.04)
Core income (loss)	$	2.85	$	2.04	$	1.45	$	3.35	$	2.64	$	(0.20)	$	3.13	$	4.94	$	9.69	$	10.52
Diluted earnings per share
Net income (loss)	$	2.99	$	2.10	$	1.50	$	3.35	$	2.33	$	(0.16)	$	3.23	$	5.10	$	9.92	$	10.52
Adjustments:
Net realized investment (gains) losses, after-tax	(0.16)		(0.08)		(0.07)		(0.03)		0.29		(0.04)		(0.11)		(0.19)		(0.32)		(0.04)
Core income (loss)	$	2.83	$	2.02	$	1.43	$	3.32	$	2.62	$	(0.20)	$	3.12	$	4.91	$	9.60	$	10.48

Adjustments to net income (loss) and weighted average shares for net income (loss) EPS calculations: (1)

Basic and Diluted	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Net income (loss), as reported	$	796	$	557	$	396	$	873	$	600	$	(40)	$	827	$	1,310	$	2,622	$	2,697
Participating share-based awards - allocated income	(5)		(4)		(3)		(7)		(5)		(1)		(6)		(10)		(19)		(19)
Net income (loss) available to common shareholders - basic and diluted	$	791	$	553	$	393	$	866	$	595	$	(41)	$	821	$	1,300	$	2,603	$	2,678
Common Shares
Basic
Weighted average shares outstanding	262.9		261.3		259.2		256.8		254.4		251.6		253.3		253.4		260.0		253.5
Diluted
Weighted average shares outstanding	262.9		261.3		259.2		256.8		254.4		251.6		253.3		253.4		260.0		253.5
Weighted average effects of dilutive securities - stock options and performance shares	1.9		2.4		2.6		2.2		1.5		—		1.0		1.4		2.3		1.1
Diluted weighted average shares outstanding	264.8		263.7		261.8		259.0		255.9		251.6		254.3		254.8		262.3		254.6

(1)  Adjustments to net income and weighted average shares for net income EPS calculations can generally be used for the core income EPS calculations.

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Statement of Income (Loss) - Consolidated

($ in millions)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Revenues
Premiums	$	6,855		$	6,988		$	7,179		$	7,250		$	7,229		$	6,955		$	7,380		$	7,480		$	28,272		$	29,044
Net investment income	582			648			622			616			611			268			671			677			2,468			2,227
Fee income	109			116			121			113			108			114			101			106			459			429
Net realized investment gains (losses)	53			25			23			12			(98)			13			37			50			113			2
Other revenues	72			57			68			72			58			51			86			84			269			279
Total revenues	7,671			7,834			8,013			8,063			7,908			7,401			8,275			8,397			31,581			31,981
Claims and expenses
Claims and claim adjustment expenses	4,442			4,821			5,230			4,640			4,789			5,107			4,886			4,341			19,133			19,123
Amortization of deferred acquisition costs	1,117			1,134			1,169			1,181			1,178			1,173			1,207			1,215			4,601			4,773
General and administrative expenses	1,057			1,125			1,098			1,085			1,137			1,121			1,109			1,142			4,365			4,509
Interest expense	88			89			84			83			84			85			87			83			344			339
Total claims and expenses	6,704			7,169			7,581			6,989			7,188			7,486			7,289			6,781			28,443			28,744
Income (loss) before income taxes	967			665			432			1,074			720			(85)			986			1,616			3,138			3,237
Income tax expense (benefit)	171			108			36			201			120			(45)			159			306			516			540
Net income (loss)	$	796		$	557		$	396		$	873		$	600		$	(40)		$	827		$	1,310		$	2,622		$	2,697
Investment impairments
Total net investment impairment (charges) recoveries	$	(1)		$	(1)		$	—		$	(1)		$	(16)		$	(46)		$	4		$	3		$	(3)		$	(55)
Credit loss (charges) recoveries recognized in net realized investment gains (losses)	$	(1)		$	(1)		$	—		$	(2)		$	(16)		$	(46)		$	4		$	3		$	(4)		$	(55)
Non-credit losses recognized in other comprehensive income	$	—		$	—		$	—		$	1		$	—		$	—		$	—		$	—		$	1		$	—
Other statistics
Effective tax rate on net investment income	14.7		%	15.4		%	15.2		%	14.8		%	15.1		%	6.2		%	15.6		%	15.4		%	15.0		%	14.3		%
Net investment income (after-tax)	$	496		$	548		$	528		$	525		$	519		$	251		$	566		$	572		$	2,097		$	1,908
Catastrophes, net of reinsurance:
Pre-tax	$	193		$	367		$	241		$	85		$	333		$	854		$	397		$	29		$	886		$	1,613
After-tax	$	152		$	290		$	190		$	67		$	263		$	673		$	314		$	24		$	699		$	1,274
Prior year reserve development - favorable (unfavorable):
Pre-tax	$	51		$	123		$	(294)		$	60		$	27		$	2		$	142		$	180		$	(60)		$	351
After-tax	$	41		$	99		$	(232)		$	45		$	21		$	1		$	113		$	141		$	(47)		$	276

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Net Income (Loss) by Major Component and Combined Ratio - Consolidated

($ in millions, net of tax)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Underwriting gain (loss)	$	307		$	52		$	(101)		$	396		$	220		$	(232)		$	281		$	741		$	654		$	1,010
Net investment income	496			548			528			525			519			251			566			572			2,097			1,908
Other income (expense), including interest expense	(48)			(63)			(49)			(54)			(63)			(69)			(49)			(51)			(214)			(232)
Core income (loss)	755			537			378			867			676			(50)			798			1,262			2,537			2,686
Net realized investment gains (losses)	41			20			18			6			(76)			10			29			48			85			11
Net income (loss)	$	796		$	557		$	396		$	873		$	600		$	(40)		$	827		$	1,310		$	2,622		$	2,697
Combined ratio (1) (2)
Loss and loss adjustment expense ratio	64.0		%	68.2		%	72.0		%	63.3		%	65.5		%	72.7		%	65.6		%	57.3		%	66.9		%	65.1		%
Underwriting expense ratio	29.7		%	30.2		%	29.5		%	29.1		%	30.0		%	31.0		%	29.3		%	29.4		%	29.6		%	29.9		%
Combined ratio	93.7		%	98.4		%	101.5		%	92.4		%	95.5		%	103.7		%	94.9		%	86.7		%	96.5		%	95.0		%
Impact on combined ratio:
Net (favorable) unfavorable prior year reserve development	(0.7)		%	(1.8)		%	4.1		%	(0.8)		%	(0.4)		%	—		%	(1.9)		%	(2.4)		%	0.2		%	(1.2)		%
Catastrophes, net of reinsurance	2.8		%	5.3		%	3.3		%	1.1		%	4.6		%	12.3		%	5.3		%	0.4		%	3.1		%	5.5		%
Underlying combined ratio	91.6		%	94.9		%	94.1		%	92.1		%	91.3		%	91.4		%	91.5		%	88.7		%	93.2		%	90.7		%

(1)  Before policyholder dividends.

(2)  Billing and policy fees and other, which are a component of other revenues, are allocated as a reduction of underwriting expenses.  In addition, fee income is allocated as a reduction of losses and loss adjustment expenses and underwriting expenses.  In addition, general and administrative expenses include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio.  See following:

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Billing and policy fees and other	$	27	$	26	$	28	$	27	$	28	$	17	$	24	$	28	$	108	$	97
Fee income:
Loss and loss adjustment expenses	$	40	$	45	$	47	$	42	$	41	$	44	$	35	$	41	$	174	$	161
Underwriting expenses	69		71		74		71		67		70		66		65		285		268
Total fee income	$	109	$	116	$	121	$	113	$	108	$	114	$	101	$	106	$	459	$	429
Non-insurance general and administrative expenses	$	47	$	50	$	48	$	56	$	55	$	52	$	60	$	67	$	201	$	234

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Core Income (Loss) - Consolidated

($ in millions)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Revenues
Premiums	$	6,855		$	6,988		$	7,179		$	7,250		$	7,229		$	6,955		$	7,380		$	7,480		$	28,272		$	29,044
Net investment income	582			648			622			616			611			268			671			677			2,468			2,227
Fee income	109			116			121			113			108			114			101			106			459			429
Other revenues	72			57			68			72			58			51			86			84			269			279
Total revenues	7,618			7,809			7,990			8,051			8,006			7,388			8,238			8,347			31,468			31,979
Claims and expenses
Claims and claim adjustment expenses	4,442			4,821			5,230			4,640			4,789			5,107			4,886			4,341			19,133			19,123
Amortization of deferred acquisition costs	1,117			1,134			1,169			1,181			1,178			1,173			1,207			1,215			4,601			4,773
General and administrative expenses	1,057			1,125			1,098			1,085			1,137			1,121			1,109			1,142			4,365			4,509
Interest expense	88			89			84			83			84			85			87			83			344			339
Total claims and expenses	6,704			7,169			7,581			6,989			7,188			7,486			7,289			6,781			28,443			28,744
Core income (loss) before income taxes	914			640			409			1,062			818			(98)			949			1,566			3,025			3,235
Income tax expense (benefit)	159			103			31			195			142			(48)			151			304			488			549
Core income (loss)	$	755		$	537		$	378		$	867		$	676		$	(50)		$	798		$	1,262		$	2,537		$	2,686
Other statistics
Effective tax rate on net investment income	14.7		%	15.4		%	15.2		%	14.8		%	15.1		%	6.2		%	15.6		%	15.4		%	15.0		%	14.3		%
Net investment income (after-tax)	$	496		$	548		$	528		$	525		$	519		$	251		$	566		$	572		$	2,097		$	1,908
Catastrophes, net of reinsurance:
Pre-tax	$	193		$	367		$	241		$	85		$	333		$	854		$	397		$	29		$	886		$	1,613
After-tax	$	152		$	290		$	190		$	67		$	263		$	673		$	314		$	24		$	699		$	1,274
Prior year reserve development - favorable (unfavorable):
Pre-tax	$	51		$	123		$	(294)		$	60		$	27		$	2		$	142		$	180		$	(60)		$	351
After-tax	$	41		$	99		$	(232)		$	45		$	21		$	1		$	113		$	141		$	(47)		$	276

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                      

Selected Statistics - Property and Casualty Operations

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Statutory underwriting
Gross written premiums	$	7,839	$	7,824	$	8,022	$	7,378	$	8,152	$	7,751	$	8,243	$	7,617	$	31,063	$	31,763
Net written premiums	$	7,057	$	7,450	$	7,569	$	7,075	$	7,346	$	7,346	$	7,771	$	7,269	$	29,151	$	29,732
Net earned premiums	$	6,855	$	6,988	$	7,179	$	7,250	$	7,229	$	6,955	$	7,380	$	7,480	$	28,272	$	29,044
Losses and loss adjustment expenses	4,389		4,764		5,166		4,578		4,733		5,053		4,830		4,291		18,897		18,907
Underwriting expenses	2,116		2,217		2,179		2,072		2,193		2,212		2,214		2,153		8,584		8,772
Statutory underwriting gain (loss)	350		7		(166)		600		303		(310)		336		1,036		791		1,365
Policyholder dividends	13		9		15		10		12		8		11		10		47		41
Statutory underwriting gain (loss) after policyholder dividends	$	337	$	(2)	$	(181)	$	590	$	291	$	(318)	$	325	$	1,026	$	744	$	1,324
Other statutory statistics
Reserves for losses and loss adjustment expenses	$	42,581	$	42,979	$	43,624	$	43,743	$	43,913	$	45,112	$	46,181	$	46,247	$	43,743	$	46,247
Increase in reserves	$	172	$	398	$	645	$	119	$	170	$	1,199	$	1,069	$	66	$	1,334	$	2,504
Statutory capital and surplus	$	21,074	$	21,080	$	20,780	$	21,330	$	20,808	$	20,607	$	21,230	$	22,180	$	21,330	$	22,180
Net written premiums/surplus (1)	1.33:1		1.34:1		1.38:1		1.37:1		1.41:1		1.42:1		1.39:1		1.34:1		1.37:1		1.34:1

(1)  Based on 12 months of rolling net written premiums.

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Written and Earned Premiums - Property and Casualty Operations

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Written premiums
Gross	$	7,839	$	7,824	$	8,022	$	7,378	$	8,152	$	7,751	$	8,243	$	7,617	$	31,063	$	31,763
Ceded	(782)		(374)		(453)		(303)		(806)		(405)		(472)		(348)		(1,912)		(2,031)
Net	$	7,057	$	7,450	$	7,569	$	7,075	$	7,346	$	7,346	$	7,771	$	7,269	$	29,151	$	29,732
Earned premiums
Gross	$	7,282	$	7,429	$	7,636	$	7,723	$	7,683	$	7,446	$	7,898	$	7,961	$	30,070	$	30,988
Ceded	(427)		(441)		(457)		(473)		(454)		(491)		(518)		(481)		(1,798)		(1,944)
Net	$	6,855	$	6,988	$	7,179	$	7,250	$	7,229	$	6,955	$	7,380	$	7,480	$	28,272	$	29,044

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Segment Income (Loss) - Business Insurance

($ in millions)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Revenues
Premiums	$	3,742		$	3,783		$	3,882		$	3,893		$	3,864		$	3,735		$	3,841		$	3,854		$	15,300		$	15,294
Net investment income	427			481			457			451			453			180			498			502			1,816			1,633
Fee income	104			111			114			108			102			108			95			100			437			405
Other revenues	43			30			39			43			31			36			58			51			155			176
Total revenues	4,316			4,405			4,492			4,495			4,450			4,059			4,492			4,507			17,708			17,508
Claims and expenses
Claims and claim adjustment expenses	2,580			2,686			3,028			2,669			2,791			2,880			2,804			2,329			10,963			10,804
Amortization of deferred acquisition costs	615			618			634			636			636			622			633			627			2,503			2,518
General and administrative expenses	632			686			657			652			685			656			651			672			2,627			2,664
Total claims and expenses	3,827			3,990			4,319			3,957			4,112			4,158			4,088			3,628			16,093			15,986
Segment income (loss) before income taxes	489			415			173			538			338			(99)			404			879			1,615			1,522
Income tax expense (benefit)	75			64			(6)			90			49			(41)			39			166			223			213
Segment income (loss)	$	414		$	351		$	179		$	448		$	289		$	(58)		$	365		$	713		$	1,392		$	1,309
Other statistics
Effective tax rate on net investment income	14.6		%	15.3		%	15.1		%	14.8		%	15.0		%	6.3		%	15.6		%	15.4		%	15.0		%	14.4		%
Net investment income (after-tax)	$	365		$	407		$	389		$	384		$	385		$	169		$	421		$	423		$	1,545		$	1,398
Catastrophes, net of reinsurance:
Pre-tax	$	95		$	211		$	116		$	48		$	195		$	377		$	97		$	(24)		$	470		$	645
After-tax	$	75		$	167		$	91		$	37		$	154		$	298		$	76		$	(19)		$	370		$	509
Prior year reserve development - favorable (unfavorable):
Pre-tax	$	(21)		$	71		$	(316)		$	8		$	5		$	—		$	(220)		$	124		$	(258)		$	(91)
After-tax	$	(16)		$	57		$	(249)		$	5		$	3		$	—		$	(173)		$	97		$	(203)		$	(73)

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Segment Income (Loss) by Major Component and Combined Ratio - Business Insurance

($ in millions, net of tax)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Underwriting gain (loss)	$	44		$	(48)		$	(210)		$	65		$	(84)		$	(221)		$	(59)		$	292		$	(149)		$	(72)
Net investment income	365			407			389			384			385			169			421			423			1,545			1,398
Other income (expense)	5			(8)			—			(1)			(12)			(6)			3			(2)			(4)			(17)
Segment income (loss)	$	414		$	351		$	179		$	448		$	289		$	(58)		$	365		$	713		$	1,392		$	1,309
Combined ratio (1) (2)
Loss and loss adjustment expense ratio	67.6		%	69.6		%	76.6		%	67.3		%	70.9		%	75.8		%	71.8		%	59.2		%	70.3		%	69.4		%
Underwriting expense ratio	30.5		%	31.5		%	30.4		%	30.2		%	31.3		%	31.3		%	30.5		%	30.6		%	30.6		%	30.9		%
Combined ratio	98.1		%	101.1		%	107.0		%	97.5		%	102.2		%	107.1		%	102.3		%	89.8		%	100.9		%	100.3		%
Impact on combined ratio:
Net (favorable) unfavorable prior year reserve development	0.6		%	(1.9)		%	8.1		%	(0.2)		%	(0.1)		%	—		%	5.8		%	(3.2)		%	1.7		%	0.6		%
Catastrophes, net of reinsurance	2.5		%	5.6		%	3.0		%	1.3		%	5.0		%	10.1		%	2.5		%	(0.6)		%	3.0		%	4.2		%
Underlying combined ratio	95.0		%	97.4		%	95.9		%	96.4		%	97.3		%	97.0		%	94.0		%	93.6		%	96.2		%	95.5		%

(1)  Before policyholder dividends.

(2)  Billing and policy fees and other, which are a component of other revenues, are allocated as a reduction of underwriting expenses.  In addition, fee income is allocated as a reduction of losses and loss adjustment expenses and underwriting expenses.  In addition, general and administrative expenses include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio.  See following:

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Billing and policy fees and other	$	4	$	3	$	5	$	4	$	4	$	3	$	4	$	5	$	16	$	16
Fee income:
Loss and loss adjustment expenses	$	40	$	45	$	47	$	42	$	41	$	44	$	35	$	41	$	174	$	161
Underwriting expenses	64		66		67		66		61		64		60		59		263		244
Total fee income	$	104	$	111	$	114	$	108	$	102	$	108	$	95	$	100	$	437	$	405
Non-insurance general and administrative expenses	$	38	$	41	$	39	$	43	$	47	$	42	$	52	$	56	$	161	$	197

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Selected Statistics - Business Insurance

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Statutory underwriting
Gross written premiums	$	4,730	$	4,193	$	4,271	$	3,957	$	4,794	$	4,127	$	4,230	$	3,909	$	17,151	$	17,060
Net written premiums	$	4,163	$	3,874	$	3,889	$	3,703	$	4,190	$	3,777	$	3,833	$	3,631	$	15,629	$	15,431
Net earned premiums	$	3,742	$	3,783	$	3,882	$	3,893	$	3,864	$	3,735	$	3,841	$	3,854	$	15,300	$	15,294
Losses and loss adjustment expenses	2,529		2,631		2,969		2,608		2,737		2,828		2,750		2,282		10,737		10,597
Underwriting expenses	1,226		1,226		1,164		1,133		1,247		1,167		1,145		1,132		4,749		4,691
Statutory underwriting gain (loss)	(13)		(74)		(251)		152		(120)		(260)		(54)		440		(186)		6
Policyholder dividends	11		7		11		7		10		6		9		7		36		32
Statutory underwriting gain (loss) after policyholder dividends	$	(24)	$	(81)	$	(262)	$	145	$	(130)	$	(266)	$	(63)	$	433	$	(222)	$	(26)

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Net Written Premiums - Business Insurance

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Net written premiums by market
Domestic
Select Accounts	$	785	$	756	$	695	$	675	$	799	$	734	$	658	$	630	$	2,911	$	2,821
Middle Market	2,410		2,009		2,150		2,061		2,408		1,960		2,131		2,012		8,630		8,511
National Accounts	304		223		273		251		301		215		239		241		1,051		996
National Property and Other	387		588		553		437		428		585		602		471		1,965		2,086
Total Domestic	3,886		3,576		3,671		3,424		3,936		3,494		3,630		3,354		14,557		14,414
International	277		298		218		279		254		283		203		277		1,072		1,017
Total	$	4,163	$	3,874	$	3,889	$	3,703	$	4,190	$	3,777	$	3,833	$	3,631	$	15,629	$	15,431
Net written premiums by product line
Domestic
Workers’ compensation	$	1,191	$	893	$	905	$	817	$	1,096	$	780	$	774	$	699	$	3,806	$	3,349
Commercial automobile	719		677		674		666		755		667		689		679		2,736		2,790
Commercial property	389		583		568		474		433		620		603		507		2,014		2,163
General liability	678		548		611		579		683		531		630		603		2,416		2,447
Commercial multi-peril	902		871		885		884		956		892		899		861		3,542		3,608
Other	7		4		28		4		13		4		35		5		43		57
Total Domestic	3,886		3,576		3,671		3,424		3,936		3,494		3,630		3,354		14,557		14,414
International	277		298		218		279		254		283		203		277		1,072		1,017
Total	$	4,163	$	3,874	$	3,889	$	3,703	$	4,190	$	3,777	$	3,833	$	3,631	$	15,629	$	15,431

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                

Segment Income - Bond & Specialty Insurance

($ in millions)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Revenues
Premiums	$	606		$	632		$	653		$	674		$	667		$	693		$	723		$	740		$	2,565		$	2,823
Net investment income	56			58			59			60			55			42			58			58			233			213
Other revenues	6			6			7			7			5			5			7			10			26			27
Total revenues	668			696			719			741			727			740			788			808			2,824			3,063
Claims and expenses
Claims and claim adjustment expenses	266			238			303			287			327			403			392			342			1,094			1,464
Amortization of deferred acquisition costs	112			118			123			125			124			128			133			134			478			519
General and administrative expenses	117			120			124			122			125			123			124			128			483			500
Total claims and expenses	495			476			550			534			576			654			649			604			2,055			2,483
Segment income before income taxes	173			220			169			207			151			86			139			204			769			580
Income tax expense	35			46			30			40			29			14			24			40			151			107
Segment income	$	138		$	174		$	139		$	167		$	122		$	72		$	115		$	164		$	618		$	473
Other statistics
Effective tax rate on net investment income	14.4		%	14.8		%	14.9		%	13.2		%	14.7		%	3.0		%	14.8		%	14.4		%	14.3		%	12.3		%
Net investment income (after-tax)	$	47		$	50		$	50		$	52		$	47		$	41		$	49		$	50		$	199		$	187
Catastrophes, net of reinsurance:
Pre-tax	$	3		$	—		$	1		$	1		$	1		$	7		$	2		$	1		$	5		$	11
After-tax	$	2		$	—		$	1		$	1		$	1		$	5		$	2		$	1		$	4		$	9
Prior year reserve development - favorable (unfavorable):
Pre-tax	$	3		$	39		$	3		$	20		$	—		$	(33)		$	—		$	32		$	65		$	(1)
After-tax	$	2		$	31		$	2		$	16		$	—		$	(26)		$	—		$	25		$	51		$	(1)

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                

Segment Income by Major Component and Combined Ratio - Bond & Specialty Insurance

($ in millions, net of tax)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Underwriting gain	$	86		$	120		$	85		$	111		$	72		$	29		$	61		$	107		$	402		$	269
Net investment income	47			50			50			52			47			41			49			50			199			187
Other income	5			4			4			4			3			2			5			7			17			17
Segment income	$	138		$	174		$	139		$	167		$	122		$	72		$	115		$	164		$	618		$	473
Combined ratio (1)
Loss and loss adjustment expense ratio	43.5		%	37.4		%	45.7		%	42.4		%	48.8		%	57.8		%	54.0		%	45.7		%	42.2		%	51.5		%
Underwriting expense ratio	37.6		%	37.5		%	37.6		%	36.2		%	37.1		%	36.0		%	35.3		%	35.2		%	37.3		%	35.9		%
Combined ratio	81.1		%	74.9		%	83.3		%	78.6		%	85.9		%	93.8		%	89.3		%	80.9		%	79.5		%	87.4		%
Impact on combined ratio:
Net (favorable) unfavorable prior year reserve development	(0.5)		%	(6.2)		%	(0.5)		%	(2.9)		%	—		%	4.7		%	—		%	(4.2)		%	(2.5)		%	—		%
Catastrophes, net of reinsurance	0.5		%	0.1		%	0.2		%	0.2		%	0.2		%	1.0		%	0.3		%	0.1		%	0.2		%	0.4		%
Underlying combined ratio	81.1		%	81.0		%	83.6		%	81.3		%	85.7		%	88.1		%	89.0		%	85.0		%	81.8		%	87.0		%

(1) General and administrative expenses include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio. See following:

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Non-insurance general and administrative expenses	$	1	$	1	$	1	$	2	$	1	$	1	$	2	$	2	$	5	$	6

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Selected Statistics - Bond & Specialty Insurance

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Statutory underwriting
Gross written premiums	$	662	$	747	$	770	$	752	$	750	$	770	$	803	$	861	$	2,931	$	3,184
Net written premiums	$	587	$	710	$	728	$	714	$	663	$	734	$	754	$	800	$	2,739	$	2,951
Net earned premiums	$	606	$	632	$	653	$	674	$	667	$	693	$	723	$	740	$	2,565	$	2,823
Losses and loss adjustment expenses	264		236		298		286		325		401		390		339		1,084		1,455
Underwriting expenses	233		251		261		242		254		253		261		261		987		1,029
Statutory underwriting gain	109		145		94		146		88		39		72		140		494		339
Policyholder dividends	2		2		4		3		2		2		2		3		11		9
Statutory underwriting gain after policyholder dividends	$	107	$	143	$	90	$	143	$	86	$	37	$	70	$	137	$	483	$	330

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Net Written Premiums - Bond & Specialty Insurance

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Net written premiums by market
Domestic
Management Liability	$	367	$	403	$	424	$	411	$	401	$	438	$	467	$	463	$	1,605	$	1,769
Surety	184		244		232		206		215		220		208		202		866		845
Total Domestic	551		647		656		617		616		658		675		665		2,471		2,614
International	36		63		72		97		47		76		79		135		268		337
Total	$	587	$	710	$	728	$	714	$	663	$	734	$	754	$	800	$	2,739	$	2,951
Net written premiums by product line
Domestic
Fidelity & surety	$	239	$	298	$	292	$	260	$	272	$	274	$	268	$	258	$	1,089	$	1,072
General liability	262		292		293		301		289		326		339		357		1,148		1,311
Other	50		57		71		56		55		58		68		50		234		231
Total Domestic	551		647		656		617		616		658		675		665		2,471		2,614
International	36		63		72		97		47		76		79		135		268		337
Total	$	587	$	710	$	728	$	714	$	663	$	734	$	754	$	800	$	2,739	$	2,951

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Segment Income - Personal Insurance

($ in millions)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Revenues
Premiums	$	2,507		$	2,573		$	2,644		$	2,683		$	2,698		$	2,527		$	2,816		$	2,886		$	10,407		$	10,927
Net investment income	99			109			106			105			103			46			115			117			419			381
Fee income	5			5			7			5			6			6			6			6			22			24
Other revenues	22			21			22			22			22			10			21			23			87			76
Total revenues	2,633			2,708			2,779			2,815			2,829			2,589			2,958			3,032			10,935			11,408
Claims and expenses
Claims and claim adjustment expenses	1,596			1,897			1,899			1,684			1,671			1,824			1,690			1,670			7,076			6,855
Amortization of deferred acquisition costs	390			398			412			420			418			423			441			454			1,620			1,736
General and administrative expenses	300			311			309			300			320			333			328			333			1,220			1,314
Total claims and expenses	2,286			2,606			2,620			2,404			2,409			2,580			2,459			2,457			9,916			9,905
Segment income before income taxes	347			102			159			411			420			9			499			575			1,019			1,503
Income tax expense (benefit)	69			14			28			84			84			(1)			107			118			195			308
Segment income	$	278		$	88		$	131		$	327		$	336		$	10		$	392		$	457		$	824		$	1,195
Other statistics
Effective tax rate on net investment income	15.4		%	16.1		%	15.8		%	15.6		%	15.8		%	9.1		%	16.2		%	16.0		%	15.8		%	15.2		%
Net investment income (after-tax)	$	84		$	91		$	89		$	89		$	87		$	41		$	96		$	99		$	353		$	323
Catastrophes, net of reinsurance:
Pre-tax	$	95		$	156		$	124		$	36		$	137		$	470		$	298		$	52		$	411		$	957
After-tax	$	75		$	123		$	98		$	29		$	108		$	370		$	236		$	42		$	325		$	756
Prior year reserve development - favorable:
Pre-tax	$	69		$	13		$	19		$	32		$	22		$	35		$	362		$	24		$	133		$	443
After-tax	$	55		$	11		$	15		$	24		$	18		$	27		$	286		$	19		$	105		$	350

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Segment Income by Major Component and Combined Ratio - Personal Insurance

($ in millions, net of tax)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Underwriting gain (loss)	$	177		$	(20)		$	24		$	220		$	232		$	(40)		$	279		$	342		$	401		$	813
Net investment income	84			91			89			89			87			41			96			99			353			323
Other income	17			17			18			18			17			9			17			16			70			59
Segment income	$	278		$	88		$	131		$	327		$	336		$	10		$	392		$	457		$	824		$	1,195
Combined ratio (1)
Loss and loss adjustment expense ratio	63.7		%	73.7		%	71.8		%	62.8		%	61.9		%	72.2		%	60.0		%	57.9		%	68.0		%	62.8		%
Underwriting expense ratio	26.4		%	26.5		%	26.2		%	25.7		%	26.3		%	29.1		%	26.4		%	26.2		%	26.2		%	26.9		%
Combined ratio	90.1		%	100.2		%	98.0		%	88.5		%	88.2		%	101.3		%	86.4		%	84.1		%	94.2		%	89.7		%
Domestic Agency combined ratio	88.9		%	98.8		%	97.2		%	88.2		%	86.9		%	100.4		%	86.0		%	84.2		%	93.3		%	89.1		%
Impact on combined ratio:
Net favorable prior year reserve development	(2.8)		%	(0.5)		%	(0.7)		%	(1.2)		%	(0.8)		%	(1.3)		%	(12.8)		%	(0.8)		%	(1.3)		%	(4.1)		%
Catastrophes, net of reinsurance	3.8		%	6.1		%	4.7		%	1.3		%	5.0		%	18.6		%	10.5		%	1.8		%	4.0		%	8.8		%
Underlying combined ratio	89.1		%	94.6		%	94.0		%	88.4		%	84.0		%	84.0		%	88.7		%	83.1		%	91.5		%	85.0		%

(1)  Billing and policy fees and other, which are a component of other revenues, and fee income are allocated as a reduction of underwriting expenses.

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Billing and policy fees and other	$	23	$	23	$	23	$	23	$	24	$	14	$	20	$	23	$	92	$	81
Fee income	$	5	$	5	$	7	$	5	$	6	$	6	$	6	$	6	$	22	$	24

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Selected Statistics - Personal Insurance

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Statutory underwriting
Gross written premiums	$	2,447	$	2,884	$	2,981	$	2,669	$	2,608	$	2,854	$	3,210	$	2,847	$	10,981	$	11,519
Net written premiums	$	2,307	$	2,866	$	2,952	$	2,658	$	2,493	$	2,835	$	3,184	$	2,838	$	10,783	$	11,350
Net earned premiums	$	2,507	$	2,573	$	2,644	$	2,683	$	2,698	$	2,527	$	2,816	$	2,886	$	10,407	$	10,927
Losses and loss adjustment expenses	1,596		1,897		1,899		1,684		1,671		1,824		1,690		1,670		7,076		6,855
Underwriting expenses	657		740		754		697		692		792		808		760		2,848		3,052
Statutory underwriting gain (loss)	$	254	$	(64)	$	(9)	$	302	$	335	$	(89)	$	318	$	456	$	483	$	1,020
Policies in force (in thousands)
Automobile	2,981		2,980		2,979		2,973		2,970		2,993		3,015		3,029		2,973		3,029
Homeowners and Other	5,163		5,263		5,361		5,444		5,534		5,679		5,790		5,858		5,444		5,858

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Net Written Premiums - Personal Insurance

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Net written premiums by market
Domestic
Agency
Automobile	$	1,224	$	1,300	$	1,347	$	1,253	$	1,260	$	1,141	$	1,402	$	1,277	$	5,124	$	5,080
Homeowners and Other	837		1,258		1,300		1,145		990		1,419		1,482		1,294		4,540		5,185
Total Agency	2,061		2,558		2,647		2,398		2,250		2,560		2,884		2,571		9,664		10,265
Direct-to-Consumer	95		103		115		99		100		102		124		107		412		433
Total Domestic	2,156		2,661		2,762		2,497		2,350		2,662		3,008		2,678		10,076		10,698
International	151		205		190		161		143		173		176		160		707		652
Total	$	2,307	$	2,866	$	2,952	$	2,658	$	2,493	$	2,835	$	3,184	$	2,838	$	10,783	$	11,350

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Selected Statistics - Personal Insurance - Domestic Agency Automobile (1)

($ in millions)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Statutory underwriting
Gross written premiums	$	1,240		$	1,304		$	1,352		$	1,258		$	1,272		$	1,145		$	1,407		$	1,282		$	5,154		$	5,106
Net written premiums	$	1,224		$	1,300		$	1,347		$	1,253		$	1,260		$	1,141		$	1,402		$	1,277		$	5,124		$	5,080
Net earned premiums	$	1,228		$	1,249		$	1,271		$	1,276		$	1,279		$	1,091		$	1,316		$	1,309		$	5,024		$	4,995
Losses and loss adjustment expenses	810			876			891			971			842			627			742			819			3,548			3,030
Underwriting expenses	296			312			310			299			301			317			323			315			1,217			1,256
Statutory underwriting gain	$	122		$	61		$	70		$	6		$	136		$	147		$	251		$	175		$	259		$	709
Other statistics
Combined ratio (2):
Loss and loss adjustment expense ratio	66.0		%	70.1		%	70.1		%	76.1		%	65.9		%	57.5		%	56.4		%	62.6		%	70.7		%	60.7		%
Underwriting expense ratio	23.4		%	23.9		%	22.9		%	23.1		%	23.5		%	28.2		%	23.4		%	23.9		%	23.3		%	24.6		%
Combined ratio	89.4		%	94.0		%	93.0		%	99.2		%	89.4		%	85.7		%	79.8		%	86.5		%	94.0		%	85.3		%
Impact on combined ratio:
Net favorable prior year reserve development	(3.4)		%	(1.1)		%	(0.5)		%	(0.5)		%	(0.4)		%	(1.0)		%	(1.6)		%	(1.2)		%	(1.3)		%	(1.1)		%
Catastrophes, net of reinsurance	0.7		%	1.3		%	0.8		%	0.1		%	0.6		%	2.5		%	0.4		%	—		%	0.7		%	0.8		%
Underlying combined ratio	92.1		%	93.8		%	92.7		%	99.6		%	89.2		%	84.2		%	81.0		%	87.7		%	94.6		%	85.6		%
Catastrophe losses, net of reinsurance:
Pre-tax	$	9		$	16		$	11		$	1		$	7		$	27		$	6		$	—		$	37		$	40
After-tax	$	7		$	13		$	8		$	1		$	6		$	21		$	4		$	—		$	29		$	31
Prior year reserve development - favorable:
Pre-tax	$	42		$	13		$	5		$	6		$	6		$	11		$	22		$	16		$	66		$	55
After-tax	$	33		$	10		$	5		$	4		$	5		$	9		$	17		$	13		$	52		$	44
Policies in force (in thousands)	2,516			2,517			2,524			2,532			2,540			2,570			2,596			2,614
Change from prior year quarter	(0.1)		%	—		%	0.2		%	0.6		%	1.0		%	2.1		%	2.9		%	3.2		%
Change from prior quarter	(0.1)		%	—		%	0.3		%	0.3		%	0.3		%	1.2		%	1.0		%	0.7		%

(1)  Represents Automobile policies sold through agents, brokers and other intermediaries, and excludes direct to consumer.

(2)  Billing and policy fees and other, which are a component of other revenues, and fee income are allocated as a reduction of underwriting expenses.

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Billing and policy fees and other	$	12	$	12	$	12	$	11	$	12	$	7	$	10	$	11	$	47	$	40
Fee income	$	3	$	3	$	4	$	3	$	3	$	4	$	4	$	3	$	13	$	14

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Selected Statistics - Personal Insurance - Domestic Agency Homeowners and Other (1)

($ in millions)	1Q2019			2Q2019			3Q2019			4Q2019			1Q2020			2Q2020			3Q2020			4Q2020			YTD 4Q2019			YTD 4Q2020
Statutory underwriting
Gross written premiums	$	954		$	1,268		$	1,316		$	1,147		$	1,086		$	1,432		$	1,495		$	1,297		$	4,685		$	5,310
Net written premiums	$	837		$	1,258		$	1,300		$	1,145		$	990		$	1,419		$	1,482		$	1,294		$	4,540		$	5,185
Net earned premiums	$	1,011		$	1,050		$	1,089		$	1,125		$	1,145		$	1,188		$	1,227		$	1,294		$	4,275		$	4,854
Losses and loss adjustment expenses	604			801			801			542			642			1,010			792			702			2,748			3,146
Underwriting expenses	277			335			349			314			310			385			392			361			1,275			1,448
Statutory underwriting gain (loss)	$	130		$	(86)		$	(61)		$	269		$	193		$	(207)		$	43		$	231		$	252		$	260
Other statistics
Combined ratio (2):
Loss and loss adjustment expense ratio	59.8		%	76.3		%	73.6		%	48.2		%	56.1		%	85.0		%	64.5		%	54.2		%	64.3		%	64.8		%
Underwriting expense ratio	28.4		%	28.2		%	28.4		%	27.6		%	28.1		%	28.9		%	28.3		%	27.7		%	28.2		%	28.2		%
Combined ratio	88.2		%	104.5		%	102.0		%	75.8		%	84.2		%	113.9		%	92.8		%	81.9		%	92.5		%	93.0		%
Impact on combined ratio:
Net favorable prior year reserve development	(2.4)		%	(1.3)		%	(1.4)		%	(0.8)		%	(1.5)		%	(1.7)		%	(27.2)		%	(0.5)		%	(1.4)		%	(7.8)		%
Catastrophes, net of reinsurance	8.0		%	12.9		%	9.9		%	3.0		%	10.8		%	34.2		%	23.6		%	3.9		%	8.3		%	17.9		%
Underlying combined ratio	82.6		%	92.9		%	93.5		%	73.6		%	74.9		%	81.4		%	96.4		%	78.5		%	85.6		%	82.9		%
Catastrophe losses, net of reinsurance:
Pre-tax	$	80		$	136		$	107		$	34		$	123		$	407		$	289		$	51		$	357		$	870
After-tax	$	63		$	107		$	85		$	27		$	97		$	322		$	228		$	41		$	282		$	688
Prior year reserve development - favorable:
Pre-tax	$	25		$	13		$	15		$	9		$	17		$	21		$	333		$	7		$	62		$	378
After-tax	$	19		$	11		$	12		$	7		$	14		$	16		$	263		$	6		$	49		$	299
Policies in force (in thousands)	4,726			4,825			4,927			5,016			5,111			5,255			5,365			5,432
Change from prior year quarter	6.1		%	6.5		%	7.1		%	7.8		%	8.1		%	8.9		%	8.9		%	8.3		%
Change from prior quarter	1.6		%	2.1		%	2.1		%	1.8		%	1.9		%	2.8		%	2.1		%	1.2		%

(1)  Represents Homeowners and Other Lines sold through agents, brokers and other intermediaries, and excludes direct to consumer.

(2)  Billing and policy fees and other, which are a component of other revenues, and fee income are allocated as a reduction of underwriting expenses.

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Billing and policy fees and other	$	8	$	8	$	8	$	8	$	8	$	5	$	7	$	8	$	32	$	28
Fee income	$	2	$	2	$	3	$	2	$	2	$	3	$	3	$	2	$	9	$	10

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Interest Expense and Other

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Revenues
Other revenues	$	1	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1	$	—
Claims and expenses
Interest expense	88		89		84		83		84		85		87		83		344		339
General and administrative expenses	8		8		8		11		7		9		6		9		35		31
Total claims and expenses	96		97		92		94		91		94		93		92		379		370
Loss before income tax benefit	(95)		(97)		(92)		(94)		(91)		(94)		(93)		(92)		(378)		(370)
Income tax benefit	(20)		(21)		(21)		(19)		(20)		(20)		(19)		(20)		(81)		(79)
Loss	$	(75)	$	(76)	$	(71)	$	(75)	$	(71)	$	(74)	$	(74)	$	(72)	$	(297)	$	(291)

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Consolidated Balance Sheet

($ in millions)	December 31,<br>2020 (1)		December 31,<br>2019
Assets
Fixed maturities, available for sale, at fair value (amortized cost $68,830 and $65,281; allowance for expected credit losses of $2 at December 31, 2020)	$	74,003	$	68,134
Equity securities, at fair value (cost $387 and $376)	453		425
Real estate investments	1,026		963
Short-term securities	5,511		4,943
Other investments	3,430		3,419
Total investments	84,423		77,884
Cash	721		494
Investment income accrued	603		618
Premiums receivable (net of allowance for expected credit losses of $105 at December 31, 2020)	7,829		7,909
Reinsurance recoverables (net of allowance for estimated uncollectible reinsurance of $146 at December 31, 2020)	8,350		8,235
Ceded unearned premiums	772		689
Deferred acquisition costs	2,358		2,273
Contractholder receivables (net of allowance for expected credit losses of $19 at December 31, 2020)	4,242		4,599
Goodwill	3,976		3,961
Other intangible assets	317		330
Other assets	3,173		3,130
Total assets	$	116,764	$	110,122
Liabilities
Claims and claim adjustment expense reserves	$	54,521	$	51,849
Unearned premium reserves	15,222		14,604
Contractholder payables	4,261		4,619
Payables for reinsurance premiums	356		363
Deferred taxes	558		137
Debt	6,550		6,558
Other liabilities	6,095		6,049
Total liabilities	87,563		84,179
Shareholders’ equity
Common stock (1,750.0 shares authorized; 252.4 and 255.5 shares issued and outstanding)	23,743		23,469
Retained earnings	38,771		36,977
Accumulated other comprehensive income	2,502		640
Treasury stock, at cost (527.3 and 522.1 shares)	(35,815)		(35,143)
Total shareholders’ equity	29,201		25,943
Total liabilities and shareholders’ equity	$	116,764	$	110,122

Note: Certain reclassifications have been made to the 2019 consolidated balance sheet to conform to the 2020 presentation.

(1) Preliminary

The Travelers Companies, Inc.                                                 

Investment Portfolio

(at carrying value, $ in millions)	December 31,<br>2020		Pre-tax Book<br>Yield (1)		December 31,<br>2019		Pre-tax Book<br>Yield (1)
Investment portfolio
Taxable fixed maturities (including redeemable preferred stock)	$	40,230	2.90	%	$	38,570	3.17	%
Tax-exempt fixed maturities	33,773		2.83	%	29,564		3.12	%
Total fixed maturities	74,003		2.87	%	68,134		3.15	%
Non-redeemable preferred stocks	43		5.03	%	42		5.04	%
Public common stocks	410				383
Total equity securities	453				425
Real estate investments	1,026				963
Short-term securities	5,511		0.18	%	4,943		1.82	%
Private equities	2,301				2,236
Hedge funds	197				186
Real estate partnerships	701				658
Other investments	231				339
Total other investments	3,430				3,419
Total investments	$	84,423			$	77,884
Net unrealized investment gains, net of tax, included in shareholders’ equity	$	4,074			$	2,246

(1)  Yields are provided for those investments with an embedded book yield.

The Travelers Companies, Inc.                                                 

Investment Portfolio - Fixed Maturities Data

(at carrying value, $ in millions)	December 31,<br>2020		December 31,<br>2019
Fixed maturities
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	$	2,149	$	2,095
Obligations of states and political subdivisions:
Pre-refunded	3,544		2,056
All other	32,816		27,861
Total	36,360		29,917
Debt securities issued by foreign governments	1,054		1,173
Mortgage-backed securities - principally obligations of U.S. Government agencies	2,361		3,280
Corporates (including redeemable preferreds)	32,079		31,669
Total fixed maturities	$	74,003	$	68,134

Fixed Maturities

Quality Characteristics (1)

	December 31, 2020				December 31, 2019
	Amount		% of Total		Amount		% of Total
Quality Ratings
Aaa	$	31,653	42.8	%	$	29,164	42.9	%
Aa	18,327		24.8		15,819		23.2
A	12,944		17.5		12,148		17.8
Baa	9,738		13.1		9,541		14.0
Total investment grade	72,662		98.2		66,672		97.9
Ba	870		1.2		846		1.2
B	366		0.5		511		0.7
Caa and lower	105		0.1		105		0.2
Total below investment grade	1,341		1.8		1,462		2.1
Total fixed maturities	$	74,003	100.0	%	$	68,134	100.0	%
Average weighted quality	Aa2, AA				Aa2, AA
Weighted average duration of fixed maturities and short-term securities, net of securities lending activities and net receivables and payables on investment sales and purchases	3.8				4.0

(1)  Rated using external rating agencies or by Travelers when a public rating does not exist.  Below investment grade assets refer to securities rated “Ba” or below.

The Travelers Companies, Inc.                                                 

Investment Income

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Gross investment income
Fixed maturities
Short-term securities	28		27		26		24		22		13		6		3		105		44
Other	53		118		85		77		88		(234)		173		182		333		209
	592		659		631		626		621		277		681		685		2,508		2,264
Investment expenses	10		11		9		10		10		9		10		8		40		37
Net investment income, pre-tax	582		648		622		616		611		268		671		677		2,468		2,227
Income taxes	86		100		94		91		92		17		105		105		371		319
Net investment income, after-tax
Effective tax rate	14.7	%	15.4	%	15.2	%	14.8	%	15.1	%	6.2	%	15.6	%	15.4	%	15.0	%	14.3	%
Average invested assets (1)	74,040		74,370		74,910		75,996		76,191		76,635		78,722		80,373		74,866		78,070
Average yield pre-tax (1)	3.1	%	3.5	%	3.3	%	3.2	%	3.2	%	1.4	%	3.4	%	3.4	%	3.3	%	2.9	%
Average yield after-tax	2.7	%	2.9	%	2.8	%	2.8	%	2.7	%	1.3	%	2.9	%	2.8	%	2.8	%	2.4	%

All values are in US Dollars.

(1)  Excludes net unrealized investment gains (losses), and is adjusted for cash, receivables for investment sales, payables on investment purchases and accrued investment income.

The Travelers Companies, Inc.                                                 

Net Realized and Unrealized Investment Gains (Losses) included in Shareholders' Equity

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Net realized investment gains (losses)
Fixed maturities	$	16	$	13	$	14	$	12	$	(2)	$	10	$	23	$	21	$	55	$	52
Equity securities	41		10		8		14		(88)		43		16		37		73		8
Other (1)	(4)		2		1		(14)		(8)		(40)		(2)		(8)		(15)		(58)
Realized investment gains (losses) before tax	53		25		23		12		(98)		13		37		50		113		2
Related taxes	12		5		5		6		(22)		3		8		2		28		(9)
Net realized investment gains (losses)	$	41	$	20	$	18	$	6	$	(76)	$	10	$	29	$	48	$	85	$	11
Gross investment gains (1)	$	65	$	31	$	30	$	32	$	31	$	69	$	41	$	64	$	158	$	205
Gross investment losses before impairments (1)	(11)		(5)		(7)		(18)		(113)		(10)		(8)		(17)		(41)		(148)
Net investment gains (losses) before impairments	54		26		23		14		(82)		59		33		47		117		57
Net credit impairment (charges) recoveries	(1)		(1)		—		(2)		(16)		(46)		4		3		(4)		(55)
Net realized investment gains (losses) before tax	53		25		23		12		(98)		13		37		50		113		2
Related taxes	12		5		5		6		(22)		3		8		2		28		(9)
Net realized investment gains (losses)	$	41	$	20	$	18	$	6	$	(76)	$	10	$	29	$	48	$	85	$	11
($ in millions)	March 31,<br>2019		June 30,<br>2019		September 30,<br>2019		December 31,<br>2019		March 31,<br>2020		June 30,<br>2020		September 30,<br>2020		December 31,<br>2020
Net unrealized investment gains, net of tax, included in shareholders’ equity, by asset type
Fixed maturities	$	1,284	$	2,388	$	2,990	$	2,853	$	2,271	$	4,632	$	4,842	$	5,175
Equity securities & other	—		1		1		—		2		2		2		—
Unrealized investment gains before tax	1,284		2,389		2,991		2,853		2,273		4,634		4,844		5,175
Related taxes	277		511		637		607		488		988		1,032		1,101
Balance, end of period	$	1,007	$	1,878	$	2,354	$	2,246	$	1,785	$	3,646	$	3,812	$	4,074
(1)  Includes the following gross investment gains and gross investment losses related to U.S. Treasury futures, which are settled daily:
Gross investment Treasury future gains	$	1	$	—	$	—	$	—	$	5	$	—	$	—	$	—	$	1	$	5
Gross investment Treasury future losses	$	1	$	—	$	—	$	—	$	12	$	—	$	—	$	—	$	1	$	12

The Company entered into these arrangements as part of its strategy to manage the duration of its fixed maturity portfolio.  In a changing interest rate environment, the change in the value of the futures contracts can be expected to partially offset changes in the value of the fixed maturity portfolio.

The Travelers Companies, Inc.                                                 

Reinsurance Recoverables

($ in millions)	December 31, 2020		December 31, 2019
Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses (1)	$	3,731	$	3,476
Gross structured settlements (2)	2,964		2,965
Mandatory pools and associations (3)	1,801		1,886
Gross reinsurance recoverables (4)	8,496		8,327
Allowance for estimated uncollectible reinsurance (5)	(146)		(92)
Net reinsurance recoverables	$	8,350	$	8,235

(1)  The Company’s top five reinsurer groups, including retroactive reinsurance, included in gross reinsurance recoverables is as follows:

Reinsurer	A.M. Best Rating of Group's Predominant Reinsurer	December 31, 2020
Swiss Re Group	A+ second highest of 16 ratings	$	535
Berkshire Hathaway	A++ highest of 16 ratings	333
Munich Re Group	A+ second highest of 16 ratings	290
Alleghany Group	A+ second highest of 16 ratings	204
Axa Group	A+ second highest of 16 ratings	177

The gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses represent the current and estimated future amounts due from reinsurers on known and incurred but not reported claims.  The ceded reserves are estimated in a manner consistent with the underlying direct and assumed reserves.  Although this total comprises recoverables due from nearly one thousand different reinsurance entities, about half is attributable to 10 reinsurer groups.

(2)  Included in reinsurance recoverables are certain amounts related to structured settlements, which comprise annuities purchased from various life insurance companies to settle certain personal physical injury claims, of which workers’ compensation claims comprise a significant portion.  In cases where the Company did not receive a release from the claimant, the amounts due from the life insurance company related to the structured settlement are included in both the claims and claim adjustment expense reserves and reinsurance recoverables in the Company’s consolidated balance sheet, as the Company retains the liability to pay the claimant in the event that the life insurance company fails to make the required annuity payments.  The Company would be required to make such payments, to the extent the purchased annuities are not covered by state guaranty associations.

The Company’s top five groups included in gross structured settlements is as follows:

Group	A.M. Best Rating of Group's Predominant Insurer	December 31, 2020
Fidelity & Guaranty Life Group	A- fourth highest of 16 ratings	$	757
Genworth Financial Group (a)	B seventh highest of 16 ratings	323
John Hancock Group	A+ second highest of 16 ratings	271
Brighthouse Financial, Inc.	A third highest of 16 ratings	234
Symetra Financial Corporation	A third highest of 16 ratings	229

(a) On October 23, 2016, Genworth Financial (Genworth) announced that they have entered into a definitive agreement under which China Oceanwide Holdings Group Co., Ltd. agreed to acquire all of the outstanding shares of Genworth. On March 7, 2017, Genworth stockholders adopted the merger agreement. On January 4, 2021, the parties announced that although the merger agreement remains in effect, they have not extended the closing deadline of December 31, 2020, and either party is able to terminate the merger agreement at any time.

(3)  The mandatory pools and associations represent various involuntary assigned risk pools that the Company is required to participate in.  These pools principally involve workers’ compensation and automobile insurance, which provide various insurance coverages to insureds that otherwise are unable to purchase coverage in the open market.  The costs of these mandatory pools in most states are usually charged back to the participating members in proportion to voluntary writings of related business in that state.  In the event that a member of the pool becomes insolvent, the remaining members assume an additional pro rata share of the pool’s liabilities.

(4) Of the total reinsurance recoverables at December 31, 2020, after deducting mandatory pools and associations and before allowances for estimated uncollectible reinsurance, $5.85 billion, or 87%, were rated by A.M. Best Company.  The Company utilizes updated A.M. Best credit ratings on a quarterly basis when determining the allowance. Of the total rated by A.M. Best Company, 94% were rated A- or better.  The remaining 13% of reinsurance recoverables were comprised of the following:  6% related to captive insurance companies, 1% related to the Company’s participation in voluntary pools and 6% were balances from other companies not rated by A.M. Best Company.  Certain of the Company's reinsurance recoverables are collateralized by letters of credit, funds held or trust agreements.

(5) The Company reports its reinsurance recoverables net of an allowance for estimated uncollectible reinsurance. The allowance is based upon the Company’s ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing, disputes, applicable coverage defenses and other relevant factors.  For structured settlements, the allowance is also based upon the Company’s ongoing review of life insurers’ creditworthiness and estimated amounts of coverage that would be available from state guaranty funds if a life insurer defaults. A probability-of-default methodology which reflects current and forecasted economic conditions is used to estimate the amount of uncollectible reinsurance due to credit-related factors and the estimate is reported in an allowance for estimated uncollectible reinsurance. The allowance also includes estimated uncollectible amounts related to dispute risk with reinsurers. The Company adopted updated guidance for the accounting for credit losses for financial instruments for the quarter ending March 31, 2020 which resulted in the recognition of an allowance for expected credit losses on structured settlements of $53 million, pre-tax, with an offsetting after-tax cumulative effect adjustment to retained earnings as of January 1, 2020.

The Travelers Companies, Inc.                                                 

Net Reserves for Losses and Loss Adjustment Expense

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Statutory Reserves for Losses and Loss Adjustment Expenses
Business Insurance
Beginning of period	$	33,857	$	34,086	$	34,377	$	34,963	$	35,142	$	35,415	$	36,210	$	36,946	$	33,857	$	35,142
Incurred	2,529		2,631		2,969		2,608		2,737		2,828		2,750		2,282		10,737		10,597
Paid	(2,320)		(2,345)		(2,354)		(2,482)		(2,364)		(2,067)		(2,054)		(2,296)		(9,501)		(8,781)
Foreign exchange and other	20		5		(29)		53		(100)		34		40		67		49		41
End of period	$	34,086	$	34,377	$	34,963	$	35,142	$	35,415	$	36,210	$	36,946	$	36,999	$	35,142	$	36,999
Bond & Specialty Insurance
Beginning of period	$	2,987	$	3,068	$	3,042	$	3,074	$	3,094	$	3,085	$	3,276	$	3,447	$	2,987	$	3,094
Incurred	264		236		298		286		325		401		390		339		1,084		1,455
Paid	(189)		(260)		(256)		(290)		(300)		(216)		(237)		(243)		(995)		(996)
Foreign exchange and other	6		(2)		(10)		24		(34)		6		18		28		18		18
End of period	$	3,068	$	3,042	$	3,074	$	3,094	$	3,085	$	3,276	$	3,447	$	3,571	$	3,094	$	3,571
Personal Insurance
Beginning of period	$	5,565	$	5,427	$	5,560	$	5,587	$	5,507	$	5,413	$	5,626	$	5,788	$	5,565	$	5,507
Incurred	1,596		1,897		1,899		1,684		1,671		1,824		1,690		1,670		7,076		6,855
Paid	(1,751)		(1,781)		(1,862)		(1,782)		(1,693)		(1,644)		(1,546)		(1,816)		(7,176)		(6,699)
Foreign exchange and other	17		17		(10)		18		(72)		33		18		35		42		14
End of period	$	5,427	$	5,560	$	5,587	$	5,507	$	5,413	$	5,626	$	5,788	$	5,677	$	5,507	$	5,677
Total
Beginning of period	$	42,409	$	42,581	$	42,979	$	43,624	$	43,743	$	43,913	$	45,112	$	46,181	$	42,409	$	43,743
Incurred	4,389		4,764		5,166		4,578		4,733		5,053		4,830		4,291		18,897		18,907
Paid	(4,260)		(4,386)		(4,472)		(4,554)		(4,357)		(3,927)		(3,837)		(4,355)		(17,672)		(16,476)
Foreign exchange and other	43		20		(49)		95		(206)		73		76		130		109		73
End of period	$	42,581	$	42,979	$	43,624	$	43,743	$	43,913	$	45,112	$	46,181	$	46,247	$	43,743	$	46,247
Prior Year Reserve Development: Unfavorable (Favorable)
Business Insurance
Asbestos	$	—	$	—	$	220	$	—	$	—	$	—	$	295	$	—	$	220	$	295
Environmental	—		60		8		8		17		17		4		16		76		54
All other	21		(131)		88		(16)		(22)		(17)		(79)		(140)		(38)		(258)
Total Business Insurance (1)	21		(71)		316		(8)		(5)		—		220		(124)		258		91
Bond & Specialty Insurance	(3)		(39)		(3)		(20)		—		33		—		(32)		(65)		1
Personal Insurance	(69)		(13)		(19)		(32)		(22)		(35)		(362)		(24)		(133)		(443)
Total	$	(51)	$	(123)	$	294	$	(60)	$	(27)	$	(2)	$	(142)	$	(180)	$	60	$	(351)

(1)  Excludes accretion of discount.

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Asbestos and Environmental Reserves

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Asbestos reserves
Beginning reserves:
Gross	$	1,608	$	1,564	$	1,474	$	1,685	$	1,601	$	1,530	$	1,470	$	1,772	$	1,608	$	1,601
Ceded	(327)		(321)		(295)		(334)		(322)		(316)		(301)		(365)		(327)		(322)
Net	1,281		1,243		1,179		1,351		1,279		1,214		1,169		1,407		1,281		1,279
Incurred losses and loss expenses:
Gross	—		—		268		—		—		—		362		—		268		362
Ceded	—		—		(48)		—		—		—		(67)		—		(48)		(67)
Paid loss and loss expenses:
Gross	44		90		57		86		69		60		61		105		277		295
Ceded	(6)		(26)		(9)		(12)		(6)		(15)		(2)		(35)		(53)		(58)
Foreign exchange and other:
Gross	—		—		—		2		(2)		—		1		1		2		—
Ceded	—		—		—		—		—		—		1		—		—		1
Ending reserves:
Gross	1,564		1,474		1,685		1,601		1,530		1,470		1,772		1,668		1,601		1,668
Ceded	(321)		(295)		(334)		(322)		(316)		(301)		(365)		(330)		(322)		(330)
Net	$	1,243	$	1,179	$	1,351	$	1,279	$	1,214	$	1,169	$	1,407	$	1,338	$	1,279	$	1,338
Environmental reserves
Beginning reserves:
Gross	$	358	$	338	$	388	$	374	$	350	$	350	$	356	$	351	$	358	$	350
Ceded	(24)		(24)		(29)		(29)		(29)		(27)		(26)		(37)		(24)		(29)
Net	334		314		359		345		321		323		330		314		334		321
Incurred losses and loss expenses:
Gross	—		67		8		9		19		17		15		16		84		67
Ceded	—		(7)		—		(1)		(2)		—		(11)		—		(8)		(13)
Paid loss and loss expenses:
Gross	20		16		22		34		18		11		21		25		92		75
Ceded	—		(1)		—		(1)		(4)		(1)		—		(1)		(2)		(6)
Foreign exchange and other:
Gross	—		(1)		—		1		(1)		—		1		1		—		1
Ceded	—		1		—		—		—		—		—		—		1		—
Ending reserves:
Gross	338		388		374		350		350		356		351		343		350		343
Ceded	(24)		(29)		(29)		(29)		(27)		(26)		(37)		(36)		(29)		(36)
Net	$	314	$	359	$	345	$	321	$	323	$	330	$	314	$	307	$	321	$	307

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Capitalization

($ in millions)	December 31,<br>2020			December 31,<br>2019
Debt
Short-term debt
Commercial paper	$	100		$	100
3.90% Senior notes due November 1, 2020 (1)	—			500
Total short-term debt	100			600
Long-term debt
7.75% Senior notes due April 15, 2026	200			200
7.625% Junior subordinated debentures due December 15, 2027	125			125
6.375% Senior notes due March 15, 2033 (1)	500			500
6.75% Senior notes due June 20, 2036 (1)	400			400
6.25% Senior notes due June 15, 2037 (1)	800			800
5.35% Senior notes due November 1, 2040 (1)	750			750
4.60% Senior notes due August 1, 2043 (1)	500			500
4.30% Senior notes due August 25, 2045 (1)	400			400
8.50% Junior subordinated debentures due December 15, 2045	56			56
3.75% Senior notes due May 15, 2046 (1)	500			500
8.312% Junior subordinated debentures due July 1, 2046	73			73
4.00% Senior notes due May 30, 2047 (1)	700			700
4.05% Senior notes due March 7, 2048 (1)	500			500
4.10% Senior notes due March 4, 2049 (1)	500			500
2.55% Senior notes due April 27, 2050 (1)	500			—
Total long-term debt	6,504			6,004
Unamortized fair value adjustment	41			43
Unamortized debt issuance costs	(95)			(89)
	6,450			5,958
Total debt	6,550			6,558
Common equity (excluding net unrealized investment gains, net of tax, included in shareholders’ equity)	25,127			23,697
Total capital (excluding net unrealized investment gains, net of tax, included in shareholders’ equity)	$	31,677		$	30,255
Total debt to capital (excluding net unrealized investment gains, net of tax, included in shareholders’ equity)	20.7		%	21.7		%

(1)  Redeemable anytime with “make-whole” premium.

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Statutory Capital and Surplus to GAAP Shareholders' Equity Reconciliation

($ in millions)	December 31,<br>2020 (1)		December 31,<br>2019
Statutory capital and surplus	$	22,180	$	21,330
GAAP adjustments
Goodwill and intangible assets	3,568		3,589
Investments	5,337		3,130
Noninsurance companies	(3,730)		(4,111)
Deferred acquisition costs	2,358		2,273
Deferred federal income tax	(1,585)		(1,144)
Current federal income tax	(42)		(29)
Reinsurance recoverables	55		47
Furniture, equipment & software	841		676
Agents balances	168		212
Other	51		(30)
Total GAAP adjustments	7,021		4,613
GAAP shareholders’ equity	$	29,201	$	25,943

(1) Estimated and Preliminary

See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.

The Travelers Companies, Inc.                                                 

Statement of Cash Flows - Preliminary

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Cash flows from operating activities
Net income (loss)	$	796	$	557	$	396	$	873	$	600	$	(40)	$	827	$	1,310	$	2,622	$	2,697
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net realized investment (gains) losses	(53)		(25)		(23)		(12)		98		(13)		(37)		(50)		(113)		(2)
Depreciation and amortization	211		190		180		182		203		188		186		212		763		789
Deferred federal income tax expense (benefit)	32		(22)		(20)		(23)		6		(77)		4		38		(33)		(29)
Amortization of deferred acquisition costs	1,117		1,134		1,169		1,181		1,178		1,173		1,207		1,215		4,601		4,773
Equity in (income) loss from other investments	(34)		(98)		(64)		(55)		(67)		253		(154)		(162)		(251)		(130)
Premiums receivable	(434)		(345)		168		227		(326)		(245)		247		418		(384)		94
Reinsurance recoverables	98		53		61		(55)		(15)		75		(210)		(12)		157		(162)
Deferred acquisition costs	(1,185)		(1,223)		(1,211)		(1,128)		(1,215)		(1,238)		(1,241)		(1,160)		(4,747)		(4,854)
Claims and claim adjustment expense reserves	(2)		331		598		120		388		1,067		1,218		(51)		1,047		2,622
Unearned premium reserves	551		407		392		(342)		414		229		317		(368)		1,008		592
Other	(458)		194		355		444		(636)		292		(38)		511		535		129
Net cash provided by operating activities	639		1,153		2,001		1,412		628		1,664		2,326		1,901		5,205		6,519
Cash flows from investing activities
Proceeds from maturities of fixed maturities	1,556		1,482		1,857		1,950		1,461		1,610		2,170		2,146		6,845		7,387
Proceeds from sales of investments:
Fixed maturities	769		726		306		386		388		832		774		1,063		2,187		3,057
Equity securities	39		32		28		41		33		21		22		35		140		111
Other investments	105		135		106		113		64		75		45		97		459		281
Purchases of investments:
Fixed maturities	(2,914)		(2,794)		(2,526)		(2,477)		(2,630)		(2,160)		(5,161)		(4,122)		(10,711)		(14,073)
Equity securities	(22)		(19)		(21)		(32)		(35)		(24)		(21)		(32)		(94)		(112)
Real estate investments	(77)		(8)		(10)		(12)		(16)		(8)		(9)		(80)		(107)		(113)
Other investments	(146)		(116)		(107)		(128)		(103)		(125)		(93)		(166)		(497)		(487)
Net sales (purchases) of short-term securities	(109)		606		(1,114)		(340)		906		(2,053)		(240)		821		(957)		(566)
Securities transactions in course of settlement	295		(72)		209		(274)		85		9		428		(569)		158		(47)
Other	(82)		(87)		(74)		(82)		(69)		(75)		(78)		(108)		(325)		(330)
Net cash provided by (used in) investing activities	(586)		(115)		(1,346)		(855)		84		(1,898)		(2,163)		(915)		(2,902)		(4,892)

The Travelers Companies, Inc.                                                 

Statement of Cash Flows - Preliminary (Continued)

($ in millions)	1Q2019		2Q2019		3Q2019		4Q2019		1Q2020		2Q2020		3Q2020		4Q2020		YTD 4Q2019		YTD 4Q2020
Cash flows from financing activities
Treasury stock acquired - share repurchase authorization	(375)		(375)		(375)		(375)		(425)		—		—		(200)		(1,500)		(625)
Treasury stock acquired - net employee share-based compensation	(46)		(1)		—		(1)		(46)		—		—		(1)		(48)		(47)
Dividends paid to shareholders	(205)		(214)		(214)		(211)		(210)		(216)		(217)		(218)		(844)		(861)
Payment of debt	—		(500)		—		—		—		—		—		(500)		(500)		(500)
Issuance of debt	492		—		—		—		—		490		—		—		492		490
Issuance of common stock - employee share options	63		111		32		7		31		34		7		55		213		127
Net cash provided by (used in) financing activities	(71)		(979)		(557)		(580)		(650)		308		(210)		(864)		(2,187)		(1,416)
Effect of exchange rate changes on cash	2		—		(6)		9		(12)		5		7		16		5		16
Net increase (decrease) in cash	(16)		59		92		(14)		50		79		(40)		138		121		227
Cash at beginning of period	373		357		416		508		494		544		623		583		373		494
Cash at end of period	$	357	$	416	$	508	$	494	$	544	$	623	$	583	$	721	$	494	$	721
Income taxes paid	$	5	$	320	$	42	$	61	$	15	$	2	$	396	$	165	$	428	$	578
Interest paid	$	50	$	121	$	60	$	107	$	60	$	106	$	60	$	113	$	338	$	339

The Travelers Companies, Inc.                                                 

Glossary of Financial Measures and Description of Reportable Business Segments

The following measures are used by the Company’s management to evaluate financial performance against historical results, to establish performance targets on a consolidated basis, and for other reasons as discussed below.  In some cases, these measures are considered non-GAAP financial measures under applicable SEC rules because they are not displayed as separate line items in the consolidated financial statements or are not required to be disclosed in the notes to financial statements or, in some cases, include or exclude certain items not ordinarily included or excluded in the most comparable GAAP financial measure.

In the opinion of the Company’s management, a discussion of these measures provides investors, financial analysts, rating agencies and other financial statement users with a better understanding of the significant factors that comprise the Company’s periodic results of operations and how management evaluates the Company’s financial performance.

Some of these measures exclude net realized investment gains (losses), net of tax, and/or net unrealized investment gains (losses), net of tax, included in shareholders’ equity, which can be significantly impacted by both discretionary and other economic factors and are not necessarily indicative of operating trends.

Other companies may calculate these measures differently, and, therefore, their measures may not be comparable to those used by the Company’s management.

Core income (loss) is consolidated net income (loss) excluding the after-tax impact of net realized investment gains (losses), discontinued operations, the effect of a change in tax laws and tax rates at enactment, and cumulative effect of changes in accounting principles when applicable.  Segment income (loss) is determined in the same manner as core income (loss) on a segment basis.  Management uses segment income (loss) to analyze each segment’s performance and as a tool in making business decisions.  Financial statement users also consider core income (loss) when analyzing the results and trends of insurance companies.  Core income (loss) per share is core income (loss) on a per common share basis.

Average shareholders’ equity is (a) the sum of total shareholders’ equity at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.  Adjusted shareholders’ equity is shareholders’ equity excluding net realized investment gains (losses), net of tax, net unrealized investment gains (losses), net of tax, included in shareholders’ equity for the periods presented and the effect of a change in tax laws and tax rates at enactment (excluding the portion related to net unrealized investment gains (losses)).  Adjusted average shareholders’ equity is (a) the sum of total adjusted shareholders’ equity at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.

Return on equity is the ratio of annualized net income (loss) to average shareholders’ equity for the periods presented.  Core return on equity is the ratio of annualized core income (loss) to adjusted average shareholders’ equity for the periods presented.  In the opinion of the Company’s management, these are important indicators of how well management creates value for its shareholders through its operating activities and its capital management.

Underwriting gain (loss) is net earned premiums and fee income less claims and claim adjustment expenses and insurance-related expenses.  In the opinion of the Company’s management, it is important to measure the profitability of each segment excluding the results of investing activities, which are managed separately from the insurance business.  This measure is used to assess each segment’s business performance and as a tool in making business decisions.

A catastrophe is a severe loss designated a catastrophe by internationally recognized organizations that track and report on insured losses resulting from catastrophic events, such as Property Claim Services (PCS) for events in the United States and Canada.  Catastrophes can be caused by various natural events, including, among others, hurricanes, tornadoes and other windstorms, earthquakes, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions and other naturally-occurring events, such as solar flares. Catastrophes can also be man-made, such as terrorist attacks and other intentionally destructive acts including those involving nuclear, biological, chemical and radiological events, cyber events, explosions and destruction of infrastructure.  Each catastrophe has unique characteristics and catastrophes are not predictable as to timing or amount.  Their effects are included in net and core income and claims and claim adjustment expense reserves upon occurrence.  A catastrophe may result in the payment of reinsurance reinstatement premiums and assessments from various pools.  The Company’s threshold for disclosing catastrophes is primarily determined at the reportable segment level. If a threshold for one segment or a combination thereof is exceeded and the other segments have losses from the same event, losses from the event are identified as catastrophe losses in the segment results and for the consolidated results of the Company.  Additionally, an aggregate threshold is applied for international business across all reportable segments. The threshold for 2020 ranges from approximately $20 million to $30 million of losses before reinsurance and taxes.

Net favorable (unfavorable) prior year loss reserve development is the increase or decrease in incurred claims and claim adjustment expenses as a result of the re-estimation of claims and claim adjustment expense reserves at successive valuation dates for a given group of claims, which may be related to one or more prior years.  In the opinion of the Company’s management, a discussion of loss reserve development is meaningful to users of the financial statements as it allows them to assess the impact between prior and current year development on incurred claims and claim adjustment expenses, net and core income (loss), and changes in claims and claim adjustment expense reserve levels from period to period.

Combined ratio  For Statutory Accounting Practices (SAP), the combined ratio is the sum of the SAP loss and LAE ratio and the SAP underwriting expense ratio as defined in the statutory financial statements required by insurance regulators.  The combined ratio, as used in this financial supplement, is the equivalent of, and is calculated in the same manner as, the SAP combined ratio except that the SAP underwriting expense ratio is based on net written premiums and the underwriting expense ratio as used in this financial supplement is based on net earned premiums.  For SAP, the loss and LAE ratio is the ratio of incurred losses and loss adjustment expenses less certain administrative services fee income to net earned premiums as defined in the statutory financial statements required by insurance regulators. The loss and LAE ratio as used in this financial supplement is calculated in the same manner as the SAP ratio.  For SAP, the underwriting expense ratio is the ratio of underwriting expenses incurred (including commissions paid), less certain administrative services fee income and billing and policy fees and other, to net written premiums as defined in the statutory financial statements required by insurance regulators. The underwriting expense ratio as used in this financial supplement, is the ratio of underwriting expenses (including the amortization of deferred acquisition costs), less certain administrative services fee income and billing and policy fees, to net earned premiums.  Underlying combined ratio is the combined ratio adjusted to exclude the impact of prior year reserve development and catastrophes, net of reinsurance.

The Travelers Companies, Inc.                                                 

Glossary of Financial Measures and Description of Reportable Business Segments

The combined ratio, loss and LAE ratio, and underwriting expense ratio are used as indicators of the Company’s underwriting discipline, efficiency in acquiring and servicing its business and overall underwriting profitability. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.

Other companies’ method of computing similarly titled measures may not be comparable to the Company’s method of computing these ratios.

Gross written premiums reflect the direct and assumed contractually determined amounts charged to policyholders for the effective period of the contract based on the terms and conditions of the insurance contract.  Net written premiums reflect gross written premiums less premiums ceded to reinsurers.

Book value per share is total common shareholders’ equity divided by the number of common shares outstanding.  Adjusted book value per share is total common shareholders’ equity excluding net unrealized investment gains and losses, net of tax, included in shareholders’ equity, divided by the number of common shares outstanding. In the opinion of the Company’s management, adjusted book value per share is useful in an analysis of a property casualty company’s book value per share as it removes the effect of changing prices on invested assets, (i.e., net unrealized investment gains (losses), net of tax) which do not have an equivalent impact on unpaid claims and claim adjustment expense reserves.

Total capital is the sum of total shareholders’ equity and debt.  Debt-to-capital ratio excluding net unrealized gain (loss) on investments, net of tax, included in shareholders’ equity is the ratio of debt to total capital excluding net unrealized investment gains and losses, net of tax, included in shareholders’ equity.  In the opinion of the Company’s management, the debt to capital ratio is useful in an analysis of the Company’s financial leverage.

Statutory capital and surplus represents the excess of an insurance company’s admitted assets over its liabilities, including loss reserves, as determined in accordance with statutory accounting practices.

Travelers has organized its businesses into the following reportable business segments:

Business Insurance - Business Insurance offers a broad array of property and casualty insurance and insurance-related services to its customers, primarily in the United States, as well as in Canada, the United Kingdom, the Republic of Ireland and throughout other parts of the world as a corporate member of Lloyd’s.  Business Insurance is organized as follows:  Select Accounts; Middle Market including Commercial Accounts, Construction, Technology, Public Sector Services, Oil & Gas, Excess Casualty, Inland Marine, Ocean Marine, and Boiler & Machinery; National Accounts; National Property and Other including National Property, Northland Transportation, Northfield, National Programs, and Agribusiness; and International including Global Services.  Business Insurance also includes Simply Business, a leading provider of small business insurance policies primarily in the United Kingdom that was acquired in August 2017, as well as Business Insurance Other, which primarily comprises the Company’s asbestos and environmental liabilities, and the assumed reinsurance and certain other runoff operations.

Bond & Specialty Insurance - Bond & Specialty Insurance provides surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to its customers in the United States and certain specialty insurance products in Canada, the United Kingdom, the Republic of Ireland and Brazil (through a joint venture as described below), utilizing various degrees of financially-based underwriting approaches.  The range of coverages includes performance, payment and commercial surety and fidelity bonds for construction and general commercial enterprises; management liability coverages including directors’ and officers’ liability, employee dishonesty, employment practices liability, fiduciary liability and cyber risk for public corporations, private companies, not-for-profit organizations and financial institutions; professional liability coverage for a variety of professionals including, among others, lawyers and design professionals; and in the United States only, property, workers’ compensation, auto and general liability for financial institutions.

Bond & Specialty Insurance surety business in Brazil and Colombia is conducted through Junto Holding Brasil S.A. (Junto) and Junto Holding Latam S.A. in Brazil. The Company owns 49.5% of both Junto, a market leader in surety coverages in Brazil, and Junto Holding Latam S.A., a Colombian start-up surety provider. These joint venture investments are accounted for using the equity method and are included in “other investments” on the consolidated balance sheet.

Personal Insurance - Personal Insurance writes a broad range of property and casualty insurance covering individuals’ personal risks, primarily in the United States, as well as in Canada. The primary products of automobile and homeowners insurance are complemented by a broad suite of related coverages.

36