UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number: 001-10898

The Travelers Companies, Inc.

(Exact name of registrant as specified in its charter)

____________________________________________________________________


Minnesota						41-0518860
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

485 Lexington Avenue

New York, NY 10017

(Address of principal executive offices) (Zip Code)

(917) 778-6000

(Registrant’s telephone number, including area code)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	ý	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ý

The number of shares of the Registrant’s Common Stock, without par value, outstanding at April 14, ~~2022~~2023 was ~~239,961,002.~~230,976,565.

The Travelers Companies, Inc.

Quarterly Report on Form 10-Q

For Quarterly Period Ended March 31, ~~2022~~2023

TABLE OF CONTENTS


		Page
	Part I — Financial Information

Item 1.	Financial Statements:

	Consolidated Statement of Income (Unaudited) — Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	3

	Consolidated Statement of Comprehensive Income (Loss) (Unaudited) — Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	4

	Consolidated Balance Sheet — March 31, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022	5

	Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) — Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	6

	Consolidated Statement of Cash Flows (Unaudited) — Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	7

	Notes to Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2829

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5658

Item 4.	Controls and Procedures	5658

	Part II — Other Information

Item 1.	Legal Proceedings	5759

Item 1A.	Risk Factors	5759

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5759

Item 5.	Other Information	5760

Item 6.	Exhibits	5860

	SIGNATURES	5961

PART 1 — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

(in millions, except per share amounts)


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022

Revenues	Revenues						Revenues
Premiums	Premiums	$	8,014	$	7,386		Premiums	$	8,854	$	8,014
Net investment income	Net investment income	637		701			Net investment income	663		637
Fee income	Fee income	103		101			Fee income	106		103
Net realized investment gains (losses)	Net realized investment gains (losses)	(23)		44			Net realized investment gains (losses)	6		(23)
Other revenues	Other revenues	78		81			Other revenues	75		78

Total revenues	Total revenues	8,809		8,313			Total revenues	9,704		8,809

Claims and expenses	Claims and expenses						Claims and expenses
Claims and claim adjustment expenses	Claims and claim adjustment expenses	5,039		4,970			Claims and claim adjustment expenses	5,959		5,039
Amortization of deferred acquisition costs	Amortization of deferred acquisition costs	1,310		1,207			Amortization of deferred acquisition costs	1,462		1,310
General and administrative expenses	General and administrative expenses	1,191		1,163			General and administrative expenses	1,267		1,191
Interest expense	Interest expense	87		82			Interest expense	88		87
Total claims and expenses	Total claims and expenses	7,627		7,422			Total claims and expenses	8,776		7,627

Income before income taxes	Income before income taxes	1,182		891			Income before income taxes	928		1,182
Income tax expense		164		158
Income tax expense (benefit)							Income tax expense (benefit)	(47)		164
Net income	Net income	$	1,018	$	733		Net income	$	975	$	1,018

Net income per share	Net income per share						Net income per share
Basic	Basic	$	4.20	$	2.89		Basic	$	4.18	$	4.20
Diluted	Diluted	$	4.15	$	2.87		Diluted	$	4.13	$	4.15

Weighted average number of common shares outstanding	Weighted average number of common shares outstanding						Weighted average number of common shares outstanding
Basic	Basic	240.9		252.1			Basic	231.7		240.9
Diluted	Diluted	243.7		254.1			Diluted	234.4		243.7

Cash dividends declared per common share	Cash dividends declared per common share	$	0.88	$	0.85		Cash dividends declared per common share	$	0.93	$	0.88

The accompanying notes are an integral part of the consolidated financial statements.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(in millions)


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022

Net income	Net income	$	1,018	$	733		Net income	$	975	$	1,018

Other comprehensive loss
Other comprehensive income (loss):							Other comprehensive income (loss):
Changes in net unrealized gains (losses) on investment securities:	Changes in net unrealized gains (losses) on investment securities:						Changes in net unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income	Having no credit losses recognized in the consolidated statement of income	(4,829)		(1,596)			Having no credit losses recognized in the consolidated statement of income	1,308		(4,829)
Having credit losses recognized in the consolidated statement of income	Having credit losses recognized in the consolidated statement of income	(1)		—			Having credit losses recognized in the consolidated statement of income	—		(1)
Net changes in benefit plan assets and obligations	Net changes in benefit plan assets and obligations	11		25			Net changes in benefit plan assets and obligations	(3)		11
Net changes in unrealized foreign currency translation	Net changes in unrealized foreign currency translation	2		26			Net changes in unrealized foreign currency translation	37		2
Other comprehensive loss before income taxes		(4,817)		(1,545)
Income tax benefit		(1,022)		(334)
Other comprehensive loss, net of taxes		(3,795)		(1,211)
Comprehensive loss		$	(2,777)	$	(478)
Other comprehensive income (loss) before income taxes							Other comprehensive income (loss) before income taxes	1,342		(4,817)
Income tax expense (benefit)							Income tax expense (benefit)	283		(1,022)
Other comprehensive income (loss), net of taxes							Other comprehensive income (loss), net of taxes	1,059		(3,795)
Comprehensive income (loss)							Comprehensive income (loss)	$	2,034	$	(2,777)

The accompanying notes are an integral part of the consolidated financial statements.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Fixed maturities, available for sale, at fair value (amortized cost $76,158 and $74,751; allowance for expected credit losses of $4 and $3)		$	74,386	$	77,810
Equity securities, at fair value (cost $761 and $749)		880		893
Fixed maturities, available for sale, at fair value (amortized cost $77,827 and $77,380; allowance for expected credit losses of $4 and $3)						Fixed maturities, available for sale, at fair value (amortized cost $77,827 and $77,380; allowance for expected credit losses of $4 and $3)	$	72,914	$	71,160
Equity securities, at fair value (cost $592 and $747)						Equity securities, at fair value (cost $592 and $747)	649		807
Real estate investments	Real estate investments	975		979		Real estate investments	953		952
Short-term securities	Short-term securities	3,467		3,836		Short-term securities	3,243		3,470
Other investments	Other investments	3,956		3,857		Other investments	4,276		4,065
Total investments	Total investments	83,664		87,375		Total investments	82,035		80,454
Cash	Cash	752		761		Cash	767		799
Investment income accrued	Investment income accrued	570		615		Investment income accrued	594		650
Premiums receivable (net of allowance for expected credit losses of $89 and $107)		8,593		8,085
Reinsurance recoverables (net of allowance for estimated uncollectible reinsurance of $135 and $141)		8,734		8,452
Premiums receivable (net of allowance for expected credit losses of $77 and $77)						Premiums receivable (net of allowance for expected credit losses of $77 and $77)	9,483		8,922
Reinsurance recoverables (net of allowance for estimated uncollectible reinsurance of $131 and $132)						Reinsurance recoverables (net of allowance for estimated uncollectible reinsurance of $131 and $132)	8,091		8,063
Ceded unearned premiums	Ceded unearned premiums	1,266		902		Ceded unearned premiums	1,360		1,024
Deferred acquisition costs	Deferred acquisition costs	2,645		2,542		Deferred acquisition costs	3,005		2,836
Deferred taxes	Deferred taxes	662		—		Deferred taxes	1,568		1,877
Contractholder receivables (net of allowance for expected credit losses of $19 and $21)		3,901		3,890
Contractholder receivables (net of allowance for expected credit losses of $19 and $17)						Contractholder receivables (net of allowance for expected credit losses of $19 and $17)	3,598		3,579
Goodwill	Goodwill	4,001		4,008		Goodwill	3,959		3,952
Other intangible assets	Other intangible assets	301		306		Other intangible assets	285		287
Other assets	Other assets	3,503		3,530		Other assets	3,607		3,274
Total assets	Total assets	$	118,592	$	120,466	Total assets	$	118,352	$	115,717

Liabilities	Liabilities					Liabilities
Claims and claim adjustment expense reserves	Claims and claim adjustment expense reserves	$	57,572	$	56,907	Claims and claim adjustment expense reserves	$	59,064	$	58,649
Unearned premium reserves	Unearned premium reserves	17,193		16,469		Unearned premium reserves	19,143		18,240
Contractholder payables	Contractholder payables	3,920		3,911		Contractholder payables	3,617		3,596
Payables for reinsurance premiums	Payables for reinsurance premiums	694		384		Payables for reinsurance premiums	761		419
Deferred taxes		—		289
Debt	Debt	7,291		7,290		Debt	7,292		7,292
Other liabilities	Other liabilities	6,391		6,329		Other liabilities	5,423		5,961
Total liabilities	Total liabilities	93,061		91,579		Total liabilities	95,300		94,157

Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
Common stock (1,750.0 shares authorized; 240.0 and 241.2 shares issued and outstanding)		24,348		24,154
Common stock (1,750.0 shares authorized; 231.0 and 232.1 shares issued and outstanding)						Common stock (1,750.0 shares authorized; 231.0 and 232.1 shares issued and outstanding)	24,703		24,565
Retained earnings	Retained earnings	42,359		41,555		Retained earnings	44,273		43,516
Accumulated other comprehensive income (loss)		(2,602)		1,193
Treasury stock, at cost (544.8 and 541.5 shares)		(38,574)		(38,015)
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(5,386)		(6,445)
Treasury stock, at cost (556.0 and 553.5 shares)						Treasury stock, at cost (556.0 and 553.5 shares)	(40,538)		(40,076)
Total shareholders’ equity	Total shareholders’ equity	25,531		28,887		Total shareholders’ equity	23,052		21,560
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	118,592	$	120,466	Total liabilities and shareholders’ equity	$	118,352	$	115,717

The accompanying notes are an integral part of the consolidated financial statements.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(in millions)


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022

Common stock	Common stock						Common stock
Balance, beginning of period	Balance, beginning of period	$	24,154	$	23,743		Balance, beginning of period	$	24,565	$	24,154
Employee share-based compensation	Employee share-based compensation	135		108			Employee share-based compensation	68		135
Compensation amortization under share-based plans and other changes	Compensation amortization under share-based plans and other changes	59		54			Compensation amortization under share-based plans and other changes	70		59
Balance, end of period	Balance, end of period	24,348		23,905			Balance, end of period	24,703		24,348

Retained earnings	Retained earnings						Retained earnings
Balance, beginning of period	Balance, beginning of period	41,555		38,771			Balance, beginning of period	43,516		41,555

Net income	Net income	1,018		733			Net income	975		1,018
Dividends	Dividends	(214)		(216)			Dividends	(218)		(214)
Other		—		(3)

Balance, end of period	Balance, end of period	42,359		39,285			Balance, end of period	44,273		42,359

Accumulated other comprehensive income (loss), net of tax	Accumulated other comprehensive income (loss), net of tax						Accumulated other comprehensive income (loss), net of tax
Balance, beginning of period	Balance, beginning of period	1,193		2,502			Balance, beginning of period	(6,445)		1,193

Other comprehensive loss		(3,795)		(1,211)
Other comprehensive income (loss)							Other comprehensive income (loss)	1,059		(3,795)
Balance, end of period	Balance, end of period	(2,602)		1,291			Balance, end of period	(5,386)		(2,602)

Treasury stock, at cost	Treasury stock, at cost						Treasury stock, at cost
Balance, beginning of period	Balance, beginning of period	(38,015)		(35,815)			Balance, beginning of period	(40,076)		(38,015)
Treasury stock acquired — share repurchase authorizations	Treasury stock acquired — share repurchase authorizations	(500)		(356)			Treasury stock acquired — share repurchase authorizations	(400)		(500)
Net shares acquired related to employee share-based compensation plans	Net shares acquired related to employee share-based compensation plans	(59)		(41)			Net shares acquired related to employee share-based compensation plans	(62)		(59)
Balance, end of period	Balance, end of period	(38,574)		(36,212)			Balance, end of period	(40,538)		(38,574)

Total shareholders’ equity	Total shareholders’ equity	$	25,531	$	28,269		Total shareholders’ equity	$	23,052	$	25,531

Common shares outstanding	Common shares outstanding						Common shares outstanding
Balance, beginning of period	Balance, beginning of period	241.2		252.4			Balance, beginning of period	232.1		241.2
Treasury stock acquired — share repurchase authorizations	Treasury stock acquired — share repurchase authorizations	(2.9)		(2.4)			Treasury stock acquired — share repurchase authorizations	(2.2)		(2.9)
Net shares issued under employee share-based compensation plans	Net shares issued under employee share-based compensation plans	1.7		1.5			Net shares issued under employee share-based compensation plans	1.1		1.7
Balance, end of period	Balance, end of period	240.0		251.5			Balance, end of period	231.0		240.0

The accompanying notes are an integral part of the consolidated financial statements.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

(in millions)
Three Months Ended March 31,
2022 2021
Cash flows from operating activities
Net income $ 1,018 $ 733
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment (gains) losses 23 (44)
Depreciation and amortization 234 235
Deferred federal income tax expense 40 56
Amortization of deferred acquisition costs 1,310 1,207
Equity in income from other investments (118) (200)
Premiums receivable (509) (333)
Reinsurance recoverables (282) 12
Deferred acquisition costs (1,413) (1,258)
Claims and claim adjustment expense reserves 679 777
Unearned premium reserves 727 509
Other (443) (504)
Net cash provided by operating activities 1,266 1,190
Cash flows from investing activities
Proceeds from maturities of fixed maturities 1,879 2,064
Proceeds from sales of investments:
Fixed maturities 1,044 1,238
Equity securities 63 25
Other investments 81 79
Purchases of investments:
Fixed maturities (4,409) (4,754)
Equity securities (63) (19)
Real estate investments (9) (5)
Other investments (135) (97)
Net sales of short-term securities 367 524
Securities transactions in the course of settlement 613 269
Acquisitions, net of cash acquired (4) (38)
Other (84) (60)
Net cash used in investing activities (657) (774)
Cash flows from financing activities
Treasury stock acquired — share repurchase authorizations (500) (356)
Treasury stock acquired — net employee share-based compensation (59) (41)
Dividends paid to shareholders (213) (214)
Issuance of common stock — employee share options 159 134
Net cash used in financing activities (613) (477)
Effect of exchange rate changes on cash (5) 3
Net decrease in cash (9) (58)
Cash at beginning of year 761 721
Cash at end of period $ 752 $ 663
Supplemental disclosure of cash flow information
Income taxes paid $ 10 $ 58
Interest paid $ 59 $ 59


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities
Net income	$	975	$	1,018
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment (gains) losses	(6)		23
Depreciation and amortization	204		234
Deferred federal income tax expense	32		40
Amortization of deferred acquisition costs	1,462		1,310
Equity in income from other investments	(30)		(118)
Premiums receivable	(557)		(509)
Reinsurance recoverables	(24)		(282)
Deferred acquisition costs	(1,629)		(1,413)
Claims and claim adjustment expense reserves	381		679
Unearned premium reserves	893		727
Other	(689)		(443)
Net cash provided by operating activities	1,012		1,266
Cash flows from investing activities
Proceeds from maturities of fixed maturities	1,538		1,879
Proceeds from sales of investments:
Fixed maturities	2,364		1,044
Equity securities	28		63

Other investments	64		81
Purchases of investments:
Fixed maturities	(4,335)		(4,409)
Equity securities	(34)		(63)
Real estate investments	(14)		(9)
Other investments	(139)		(135)
Net sales of short-term securities	228		367
Securities transactions in the course of settlement	(35)		613
Acquisition, net of cash acquired	—		(4)
Other	(120)		(84)
Net cash used in investing activities	(455)		(657)

Cash flows from financing activities
Treasury stock acquired — share repurchase authorizations	(398)		(500)
Treasury stock acquired — net employee share-based compensation	(62)		(59)
Dividends paid to shareholders	(215)		(213)


Issuance of common stock — employee share options	82		159
Net cash used in financing activities	(593)		(613)
Effect of exchange rate changes on cash	4		(5)
Net decrease in cash	(32)		(9)
Cash at beginning of year	799		761
Cash at end of period	$	767	$	752

Supplemental disclosure of cash flow information
Income taxes paid (received)	$	(16)	$	10
Interest paid	$	60	$	59

The accompanying notes are an integral part of the consolidated financial statements.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Basis of Presentation

The interim consolidated financial statements include the accounts of The Travelers Companies, Inc. (together with its subsidiaries, the Company). These financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP) and are unaudited. In the opinion of the Company’s management, all adjustments necessary for a fair presentation have been reflected. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted. All material intercompany transactions and balances have been eliminated. The accompanying interim consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the Company’s ~~2021~~2022 Annual Report).

The preparation of the interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period. Actual results could differ from those estimates. ~~Certain reclassifications have been made to the 2021 financial statements to conform to the 2022 presentation.~~

Adoption of Accounting Standards

For information regarding accounting standards that the Company adopted during the periods presented, see note 1 of the notes to the consolidated financial statements in the Company’s ~~2021~~2022 Annual Report.

Income Taxes

The Company recognized a one-time tax benefit of $211 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item impacted by the repeal of Internal Revenue Code Section 847, which related to the discounting of property-casualty loss reserves.

2. SEGMENT INFORMATION

Nature of Operations

The Company’s results are reported in the following 3three business segments — Business Insurance, Bond & Specialty Insurance and Personal Insurance. These segments reflect the manner in which the Company’s businesses are currently managed and represent an aggregation of products and services based on the type of customer, how the business is marketed and the manner in which risks are underwritten. For more information regarding the Company’s nature of operations, see the “Nature of Operations” section of note 1 of the notes to the consolidated financial statements in the Company’s ~~2021~~2022 Annual Report.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

2. SEGMENT INFORMATION, Continued

The following tables summarize the components of the Company’s revenues, income and total assets by reportable business segments:


(For the three months ended March 31, in millions)	(For the three months ended March 31, in millions)	Business Insurance		Bond & Specialty Insurance		Personal Insurance		Total Reportable Segments		(For the three months ended March 31, in millions)	Business Insurance		Bond & Specialty Insurance		Personal Insurance		Total Reportable Segments

2023										2023
Premiums										Premiums	$	4,477	$	875	$	3,502	$	8,854
Net investment income										Net investment income	473		73		117		663
Fee income										Fee income	99		—		7		106
Other revenues										Other revenues	47		5		23		75
Total segment revenues (1)										Total segment revenues (1)	$	5,096	$	953	$	3,649	$	9,698
Segment income (1)										Segment income (1)	$	756	$	207	$	83	$	1,046

2022	2022									2022
Premiums	Premiums	$	4,071	$	820	$	3,123	$	8,014	Premiums	$	4,071	$	820	$	3,123	$	8,014
Net investment income	Net investment income	468		59		110		637		Net investment income	468		59		110		637
Fee income	Fee income	96		—		7		103		Fee income	96		—		7		103
Other revenues	Other revenues	53		4		21		78		Other revenues	53		4		21		78
Total segment revenues (1)	Total segment revenues (1)	$	4,688	$	883	$	3,261	$	8,832	Total segment revenues (1)	$	4,688	$	883	$	3,261	$	8,832
Segment income (1)	Segment income (1)	$	669	$	217	$	225	$	1,111	Segment income (1)	$	669	$	217	$	225	$	1,111

2021
Premiums		$	3,799	$	743	$	2,844	$	7,386
Net investment income		523		59		119		701
Fee income		95		—		6		101
Other revenues		53		5		23		81
Total segment revenues (1)		$	4,470	$	807	$	2,992	$	8,269
Segment income (1)		$	317	$	137	$	314	$	768

(1)Segment revenues for reportable business segments exclude net realized investment gains (losses) and revenues included in ~~"interest~~“interest expense and other."” Segment income for reportable business segments ~~equals net income excluding~~excludes the after-tax impact of net realized investment gains (losses) and income (loss) from ~~"interest~~“interest expense and other."

”

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

2. SEGMENT INFORMATION, Continued

Business Segment Reconciliations
Three Months Ended
March 31,
(in millions) 2022 2021
Revenue reconciliation
Earned premiums
Business Insurance:
Domestic:
Workers’ compensation $ 830 $ 811
Commercial automobile 713 695
Commercial property 608 531
General liability 688 607
Commercial multi-peril 967 870
Other 17 14
Total Domestic 3,823 3,528
International 248 271
Total Business Insurance 4,071 3,799
Bond & Specialty Insurance:
Domestic:
Fidelity and surety 274 266
General liability 373 331
Other 55 56
Total Domestic 702 653
International 118 90
Total Bond & Specialty Insurance 820 743
Personal Insurance:
Domestic:
Automobile 1,458 1,370
Homeowners and Other 1,496 1,308
Total Domestic 2,954 2,678
International 169 166
Total Personal Insurance 3,123 2,844
Total earned premiums 8,014 7,386
Net investment income 637 701
Fee income 103 101
Other revenues 78 81
Total segment revenues 8,832 8,269
Net realized investment gains (losses) (23) 44
Total revenues $ 8,809 $ 8,313
Income reconciliation, net of tax
Total segment income $ 1,111 $ 768
Interest Expense and Other (1)
(74) (69)
Core income 1,037 699
Net realized investment gains (losses) (19) 34
Net income $ 1,018 $ 733


	Three Months Ended March 31,
(in millions)	2023		2022
Revenue reconciliation
Earned premiums
Business Insurance:
Domestic:
Workers’ compensation	$	850	$	830
Commercial automobile	761		713
Commercial property	709		608
General liability	760		688
Commercial multi-peril	1,100		967
Other	18		17
Total Domestic	4,198		3,823
International	279		248
Total Business Insurance	4,477		4,071
Bond & Specialty Insurance:
Domestic:
Fidelity and surety	306		274
General liability	398		373
Other	54		55
Total Domestic	758		702
International	117		118
Total Bond & Specialty Insurance	875		820
Personal Insurance:
Domestic:
Automobile	1,624		1,458
Homeowners and Other	1,724		1,496
Total Domestic	3,348		2,954
International	154		169
Total Personal Insurance	3,502		3,123
Total earned premiums	8,854		8,014
Net investment income	663		637
Fee income	106		103
Other revenues	75		78
Total segment revenues	9,698		8,832

Net realized investment gains (losses)	6		(23)
Total revenues	$	9,704	$	8,809
Income reconciliation, net of tax
Total segment income	$	1,046	$	1,111
Interest Expense and Other (1)	(76)		(74)
Core income	970		1,037
Net realized investment gains (losses)	5		(19)

Net income	$	975	$	1,018

(1)The primary component of Interest Expense and Other was after-tax interest expense of ~~$69~~$70 million and ~~$65~~$69 million for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

2. SEGMENT INFORMATION, Continued


(in millions)	(in millions)	March 31, 2022		December 31, 2021		(in millions)	March 31, 2023		December 31, 2022
Asset reconciliation	Asset reconciliation					Asset reconciliation
Business Insurance	Business Insurance	$	89,036	$	90,353	Business Insurance	$	88,468	$	86,522
Bond & Specialty Insurance	Bond & Specialty Insurance	10,171		10,146		Bond & Specialty Insurance	10,539		10,119
Personal Insurance	Personal Insurance	18,527		18,983		Personal Insurance	18,514		18,275
Total assets by reportable segment	Total assets by reportable segment	117,734		119,482		Total assets by reportable segment	117,521		114,916
Other assets (1)	Other assets (1)	858		984		Other assets (1)	831		801
Total consolidated assets	Total consolidated assets	$	118,592	$	120,466	Total consolidated assets	$	118,352	$	115,717

_________________________________________________________

(1)The primary components of other assets at both March 31, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~accrued~~the over-funded benefit plan assets related to the Company’s qualified domestic pension plan and other intangible assets.

3. INVESTMENTS

Fixed Maturities

The amortized cost and fair value of investments in fixed maturities classified as available for sale were as follows:


		Amortized Cost				Allowance for Expected Credit Losses				Gross Unrealized								Fair Value					Amortized Cost			Allowance for Expected Credit Losses		Gross Unrealized								Fair Value
(at March 31, 2022, in millions)								Gains				Losses
(at March 31, 2023, in millions)																				(at March 31, 2023, in millions)					Amortized Cost			Allowance for Expected Credit Losses				Gains				Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	U.S. Treasury securities and obligations of U.S. government and government agencies and authorities			$	3,356			$	—			$	7			$	190				$	3,173		U.S. Treasury securities and obligations of U.S. government and government agencies and authorities						$	18			$	283
Obligations of U.S. states, municipalities and political subdivisions:	Obligations of U.S. states, municipalities and political subdivisions:																			Obligations of U.S. states, municipalities and political subdivisions:
Local general obligation	Local general obligation	19,345				—				275				821				18,799		Local general obligation			18,866			—				74				1,430				17,510
Revenue	Revenue	11,585				—				172				396				11,361		Revenue			10,321			—		51				709				9,663
State general obligation	State general obligation	1,180				—				19				46				1,153		State general obligation			1,198			—		5				68				1,135
Pre-refunded	Pre-refunded	3,882				—				93				—				3,975		Pre-refunded			1,710			—		15				—				1,725
Total obligations of U.S. states, municipalities and political subdivisions	Total obligations of U.S. states, municipalities and political subdivisions	35,992				—				559				1,263				35,288		Total obligations of U.S. states, municipalities and political subdivisions			32,095			—		145				2,207				30,033
Debt securities issued by foreign governments	Debt securities issued by foreign governments	1,073				—				—				32				1,041		Debt securities issued by foreign governments			1,051			—		—				41				1,010
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,791				—				23				54				1,760		Mortgage-backed securities, collateralized mortgage obligations and pass-through securities			3,024			—		20				180				2,864
Corporate and all other bonds	Corporate and all other bonds	33,946				4				257				1,075				33,124		Corporate and all other bonds			35,040			4		71				2,452				32,655
Total	Total	$	76,158			$	4			$	846			$	2,614			$	74,386	Total			$	77,827		$	4	$	254			$	5,163			$	72,914

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

3. INVESTMENTS, Continued


		Amortized Cost				Allowance for Expected Credit Losses				Gross Unrealized								Fair Value					Amortized Cost			Allowance for Expected Credit Losses		Gross Unrealized								Fair Value
(at December 31, 2021, in millions)								Gains				Losses
(at December 31, 2022, in millions)																				(at December 31, 2022, in millions)					Amortized Cost			Allowance for Expected Credit Losses				Gains				Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	U.S. Treasury securities and obligations of U.S. government and government agencies and authorities			$	3,574			$	—			$	20			$	32				$	3,562		U.S. Treasury securities and obligations of U.S. government and government agencies and authorities						$	3			$	363
Obligations of U.S. states, municipalities and political subdivisions:	Obligations of U.S. states, municipalities and political subdivisions:																			Obligations of U.S. states, municipalities and political subdivisions:
Local general obligation	Local general obligation	18,668				—				1,045				46				19,667		Local general obligation			19,615			—				33				1,825				17,823
Revenue	Revenue	11,274				—				693				27				11,940		Revenue			11,076			—		29				907				10,198
State general obligation	State general obligation	1,158				—				67				2				1,223		State general obligation			1,104			—		3				88				1,019
Pre-refunded	Pre-refunded	3,825				—				207				—				4,032		Pre-refunded			2,323			—		17				1				2,339
Total obligations of U.S. states, municipalities and political subdivisions	Total obligations of U.S. states, municipalities and political subdivisions	34,925				—				2,012				75				36,862		Total obligations of U.S. states, municipalities and political subdivisions			34,118			—		82				2,821				31,379
Debt securities issued by foreign governments	Debt securities issued by foreign governments	1,041				—				7				7				1,041		Debt securities issued by foreign governments			1,049			—		—				55				994
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,754				—				68				5				1,817		Mortgage-backed securities, collateralized mortgage obligations and pass-through securities			2,178			—		13				200				1,991
Corporate and all other bonds	Corporate and all other bonds	33,457				3				1,249				175				34,528		Corporate and all other bonds			34,237			3		37				2,913				31,358
Total	Total	$	74,751			$	3			$	3,356			$	294			$	77,810	Total			$	77,380		$	3	$	135			$	6,352			$	71,160

Pre-refunded bonds of ~~$3.98~~$1.73 billion and ~~$4.03~~$2.34 billion at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, were bonds for which U.S. states or municipalities have established irrevocable trusts that are almost exclusively comprised of U.S. Treasury securities and obligations of U.S. government and government agencies and authorities. These trusts were created to fund the payment of principal and interest due under the bonds.

Proceeds from the sales of fixed maturities classified as available for sale were ~~$1.04~~$2.36 billion and ~~$1.24~~$1.04 billion during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Gross gains of $5$17 million and ~~$15~~$5 million and gross losses of $2$27 million and $1$2 million were realized on those sales during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

Equity Securities

The cost and fair value of investments in equity securities were as follows:


								Fair
(at March 31, 2022, in millions)		Cost		Gross Gains		Gross Losses		Value
(at March 31, 2023, in millions)										(at March 31, 2023, in millions)	Cost		Gross Gains		Gross Losses		Fair Value
Common stock	Common stock	$	705	$	118	$	7	$	816	Common stock	$	549	$	79	$	25	$	603
Non-redeemable preferred stock	Non-redeemable preferred stock	56		9		1		64		Non-redeemable preferred stock	43		3		—		46
Total	Total	$	761	$	127	$	8	$	880	Total	$	592	$	82	$	25	$	649

Fair
(at December 31, 2021, in millions) Cost Gross Gains Gross Losses Value
Common stock $ 694 $ 137 $ 4 $ 827
Non-redeemable preferred stock 55 11 — 66
Total $ 749 $ 148 $ 4 $ 893


(at December 31, 2022, in millions)	Cost		Gross Gains		Gross Losses		Fair Value
Common stock	$	706	$	89	$	32	$	763
Non-redeemable preferred stock	41		3		—		44
Total	$	747	$	92	$	32	$	807

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the Company recognized ~~$(14)~~$17 million and ~~$23~~$(14) million of net gains (losses) on equity securities still held as of March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

3. INVESTMENTS, Continued

Unrealized Investment Losses

The following tables summarize, for all fixed maturities classified as available for sale in an unrealized loss position at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the aggregate fair value and gross unrealized loss by the length of time those securities have been continuously in an unrealized loss position. The fair value amounts reported in the tables are estimates that are prepared using the process described in note 4 herein and in note 4 of the notes to the consolidated financial statements in the Company’s ~~2021~~2022 Annual Report. The Company also relies upon estimates of several factors in its review and evaluation of individual investments, using the process described in note 1 of the notes to the consolidated financial statements in the Company’s ~~2021~~2022 Annual Report to determine whether a credit loss impairment exists.

Less than 12 months 12 months or longer Total
(at March 31, 2022, in millions) Fair
Value Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities $ 2,344 $ 167 $ 228 $ 23 $ 2,572 $ 190
Obligations of U.S. states, municipalities and political subdivisions 10,923 1,100 1,177 163 12,100 1,263
Debt securities issued by foreign governments 633 21 145 11 778 32
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities 1,336 53 21 1 1,357 54
Corporate and all other bonds 15,170 836 1,964 239 17,134 1,075
Total $ 30,406 $ 2,177 $ 3,535 $ 437 $ 33,941 $ 2,614


	Less than 12 months				12 months or longer				Total
(at March 31, 2023, in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,056	$	29	$	1,969	$	254	$	4,025	$	283
Obligations of U.S. states, municipalities and political subdivisions	7,701		182		10,534		2,025		18,235		2,207
Debt securities issued by foreign governments	284		3		668		38		952		41
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	875		27		1,081		153		1,956		180
Corporate and all other bonds	14,709		441		15,098		2,011		29,807		2,452
Total	$	25,625	$	682	$	29,350	$	4,481	$	54,975	$	5,163

Less than 12 months 12 months or longer Total
(at December 31, 2021, in millions) Fair
Value Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities $ 2,438 $ 32 $ 5 $ — $ 2,443 $ 32
Obligations of U.S. states, municipalities and political subdivisions 3,873 69 153 6 4,026 75
Debt securities issued by foreign governments 452 7 7 — 459 7
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities 426 5 1 — 427 5
Corporate and all other bonds 7,306 153 436 22 7,742 175
Total $ 14,495 $ 266 $ 602 $ 28 $ 15,097 $ 294

At March 31, 2022, the amount of gross unrealized losses for all fixed maturity investments reported at fair value for which fair value was less than 80% of amortized cost was $142 million due to higher interest rates.


	Less than 12 months				12 months or longer				Total
(at December 31, 2022, in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	2,835	$	100	$	1,679	$	263	$	4,514	$	363
Obligations of U.S. states, municipalities and political subdivisions	19,251		1,975		3,134		846		22,385		2,821
Debt securities issued by foreign governments	604		22		367		33		971		55
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,414		128		316		72		1,730		200
Corporate and all other bonds	24,080		1,635		6,096		1,278		30,176		2,913
Total	$	48,184	$	3,860	$	11,592	$	2,492	$	59,776	$	6,352

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

3. INVESTMENTS, Continued

~~Credit~~ The following tables summarize, for all fixed maturities reported at fair value for which fair value was less than 80% of amortized cost at March 31, 2023 and December 31, 2022, the gross unrealized investment loss by length of time those securities have continuously been in an unrealized loss position of greater than 20% of amortized cost:


	Period For Which Fair Value is Less Than 80% of Amortized Cost
(at March 31, 2023, in millions)	3 months or less		Greater than 3 months, 6 months or less		Greater than 6 months, 12 months or less		Greater than 12 months		Total
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	—	$	—	$	—	$	—	$	—
Obligations of U.S. states, municipalities and political subdivisions	115		1		617		185		918
Debt securities issued by foreign governments	—		—		—		—		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	35		—		—		—		35
Corporate and all other bonds	103		1		84		—		188
Total	$	253	$	2	$	701	$	185	$	1,141


	Period For Which Fair Value is Less Than 80% of Amortized Cost
(at December 31, 2022, in millions)	3 months or less		Greater than 3 months, 6 months or less		Greater than 6 months, 12 months or less		Greater than 12 months		Total
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	—	$	—	$	—	$	—	$	—
Obligations of U.S. states, municipalities and political subdivisions	81		776		643		—		1,500
Debt securities issued by foreign governments	1		—		—		—		1
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	4		48		—		—		52
Corporate and all other bonds	89		526		8		—		623
Total	$	175	$	1,350	$	651	$	—	$	2,176

Recent increases in interest rates resulted in the gross unrealized investment losses disclosed in the table above; however, the net unrealized loss is considered temporary in nature as the decrease in value is not due to credit impairments and there is no impact on expected contractual cash flows from fixed maturities.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

3. INVESTMENTS, Continued

Impairment Charges

The following table presents changes in the allowance for expected credit losses on fixed maturities classified as available for sale for the category of Corporate and All Other Bonds (no other categories of fixed maturities currently have an allowance for expected credit losses):

Fixed Maturities
Corporate and All Other Bonds
(in millions) At and For the Three Months Ended March 31, 2022 At and For the Three Months Ended March 31, 2021
Balance, beginning of period $ 3 $ 2
Additions for expected credit losses on securities where no credit losses were previously recognized — —
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized 1 —
Reductions due to sales/defaults of credit-impaired securities — —
Reductions for impairments of securities which the Company intends to sell or more likely than not will be required to sell (1)
— —
Balance, end of period $ 4 $ 2

~~(1)Credit impairment charges recognized in net realized investment gains (losses) for both the three months ended March 31, 2022 and~~ ~~2021~~ ~~included no credit losses on fixed maturity securities which the Company intends to sell.~~


	Fixed Maturities
	Corporate and All Other Bonds
	At and For the Three Months Ended
(in millions)	March 31, 2023		March 31, 2022

Balance, beginning of period	$	3	$	3
Additions for expected credit losses on securities where no credit losses were previously recognized	—		—
Additions for expected credit losses on securities where credit losses were previously recognized	1		1
Reductions due to sales/defaults of credit-impaired securities	—		—
Reductions for impairments of securities which the Company intends to sell or more likely than not will be required to sell	—		—
Balance, end of period	$	4	$	4

Total net ~~credit~~ impairment charges, ~~included~~including credit impairments, reported in net realized investment gains (losses) in the consolidated statement of income, were $1 million ~~and $0 million~~ for both the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022. Credit losses related to the fixed maturity portfolio for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 represented less than 1% of the fixed maturity portfolio on a pre-tax basis and less than 1% of shareholders’ equity on an after-tax basis.

Other Investments

Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income from these other investments is generally reflected in the ~~Company's~~Company’s financial statements on a quarter lag basis.

4. FAIR VALUE MEASUREMENTS

The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in the fair value accounting guidance. The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the fair value accounting guidance hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. The level in the fair value hierarchy within which the fair value measurement is reported is based on the lowest level input that is significant to the measurement in its entirety. The three levels of the hierarchy are as follows:

•Level 1 - Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.

•Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued~~

~~4. FAIR VALUE MEASUREMENTS, Continued~~

•Level 3 - Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company’s own assumptions about the inputs that market participants would use.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

4. FAIR VALUE MEASUREMENTS, Continued

Valuation of Investments Reported at Fair Value in Financial Statements

The Company utilized a pricing service to estimate fair value measurements for approximately 99% of its fixed maturities at both March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

While the vast majority of the Company’s fixed maturities are included in Level 2, the Company holds a number of ~~municipal bonds and~~ corporate bonds which are not valued by the pricing service and estimates the fair value of these bonds using either another internal pricing matrix, a present value income approach, or a broker quote (collectively, the other methodologies). The other methodologies include some unobservable inputs that are significant to the valuation. Due to the limited amount of observable market information available in the estimation of fair value, the Company includes the fair value estimates for bonds that are valued using the other methodologies in Level 3.

For certain investments in non-public common and preferred equity securities, the fair value estimate is determined either internally or by an external fund manager based on the impact of recent observable transactions on the ~~investment’s equity,~~investment, recent filings, operating results, balance sheet stability, growth and other business and market sector fundamentals. Due to the significant unobservable inputs in these valuations, the Company included the fair value estimate of ~~$345~~$193 million and ~~$343~~$371 million for these investments at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, in the amounts disclosed in Level 3.

For more information regarding the valuation of the Company’s fixed maturities, equity securities and other investments, see note 4 of the notes to the consolidated financial statements in the Company’s ~~2021~~2022 Annual Report.

~~Other Liabilities~~

The Company has a put/call option that was entered into in connection with a business acquisition that allows the Company to acquire the remaining shares of the acquired company at a future date. The fair value of the put/call option at both March 31, 2022 and December 31, 2021 was $3 million, and was determined using an internal model and is based on the acquired company's financial performance, adjusted for a risk margin and discounted to present value. The Company includes the fair value estimate of the put/call option in Level 3.

Fair Value Hierarchy

The following tables present the level within the fair value hierarchy at which the Company’s financial assets and financial liabilities are measured on a recurring basis.

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued~~

~~4. FAIR VALUE MEASUREMENTS, Continued~~

(at March 31, 2022, in millions) Total Level 1 Level 2 Level 3
Invested assets:
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities $ 3,173 $ 3,173 $ — $ —
Obligations of U.S. states, municipalities and political subdivisions 35,288 — 35,284 4
Debt securities issued by foreign governments 1,041 — 1,041 —
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities 1,760 — 1,712 48
Corporate and all other bonds 33,124 3 32,897 224
Total fixed maturities 74,386 3,176 70,934 276
Equity securities
Common stock 816 497 — 319
Non-redeemable preferred stock 64 18 20 26
Total equity securities 880 515 20 345
Other investments 19 17 — 2
Total $ 75,285 $ 3,708 $ 70,954 $ 623
Other liabilities $ 3 $ — $ — $ 3

(at December 31, 2021, in millions) Total Level 1 Level 2 Level 3
Invested assets:
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities $ 3,562 $ 3,562 $ — $ —
Obligations of U.S. states, municipalities and political subdivisions 36,862 — 36,858 4
Debt securities issued by foreign governments 1,041 — 1,041 —
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities 1,817 — 1,762 55
Corporate and all other bonds 34,528 — 34,339 189
Total fixed maturities 77,810 3,562 74,000 248
Equity securities
Common stock 827 509 — 318
Non-redeemable preferred stock 66 21 20 25
Total equity securities 893 530 20 343
Other investments 23 18 — 5
Total $ 78,726 $ 4,110 $ 74,020 $ 596
Other liabilities $ 3 $ — $ — $ 3

~~There was no significant activity in Level 3 of the hierarchy during the three months ended March 31, 2022.~~


(at March 31, 2023, in millions)	Total		Level 1		Level 2		Level 3

Invested assets:
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	6,352	$	6,352	$	—	$	—
Obligations of U.S. states, municipalities and political subdivisions	30,033		—		30,033		—
Debt securities issued by foreign governments	1,010		—		1,010		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	2,864		—		2,864		—
Corporate and all other bonds	32,655		9		32,371		275
Total fixed maturities	72,914		6,361		66,278		275
Equity securities
Common stock	603		438		—		165
Non-redeemable preferred stock	46		15		3		28
Total equity securities	649		453		3		193
Other investments	16		15		—		1
Total	$	73,579	$	6,829	$	66,281	$	469

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

4. FAIR VALUE MEASUREMENTS, Continued


(at December 31, 2022, in millions)	Total		Level 1		Level 2		Level 3

Invested assets:
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	5,438	$	5,438	$	—	$	—
Obligations of U.S. states, municipalities and political subdivisions	31,379		—		31,379		—
Debt securities issued by foreign governments	994		—		994		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,991		—		1,991		—
Corporate and all other bonds	31,358		—		31,055		303
Total fixed maturities	71,160		5,438		65,419		303
Equity securities
Common stock	763		418		—		345
Non-redeemable preferred stock	44		15		3		26
Total equity securities	807		433		3		371
Other investments	16		15		—		1
Total	$	71,983	$	5,886	$	65,422	$	675

Other liabilities	$	2	$	—	$	—	$	2

There was no significant activity in Level 3 of the hierarchy during the three months ended March 31, 2023.

Financial Instruments Disclosed, But Not Carried, At Fair Value

The following tables present the carrying value and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value, and the level within the fair value hierarchy at which such assets and liabilities are categorized.
(at March 31, 2022, in millions) Carrying
Value Fair
Value Level 1 Level 2 Level 3
Financial assets
Short-term securities $ 3,467 $ 3,467 $ 376 $ 3,030 $ 61
Financial liabilities
Debt $ 7,191 $ 7,920 $ — $ 7,920 $ —
Commercial paper 100 100 — 100 —


(at March 31, 2023, in millions)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets
Short-term securities	$	3,243	$	3,243	$	409	$	2,782	$	52
Financial liabilities
Debt	$	7,192	$	6,787	$	—	$	6,787	$	—
Commercial paper	100		100		—		100		—


(at December 31, 2021, in millions)		Carrying Value		Fair Value		Level 1		Level 2		Level 3
(at December 31, 2022, in millions)												(at December 31, 2022, in millions)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets	Financial assets											Financial assets
Short-term securities	Short-term securities	$	3,836	$	3,836	$	1,163	$	2,615	$	58	Short-term securities	$	3,470	$	3,470	$	871	$	2,546	$	53
Financial liabilities	Financial liabilities											Financial liabilities
Debt	Debt	$	7,190	$	9,085	$	—	$	9,085	$	—	Debt	$	7,192	$	6,509	$	—	$	6,509	$	—
Commercial paper	Commercial paper	100		100		—		100		—		Commercial paper	100		100		—		100		—

The Company had no material assets or liabilities that were measured at fair value on a non-recurring basis during the three months ended March 31, ~~2022~~2023 or the year ended December 31, ~~2021.~~2022.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

5. ALLOWANCE FOR EXPECTED CREDIT LOSSES

Premiums Receivable

The following table presents the balances of premiums receivable, net of the allowance for expected credit losses, at March 31, ~~2022~~2023 and ~~2021,~~2022, and the changes in the allowance for expected credit losses for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.


		At and For the Three Months Ended March 31, 2022				At and For the Three Months Ended March 31, 2021				At and For the Three Months Ended March 31, 2023				At and For the Three Months Ended March 31, 2022
(in millions)	(in millions)	Premiums Receivable, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses		Premiums Receivable, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses			(in millions)	Premiums Receivable, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses		Premiums Receivable, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses

Balance, beginning of period	Balance, beginning of period	$	8,085	$	107	$	7,829	$	105		Balance, beginning of period	$	8,922	$	77	$	8,085	$	107

Current period change for expected credit losses	Current period change for expected credit losses			18				16			Current period change for expected credit losses			10				18
Write-offs of uncollectible premiums receivable	Write-offs of uncollectible premiums receivable			36				11			Write-offs of uncollectible premiums receivable			10				36

Balance, end of period	Balance, end of period	$	8,593	$	89	$	8,167	$	110		Balance, end of period	$	9,483	$	77	$	8,593	$	89

Reinsurance Recoverables

The following table presents the balances of reinsurance recoverables, net of the allowance for estimated uncollectible reinsurance, at March 31, ~~2022~~2023 and ~~2021,~~2022, and the changes in the allowance for estimated uncollectible reinsurance for the three

months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued~~

~~5. ALLOWANCE FOR EXPECTED CREDIT LOSSES, Continued~~


		At and For the Three Months Ended March 31, 2022				At and For the Three Months Ended March 31, 2021				At and For the Three Months Ended March 31, 2023				At and For the Three Months Ended March 31, 2022
(in millions)	(in millions)	Reinsurance Recoverables, Net of Allowance for Estimated Uncollectible Reinsurance		Allowance for Estimated Uncollectible Reinsurance		Reinsurance Recoverables, Net of Allowance for Estimated Uncollectible Reinsurance		Allowance for Estimated Uncollectible Reinsurance			(in millions)	Reinsurance Recoverables, Net of Allowance for Estimated Uncollectible Reinsurance		Allowance for Estimated Uncollectible Reinsurance		Reinsurance Recoverables, Net of Allowance for Estimated Uncollectible Reinsurance		Allowance for Estimated Uncollectible Reinsurance

Balance, beginning of period	Balance, beginning of period	$	8,452	$	141	$	8,350	$	146		Balance, beginning of period	$	8,063	$	132	$	8,452	$	141

Current period change for estimated uncollectible reinsurance	Current period change for estimated uncollectible reinsurance			(6)				(4)			Current period change for estimated uncollectible reinsurance			(1)				(6)
Write-offs of uncollectible reinsurance recoverables	Write-offs of uncollectible reinsurance recoverables			—				—			Write-offs of uncollectible reinsurance recoverables			—				—
Balance, end of period	Balance, end of period	$	8,734	$	135	$	8,345	$	142		Balance, end of period	$	8,091	$	131	$	8,734	$	135

Of the total reinsurance recoverables at March 31, ~~2022,~~2023, $5.69 billion, or 87%, were rated by A.M. Best Company, after deducting mandatory pools and associations and before allowances for estimated uncollectible ~~reinsurance, $5.94 billion, or 84%, were rated by A.M. Best Company.~~reinsurance. 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 ~~16%~~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 9%6% were balances from other companies not rated by A.M. Best Company. Certain of the ~~Company's~~Company’s reinsurance recoverables are collateralized by letters of credit, funds held or trust agreements.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

5. ALLOWANCE FOR EXPECTED CREDIT LOSSES, Continued

Contractholder Receivables

The following table presents the balances of contractholder receivables, net of the allowance for expected credit losses, at March 31, ~~2022~~2023 and ~~2021,~~2022, and the changes in the allowance for expected credit losses for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.


		At and For the Three Months Ended March 31, 2022				At and For the Three Months Ended March 31, 2021				At and For the Three Months Ended March 31, 2023				At and For the Three Months Ended March 31, 2022
(in millions)	(in millions)	Contractholder Receivables, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses		Contractholder Receivables, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses			(in millions)	Contractholder Receivables, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses		Contractholder Receivables, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses

Balance, beginning of period	Balance, beginning of period	$	3,890	$	21	$	4,242	$	19		Balance, beginning of period	$	3,579	$	17	$	3,890	$	21

Current period change for expected credit losses	Current period change for expected credit losses			(2)				—			Current period change for expected credit losses			2				(2)
Write-offs of uncollectible contractholder receivables	Write-offs of uncollectible contractholder receivables			—				—			Write-offs of uncollectible contractholder receivables			—				—

Balance, end of period	Balance, end of period	$	3,901	$	19	$	4,271	$	19		Balance, end of period	$	3,598	$	19	$	3,901	$	19

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued~~

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The following table presents the carrying amount of the Company’s goodwill by segment. Each reportable segment includes goodwill associated with the Company’s international business which is subject to the impact of changes in foreign currency exchange rates.


(in millions)	(in millions)	March 31, 2022		December 31, 2021		(in millions)	March 31, 2023		December 31, 2022
Business Insurance	Business Insurance	$	2,600	$	2,610	Business Insurance	$	2,572	$	2,565
Bond & Specialty Insurance	Bond & Specialty Insurance	550		550		Bond & Specialty Insurance	550		550
Personal Insurance	Personal Insurance	825		822		Personal Insurance	811		811
Other	Other	26		26		Other	26		26
Total	Total	$	4,001	$	4,008	Total	$	3,959	$	3,952

Other Intangible Assets

The following tables present a summary of the Company’s other intangible assets by major asset class.


(at March 31, 2022, in millions)		Gross Carrying Amount		Accumulated Amortization		Net
(at March 31, 2023, in millions)								(at March 31, 2023, in millions)	Gross Carrying Amount		Accumulated Amortization		Net
Subject to amortization	Subject to amortization							Subject to amortization
Customer-related	Customer-related	$	102	$	43	$	59	Customer-related	$	97	$	50	$	47
Contract-based (1)	Contract-based (1)	205		189		16		Contract-based (1)	204		192		12
Total subject to amortization	Total subject to amortization	307		232		75		Total subject to amortization	301		242		59
Not subject to amortization	Not subject to amortization	226		—		226		Not subject to amortization	226		—		226
Total	Total	$	533	$	232	$	301	Total	$	527	$	242	$	285

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

6. GOODWILL AND OTHER INTANGIBLE ASSETS, Continued


(at December 31, 2021, in millions)		Gross Carrying Amount		Accumulated Amortization		Net
(at December 31, 2022, in millions)								(at December 31, 2022, in millions)	Gross Carrying Amount		Accumulated Amortization		Net
Subject to amortization	Subject to amortization							Subject to amortization
Customer-related	Customer-related	$	104	$	41	$	63	Customer-related	$	96	$	48	$	48
Contract-based (1)	Contract-based (1)	205		188		17		Contract-based (1)	204		191		13
Total subject to amortization	Total subject to amortization	309		229		80		Total subject to amortization	300		239		61
Not subject to amortization	Not subject to amortization	226		—		226		Not subject to amortization	226		—		226
Total	Total	$	535	$	229	$	306	Total	$	526	$	239	$	287

_________________________________________________________

(1)Contract-based intangible assets subject to amortization are comprised of fair value adjustments on claims and claim adjustment expense reserves, reinsurance recoverables and other contract-related intangible assets. Fair value adjustments recorded in connection with insurance acquisitions were based on management’s estimate of nominal claims and claim adjustment expense reserves and reinsurance recoverables. The method used calculated a risk adjustment to a risk-free discounted reserve that would, if reserves ran off as expected, produce results that yielded the assumed cost-of-capital on the capital supporting the loss reserves. The fair value adjustments are reported as other intangible assets on the consolidated balance sheet, and the amounts measured in accordance with the acquirer’s accounting policies for insurance contracts have been reported as part of the claims and claim adjustment expense reserves and reinsurance recoverables. The intangible assets are being recognized into income over the expected payment pattern. Because the time value of money and the risk adjustment (cost of capital) components of the intangible assets run off at different rates, the amount recognized in income may be a net benefit in some periods and a net expense in other periods.

Amortization expense of intangible assets was $3 million and $4 million for the three months ended March 31, 2022 and 2021, respectively. Amortization expense for all intangible assets subject to amortization is estimated to be $10 million for the remainder of 2022, $13 million in 2023, $12 million in 2024, $12 million in 2025 and $11 million in 2026. Amortization

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued~~

~~6. GOODWILL AND OTHER INTANGIBLE ASSETS, Continued~~

expense for intangible assets arising from insurance contracts acquired in a business combination is estimated to be $2 million for the remainder of 2022, $3 million in 2023, $2 million in 2024, $2 million in 2025 and $1 million in 2026.

7. INSURANCE CLAIM RESERVES

Claims and claim adjustment expense reserves were as follows:


(in millions)	(in millions)	March 31, 2022		December 31, 2021		(in millions)	March 31, 2023		December 31, 2022
Property-casualty	Property-casualty	$	57,563	$	56,897	Property-casualty	$	59,058	$	58,643
Accident and health	Accident and health	9		10		Accident and health	6		6
Total	Total	$	57,572	$	56,907	Total	$	59,064	$	58,649

~~The following table presents a reconciliation of beginning and ending property casualty reserve balances for claims and claim adjustment expenses:~~
Three Months Ended March 31,
(in millions) 2022 2021
Claims and claim adjustment expense reserves at beginning of year $ 56,897 $ 54,510
Less reinsurance recoverables on unpaid losses 8,209 8,153
Net reserves at beginning of year 48,688 46,357
Estimated claims and claim adjustment expenses for claims arising in the current year 5,133 5,242
Estimated decrease in claims and claim adjustment expenses for
claims arising in prior years
(114) (294)
Total increases 5,019 4,948
Claims and claim adjustment expense payments for claims arising in:
Current year 1,074 1,059
Prior years 3,498 3,012
Total payments 4,572 4,071
Unrealized foreign exchange (gain) loss (13) 28
Net reserves at end of period 49,122 47,262
Plus reinsurance recoverables on unpaid losses 8,441 8,068
Claims and claim adjustment expense reserves at end of period $ 57,563 $ 55,330

Gross claims and claim adjustment expense reserves at March 31, 2022 increased by $666 million from December 31, 2021, primarily reflecting the impacts of (i) higher volumes of insured exposures, (ii) loss cost trends for the current accident year, (iii) fully reinsured property losses associated with fronting arrangements and (iv) reduced claim settlement activity largely due to continued disruptions in the judicial system related to COVID-19.

Reinsurance recoverables on unpaid losses at March 31, 2022 increased by $232 million from December 31, 2021, primarily reflecting the impact of fully reinsured property losses associated with fronting arrangements, partially offset by cash collections in the first three months of 2022.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

7. INSURANCE CLAIM RESERVES, Continued

The following table presents a reconciliation of beginning and ending property casualty reserve balances for claims and claim adjustment expenses:


	Three Months Ended March 31,
(in millions)	2023		2022
Claims and claim adjustment expense reserves at beginning of year	$	58,643	$	56,897
Less reinsurance recoverables on unpaid losses	7,790		8,209

Net reserves at beginning of year	50,853		48,688

Estimated claims and claim adjustment expenses for claims arising in the current year	6,025		5,133
Estimated decrease in claims and claim adjustment expenses for claims arising in prior years	(90)		(114)
Total increases	5,935		5,019

Claims and claim adjustment expense payments for claims arising in:
Current year	1,177		1,074
Prior years	4,382		3,498
Total payments	5,559		4,572
Unrealized foreign exchange (gain) loss	28		(13)
Net reserves at end of period	51,257		49,122
Plus reinsurance recoverables on unpaid losses	7,801		8,441
Claims and claim adjustment expense reserves at end of period	$	59,058	$	57,563

Gross claims and claim adjustment expense reserves at March 31, 2023 increased by $415 million from December 31, 2022, primarily reflecting the impacts of (i) higher volumes of insured exposures, (ii) loss cost trends for the current accident year and (iii) catastrophe losses in the first three months of 2023, partially offset by (iv) claim payments made during the first three months of 2023 and (v) net favorable prior year reserve development.

Reinsurance recoverables on unpaid losses at March 31, 2023 increased by $11 million from December 31, 2022.

Prior Year Reserve Development

The following disclosures regarding reserve development are on a “net of reinsurance” basis.

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, estimated claims and claim adjustment expenses incurred included ~~$114~~$90 million and ~~$294~~$114 million, respectively, of net favorable development for claims arising in prior years, including ~~$153~~$105 million and ~~$317~~$153 million, respectively, of net favorable prior year reserve development, and $11 million and $12 million, respectively, of accretion of discount ~~in each period~~ that impacted the ~~Company's~~Company’s results of operations.

Business Insurance. Net favorable prior year reserve development in the first ~~quarters~~quarter of ~~2022 and 2021~~2023 totaled ~~$113~~$19 million, ~~and $134 million, respectively,~~ primarily driven by better than expected loss experience in the domestic ~~operations' workers'~~operations’ workers’ compensation product line for multiple accident years, partially offset by higher than expected loss experience in the general liability product line for excess coverages for multiple accident years. Net favorable prior year reserve development in the first quarter of 2022 totaled $113 million, primarily driven by better than expected loss experience in the domestic operations’ workers’ compensation product line for multiple accident years. The first quarters of ~~2022~~2023 and ~~2021~~2022 also included an increase to environmental reserves. ~~Included in net~~

Bond & Specialty Insurance. Net favorable prior year reserve development in the first quarter of ~~2021 was a subrogation benefit of $10~~2023 totaled $58 million, ~~from Southern California Edison Company related to~~primarily driven by better than expected loss experience in the ~~2018 Woolsey wildfire~~domestic operations’ fidelity and surety product lines and in ~~California.~~

~~Bond & Specialty Insurance.~~ the general liability product line for management liability coverages for recent accident years. Net favorable prior year reserve development in the first quarter of 2022 totaled $35 million, primarily driven by better than expected loss experience in the domestic ~~operations'~~operations’ fidelity and surety product lines for recent accident years, partially offset by higher than expected loss experience in the domestic operations' general liability product line for management liability coverages for multiple accident years. Net favorable prior year reserve development in the first quarter of 2021 totaled $15 million, primarily driven by better than expected loss experience in the domestic fidelity and surety product lines for multiple accident years, partially offset by higher than expected loss experience in the domesticoperations’ general liability product line for management liability coverages for multiple accident years.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

7. INSURANCE CLAIM RESERVES, Continued

Personal Insurance. Net favorable prior year reserve development in the first quarter of ~~2022~~2023 totaled ~~$5 million.~~$28 million, primarily driven by better than expected loss experience in the domestic operations’ homeowners and other product line for recent accident years. Net favorable prior year reserve development in the first quarter of ~~2021~~2022 totaled $168 million, primarily driven by better than expected loss experience in domestic operations in both the homeowners and other and automobile product lines for recent accident years. Included in net favorable prior year reserve development in the first quarter of 2021 was a subrogation benefit of $62 million from Southern California Edison Company related to the 2018 Woolsey wildfire in California.

$5 million.

8. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the changes in the Company’s accumulated other comprehensive income (loss) (AOCI) for the three months ended March 31, ~~2022.~~2023.

Changes in Net Unrealized Gains (Losses) on Investment Securities
(in millions) Having No Credit
Losses Recognized in
the Consolidated
Statement of Income Having Credit
Losses Recognized
in the Consolidated
Statement of
Income Net Benefit Plan Assets and
Obligations
Recognized in
Shareholders’
Equity Net Unrealized
Foreign Currency
Translation Total Accumulated
Other
Comprehensive
Income (Loss)
Balance, December 31, 2021 $ 2,233 $ 182 $ (473) $ (749) $ 1,193
Other comprehensive income (loss) (OCI) before reclassifications, net of tax (3,804) (1) 1 2 (3,802)
Amounts reclassified from AOCI, net of tax (1) — 8 — 7
Net OCI, current period (3,805) (1) 9 2 (3,795)
Balance, March 31, 2022 $ (1,572) $ 181 $ (464) $ (747) $ (2,602)


	Changes in Net Unrealized Gains (Losses) on Investment Securities
(in millions)	Having No Credit Losses Recognized in the Consolidated Statement of Income		Having Credit Losses Recognized in the Consolidated Statement of Income		Net Benefit Plan Assets and Obligations Recognized in Shareholders’ Equity		Net Unrealized Foreign Currency Translation		Total Accumulated Other Comprehensive Income (Loss)

Balance, December 31, 2022	$	(5,077)	$	179	$	(542)	$	(1,005)	$	(6,445)

Other comprehensive income (loss) (OCI) before reclassifications, net of tax	1,021				1		31		1,053
Amounts reclassified from AOCI, net of tax	9		—		(3)		—		6
Net OCI, current period	1,030		—		(2)		31		1,059
Balance, March 31, 2023	$	(4,047)	$	179	$	(544)	$	(974)	$	(5,386)

2122

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

8. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), Continued

The following table presents the pre-tax components of the Company’s other comprehensive income (loss) and the related income tax expense (benefit).


		Three Months Ended March 31,				Three Months Ended March 31,
(in millions)	(in millions)	2022		2021			(in millions)	2023		2022

Changes in net unrealized gains (losses) on investment securities:	Changes in net unrealized gains (losses) on investment securities:						Changes in net unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income	Having no credit losses recognized in the consolidated statement of income	$	(4,829)	$	(1,596)		Having no credit losses recognized in the consolidated statement of income	$	1,308	$	(4,829)
Income tax benefit		(1,024)		(339)
Income tax expense (benefit)							Income tax expense (benefit)	278		(1,024)
Net of taxes	Net of taxes	(3,805)		(1,257)			Net of taxes	1,030		(3,805)

Having credit losses recognized in the consolidated statement of income	Having credit losses recognized in the consolidated statement of income	(1)		—			Having credit losses recognized in the consolidated statement of income	—		(1)
Income tax benefit	Income tax benefit	—		—			Income tax benefit	—		—
Net of taxes	Net of taxes	(1)		—			Net of taxes	—		(1)

Net changes in benefit plan assets and obligations	Net changes in benefit plan assets and obligations	11		25			Net changes in benefit plan assets and obligations	(3)		11
Income tax expense		2		5
Income tax expense (benefit)							Income tax expense (benefit)	(1)		2
Net of taxes	Net of taxes	9		20			Net of taxes	(2)		9

Net changes in unrealized foreign currency translation	Net changes in unrealized foreign currency translation	2		26			Net changes in unrealized foreign currency translation	37		2
Income tax expense	Income tax expense	—		—			Income tax expense	6		—
Net of taxes	Net of taxes	2		26			Net of taxes	31		2

Total other comprehensive loss		(4,817)		(1,545)
Total income tax benefit		(1,022)		(334)
Total other comprehensive loss, net of taxes		$	(3,795)	$	(1,211)
Total other comprehensive income (loss)							Total other comprehensive income (loss)	1,342		(4,817)
Total income tax expense (benefit)							Total income tax expense (benefit)	283		(1,022)
Total other comprehensive income (loss), net of taxes							Total other comprehensive income (loss), net of taxes	$	1,059	$	(3,795)

2223

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

8. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), Continued

The following table presents the pre-tax and related income tax (expense) benefit components of the amounts reclassified from the Company’s AOCI to the Company’s consolidated statement of income.


		Three Months Ended March 31,				Three Months Ended March 31,
(in millions)	(in millions)	2022		2021			(in millions)	2023		2022

Reclassification adjustments related to unrealized gains (losses) on investment securities:	Reclassification adjustments related to unrealized gains (losses) on investment securities:						Reclassification adjustments related to unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income (1)	Having no credit losses recognized in the consolidated statement of income (1)	$	(2)	$	(14)		Having no credit losses recognized in the consolidated statement of income (1)	$	11	$	(2)
Income tax expense (2)		(1)		(3)
Income tax (expense) benefit (2)							Income tax (expense) benefit (2)	2		(1)
Net of taxes	Net of taxes	(1)		(11)			Net of taxes	9		(1)

Having credit losses recognized in the consolidated statement of income (1)	Having credit losses recognized in the consolidated statement of income (1)	—		—			Having credit losses recognized in the consolidated statement of income (1)	—		—
Income tax benefit (2)	Income tax benefit (2)	—		—			Income tax benefit (2)	—		—
Net of taxes	Net of taxes	—		—			Net of taxes	—		—

Reclassification adjustment related to benefit plan assets and obligations:	Reclassification adjustment related to benefit plan assets and obligations:						Reclassification adjustment related to benefit plan assets and obligations:
Claims and claim adjustment expenses (3)		4		10
General and administrative expenses (3)		6		15
Claims and claim adjustment expenses (benefit) (3)							Claims and claim adjustment expenses (benefit) (3)	(1)		4
General and administrative expenses (benefit) (3)							General and administrative expenses (benefit) (3)	(2)		6
Total	Total	10		25			Total	(3)		10
Income tax benefit (2)	Income tax benefit (2)	2		5			Income tax benefit (2)	—		2
Net of taxes	Net of taxes	8		20			Net of taxes	(3)		8

Reclassification adjustment related to foreign currency translation (1)	Reclassification adjustment related to foreign currency translation (1)	—		—			Reclassification adjustment related to foreign currency translation (1)	—		—
Income tax benefit (2)	Income tax benefit (2)	—		—			Income tax benefit (2)	—		—
Net of taxes	Net of taxes	—		—			Net of taxes	—		—

Total reclassifications	Total reclassifications	8		11			Total reclassifications	8		8
Total income tax benefit	Total income tax benefit	1		2			Total income tax benefit	2		1
Total reclassifications, net of taxes	Total reclassifications, net of taxes	$	7	$	9		Total reclassifications, net of taxes	$	6	$	7

~~_________________________________________________________~~

(1)(Increases) decreases net realized investment gains (losses) on the consolidated statement of income.

(2)(Increases) decreases income tax expense (benefit) on the consolidated statement of income.

(3)Increases (decreases) expenses on the consolidated statement of income.

9. COMMON SHARE REPURCHASES

During the three months ended March 31, ~~2022,~~2023, the Company repurchased ~~2.9~~2.2 million common shares under its share repurchase authorizations for total cost of ~~$500~~$400 million. The average cost per share repurchased was ~~$172.10.~~$183.26. In addition, the Company acquired ~~0.4~~0.3 million common shares for a total cost of ~~$59~~$62 million during the three months ended March 31, ~~2022~~2023 that were not part of its publicly announced share repurchase authorizations. These shares consisted of shares retained to cover payroll withholding taxes in connection with the vesting of restricted stock unit awards and performance share awards, and shares used by employees to cover the price of certain stock options that were exercised. ~~At March 31, 2022,~~Included in the ~~Company had $3.51~~cost of treasury stock acquired pursuant to common share repurchases is the 1% excise tax imposed as part of the Inflation Reduction Act. On April 19, 2023, the Board of Directors approved a share repurchase authorization that added an additional $5.0 billion of repurchase capacity to the $1.60 billion of capacity remaining ~~under its share repurchase authorizations.~~at March 31, 2023.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

10. EARNINGS PER SHARE

The following is a reconciliation of the income and share data used in the basic and diluted earnings per share computations for the periods presented:

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued~~

~~10. EARNINGS PER SHARE, Continued~~


		Three Months Ended March 31,				Three Months Ended March 31,
(in millions, except per share amounts)	(in millions, except per share amounts)	2022		2021			(in millions, except per share amounts)	2023		2022

Basic and Diluted	Basic and Diluted						Basic and Diluted
Net income, as reported	Net income, as reported	$	1,018	$	733		Net income, as reported	$	975	$	1,018
Participating share-based awards — allocated income	Participating share-based awards — allocated income	(7)		(5)			Participating share-based awards — allocated income	(7)		(7)
Net income available to common shareholders — basic and diluted	Net income available to common shareholders — basic and diluted	$	1,011	$	728		Net income available to common shareholders — basic and diluted	$	968	$	1,011

Common Shares	Common Shares						Common Shares
Basic	Basic						Basic
Weighted average shares outstanding	Weighted average shares outstanding	240.9		252.1			Weighted average shares outstanding	231.7		240.9

Diluted	Diluted						Diluted
Weighted average shares outstanding	Weighted average shares outstanding	240.9		252.1			Weighted average shares outstanding	231.7		240.9
Weighted average effects of dilutive securities — stock options and performance shares	Weighted average effects of dilutive securities — stock options and performance shares	2.8		2.0			Weighted average effects of dilutive securities — stock options and performance shares	2.7		2.8
Total	Total	243.7		254.1			Total	234.4		243.7

Net Income per Common Share	Net Income per Common Share						Net Income per Common Share
Basic	Basic	$	4.20	$	2.89		Basic	$	4.18	$	4.20
Diluted	Diluted	$	4.15	$	2.87		Diluted	$	4.13	$	4.15

11. SHARE-BASED INCENTIVE COMPENSATION

The following information relates to fully vested stock option awards at March 31, ~~2022:~~2023:


Stock Options	Stock Options	Number	Weighted Average Exercise Price		Weighted Average Contractual Life Remaining	Aggregate Intrinsic Value ($ in millions)		Stock Options	Number	Weighted Average Exercise Price		Weighted Average Contractual Life Remaining	Aggregate Intrinsic Value ($ in millions)
Vested at end of period (1)	Vested at end of period (1)	7,437,915	$	130.41	6.5 years	$	389	Vested at end of period (1)	7,603,711	$	137.41	6.2 years	$	269
Exercisable at end of period	Exercisable at end of period	4,607,372	$	122.31	5.2 years	$	278	Exercisable at end of period	5,519,783	$	127.94	5.3 years	$	240

(1)Represents awards for which the requisite service has been rendered, including those that are retirement eligible.

The total compensation cost for all share-based incentive compensation awards recognized in earnings was ~~$59~~$69 million and ~~$53~~$59 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The related tax benefits recognized in earnings were ~~$10~~$11 million and $9$10 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

The total unrecognized compensation cost related to all nonvested share-based incentive compensation awards at March 31, ~~2022~~2023 was ~~$278~~$324 million, which is expected to be recognized over a weighted-average period of 2.2 years.

2425

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

12. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS

The following table summarizes the components of net periodic benefit cost (benefit) for the Company’s pension and postretirement benefit plans recognized in the consolidated statement of income for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.


		Pension Plans				Postretirement Benefit Plans					Pension Plans				Postretirement Benefit Plans
(for the three months ended March 31, in millions)	(for the three months ended March 31, in millions)	2022		2021		2022		2021		(for the three months ended March 31, in millions)	2023		2022		2023		2022

Net Periodic Benefit Cost (Benefit):	Net Periodic Benefit Cost (Benefit):									Net Periodic Benefit Cost (Benefit):
Service cost	Service cost	$	36	$	35	$	—	$	—	Service cost	$	27	$	36	$	—	$	—

Non-service cost (benefit):	Non-service cost (benefit):									Non-service cost (benefit):
Interest cost on benefit obligation	Interest cost on benefit obligation	$	25	$	21	$	1	$	1	Interest cost on benefit obligation	$	44	$	25	$	1	$	1
Expected return on plan assets	Expected return on plan assets	(74)		(69)		—		—		Expected return on plan assets	(78)		(74)		—		—

Amortization of unrecognized:	Amortization of unrecognized:									Amortization of unrecognized:
Prior service benefit	Prior service benefit	—		—		(1)		(1)		Prior service benefit	—		—		(1)		(1)
Net actuarial (gain) loss	Net actuarial (gain) loss	12		27		(1)		(1)		Net actuarial (gain) loss	—		12		(2)		(1)
Total non-service cost (benefit)	Total non-service cost (benefit)	(37)		(21)		(1)		(1)		Total non-service cost (benefit)	(34)		(37)		(2)		(1)
Net periodic benefit cost (benefit)	Net periodic benefit cost (benefit)	$	(1)	$	14	$	(1)	$	(1)	Net periodic benefit cost (benefit)	$	(7)	$	(1)	$	(2)	$	(1)

The following table indicates the line items in which the respective service cost and non-service cost (benefit) are presented in the consolidated statement of income for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

Pension Plans Postretirement Benefit Plans
(for the three months ended March 31, in millions) 2022 2021 2022 2021
Service Cost:
Claims and claim adjustment expenses $ 15 $ 14 $ — $ —
General and administrative expenses 21 21 — —
Total service cost 36 35 — —
Non-Service Cost (Benefit):
Claims and claim adjustment expenses (15) (9) — —
General and administrative expenses (22) (12) (1) (1)
Total non-service cost (benefit) (37) (21) (1) (1)
Net periodic benefit cost (benefit) $ (1) $ 14 $ (1) $ (1)


	Pension Plans				Postretirement Benefit Plans
(for the three months ended March 31, in millions)	2023		2022		2023		2022
Service Cost:
Claims and claim adjustment expenses	$	11	$	15	$	—	$	—
General and administrative expenses	16		21		—		—
Total service cost	27		36		—		—
Non-Service Cost (Benefit):
Claims and claim adjustment expenses	(14)		(15)		(1)		—
General and administrative expenses	(20)		(22)		(1)		(1)
Total non-service cost (benefit)	(34)		(37)		(2)		(1)
Net periodic benefit cost (benefit)	$	(7)	$	(1)	$	(2)	$	(1)

13. LEASES

The Company enters into lease agreements for real estate that is primarily used for office space in the ordinary course of business. These leases are accounted for as operating leases, whereby lease expense is recognized on a straight-line basis over the term of the lease, and a right-of-use asset and lease liability is recognized as part of other assets and other liabilities, respectively, in the consolidated balance sheet.

Most leases include an option to extend or renew the lease term. The exercise of the renewal option is at the ~~Company's~~Company’s discretion. The operating lease liability includes lease payments related to options to extend or renew the lease term if the Company is reasonably certain of exercising those options. The Company, in determining the present value of lease payments, utilizes either the rate implicit in the lease, if that rate is readily determinable, or the Company’s incremental secured borrowing rate commensurate with the term of the underlying lease.

2526

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

13. LEASES, Continued

Lease expense is included in general and administrative expenses in the consolidated statement of income. Additional information regarding the Company’s real estate operating leases is as follows:


		Three Months Ended March 31,						Three Months Ended March 31,
(in millions)	(in millions)	2022			2021				(in millions)	2023			2022

Lease cost	Lease cost								Lease cost
Operating leases	Operating leases	$	21		$	23			Operating leases	$	19		$	21
Short-term leases (1)	Short-term leases (1)	—			—				Short-term leases (1)	1			—

Lease expense	Lease expense	21			23				Lease expense	20			21
Less: sublease income (2)	Less: sublease income (2)	—			—				Less: sublease income (2)	—			—
Net lease cost	Net lease cost	$	21		$	23			Net lease cost	$	20		$	21

Other information on operating leases	Other information on operating leases								Other information on operating leases

Cash payments to settle a lease liability reported in cash flows	Cash payments to settle a lease liability reported in cash flows	$	24		$	26			Cash payments to settle a lease liability reported in cash flows	$	21		$	24
Right-of-use assets obtained in exchange for new lease liabilities	Right-of-use assets obtained in exchange for new lease liabilities	$	2		$	12			Right-of-use assets obtained in exchange for new lease liabilities	$	10		$	2
Weighted average discount rate	Weighted average discount rate	2.23		%	2.46		%		Weighted average discount rate	2.44		%	2.23		%
Weighted average remaining lease term	Weighted average remaining lease term	4.8 years			4.9 years				Weighted average remaining lease term	4.4 years			4.8 years

(1)

~~(1)~~ Leases with a term of twelve months or less are not recorded on the consolidated balance sheet.

(2)Sublease income consists of rent from third parties of office space and is recognized as part of other revenues in the consolidated statement of income.

14. CONTINGENCIES, COMMITMENTS AND GUARANTEES

Contingencies

The major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or to which any of the Company’s properties is subject are described below.

Asbestos and Environmental Claims and Litigation

In the ordinary course of its insurance business, the Company has received and continues to receive claims for insurance arising under policies issued by the Company asserting alleged injuries and damages from asbestos- and environmental-related exposures that are the subject of related coverage litigation. The Company is defending asbestos- and environmental-related litigation vigorously and believes that it has meritorious defenses; however, the outcomes of these disputes are uncertain. In this regard, the Company employs dedicated specialists and comprehensive resolution strategies to manage asbestos and environmental loss exposure, including settling litigation under appropriate circumstances. Currently, it is not possible to predict legal outcomes and their impact on future loss development for claims and litigation relating to asbestos and environmental claims. Any such development could be affected by future court decisions and interpretations, as well as future changes, if any, in applicable legislation. Because of these uncertainties, additional liabilities may arise for amounts in excess of the Company’s current insurance reserves. In addition, the Company’s estimate of ultimate claims and claim adjustment expenses may change. These additional liabilities or changes in estimates, or a range of either, cannot now be reasonably estimated and could result in income statement charges that could be material to the Company’s results of operations in future periods.

Other Proceedings Not Arising Under Insurance Contracts or Reinsurance Agreements

The Company is involved in other lawsuits, including lawsuits alleging extra-contractual damages relating to insurance contracts or reinsurance agreements, that do not arise under insurance contracts or reinsurance agreements. The legal costs

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued~~

~~14. CONTINGENCIES, COMMITMENTS AND GUARANTEES, Continued~~

associated with such lawsuits are expensed in the period in which the costs are incurred. Based upon currently available information, the Company does not believe it is reasonably possible that any such lawsuit or related lawsuits would be material to the Company’s results of operations or would have a material adverse effect on the Company’s financial position or liquidity.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

14. CONTINGENCIES, COMMITMENTS AND GUARANTEES, Continued

Other Commitments and Guarantees

Commitments

Investment Commitments — The Company has unfunded commitments to private equity limited partnerships, real estate partnerships and others. These commitments totaled ~~$1.72~~$1.77 billion and ~~$1.70~~$1.80 billion at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Guarantees

The maximum amount of the Company’s contingent obligation for indemnifications related to the sale of businesses that are quantifiable was $351 million at March 31, ~~2022.~~2023.

The maximum amount of the Company’s obligation related to the guarantee of certain insurance policy obligations of a former insurance subsidiary was $480 million at March 31, ~~2022,~~2023, all of which is indemnified by a third party. For more information regarding ~~Company~~the Company’s guarantees, see note 17 of the notes to the consolidated financial statements in the Company’s ~~2021~~2022 Annual Report.

2728

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of the Company’s financial condition and results of operations.

FINANCIAL HIGHLIGHTS

~~2022~~2023 First Quarter Consolidated Results of Operations

•Net income of ~~$1.02 billion,~~$975 million, or ~~$4.20~~$4.18 per share basic and ~~$4.15~~$4.13 per share diluted

•Net earned premiums of ~~$8.01~~$8.85 billion

•Catastrophe losses of ~~$160~~$535 million ($~~127~~422 million after-tax)

•Net favorable prior year reserve development of ~~$153~~$105 million ($~~122~~83 million after-tax)

•Combined ratio of ~~91.3%~~95.4%

•Net investment income of ~~$637~~$663 million ($~~539~~557 million after-tax)

•One-time tax benefit of $211 million due to the expiration of the statute of limitations with respect to a tax item

•Net realized investment ~~losses~~gains of ~~$23~~$6 million ($195 million after-tax)

•Operating cash flows of ~~$1.27~~$1.01 billion

~~2022~~2023 First Quarter Consolidated Financial Condition

•Total investments of ~~$83.66~~$82.04 billion; fixed maturities and short-term securities comprised 93% of total investments

•Total assets of ~~$118.59~~$118.35 billion

•Total debt of $7.29 billion, resulting in a debt-to-total capital ratio of ~~22.2%~~24.0% (21.3% excluding net unrealized ~~investment gains,~~investment losses, net of tax)

•Total capital returned to shareholders of ~~$773~~$680 million, comprising ~~$559~~$462 million of share repurchases and ~~$214~~$218 million of dividends

•Shareholders’ equity of ~~$25.53~~$23.05 billion

•Net unrealized investment losses of ~~$1.77~~$4.91 billion ($~~1.39~~3.87 billion after-tax)

•Book value per common share of ~~$106.40~~$99.80

•Holding company liquidity of $1.55 billion

2829

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

CONSOLIDATED OVERVIEW

Consolidated Results of Operations
Three Months Ended
March 31,
(in millions, except ratio and per share amounts) 2022 2021
Revenues
Premiums $ 8,014 $ 7,386
Net investment income 637 701
Fee income 103 101
Net realized investment gains (losses) (23) 44
Other revenues 78 81
Total revenues 8,809 8,313
Claims and expenses
Claims and claim adjustment expenses 5,039 4,970
Amortization of deferred acquisition costs 1,310 1,207
General and administrative expenses 1,191 1,163
Interest expense 87 82
Total claims and expenses 7,627 7,422
Income before income taxes 1,182 891
Income tax expense 164 158
Net income $ 1,018 $ 733
Net income per share
Basic $ 4.20 $ 2.89
Diluted $ 4.15 $ 2.87
Combined ratio
Loss and loss adjustment expense ratio 62.3 % 66.7 %
Underwriting expense ratio 29.0 29.9
Combined ratio 91.3 % 96.6 %


	Three Months Ended March 31,
(in millions, except ratio and per share amounts)	2023			2022
Revenues
Premiums	$	8,854		$	8,014
Net investment income	663			637
Fee income	106			103
Net realized investment gains (losses)	6			(23)
Other revenues	75			78
Total revenues	9,704			8,809
Claims and expenses
Claims and claim adjustment expenses	5,959			5,039
Amortization of deferred acquisition costs	1,462			1,310
General and administrative expenses	1,267			1,191
Interest expense	88			87
Total claims and expenses	8,776			7,627
Income before income taxes	928			1,182
Income tax expense (benefit)	(47)			164
Net income	$	975		$	1,018
Net income per share
Basic	$	4.18		$	4.20
Diluted	$	4.13		$	4.15
Combined ratio
Loss and loss adjustment expense ratio	66.7		%	62.3		%
Underwriting expense ratio	28.7			29.0
Combined ratio	95.4		%	91.3		%

The following discussions of the Company’s net income and segment income are presented on an after-tax basis. Discussions of the components of net income and segment income are presented on a pre-tax basis, unless otherwise noted. Discussions of net income per common share are presented on a diluted basis.

Overview

Diluted net income per share of $4.13 in the first quarter of 2023 decreased by less than 1% from diluted net income per share of $4.15 in the same period of 2022. Net income of $975 million in the first quarter of ~~2022 increased~~2023 decreased by ~~45% over diluted~~4% from net ~~income per share of $2.87 in the same period of 2021. Net~~ income of $1.02 billion in the ~~first quarter of 2022 increased by 39% over net income of $733 million in the~~ same period of ~~2021.~~2022. The ~~higher~~lower rate of ~~increase~~decrease in diluted net income per share reflected the impact of share repurchases in recent periods. The ~~increase~~decrease in income before income taxes in the first quarter of ~~2022~~2023 primarily reflected the pre-tax impacts of (i) ~~lower~~higher catastrophe losses ~~partially offset by~~and (ii) lower net favorable prior year reserve development, partially offset by (iii) ~~lower~~higher underwriting margins excluding catastrophe losses and prior year reserve development ("(“underlying underwriting ~~margins"~~margins”), (iv) net realized investment ~~losses~~gains compared to net realized investment ~~gains~~losses in the ~~same period~~first quarter of ~~2021~~2022 and (v) ~~lower~~higher net investment income. Catastrophe losses in the first quarters of 2023 and 2022 ~~and 2021~~ were ~~$160~~$535 million and ~~$835~~$160 million, respectively. Net favorable prior year reserve development in the first quarters of 2023 and 2022 ~~and 2021~~ was ~~$153~~$105 million and ~~$317~~$153 million, respectively. The ~~lower~~higher underlying underwriting margins in the first quarter of ~~2022~~2023 were driven by Business Insurance and Personal Insurance, partially offset by ~~Business Insurance and~~ Bond & Specialty Insurance. ~~Underlying underwriting margins~~The Company recorded an income tax benefit in the first quarter of ~~2021 included~~2023 compared with income tax expense in the same period of 2022. The change in income taxes primarily reflected a ~~net favorable impact from COVID-19 and related economic conditions. Income~~one-time tax ~~expense~~benefit of $211 million in the first quarter of ~~2022 was higher than in~~2023 due to the ~~same period~~expiration of ~~2021, primarily reflecting~~the statute of limitations with respect to a tax item and the impact of the ~~increase~~decrease in income before income taxes, partially offset by a $47 million reduction in income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters.

2930

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

For discussion regarding the potential future impacts of COVID-19 and related economic conditions on the Company, see “Outlook” herein and “The ongoing impact of COVID-19 and related risks could materially affect our results of operations, financial position and/or liquidity” included in “Part I—Item 1A—Risk Factors” in the Company's 2021 Annual Report.

The Company has insurance operations in Canada, the United Kingdom, the Republic of Ireland and throughout other parts of the world as a corporate member of Lloyd’s, as well as in Brazil and Colombia through joint ventures. Because these operations are conducted in local currencies other than the U.S. dollar, the Company is subject to changes in foreign currency exchange rates. For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, changes in foreign currency exchange rates impacted reported line items in the statement of income by insignificant amounts. The impact of these changes was not material to the Company’s net income or segment income for the periods reported.

Revenues

Earned Premiums

Earned premiums in the first quarter of ~~2022~~2023 were ~~$8.01~~$8.85 billion, ~~$628~~$840 million or 9%10% higher than in the same period of ~~2021.~~2022. In Business Insurance, earned premiums in the first quarter ~~of 2022~~2023 increased by 7%10% over the same period of 2021. Earned premiums in Business Insurance in the first quarter of 2021 were negatively impacted by lower net written premiums in the preceding twelve months due to a modest reduction in exposures and a decrease in new business volume, in each case impacted by COVID-19 and related economic conditions.2022. In Bond & Specialty Insurance, earned premiums in the first quarter of ~~2022~~2023 increased by ~~10%~~7% over the same period of ~~2021.~~2022. In Personal Insurance, earned premiums in the first quarter of ~~2022~~2023 increased by ~~10%~~12% over the same period of ~~2021. Earned premiums in Bond & Specialty Insurance and Personal Insurance in the first quarter of 2021 were not materially impacted by COVID-19 and related economic conditions.~~2022. Factors contributing to the changes in earned premiums in each segment are discussed in more detail in the segment discussions that follow.

Net Investment Income

The following table sets forth information regarding the Company’s investments.


		Three Months Ended March 31,						Three Months Ended March 31,
(dollars in millions)	(dollars in millions)	2022			2021				(dollars in millions)	2023			2022
Average investments (1)	Average investments (1)	$	86,345		$	81,209			Average investments (1)	$	88,740		$	86,345
Pre-tax net investment income	Pre-tax net investment income	637			701				Pre-tax net investment income	663			637
After-tax net investment income	After-tax net investment income	539			590				After-tax net investment income	557			539
Average pre-tax yield (2)	Average pre-tax yield (2)	2.9		%	3.5		%		Average pre-tax yield (2)	3.0		%	2.9		%
Average after-tax yield (2)	Average after-tax yield (2)	2.5		%	2.9		%		Average after-tax yield (2)	2.5		%	2.5		%

_________________________________________________________

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

(2)Excludes net realized and net unrealized investment gains and losses.

Net investment income in the first quarter of ~~2022~~2023 was ~~$637~~$663 million, ~~$64~~$26 million or ~~9% lower~~4% higher than in the same period of ~~2021.~~2022. Net investment income from fixed maturity investments in the first quarter ~~of 2022~~2023 was ~~$505~~$575 million, ~~$14~~$70 million higher than in the same period of ~~2021.~~2022. The increase primarily resulted from higher long-term average yields and a higher average level of fixed maturity ~~investments, partially offset by lower long-term interest rates.~~investments. Net investment income from short-term securities in the first quarter of 2023 was $47 million, $45 million higher than in the same period of 2022, ~~was $2~~primarily resulting from higher short-term average yields. The Company’s remaining investment portfolios had net investment income of $53 million $1in the first quarter of 2023, $89 million lower than in the same period of 2021, primarily resulting from a lower level of short-term investments, partially offset by higher short-term interest rates. The Company's remaining investment portfolios had net investment income of $142 million in the first quarter of 2022, $76 million lower than in the same period of 2021.2022. The decline in net investment income from these portfolios ~~in the first quarter of 2022 compared with the same period of 2021~~ primarily reflected ~~the impact of~~ lower ~~returns from~~ private equity and real estate partnerships ~~as compared to strong returns in the same period of 2021.~~returns. Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income from these other investments is generally reflected in the ~~Company's~~Company’s financial statements on a quarter lag basis.

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued~~

Fee Income

Fee income in the first quarter of ~~2022~~2023 was ~~$103~~$106 million, $2$3 million higher than in the same period of ~~2021.~~2022. The National Accounts market in Business Insurance is the primary source of the Company’s fee-based business and is discussed in the Business Insurance segment discussion that follows.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Net Realized Investment Gains (Losses)

The following table sets forth information regarding the Company’s net realized investment gains (losses).

Three Months Ended
March 31,
(in millions) 2022 2021
Credit impairment gains (losses):
Fixed maturities $ (1) $ —
Other investments — —
Net realized investment gains (losses) on equity securities still held (14) 23
Other net realized investment gains (losses), including from sales (8) 21
Total $ (23) $ 44


	Three Months Ended March 31,
(in millions)	2023		2022
Impairment gains (losses):
Fixed maturities	$	(1)	$	(1)

Net realized investment gains (losses) on equity securities still held	17		(14)
Other net realized investment gains (losses), including from sales	(10)		(8)
Total	$	6	$	(23)

Net realized investment gains ~~(losses)~~ on equity securities still held ~~of $(14)~~were $17 million in the first quarter of 2023, driven by the impact of changes in fair value attributable to favorable equity markets. Net realized investment losses on equity securities still held were $14 million in the first quarter of 2022, ~~were~~ driven by the impact of changes in fair value attributable to unfavorable equity markets. ~~Net realized investment gains on equity securities still held of $23 million in the first quarter of 2021 were driven by the impact of changes in fair value attributable to favorable equity markets.~~

Other Revenues

Other revenues in the first ~~quarters~~quarter of ~~2022 and 2021 included~~2023 were $75 million, $3 million lower than in the same period of 2022. Other revenues include revenues from Simply Business, ~~and~~ installment premium charges and other policyholder service charges.

Claims and Expenses

Claims and Claim Adjustment Expenses

Claims and claim adjustment expenses in the first quarter of ~~2022~~2023 were ~~$5.04~~$5.96 billion, ~~$69~~$920 million or 1%18% higher than in the same period of ~~2021,~~2022, primarily reflecting the impacts of (i) higher business volumes, (ii) ~~loss cost trends, including~~higher catastrophe losses, (iii) elevated ~~severity~~losses in the ~~current quarter in both the~~ automobile ~~and homeowners and other~~ product ~~lines~~line in Personal Insurance, ~~(iii)~~(iv) lower net favorable prior year reserve development and ~~(iv)~~(v) loss activity related to the disruption in the banking sector in Bond & Specialty Insurance, partially offset by (vi) property losses that were lower than a ~~comparison to a low~~somewhat elevated level ~~of loss activity~~ in the prior year quarter in ~~the automobile product line in Personal Insurance, partially offset by (v) lower catastrophe losses.~~Business Insurance. Catastrophe losses in the first quarter of ~~2022~~2023 primarily resulted from severe wind and hail storms in multiple states. Catastrophe losses in the first quarter of ~~2021~~2022 primarily resulted from winter storms and wind storms in several regions of the United States. ~~The impacts of COVID-19 and related economic conditions on claims and claim adjustment expenses in the first quarter of 2021 are discussed in more detail in the segment discussions that follow.~~

Factors contributing to net favorable prior year reserve development during the first quarters of ~~2022~~2023 and ~~2021~~2022 are discussed in more detail in note 7 of the notes to the unaudited consolidated financial statements.

Significant Catastrophe Losses

~~There were no significant catastrophes incurred during the three months ended March 31, 2022.~~ The following table presents the amount of losses recorded by the Company for significant catastrophes that occurred in the three months ended March 31, ~~2021,~~2023 and 2022, the amount of net unfavorable (favorable) prior year reserve development recognized in the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 for significant catastrophes that occurred in ~~2021~~2022 and ~~2020,~~2021, and the estimate of ultimate losses for those catastrophes at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. For purposes of the table, a significant catastrophe is an event for which the Company estimates its ultimate losses will be $100 million or more after reinsurance and before taxes. The ~~Company's~~Company’s threshold for disclosing catastrophes is primarily determined at the reportable segment level and for ~~2022~~2023 ranged from $20 million to $30 million of losses before reinsurance and taxes. For the Company’s definition of a catastrophe, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations— Consolidated Overview” in the Company’s ~~2021~~2022 Annual Report.

3132

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued


		Losses Incurred/Unfavorable (Favorable) Prior Year Reserve Development					Losses Incurred/Unfavorable (Favorable) Prior Year Reserve Development
		Three Months Ended March 31,							Three Months Ended March 31,
				Estimated Ultimate Losses	Three Months Ended March 31,							Estimated Ultimate Losses
(in millions, pre-tax and net of reinsurance) (1)	(in millions, pre-tax and net of reinsurance) (1)	2022	2021						December 31, 2021	(in millions, pre-tax and net of reinsurance) (1)	2023	2022		March 31, 2023		December 31, 2022

2020
PCS Serial Number:
16 — Tennessee tornado activity		3	(1)			145				142
19 — Severe storms		(3)	(5)			122		125
20 — Severe storms		5	(5)			145		140
33 — Civil unrest		(4)	—			89		93
44 — Tropical Storm Isaias		3	(1)			121		118
46 — Midwest derecho		(2)	(5)			200		202
68 — California wildfire - Glass fire		—	(7)			136		136

2021	2021									2021
PCS Serial Number:	PCS Serial Number:									PCS Serial Number:
15 — Winter storms	15 — Winter storms	(3)	223			225		228		15 — Winter storms	(18)		(3)		197		215
17 — Winter storms	17 — Winter storms	—	480			508		508		17 — Winter storms	(21)		—		462		483
29 — Severe wind storms	29 — Severe wind storms	(1)	n/a			104		105		29 — Severe wind storms	—		(1)		93		93
60 — Hurricane Ida	60 — Hurricane Ida	(20)	n/a			397		417		60 — Hurricane Ida	19		(20)		355		336
76 — Tornado outbreak	76 — Tornado outbreak	2	n/a			133		131		76 — Tornado outbreak	(3)		2		110		113

2022										2022
PCS Serial Number:										PCS Serial Number:
33 — Severe wind and hail storms										33 — Severe wind and hail storms	(7)		n/a		130		137
35 — Severe wind and hail storms										35 — Severe wind and hail storms	(2)		n/a		182		184
43 — Severe wind and hail storms										43 — Severe wind and hail storms	(10)		n/a		112		122
61 — Hurricane Ian										61 — Hurricane Ian	(53)		n/a		174		227
73 — Winter storm										73 — Winter storm	143		n/a		655		512

2023										2023
PCS Serial Number:										PCS Serial Number:
25 — Severe wind and hail storms										25 — Severe wind and hail storms	148		n/a		148		n/a
32 — Severe wind and hail storms										32 — Severe wind and hail storms	119		n/a		119		n/a

n/a: not applicable.

(1) Amounts are reported pre-tax and net of recoveries under all applicable reinsurance treaties, except for the ~~Company's~~Company’s 2022 and 2021 ~~and 2020~~ Underlying Property Aggregate Catastrophe Excess-of-Loss Treaties, the terms of which are described in ~~"Part~~“Part I—Item 1—~~Business"~~Business” in the ~~Company's 2021~~Company’s 2022 Annual Report. Those treaties covered the accumulation of certain property losses arising from one or multiple occurrences (both catastrophe and non-catastrophe events) for the period January 1, 2022 through and including December 31, 2022 and the period January 1, 2021 through and including December 31, ~~2021 and the period January 1, 2020 through and including December 31, 2020, respectively.~~2021. As a result, the benefits from those treaties are not included in the table above as the allocation of the ~~treaty's~~treaty’s benefit to each identified catastrophe changes each time there are additional events or changes in estimated losses from any covered event.

~~n/a:~~PCS Catastrophe Event 33 occurred from March 30, 2023 through April 1, 2023. Estimated losses incurred through March 31, 2023 were $96 million and are not ~~applicable.~~

disclosed in the table above. The estimated losses incurred subsequent to March 31, 2023 related to Event 33 will be reported in the Company’s results for the quarter ending June 30, 2023 and will be disclosed in the table above (including in the Estimated Ultimate Losses related to Event 33).

Amortization of Deferred Acquisition Costs

Amortization of deferred acquisition costs in the first quarter of ~~2022~~2023 was ~~$1.31~~$1.46 billion, ~~$103~~$152 million or 9%12% higher than in the same period of ~~2021,~~2022, generally consistent with the increase in earned premiums. Amortization of deferred acquisition costs is discussed in more detail in the segment discussions that follow.

General and Administrative Expenses

General and administrative expenses in the first quarter of ~~2022~~2023 were ~~$1.19~~$1.27 billion, ~~$28~~$76 million or 2%6% higher than in the same period of ~~2021,~~2022, primarily reflecting the impact of costs associated with higher business volumes. General and administrative expenses are discussed in more detail in the segment discussions that follow.

Interest Expense

Interest expense in the first ~~quarters~~quarter of ~~2022 and 2021~~2023 was $88 million, compared with $87 million ~~and $82 million, respectively.~~in the same period of 2022.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Income Tax Expense (Benefit)

~~Income~~The income tax ~~expense~~benefit in the first quarter of ~~2022~~2023 was $47 million, compared with income tax expense of $164 million ~~$6 million or 4% higher than~~ in the same period of ~~2021,~~2022. The change in income taxes primarily ~~reflecting~~reflected the ~~$291~~one-time tax benefit of $211 million ~~increase~~in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item and the impact of the $254 million decrease in income before income taxes in the first quarter of ~~2022,~~2023, partially offset by the $47 million reduction in income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters.

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued~~

The Company’s effective tax rate was ~~14%~~(5)% and ~~18%~~14% in the first quarters of ~~2022~~2023 and ~~2021,~~2022, respectively. The effective tax rates ~~in both periods~~ were lower than the statutory rate of 21%~~, primarily due to~~ in all periods. The effective tax rate for the first quarter of 2023 was reduced by the impact of ~~tax-exempt investment income on~~ the ~~calculation of the Company’s income~~one-time tax ~~provision. In addition,~~benefit discussed above, and the effective tax rate for the first quarter of 2022 was reduced by the impact of the resolution of prior year tax matters discussed above.

The effective tax rate for both periods also reflected the impact of tax-exempt investment income on the calculation of the Company’s income tax provision.

Combined Ratio

The combined ratio of 95.4% in the first quarter of 2023 was 4.1 points higher than the combined ratio of 91.3% in the same period of 2022. The loss and loss adjustment expense ratio of 66.7% in the first quarter of ~~2022~~2023 was ~~5.3~~4.4 points ~~lower~~higher than the ~~combined ratio of 96.6% in the same period of 2021. The~~ loss and loss adjustment expense ratio of 62.3% in the ~~first quarter of 2022 was 4.4 points lower than the loss and loss adjustment expense ratio of 66.7% in the~~ same period of ~~2021.~~2022. The underwriting expense ratio of ~~29.0% for~~28.7% in the first quarter of ~~2022~~2023 was ~~0.9~~0.3 points lower than the underwriting expense ratio of ~~29.9%~~29.0% in the same period of ~~2021.~~

2022.

Catastrophe losses in the first quarters of ~~2022~~2023 and ~~2021~~2022 accounted for ~~2.0~~6.0 points and ~~11.3~~2.0 points, respectively, of the combined ratio. Net favorable prior year reserve development in the first quarters of 2023 and 2022 ~~and 2021~~ provided ~~1.9~~1.2 points and ~~4.2~~1.9 points of benefit, respectively, to the combined ratio. The combined ratio excluding prior year reserve development and catastrophe losses (“underlying combined ratio”) in the first quarter of ~~2022~~2023 was ~~1.7~~0.6 points ~~higher~~lower than the ~~2021~~2022 ratio on the same basis, primarily reflecting the impacts of (i) the benefit of earned pricing, (ii) property losses that were lower than a ~~comparison to a low~~somewhat elevated level ~~of loss activity~~ in the prior year quarter in Business Insurance and (iii) a lower expense ratio, partially offset by (iv) elevated losses in the automobile product line in Personal Insurance and ~~(ii) elevated severity~~(v) loss activity related to the disruption in the ~~current quarter~~banking sector in ~~both the automobile and homeowners and other product lines in Personal Insurance, partially offset by (iii) earned pricing that exceeded loss cost trends in Business Insurance and~~ Bond & Specialty ~~Insurance and (iv) a lower expense ratio.~~

Insurance.

The combined ratio continues to be impacted by the tort environment, including more aggressive attorney involvement in insurance claims.

Written Premiums

Consolidated gross and net written premiums were as follows:


		Gross Written Premiums				Gross Written Premiums
		Three Months Ended March 31,					Three Months Ended March 31,
(in millions)	(in millions)	2022		2021				(in millions)	2023		2022
Business Insurance	Business Insurance	$	5,148	$	4,776			Business Insurance	$	5,828	$	5,148
Bond & Specialty Insurance	Bond & Specialty Insurance	1,009		834				Bond & Specialty Insurance	1,010		1,009
Personal Insurance	Personal Insurance	3,126		2,797				Personal Insurance	3,509		3,126
Total	Total	$	9,283	$	8,407			Total	$	10,347	$	9,283

Net Written Premiums
Three Months Ended
March 31,
(in millions) 2022 2021
Business Insurance $ 4,502 $ 4,125
Bond & Specialty Insurance 882 723
Personal Insurance 2,983 2,657
Total $ 8,367 $ 7,505


	Net Written Premiums
	Three Months Ended March 31,
(in millions)	2023		2022
Business Insurance	$	5,157	$	4,502
Bond & Specialty Insurance	886		882
Personal Insurance	3,353		2,983
Total	$	9,396	$	8,367

Gross and net written premiums in the first quarter of ~~2022~~2023 increased by ~~10%~~11% and ~~11%~~12%, respectively, over the same period of 2021. Gross and net written premiums in Business Insurance in the first quarter of 2022 increased by 8% and 9%, respectively, over the same period of 2021. Gross and net written premiums in Bond & Specialty Insurance in the first quarter of 2022 increased by 21% and 22%, respectively, over the same period of 2021. Gross and net written premiums in Personal Insurance in the first quarter of 2022 both increased by 12% over the same period of 2021.2022. Factors contributing to the changes in gross and net written premiums in each segment are discussed in more detail in the segment discussions that follow.

3334

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

RESULTS OF OPERATIONS BY SEGMENT

Business Insurance

Results of Business Insurance were as follows:
Three Months Ended
March 31,
(dollars in millions) 2022 2021
Revenues
Earned premiums $ 4,071 $ 3,799
Net investment income 468 523
Fee income 96 95
Other revenues 53 53
Total revenues 4,688 4,470
Total claims and expenses 3,879 4,098
Segment income before income taxes 809 372
Income tax expense 140 55
Segment income $ 669 $ 317
Loss and loss adjustment expense ratio 60.7 % 72.2 %
Underwriting expense ratio 30.2 31.3
Combined ratio 90.9 % 103.5 %


	Three Months Ended March 31,
(dollars in millions)	2023			2022
Revenues
Earned premiums	$	4,477		$	4,071
Net investment income	473			468
Fee income	99			96
Other revenues	47			53
Total revenues	5,096			4,688
Total claims and expenses	4,383			3,879
Segment income before income taxes	713			809
Income tax expense (benefit)	(43)			140
Segment income	$	756		$	669

Loss and loss adjustment expense ratio	63.8		%	60.7		%
Underwriting expense ratio	29.8			30.2
Combined ratio	93.6		%	90.9		%

Overview

Segment income in the first quarter of ~~2022~~2023 was ~~$669~~$756 million, ~~$352~~$87 million or ~~111%~~13% higher than segment income of ~~$317~~$669 million in the same period of ~~2021.~~2022. The ~~increase~~decrease in segment income before income taxes primarily reflected the pre-tax impacts of (i) ~~lower~~higher catastrophe losses and (ii) ~~higher underlying underwriting margins, partially offset by (iii) lower net investment income and (iv)~~ lower net favorable prior year reserve ~~development.~~development, partially offset by (iii) higher underlying underwriting margins. Catastrophe losses in the first quarters of 2023 and 2022 ~~and 2021~~ were ~~$79~~$199 million and ~~$506~~$79 million, respectively. Net favorable prior year reserve development in the first quarters of 2023 and 2022 ~~and 2021~~ was ~~$113~~$19 million and ~~$134~~$113 million, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) higher business volumes, (ii) property losses that were lower than a somewhat elevated level in the prior year quarter and ~~(ii)~~(iii) the benefit of earned ~~pricing that exceeded loss cost trends. Income~~pricing. The segment recorded an income tax ~~expense~~benefit in the first quarter of ~~2022 was higher than~~2023 compared with income tax expense in the same period of ~~2021,~~2022. The change in income taxes primarily ~~reflecting~~reflected a one-time tax benefit of $171 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item and the impact of the ~~increase~~decrease in segment income before income taxes.

Revenues

Earned Premiums

Earned premiums in the first quarter of ~~2022~~2023 were ~~$4.07~~$4.48 billion, ~~$272~~$406 million or 7%10% higher than in the same period of ~~2021. The increase~~2022, primarily ~~reflected~~reflecting the increase in net written premiums over the preceding twelve months. Earned premiums in the first quarter of 2021 were negatively impacted by lower net written premiums in the preceding twelve months due to a modest reduction in exposures and a decrease in new business volume, in each case impacted by COVID-19 and related economic conditions.

Net Investment Income

Net investment income in the first quarter of ~~2022~~2023 was ~~$468~~$473 million, ~~$55~~$5 million or ~~11% lower~~1% higher than in the same period of ~~2021.~~2022. Refer to the ~~“Net~~“Revenues—Net Investment Income” section of the “Consolidated Results of Operations” discussion herein for a description of the factors contributing to the ~~decrease~~increase in the Company’s consolidated net investment income in the first quarter of ~~2022~~2023 compared with the same period of ~~2021.~~2022. In addition, refer to note 2 of the notes to the consolidated financial statements in the Company’s ~~2021~~2022 Annual Report for a discussion of the Company’s net investment income allocation methodology.

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued~~

Fee Income

National Accounts is the primary source of fee income due to revenue from its large deductible policies and service businesses, which include risk management, claims administration, loss control and risk management information services provided to third parties, as well as policy issuance and claims management services to ~~workers'~~workers’ compensation residual market pools. Fee income in the first quarter of ~~2022~~2023 was ~~$96~~$99 million, $1$3 million or 1%3% higher than in the same period of ~~2021, primarily reflecting higher serviced premium volume from the workers' compensation residual market pool.~~2022.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Other Revenues

Other revenues in the first quarter of ~~2022~~2023 were ~~$53~~$47 million, ~~comparable with~~$6 million lower than in the same period of ~~2021.~~2022. Other revenues include revenues from Simply Business, ~~as well as~~ installment premium charges and other policyholder service charges.

Claims and Expenses

Claims and Claim Adjustment Expenses

Claims and claim adjustment expenses in the first quarter of ~~2022~~2023 were ~~$2.51~~$2.91 billion, ~~$274~~$393 million or ~~10% lower~~16% higher than in the same period of ~~2021,~~2022, primarily reflecting the impacts of (i) ~~lower catastrophe losses, partially offset by (ii) loss cost trends, (iii)~~ higher business volumes, ~~and (iv)~~(ii) higher catastrophe losses, (iii) lower net favorable prior year reserve ~~development. Claims~~development and ~~claim adjustment expenses~~(iv) loss cost trends, partially offset by (v) property losses that were lower than a somewhat elevated level in the ~~first quarter of 2021 included favorable loss activity related to the impact of COVID-19 and related economic conditions.~~

prior year quarter.

Amortization of Deferred Acquisition Costs

Amortization of deferred acquisition costs in the first quarter of ~~2022~~2023 was ~~$668~~$742 million, ~~$41~~$74 million or 7%11% higher than the same period of ~~2021,~~2022, generally consistent with the increase in earned premiums.

General and Administrative Expenses

General and administrative expenses in the first quarter of ~~2022~~2023 were ~~$697~~$734 million, ~~$14~~$37 million or 2%5% higher than in the same period of ~~2021,~~2022, primarily in support of business growth.

Income Tax Expense (Benefit)

~~Income~~The income tax benefit in the first quarter of 2023 was $43 million, compared with income tax expense of $140 million in the same period of 2022. The change in income taxes primarily reflected the one-time tax benefit of $171 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item and the impact of the $96 million decrease in income before income taxes, partially offset by a $3 million reduction in income tax expense in the first quarter of 2022 was $140 million, $85 million higher than the same period of 2021, primarily reflecting the impact of the $437 million increase in income before income taxes. Income tax expense in the first quarter of 2022 was reduced by $3 million as a result of the resolution of prior year tax matters.

Combined Ratio

The combined ratio of 93.6% in the first quarter of 2023 was 2.7 points higher than the combined ratio of 90.9% in the same period of 2022. The loss and loss adjustment expense ratio of 63.8% in the first quarter of ~~2022~~2023 was ~~12.6~~3.1 points ~~lower~~higher than the ~~combined ratio of 103.5% in the same period of 2021. The~~ loss and loss adjustment expense ratio of 60.7% in the ~~first quarter of 2022 was 11.5 points lower than the loss and loss adjustment expense ratio of 72.2% in the~~ same period of ~~2021.~~2022. The underwriting expense ratio of ~~30.2% for~~29.8% in the first quarter of ~~2022~~2023 was ~~1.1~~0.4 points lower than the underwriting expense ratio of ~~31.3%~~30.2% in the same period of ~~2021.~~

2022.

Catastrophe losses in the first quarters of ~~2022~~2023 and ~~2021~~2022 accounted for ~~1.9~~4.4 points and ~~13.3~~1.9 points, respectively, of the combined ratio. Net favorable prior year reserve development in the first quarters of 2023 and 2022 ~~and 2021~~ provided ~~2.8~~0.4 points and ~~3.5~~2.8 points of benefit, respectively, to the combined ratio. The underlying combined ratio in the first quarter of ~~2022~~2023 was ~~1.9~~2.2 points lower than the ~~2021~~2022 ratio on the same basis, primarily reflecting the impacts of (i) ~~earned pricing~~property losses that ~~exceeded loss cost trends~~were lower than a somewhat elevated level in the prior year quarter and (ii) ~~a lower expense ratio.~~

the benefit of earned pricing.

3536

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Written Premiums

Business Insurance’s gross and net written premiums by market were as follows:


		Gross Written Premiums				Gross Written Premiums
		Three Months Ended March 31,					Three Months Ended March 31,
(in millions)	(in millions)	2022		2021				(in millions)	2023		2022
Domestic:	Domestic:							Domestic:
Select Accounts	Select Accounts	$	837	$	751			Select Accounts	$	924	$	837
Middle Market	Middle Market	2,795		2,565				Middle Market	3,129		2,795
National Accounts	National Accounts	510		497				National Accounts	493		510
National Property and Other	National Property and Other	638		600				National Property and Other	747		638
Total Domestic	Total Domestic	4,780		4,413				Total Domestic	5,293		4,780
International	International	368		363				International	535		368
Total Business Insurance	Total Business Insurance	$	5,148	$	4,776			Total Business Insurance	$	5,828	$	5,148

Net Written Premiums
Three Months Ended
March 31,
(in millions) 2022 2021
Domestic:
Select Accounts $ 819 $ 729
Middle Market 2,616 2,384
National Accounts 303 290
National Property and Other 497 445
Total Domestic 4,235 3,848
International 267 277
Total Business Insurance $ 4,502 $ 4,125


	Net Written Premiums
	Three Months Ended March 31,
(in millions)	2023		2022
Domestic:
Select Accounts	$	908	$	819
Middle Market	2,926		2,616
National Accounts	294		303
National Property and Other	590		497
Total Domestic	4,718		4,235
International	439		267
Total Business Insurance	$	5,157	$	4,502

Gross and net written premiums in the first quarter of ~~2022~~2023 increased by 8%13% and 9%15%, respectively, over the same period of ~~2021.~~

2022.

Select Accounts. Net written premiums of ~~$819~~$908 million in the first quarter of ~~2022~~2023 increased by ~~12%~~11% over the same period of ~~2021.~~2022. Retention rates remained strong in the first quarter of ~~2022~~2023 and increased slightly over the same period of ~~2021.~~2022. Renewal premium changes in the first quarter of ~~2022~~2023 remained positive and were ~~lower~~higher than in the same period of ~~2021.~~2022. New business premiums in the first quarter of ~~2022~~2023 increased over the same period of ~~2021.~~

2022.

Middle Market. Net written premiums of ~~$2.62~~$2.93 billion in the first quarter of ~~2022~~2023 increased by ~~10%~~12% over the same period of ~~2021.~~2022. Retention rates remained strong in the first quarter of ~~2022~~2023 and increased slightly over the same period of ~~2021.~~2022. Renewal premium changes in the first quarter of ~~2022~~2023 remained positive and were comparable with the same period of ~~2021.~~2022. New business premiums in the first quarter of ~~2022~~2023 increased over the same period of ~~2021.~~

2022.

National Accounts. Net written premiums of ~~$303~~$294 million in the first quarter of ~~2022 increased~~2023 decreased by ~~4% over~~3% from the same period of ~~2021.~~2022. Retention rates remained strong in the first quarter of 2023 but were lower than the same period of 2022. Renewal premium changes in the first quarter of ~~2022~~2023 were ~~slightly negative~~positive and ~~lower~~higher than in the same period of ~~2021.~~2022. New business premiums in the first quarter of ~~2022 increased over~~2023 decreased from the same period of ~~2021.~~

2022.

National Property and Other. Net written premiums of ~~$497~~$590 million in the first quarter of ~~2022~~2023 increased by ~~12%~~19% over the same period of ~~2021.~~2022. Retention rates remained strong in the first quarter of ~~2022~~2023 and increased over the same period of ~~2021.~~2022. Renewal premium changes in the first quarter of ~~2022~~2023 remained positive and were ~~lower~~higher than in the same period of ~~2021.~~2022. New business premiums in the first quarter of ~~2022~~2023 increased over the same period of ~~2021.~~2022.

International. Net written premiums of $439 million in the first quarter of 2023 increased by 64% over the same period of 2022, primarily driven by the impact of the Company’s quota share reinsurance agreement with subsidiaries of Fidelis

3637

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

~~International.~~ ~~Net written premiums of $267 million in the first quarter of 2022 decreased by 4% from the same period of 2021, primarily driven by Canada and the Company's operations at Lloyd's,~~Insurance Holdings Limited (Fidelis) effective January 1, 2023, partially offset by the ~~United Kingdom.~~ impact of changes in foreign currency exchange rates.

Bond & Specialty Insurance

Results of Bond & Specialty Insurance were as follows:
Three Months Ended
March 31,
(dollars in millions) 2022 2021
Revenues
Earned premiums $ 820 $ 743
Net investment income 59 59
Other revenues 4 5
Total revenues 883 807
Total claims and expenses 644 638
Segment income before income taxes 239 169
Income tax expense 22 32
Segment income $ 217 $ 137
Loss and loss adjustment expense ratio 42.8 % 49.9 %
Underwriting expense ratio 35.2 35.3
Combined ratio 78.0 % 85.2 %


	Three Months Ended March 31,
(dollars in millions)	2023			2022
Revenues
Earned premiums	$	875		$	820
Net investment income	73			59
Other revenues	5			4
Total revenues	953			883
Total claims and expenses	705			644
Segment income before income taxes	248			239
Income tax expense	41			22
Segment income	$	207		$	217

Loss and loss adjustment expense ratio	43.0		%	42.8		%
Underwriting expense ratio	37.0			35.2
Combined ratio	80.0		%	78.0		%

Overview

Segment income in the first quarter of ~~2022~~2023 was ~~$217~~$207 million, ~~$80~~$10 million or ~~58% higher~~5% lower than segment income of ~~$137~~$217 million in the same period of ~~2021.~~2022. The increase in segment income before income taxes primarily reflected the pre-tax impacts of (i) higher ~~underlying underwriting margins, (ii) lower catastrophe losses and (iii) higher~~ net favorable prior year reserve ~~development. Catastrophe losses in the first quarters of 2022~~development and ~~2021 were $1 million and $24 million, respectively.~~(ii) higher net investment income, partially offset by (iii) lower underlying underwriting margins. Net favorable prior year reserve development in the first quarters of 2023 and 2022 was $58 million and ~~2021 was~~ $35 million, respectively. Catastrophe losses in the first quarters of 2023 and ~~$15~~2022 were $5 million and $1 million, respectively. The ~~higher~~lower underlying underwriting margins primarily reflected the impacts of (i) loss activity related to the disruption in the banking sector and (ii) higher general and administrative expenses, partially offset by (iii) higher business volumes ~~(ii) elevated other loss activity in~~and (iv) the ~~prior year quarter and (iii)~~benefit of earned ~~pricing that exceeded loss cost trends.~~pricing. Income tax expense in the first quarter of ~~2022~~2023 was ~~lower~~higher than in the same period of ~~2021,~~2022, primarily reflecting a $24 million reduction in income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters ~~partially offset by~~and the impact of the increase in segment income before income ~~taxes.~~

taxes, partially offset by a one-time tax benefit of $9 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item.

Revenues

Earned Premiums

Earned premiums in the first quarter of ~~2022~~2023 were ~~$820~~$875 million, ~~$77~~$55 million or ~~10%~~7% higher than in the same period of ~~2021,~~2022, primarily reflecting ~~the increase~~increases in net written premiums ~~over~~in prior quarters, including the ~~preceding twelve months.~~

impact of longer duration surety bonds and multi-year management liability policies.

Net Investment Income

Net investment income in the first quarter of ~~2022~~2023 was ~~$59~~$73 million, ~~comparable with~~$14 million or 24% higher than in the same period of ~~2021.~~2022. Included in Bond & Specialty Insurance are certain legal entities whose invested assets and related net investment income are reported exclusively in this segment and not allocated among all business segments. Refer to the ~~“Net~~“Revenues—Net Investment Income” section of “Consolidated Results of Operations” herein for a discussion of the ~~decrease~~increase in the Company’s consolidated net investment income in the first quarter of ~~2022~~2023 compared with the same period of ~~2021.~~2022. In addition, refer to note 2 of the notes to the consolidated financial statements in the Company’s ~~2021~~2022 Annual Report for a discussion of the Company’s net investment income allocation methodology.

3738

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Claims and Expenses

Claims and Claim Adjustment Expenses

Claims and claim adjustment expenses in the first quarter of ~~2022~~2023 were ~~$354~~$380 million, ~~$20~~$26 million or ~~5% lower~~7% higher than in the same period of ~~2021,~~2022, primarily reflecting the impacts of (i) ~~lower catastrophe losses,~~higher business volumes and (ii) loss activity related to the disruption in the banking sector, partially offset by (iii) higher net favorable prior year reserve ~~development and (iii) elevated other loss activity in the prior year quarter, partially offset by (iv) higher business volumes.~~

development.

Amortization of Deferred Acquisition Costs

Amortization of deferred acquisition costs in the first quarter of ~~2022~~2023 was ~~$149~~$160 million, ~~$15~~$11 million or ~~11%~~7% higher than in the same period of ~~2021,~~2022, generally consistent with the increase in earned premiums.

General and Administrative Expenses

General and administrative expenses in the first quarter of ~~2022~~2023 were ~~$141~~$165 million, ~~$11~~$24 million or 8%17% higher than in the same period of ~~2021. The increase~~2022, primarily ~~reflected the impact of~~reflecting higher ~~business volumes.~~

employee and technology related expenses.

Income Tax Expense

Income tax expense in the first quarter of ~~2022~~2023 was ~~$22~~$41 million, ~~$10~~$19 million or ~~31% lower~~86% higher than in the same period of ~~2021,~~2022, primarily reflecting the $24 million reduction in income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters ~~partially offset by~~and the impact of the ~~$70~~$9 million increase in segment income before income ~~taxes.~~

taxes, partially offset by the one-time tax benefit of $9 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item.

Combined Ratio

The combined ratio of 80.0% in the first quarter of 2023 was 2.0 points higher than the combined ratio of 78.0% in the same period of 2022. The loss and loss adjustment expense ratio of 43.0% in the first quarter of ~~2022~~2023 was ~~7.2~~0.2 points ~~lower~~higher than the ~~combined ratio of 85.2% in the same period of 2021. The~~ loss and loss adjustment expense ratio of 42.8% in the same period of 2022. The underwriting expense ratio of 37.0% in the first quarter of ~~2022~~2023 was ~~7.1~~1.8 points ~~lower~~higher than the ~~loss and loss adjustment expense ratio of 49.9% in the same period of 2021. The~~ underwriting expense ratio of 35.2% in the ~~first quarter of 2022 was 0.1 points lower than the underwriting expense ratio of 35.3% in the~~ same period of ~~2021.~~

2022.

Net favorable prior year reserve development in the first quarters of 2023 and 2022 ~~and 2021~~ provided ~~4.3~~6.7 points and ~~2.1~~4.3 points of benefit, respectively, to the combined ratio. Catastrophe losses in the first quarters of ~~2022~~2023 and ~~2021~~2022 accounted for ~~0.1~~0.6 points and ~~3.1~~0.1 points, respectively, of the combined ratio. The underlying combined ratio in the first quarter of ~~2022~~2023 was ~~2.0~~3.9 points ~~lower~~higher than the ~~2021~~2022 ratio on the same basis, primarily reflecting the impacts of (i) ~~elevated other~~ loss activity related to the disruption in the ~~prior year quarter~~banking sector and (ii) higher general and administrative expenses, partially offset by (iii) the benefit of earned ~~pricing that exceeded loss cost trends.~~pricing.

~~Written Premiums~~

~~The Bond & Specialty Insurance segment’s gross and net written premiums were as follows:~~

Gross Written Premiums
Three Months Ended
March 31,
(in millions) 2022 2021
Domestic:
Management Liability $ 574 $ 502
Surety 296 235
Total Domestic 870 737
International 139 97
Total Bond & Specialty Insurance $ 1,009 $ 834

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued~~

Net Written Premiums
Three Months Ended
March 31,
(in millions) 2022 2021
Domestic:
Management Liability $ 505 $ 444
Surety 257 200
Total Domestic 762 644
International 120 79
Total Bond & Specialty Insurance $ 882 $ 723

~~Gross and net written premiums in the first quarter of 2022 increased by 21% and 22%, respectively, over the same period of 2021.~~

~~Domestic.~~ Net written premiums of $762 million in the first quarter of 2022 increased by 18% over the same period of 2021. Excluding the surety line of business, for which the following are not relevant measures, retention rates remained strong in the first quarter of 2022. Renewal premium changes in the first quarter of 2022 remained positive and were higher than in the same period of 2021. New business premiums in the first quarter of 2022 increased over the same period of 2021.

~~International.~~ ~~Net written premiums of $120 million in the first quarter of 2022 increased by 52% over the same period of 2021, primarily driven by increases in the United Kingdom and broader Europe.~~

~~Personal Insurance~~

~~Results of Personal Insurance were as follows:~~

Three Months Ended
March 31,
(dollars in millions) 2022 2021
Revenues
Earned premiums $ 3,123 $ 2,844
Net investment income 110 119
Fee income 7 6
Other revenues 21 23
Total revenues 3,261 2,992
Total claims and expenses 3,009 2,598
Segment income before income taxes 252 394
Income tax expense 27 80
Segment income $ 225 $ 314
Loss and loss adjustment expense ratio 69.5 % 63.6 %
Underwriting expense ratio 25.8 26.7
Combined ratio 95.3 % 90.3 %

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Written Premiums

The Bond & Specialty Insurance segment’s gross and net written premiums were as follows:


	Gross Written Premiums
	Three Months Ended March 31,
(in millions)	2023		2022

Domestic:
Management Liability	$	564	$	574
Surety	303		296
Total Domestic	867		870
International	143		139
Total Bond & Specialty Insurance	$	1,010	$	1,009


	Net Written Premiums
	Three Months Ended March 31,
(in millions)	2023		2022
Domestic:
Management Liability	$	511	$	505
Surety	257		257
Total Domestic	768		762
International	118		120
Total Bond & Specialty Insurance	$	886	$	882

Gross and net written premiums in the first quarter of 2023 were comparable with the same period of 2022.

Domestic. Net written premiums of $768 million in the first quarter of 2023 increased by 1% over the same period of 2022. Excluding the surety line of business, for which the following are not relevant measures, retention rates remained strong in the first quarter of 2023 and increased over the same period of 2022. Renewal premium changes in the first quarter of 2023 remained positive but were lower than in the same period of 2022. New business premiums in the first quarter of 2023 increased over the same period of 2022.

International. Net written premiums of $118 million in the first quarter of 2023 decreased by 2% from the same period of 2022, primarily driven by the impact of changes in foreign currency exchange rates, partially offset by an increase in Canada.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Personal Insurance

Results of Personal Insurance were as follows:


	Three Months Ended March 31,
(dollars in millions)	2023			2022
Revenues
Earned premiums	$	3,502		$	3,123
Net investment income	117			110
Fee income	7			7
Other revenues	23			21
Total revenues	3,649			3,261
Total claims and expenses	3,591			3,009
Segment income before income taxes	58			252
Income tax expense (benefit)	(25)			27
Segment income	$	83		$	225

Loss and loss adjustment expense ratio	76.3		%	69.5		%
Underwriting expense ratio	25.2			25.8
Combined ratio	101.5		%	95.3		%

Overview

Segment income in the first quarter of ~~2022~~2023 was ~~$225~~$83 million, ~~$89~~$142 million or ~~28%~~63% lower than segment income of ~~$314~~$225 million in the same period of ~~2021.~~2022. The decrease in segment income before income taxes primarily reflected the pre-tax impacts of (i) ~~lower~~higher catastrophe losses, partially offset by (ii) higher underlying underwriting margins and ~~(ii) lower~~(iii) higher net favorable prior year reserve ~~development, partially offset by (iii) lower catastrophe losses.~~development. Catastrophe losses in the first quarters of 2023 and 2022 were $331 million and $80 million, respectively. Net favorable prior year reserve development in the first quarters of 2023 and 2022 ~~and 2021~~ was $5$28 million and ~~$168 million, respectively. Catastrophe losses in the first quarters of 2022 and 2021 were $80 million and $305~~$5 million, respectively. The ~~lower~~higher underlying underwriting margins primarily reflected the impacts of (i) ~~a comparison to a low level~~the benefit of ~~loss activity in the prior year quarter in the automobile product line and (ii) elevated severity in the current quarter~~earned pricing in both the automobile and homeowners and other product lines, (ii) higher business volumes and (iii) lower losses in the homeowners and other product line, partially offset by ~~(iii) higher business volumes. Income~~(iv) elevated losses in the automobile product line. The segment recorded an income tax ~~expense~~benefit in the first quarter of ~~2022 was lower than~~2023 compared with income tax expense in the same period of ~~2021,~~2022. The change in income taxes primarily ~~reflecting~~reflected the impact of the decrease in segment income before income taxes and a one-time tax benefit of $31 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item, partially offset by a $20 million reduction in income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters.

Revenues

Earned Premiums

Earned premiums in the first quarter of ~~2022~~2023 were ~~$3.12~~$3.50 billion, ~~$279~~$379 million or ~~10%~~12% higher than in the same period of ~~2021,~~2022, primarily reflecting the increase in net written premiums over the preceding twelve months.

Net Investment Income

Net investment income in the first quarter of ~~2022~~2023 was ~~$110~~$117 million, $9$7 million or ~~8% lower~~6% higher than in the same period of ~~2021.~~2022. Refer to the ~~“Net~~“Revenues—Net Investment Income” section of the “Consolidated Results of Operations” discussion herein for a description of the factors contributing to the ~~decrease~~increase in the Company’s consolidated net investment income in the first quarter of ~~2022~~2023 compared with the same period of ~~2021.~~2022. In addition, refer to note 2 of the notes to the consolidated financial statements in the Company’s ~~2021~~2022 Annual Report for a discussion of the Company’s net investment income allocation methodology.

Other Revenues

Other revenues in the first quarters of ~~2022~~2023 and ~~2021~~2022 primarily consisted of installment premium charges.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Claims and Expenses

Claims and Claim Adjustment Expenses

Claims and claim adjustment expenses in the first quarter of ~~2022~~2023 were ~~$2.17~~$2.67 billion, ~~$363~~$501 million or ~~20%~~23% higher than in the same period of ~~2021,~~2022, primarily reflecting the impacts of (i) ~~loss cost trends, including elevated severity in the current quarter in both the automobile and homeowners and other product lines,~~higher catastrophe losses, (ii) ~~lower net favorable prior year reserve development, (iii)~~ higher business volumes and ~~(iv) a comparison to a low level of loss activity in the prior year quarter~~(iii) elevated losses in the automobile product line, partially offset by (iv) lower losses in the homeowners and other product line and (v) ~~lower catastrophe losses.~~higher net favorable prior year reserve development.

Factors contributing to net favorable prior year reserve development during the first quarter of 2023 are discussed in more detail in note 7 of the notes to the unaudited consolidated financial statements. Net favorable prior year reserve development was not significant in the first quarter of 2022. Factors contributing to net favorable prior year reserve development during the first quarter of 2021 are discussed in more detail in note 7 of notes to the unaudited consolidated financial statements.

Amortization of Deferred Acquisition Costs

Amortization of deferred acquisition costs in the first quarter of ~~2022~~2023 was ~~$493~~$560 million, ~~$47~~$67 million or ~~11%~~14% higher than in the same period of ~~2021,~~2022, generally consistent with the increase in earned premiums.

General and Administrative Expenses

General and administrative expenses in the first quarter of ~~2022~~2023 were ~~$345~~$359 million, ~~comparable with~~$14 million or 4% higher than in the same period of ~~2021.~~

2022, primarily reflecting the impact of higher business volumes.

Income Tax Expense (Benefit)

~~Income~~The income tax ~~expense~~benefit in the first quarter of ~~2022~~2023 was $25 million, compared with income tax expense of $27 million ~~$53 million or 66% lower than~~ in the same period of ~~2021,~~2022. The change in income taxes primarily ~~reflecting~~reflected the impact of the ~~$142~~$194 million decrease in segment income before income taxes and the one-time tax benefit of $31 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item, partially offset by the $20 million reduction in income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters.

Combined Ratio

The combined ratio of 101.5% in the first quarter of 2023 was 6.2 points higher than the combined ratio of 95.3% in the same period of 2022. The loss and loss adjustment expense ratio of 76.3% in the first quarter of 2023 was 6.8 points higher than the loss and loss adjustment expense ratio of 69.5% in the same period of 2022. The underwriting expense ratio of 25.2% in the first quarter of 2023 was 0.6 points lower than the underwriting expense ratio of 25.8% in the same period of 2022.

Catastrophe losses in the first quarters of 2023 and 2022 accounted for 9.4 points and 2.6 points, respectively, of the combined ratio. Net favorable prior year reserve development in the first quarters of 2023 and 2022 provided 0.8 points and 0.1 points of benefit, respectively, to the combined ratio. The underlying combined ratio in the first quarter of 2023 was 0.1 points higher than the 2022 ratio on the same basis, primarily reflecting the impacts of (i) elevated losses in the automobile product line, largely offset by (ii) the benefit of earned pricing in both the automobile and homeowners and other product lines, (iii) lower losses in the homeowners and other product line and (iv) a lower expense ratio.

4042

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

~~Combined Ratio~~

The combined ratio of 95.3% in the first quarter of 2022 was 5.0 points higher than the combined ratio of 90.3% in the same period of 2021. The loss and loss adjustment expense ratio of 69.5% in the first quarter of 2022 was 5.9 points higher than the loss and loss adjustment expense ratio of 63.6% in the same period of 2021. The underwriting expense ratio of 25.8% for the first quarter of 2022 was 0.9 points lower than the underwriting expense ratio of 26.7% in the same period of 2021.

Catastrophe losses in the first quarters of 2022 and 2021 accounted for 2.6 points and 10.8 points, respectively, of the combined ratio. Net favorable prior year reserve development in the first quarters of 2022 and 2021 provided 0.1 points and 5.9 points of benefit, respectively, to the combined ratio. The underlying combined ratio in the first quarter of 2022 was 7.4 points higher than the 2021 ratio on the same basis, primarily reflecting the impacts of (i) a comparison to a low level of loss activity in the prior year quarter in the automobile product line and (ii) elevated severity in the current quarter in both the automobile and homeowners and other product lines, partially offset by (iii) a lower expense ratio.

Written Premiums

Personal Insurance’s gross and net written premiums were as follows:


		Gross Written Premiums				Gross Written Premiums
		Three Months Ended March 31,					Three Months Ended March 31,
(in millions)	(in millions)	2022		2021				(in millions)	2023		2022

Domestic:	Domestic:							Domestic:
Automobile	Automobile	$	1,507	$	1,387			Automobile	$	1,661	$	1,507
Homeowners and Other	Homeowners and Other	1,472		1,268				Homeowners and Other	1,711		1,472
Total Domestic	Total Domestic	2,979		2,655				Total Domestic	3,372		2,979
International	International	147		142				International	137		147
Total Personal Insurance	Total Personal Insurance	$	3,126	$	2,797			Total Personal Insurance	$	3,509	$	3,126

Net Written Premiums
Three Months Ended
March 31,
(in millions) 2022 2021
Domestic:
Automobile $ 1,496 $ 1,375
Homeowners and Other 1,344 1,144
Total Domestic 2,840 2,519
International 143 138
Total Personal Insurance $ 2,983 $ 2,657


	Net Written Premiums
	Three Months Ended March 31,
(in millions)	2023		2022
Domestic:
Automobile	$	1,654	$	1,496
Homeowners and Other	1,565		1,344
Total Domestic	3,219		2,840
International	134		143
Total Personal Insurance	$	3,353	$	2,983

Gross and net written premiums in the first quarter of ~~2022~~2023 both increased by 12% over the same period of ~~2021.~~

2022.

Domestic

Automobile net written premiums of ~~$1.50~~$1.65 billion in the first quarter of ~~2022~~2023 increased by 9%11% over the same period of ~~2021.~~2022. Retention rates remained strong in the first quarter of 2023 but were lower than the same period of 2022. Renewal premium changes in the first quarter of ~~2022~~2023 remained positive and were higher than in the same period of ~~2021.~~2022. New business premiums in the first quarter of ~~2022 increased over~~2023 decreased from the same period of ~~2021.~~

2022.

Homeowners and Other net written premiums of ~~$1.34~~$1.57 billion in the first quarter of ~~2022~~2023 increased by ~~17%~~16% over the same period of ~~2021.~~2022. Retention rates remained strong in the first quarter of 2023 but were lower than the same period of 2022. Renewal premium changes in the first quarter of ~~2022~~2023 remained positive and were higher than in the same period of ~~2021.~~2022. New business premiums in the first quarter of 2023 were comparable with the same period of 2022.

For its Domestic business, Personal Insurance had approximately 9.2 million and 9.0 million active policies at March 31, 2023 and 2022, respectively.

International

International net written premiums of $134 million in the first quarter of 2023 decreased by 6% from the same period of ~~2021.~~2022, driven by the impact of changes in foreign currency exchange rates.

For its International business, Personal Insurance had approximately 448,000 and 473,000 active policies at March 31, 2023 and 2022, respectively.

4143

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

~~For its Domestic business, Personal Insurance had approximately 9.0 million and 8.5 million active policies at March 31, 2022 and 2021, respectively.~~

~~International~~

~~International net written premiums of $143 million in the first quarter of 2022 increased by 4% over the same period of 2021.~~

~~For its International business, Personal Insurance had approximately 473,000 and 490,000 active policies at March 31, 2022 and 2021, respectively.~~

Interest Expense and Other


		Three Months Ended March 31,				Three Months Ended March 31,
(in millions)	(in millions)	2022		2021			(in millions)	2023		2022
Income (loss)	Income (loss)	$	(74)	$	(69)		Income (loss)	$	(76)	$	(74)

The Income (loss) for Interest Expense and Other in the first quarters of 2023 and 2022 ~~and 2021~~ was ~~$(74)~~$(76) million and ~~$(69)~~$(74) million, respectively. Pre-tax interest expense for the first quarters of 2023 and 2022 ~~and 2021~~ was ~~$87~~$88 million and ~~$82~~$87 million, respectively. After-tax interest expense for the first quarters of 2023 and 2022 ~~and 2021~~ was ~~$69~~$70 million and ~~$65~~$69 million, respectively.

ASBESTOS CLAIMS AND LITIGATION

The Company believes that the property and casualty insurance industry has suffered from court decisions and other trends that have expanded insurance coverage for asbestos claims far beyond the original intent of insurers and policyholders. The Company has received and continues to receive a significant number of asbestos claims. Factors underlying these claim filings include continued intensive advertising by lawyers seeking asbestos claimants and the focus by plaintiffs on defendants, such as manufacturers of talcum powder, who were not traditionally primary targets of asbestos litigation. The focus on these defendants is primarily the result of the number of traditional asbestos defendants who have sought bankruptcy protection in previous years. The bankruptcy of many traditional defendants has also caused increased settlement demands against those policyholders who are not in bankruptcy but remain in the tort system. Currently, in many jurisdictions, those who allege very serious injury and who can present credible medical evidence of their injuries are receiving priority trial settings in the courts, while those who have not shown any credible disease manifestation are having their hearing dates delayed or placed on an inactive docket. Prioritizing claims involving credible evidence of injuries, along with the focus on defendants who were not traditionally primary targets of asbestos litigation, contributes to the claims and claim adjustment expense payment patterns experienced by the Company. The Company’s asbestos-related claims and claim adjustment expense experience also has been impacted by the unavailability of other insurance sources potentially available to policyholders, whether through exhaustion of policy limits or through the insolvency of other participating insurers.

The Company continues to be involved in disputes, including litigation, with a number of policyholders, some of whom are in bankruptcy, over coverage for asbestos-related claims. Many coverage disputes with policyholders are only resolved through settlement agreements. Because many policyholders make exaggerated demands, it is difficult to predict the outcome of settlement negotiations. Settlements involving bankrupt policyholders may include extensive releases which are favorable to the Company, but which could result in settlements for larger amounts than originally anticipated. Although the Company has seen a reduction in the overall risk associated with these disputes, it remains difficult to predict the ultimate cost of these claims. As in the past, the Company will continue to pursue settlement opportunities.

In addition to claims against policyholders, proceedings have been launched directly against insurers, including the Company, by individuals challenging insurers’ conduct with respect to the handling of past asbestos claims and by individuals seeking damages arising from alleged asbestos-related bodily injuries. It is possible that other direct actions against insurers, including the Company, could be filed in the future. It is difficult to predict the outcome of these proceedings, including whether the plaintiffs would be able to sustain these actions against insurers based on novel legal theories of liability. The Company believes it has meritorious defenses to any such claims and has received favorable rulings in certain jurisdictions.

Because each policyholder presents different liability and coverage issues, the Company generally reviews the exposure presented by each policyholder with open claims at least annually. Among the factors the Company may consider in the course of this review are: available insurance coverage, including the role of any umbrella or excess insurance the Company has issued to the policyholder; limits and deductibles; an analysis of the policyholder’s potential liability; the jurisdictions involved; past and anticipated future claim activity and loss development on pending claims; past settlement values of similar claims; allocated

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued~~

claim adjustment expense; the potential role of other insurance; the role, if any, of non-asbestos claims or potential non-asbestos claims in any resolution process; and applicable coverage defenses or determinations, if any, including the determination as to whether or not an asbestos claim is a products/completed operation claim subject to an aggregate limit and the available coverage, if any, for that claim.

The Company’s quarterly asbestos reserve reviews include an analysis of exposure and claim payment patterns by policyholder, as well as recent settlements, policyholder bankruptcies, judicial rulings and legislative actions. The Company also analyzes developing payment patterns among policyholders and the assumed reinsurance component of reserves, as well as projected reinsurance billings and recoveries. In addition, the Company reviews its historical gross and net loss and expense paid

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

experience, year-by-year, to assess any emerging trends, fluctuations, or characteristics suggested by the aggregate paid activity. Conventional actuarial methods are not utilized to establish asbestos reserves, and the Company’s evaluations have not resulted in a reliable method to determine a meaningful average asbestos defense or indemnity payment.

Over the past decade, the property and casualty insurance industry, including the Company, has experienced net unfavorable prior year reserve development with regard to asbestos reserves, but the Company believes that over that period there has been a reduction in the volatility associated with the Company’s overall asbestos exposure as the overall asbestos environment has evolved from one dominated by exposure to significant litigation risks, particularly coverage disputes relating to policyholders in bankruptcy who were asserting that their claims were not subject to the aggregate limits contained in their policies, to an environment primarily driven by a frequency of litigation related to individuals with mesothelioma. The Company’s overall view of the current underlying asbestos environment is essentially unchanged from recent periods, and there remains a high degree of uncertainty with respect to future exposure to asbestos claims.

Net asbestos paid loss and loss expenses in the first three months of 2023 and 2022 ~~and 2021~~ were ~~$36~~$33 million and ~~$49~~$36 million, respectively. Net asbestos reserves were ~~$1.30~~$1.27 billion and ~~$1.29~~$1.30 billion at March 31, ~~2022~~2023 and ~~March 31, 2021,~~2022, respectively.

The following table displays activity for asbestos losses and loss expenses and reserves:


(at and for the three months ended March 31, in millions)	(at and for the three months ended March 31, in millions)	2022		2021		(at and for the three months ended March 31, in millions)	2023		2022
Beginning reserves:	Beginning reserves:					Beginning reserves:
Gross	Gross	$	1,687	$	1,668	Gross	$	1,674	$	1,687
Ceded	Ceded	(346)		(330)		Ceded	(369)		(346)
Net	Net	1,341		1,338		Net	1,305		1,341

Incurred losses and loss expenses:	Incurred losses and loss expenses:					Incurred losses and loss expenses:
Gross	Gross	—		—		Gross	—		—
Ceded	Ceded	—		—		Ceded	—		—
Net	Net	—		—		Net	—		—

Paid loss and loss expenses:	Paid loss and loss expenses:					Paid loss and loss expenses:
Gross	Gross	52		52		Gross	54		52
Ceded	Ceded	(16)		(3)		Ceded	(21)		(16)
Net	Net	36		49		Net	33		36

Foreign exchange and other:	Foreign exchange and other:					Foreign exchange and other:
Gross	Gross	—		—		Gross	—		—
Ceded	Ceded	(1)		—		Ceded	—		(1)
Net	Net	(1)		—		Net	—		(1)

Ending reserves:	Ending reserves:					Ending reserves:
Gross	Gross	1,635		1,616		Gross	1,620		1,635
Ceded	Ceded	(331)		(327)		Ceded	(348)		(331)
Net	Net	$	1,304	$	1,289	Net	$	1,272	$	1,304

See “—Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves.”

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

ENVIRONMENTAL CLAIMS AND LITIGATION

The Company has received and continues to receive claims from policyholders who allege that they are liable for injury or damage arising out of the alleged storage, emissions or disposal of toxic substances, frequently under policies issued prior to the mid-1980s. These claims are mainly brought pursuant to various state or federal statutes that require a liable party to undertake or pay for environmental remediation. For example, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) enables private parties as well as federal and state governments to take action with respect to releases and threatened releases of hazardous substances. This federal statute permits the recovery of response costs from some liable parties and may require liable parties to undertake their own remedial action. Liability under these statutes may be joint and several with other responsible parties. The Company has also been, and continues to be, involved in litigation involving insurance coverage issues pertaining to environmental claims. The Company believes that some court decisions pertaining to environmental claims have interpreted the insurance coverage to be broader than the original intent of the insurers and policyholders.

In establishing environmental reserves, the Company evaluates the exposure presented by each policyholder and the anticipated cost of resolution, if any. In the course of its analysis, the Company generally considers the probable liability, available coverage and relevant judicial interpretations. In addition, the Company considers the many variables presented, such as: the nature of the alleged activities of the policyholder at each site; the number of sites; the total number of potentially responsible parties at each site; the nature of the alleged environmental harm and the corresponding remedy at each site; the nature of government enforcement activities at each site; the ownership and general use of each site; the overall nature of the insurance relationship between the Company and the policyholder, including the role of any umbrella or excess insurance the Company has issued to the policyholder; the involvement of other insurers; the potential for other available coverage, including the number of years of coverage; the role, if any, of non-environmental claims or potential non-environmental claims in any resolution process; and the applicable law in each jurisdiction. The evaluation of the exposure presented by a policyholder can change as information concerning that policyholder and the many variables presented is developed. Conventional actuarial methods are not used to estimate these reserves.

Over the past several years, the Company has experienced generally favorable trends in the number of new policyholders tendering environmental claims for the first time and in the number of pending declaratory judgment actions relating to environmental matters. These policyholders continue to present smaller exposures, are involved in fewer hazardous waste sites and are lower tier defendants than policyholders presenting such claims in the past. Further, in many instances, clean-up costs have been reduced because regulatory agencies are willing to accept risk-based site analyses and more efficient clean-up technologies. However, the degree to which those favorable trends have continued has been less than anticipated. In addition, reserve development on existing environmental claims as well as the costs associated with coverage litigation on environmental matters has been greater than anticipated, driven by claims and legal developments in a limited number of jurisdictions. As a result of these factors, the Company increased its net environmental reserves by ~~$45~~$31 million and ~~$33~~$45 million in the first three months of ~~2022~~2023 and ~~2021,~~2022, respectively. Net environmental paid loss and loss expenses in the first three months of 2023 and 2022 ~~and 2021~~ were ~~$15~~$25 million and ~~$23~~$15 million, respectively. Net environmental reserves were ~~$351~~$377 million and ~~$316~~$351 million at March 31, ~~2022~~2023 and ~~March 31, 2021,~~2022, respectively.

UNCERTAINTY REGARDING ADEQUACY OF ASBESTOS AND ENVIRONMENTAL RESERVES

As a result of the processes and procedures discussed above, management believes that the reserves carried for asbestos and environmental claims are appropriately established based upon known facts, current law and management’s judgment. However, the uncertainties surrounding the final resolution of these claims continue, and it is difficult to determine the ultimate exposure for asbestos and environmental claims and related litigation. As a result, these reserves are subject to revision as new information becomes available and as claims develop. The continuing uncertainties include, without limitation:

•the risks and lack of predictability inherent in complex litigation;

•a further increase in the cost to resolve, and/or the number of, asbestos and environmental claims beyond that which is anticipated;

•the emergence of a greater number of asbestos claims than anticipated as a result of extended life expectancies resulting from medical advances and lifestyle improvements;

•the role of any umbrella or excess policies we have issued;

•the resolution or adjudication of disputes concerning coverage for asbestos and environmental claims in a manner inconsistent with our previous assessment of these disputes;

•the number and outcome of direct actions against us;

4446

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

•future developments pertaining to our ability to recover reinsurance for asbestos and environmental claims;

•any impact on asbestos defendants we insure due to the bankruptcy of other asbestos defendants;

•the unavailability of other insurance sources potentially available to policyholders, whether through exhaustion of policy limits or through the insolvency of other participating insurers; and

•uncertainties arising from the insolvency or bankruptcy of policyholders.

Changes in the legal, regulatory and legislative environment may impact the future resolution of asbestos and environmental claims and result in adverse loss reserve development. The emergence of a greater number of asbestos or environmental claims beyond that which is anticipated may result in adverse loss reserve development. Changes in applicable legislation and future court and regulatory decisions and interpretations, including the outcome of legal challenges to legislative and/or judicial reforms establishing medical criteria for the pursuit of asbestos claims, could affect the settlement of asbestos and environmental claims. It is also difficult to predict the ultimate outcome of complex coverage disputes until settlement negotiations near completion and significant legal questions are resolved or, failing settlement, until the dispute is adjudicated. This is particularly the case with policyholders in bankruptcy where negotiations often involve a large number of claimants and other parties and require court approval to be effective. As part of its continuing analysis of asbestos and environmental reserves, the Company continues to study the implications of these and other developments.

Because of the uncertainties set forth above, additional liabilities may arise for amounts in excess of the Company’s current reserves. In addition, the Company’s estimate of claims and claim adjustment expenses may change. These additional liabilities or increases in estimates, or a range of either, cannot now be reasonably estimated and could result in income statement charges that could be material to the Company’s operating results in future periods.

INVESTMENT PORTFOLIO

The Company’s invested assets at March 31, ~~2022~~2023 were ~~$83.66~~$82.04 billion, of which 93% was invested in fixed maturity and short-term investments, 1% in equity securities, 1% in real estate investments and 5% in other investments. Because the primary purpose of the investment portfolio is to fund future claims payments, the Company employs a thoughtful investment philosophy that focuses on appropriate risk-adjusted returns. A significant majority of funds available for investment are deployed in a widely diversified portfolio of high quality, liquid, taxable U.S. government, tax-exempt and taxable U.S. municipal and taxable corporate and U.S. agency mortgage-backed bonds.

The carrying value of the Company’s fixed maturity portfolio at March 31, ~~2022~~2023 was ~~$74.39~~$72.91 billion. The Company closely monitors the duration of its fixed maturity investments, and investment purchases and sales are executed with the objective of having adequate funds available to satisfy the Company’s insurance and debt obligations. The weighted average credit quality of the Company’s fixed maturity portfolio, both including and excluding U.S. Treasury securities, was “Aa2” at both March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. Below investment grade securities represented ~~1.4%~~1.3% of the total fixed maturity investment portfolio at both March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. The weighted average effective duration of fixed maturities and short-term securities was 4.5 (4.7 excluding short-term securities) at March 31, ~~2022~~2023 and ~~4.2 (4.4~~4.6 (4.8 excluding short-term securities) at December 31, ~~2021.~~2022.

Obligations of U.S. States, Municipalities and Political Subdivisions

The Company’s fixed maturity investment portfolio at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 included ~~$35.29~~$30.03 billion and ~~$36.86~~$31.38 billion, respectively, of securities which are obligations of U.S. states, municipalities and political subdivisions (collectively referred to as the municipal bond portfolio). The municipal bond portfolio is diversified across the United States, the District of Columbia and Puerto Rico and includes general obligation and revenue bonds issued by states, cities, counties, school districts and similar issuers. Included in the municipal bond portfolio at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~$3.98~~$1.73 billion and ~~$4.03~~$2.34 billion, respectively, of pre-refunded bonds, which are bonds for which U.S. states or municipalities have established irrevocable trusts, almost exclusively comprised of U.S. Treasury securities and obligations of U.S. government and government agencies and authorities. These trusts were created to fund the payment of principal and interest due under the bonds. The irrevocable trusts are verified as to their sufficiency by an independent verification agent of the underwriter, issuer or trustee. All of the Company’s holdings of securities issued by Puerto Rico and related entities have either been pre-refunded and therefore are defeased by U.S. Treasury securities or have FHA guarantees subject to federal appropriation.

The Company bases its investment decision on the underlying credit characteristics of the municipal security. The weighted average credit rating of the municipal bond portfolio was ~~"Aaa/Aa1"~~“Aaa/Aa1” at both March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Mortgage-Backed Securities, Collateralized Mortgage Obligations and Pass-Through Securities

The Company’s fixed maturity investment portfolio at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 included ~~$1.76~~$2.86 billion and ~~$1.82~~$1.99 billion, respectively, of residential mortgage-backed securities, including pass-through securities and collateralized mortgage obligations (CMOs), all of which are subject to prepayment risk (either shortening or lengthening of duration). While prepayment risk for securities and its effect on income cannot be fully controlled, particularly when interest rates move dramatically, the Company’s ~~investment~~investment strategy generally favors securities that reduce this risk within expected interest rate ranges. Included in the totals at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 were ~~$766 million~~$1.54 billion and ~~$846~~$922 million, respectively, of GNMA, FNMA, FHLMC (excluding FHA project loans) and Canadian government guaranteed residential mortgage-backed pass-through securities classified as available for sale. Also included in those totals were residential CMOs classified as available for sale with a fair value of ~~$995 million~~$1.32 billion and ~~$971 million~~$1.07 billion at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Approximately ~~41%~~42% and ~~47%~~40% of the Company’s CMO holdings at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, were guaranteed by or fully collateralized by securities issued by GNMA, FNMA or FHLMC. The weighted average credit rating of the ~~$591~~$767 million and ~~$511~~$647 million of non-guaranteed CMO holdings was ~~"Aaa/Aal"~~“Aaa/Aal” at both March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. The weighted average credit rating of all of the above securities was ~~"Aaa/Aa1"~~“Aaa/Aa1” at both March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. For further discussion regarding the Company’s investments in residential CMOs, see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investment Portfolio” in the Company’s ~~2021~~2022 Annual Report.

Equity Securities, Real Estate and Short-Term Investments

See note 1 of the notes to the consolidated financial statements in the Company’s ~~2021~~2022 Annual Report for further information about these invested asset classes.

Other Investments

The Company also invests in private equity, hedge fund and real estate partnerships, and joint ventures. These asset classes have historically provided a higher return than investments in fixed maturities but are subject to more volatility. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the carrying value of the Company’s other investments was ~~$3.96~~$4.28 billion and ~~$3.86~~$4.07 billion, respectively.

Investments in private equity, hedge fund and real estate partnerships are accounted for under the equity method of accounting ~~and~~and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income from these other ~~investments~~investments is generally reflected in the ~~Company's~~Company’s financial statements on a quarter lag basis.

REINSURANCE RECOVERABLES

The Company reinsures a portion of the risks it underwrites in order to control its exposure to losses. For a description of the Company’s reinsurance recoverables, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reinsurance Recoverables” in the Company’s ~~2021~~2022 Annual Report.

The following table summarizes the composition of the Company’s reinsurance recoverables:


(in millions)	(in millions)	March 31, 2022		December 31, 2021		(in millions)	March 31, 2023		December 31, 2022
Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses	Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses	$	4,159	$	3,931	Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses	$	3,784	$	3,792
Gross structured settlements	Gross structured settlements	2,900		2,900		Gross structured settlements	2,784		2,802
Mandatory pools and associations	Mandatory pools and associations	1,810		1,762		Mandatory pools and associations	1,654		1,601
Gross reinsurance recoverables	Gross reinsurance recoverables	8,869		8,593		Gross reinsurance recoverables	8,222		8,195
Allowance for estimated uncollectible reinsurance	Allowance for estimated uncollectible reinsurance	(135)		(141)		Allowance for estimated uncollectible reinsurance	(131)		(132)
Net reinsurance recoverables	Net reinsurance recoverables	$	8,734	$	8,452	Net reinsurance recoverables	$	8,091	$	8,063

Net reinsurance recoverables at March 31, ~~2022~~2023 increased by ~~$282~~$28 million from December 31, ~~2021,~~2022, primarily ~~reflecting the impact of fully reinsured property losses associated with fronting arrangements,~~due to an increase in mandatory pools and associations, partially offset by ~~cash collections~~a decrease in ~~the first three months of 2022.~~gross structured settlements.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

OUTLOOK

The following discussion provides outlook information for certain key drivers of the Company’s results of operations and capital position.

Premiums. The Company’s earned premiums are a function of net written premium volume. Net written premiums comprise both renewal business and new business and are recognized as earned premium over the term of the underlying policies. When business renews, the amount of net written premiums associated with that business may increase or decrease (renewal premium change) as a result of increases or decreases in rate and/or insured exposures, which the Company considers as a measure of units of exposure (such as the number and value of vehicles or properties insured). Net written premiums from both renewal and new business, and therefore earned premiums, are impacted by competitive market conditions as well as general economic conditions, which, particularly in the case of Business Insurance, affect audit premium adjustments, policy endorsements and mid-term cancellations. Net written premiums may also be impacted by the structure of reinsurance programs and related costs, as well as changes in foreign currency exchange rates.

Overall, the Company expects that retention levels (the amount of expiring premium that renews, before the impact of renewal premium changes) will remain strong by historical standards during the remainder of ~~2022.~~2023.

Property and casualty insurance market conditions are expected to remain competitive during the remainder of ~~2022~~2023 for new business. In each of the Company’s business segments, new business generally has less of an impact on underwriting profitability than renewal business, given the volume of new business relative to renewal business. However, in periods of meaningful increases in new business, despite its positive impact on underwriting gains over time, the impact of higher new business levels may negatively impact the combined ratio for a period of time. In periods of meaningful decreases in new business, despite its negative impact on underwriting gains over time, the impact of lower new business levels may positively impact the combined ratio for a period of time.

Effective January 1, 2023, the Company entered into a quota share reinsurance agreement with subsidiaries of Fidelis Insurance Holdings Limited (Fidelis) pursuant to which the Company assumes 20% of the business written by Fidelis during 2023, subject to a loss ratio cap. The Company’s portion of net written premiums from Fidelis is expected to be approximately $550 million to $600 million for the full year and will be reported as part of the International results of Business Insurance. The Company also has a minority investment in Fidelis.

Underwriting Gain/Loss. The Company’s underwriting gain/loss can be significantly impacted by catastrophe losses and net favorable or unfavorable prior year reserve development, as well as underlying underwriting margins. Underlying underwriting margins can be impacted by a number of factors, including variability in non-catastrophe weather, large loss and other loss activity; changes in current period loss estimates resulting from prior period loss development; changes in loss cost ~~trends, including as a result of COVID-19 and related economic conditions;~~trends; changes in business mix; changes in reinsurance coverages and/or costs; premium adjustments; and variability in expenses and assessments.

Catastrophe losses and non-catastrophe weather-related losses are inherently unpredictable from period to period. The Company’s results of operations could be adversely impacted if significant catastrophe and non-catastrophe weather-related losses were to occur.

On average for the ten-year period ended December 31, ~~2021,~~2022, the Company experienced approximately ~~40%~~41% of its annual catastrophe losses during the second quarter, primarily arising out of severe wind and hail storms, including tornadoes. Hurricanes, wildfires and winter storms tend to happen at other times of the year and can also have a material impact on the ~~Company's~~Company’s results of operations. Catastrophe losses incurred in a particular quarter in any given year may differ materially from historical experience. In addition, most of the ~~Company's~~Company’s reinsurance programs renew on January 1 or July 1 of each year, and, therefore, any changes to the availability, cost or coverage terms of such programs will be effective after such dates.

Over much of the past decade, the Company’s results have included significant amounts of net favorable prior year reserve development driven by better than expected loss experience. However, given the inherent uncertainty in estimating claims and claim adjustment expense reserves, loss experience could develop such that the Company recognizes in future periods higher or lower levels of favorable prior year reserve development, no favorable prior year reserve development or unfavorable prior year reserve development. In addition, the ongoing review of prior year claims and claim adjustment expense reserves, or other changes in current period circumstances, may result in the Company revising current year loss estimates upward or downward in future periods of the current year.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

It is possible that changes in economic conditions, the supply chain, the labor market and geopolitical tensions, as well as steps taken by federal, state and/or local governments and the Federal Reserve could lead to higher or lower inflation than the Company anticipated, which could in turn lead to an increase or decrease in the Company’s loss costs and the need to strengthen or reduce claims and claim adjustment expense reserves. These impacts of inflation on loss costs and claims and claim adjustment expense reserves could be more pronounced for those lines of business that require a relatively longer period

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued~~

of time to finalize and settle claims for a given accident year and, accordingly, are relatively more inflation sensitive. Labor shortages, higher costs of used vehicles and parts, and increased demand and decreased supply for raw materials are adversely impacting severity in our auto and property businesses and may continue to do so in future quarters. For a further discussion, see “Part I—Item 1A—Risk Factors—If actual claims exceed our 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, our financial results could be materially and adversely affected” in the ~~Company's 2021~~Company’s 2022 Annual Report.

~~Economic conditions and therefore the~~The Company’s results of operations may be impacted by a ~~variety~~number of other factors, ~~as well, many of which could continue to be affected by COVID-19, such as~~including an economic slowdown, a recession, financial market volatility, disruption in the banking sector, supply chain disruptions, monetary and fiscal policy measures (including future actions or inactions of the United States government related to the “debt-ceiling”), heightened geopolitical tensions, fluctuations in interest rates and foreign currency exchange rates, the political and regulatory environment, changes to the U.S. Federal budget and potential changes in tax laws.

Investment Portfolio. The Company expects to continue to focus its investment strategy on maintaining a high-quality investment portfolio and a relatively short average effective duration. The weighted average effective duration of fixed maturities and short-term securities was 4.5 (4.7 excluding short-term securities) at March 31, ~~2022.~~2023. From time to time, the Company enters into short positions in U.S. Treasury futures contracts to manage the duration of its fixed maturity portfolio. At March 31, ~~2022,~~2023, the Company had no open U.S. Treasury futures contracts. The Company regularly evaluates its investment alternatives and mix. Currently, the majority of the Company’s investments are comprised of a widely diversified portfolio of high-quality, liquid, taxable U.S. government, tax-exempt and taxable U.S. municipal and taxable corporate and U.S. agency mortgage-backed bonds.

The Company also invests much smaller amounts in equity securities, real estate and private equity, hedge fund and real estate partnerships, and joint ventures. These investment classes have the potential for higher returns but also the potential for greater volatility and higher degrees of risk, including less stable rates of return and less liquidity.

Approximately ~~27%~~30% of the fixed maturity portfolio is expected to mature over the next three years (including the early redemption of bonds, assuming interest rates (including credit spreads) do not rise significantly by applicable call dates). As a result, the overall yield on and composition of its portfolio could be meaningfully impacted by the types of investments available for reinvestment with the proceeds of maturing bonds.

Net investment income is a material contributor to the Company’s results of operations. Based on our current expectations for ~~slightly higher levels of fixed income investments and~~ the impact of expected higher reinvestment yields on fixed income investments and slightly higher levels of fixed income investments, the Company expects that after-tax net investment income from that portfolio will be approximately ~~$440~~$530 million in the second quarter of ~~2022, $460~~2023, $555 million in the third quarter of ~~2022~~2023 and ~~$480~~$575 million in the fourth quarter of ~~2022.~~2023. This expectation could be impacted by the direction of interest rates and disruptions in global financial markets. Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income or loss from these other investments is generally reflected in the ~~Company's~~Company’s financial statements on a quarter lag basis. Net investment income from these other investments was particularly strong during 2021 reflecting strong global financial market performance. Given the particularly strong 2021 performance, the Company expects that net investment income from these other investments in 2022 will be significantly lower than in 2021. The Company’s net investment income in future periods from its non-fixed income investment portfolio will be impacted, positively or negatively, by the performance of global financial markets.

The Company had net pre-tax realized investment ~~losses~~gains of ~~$23~~$6 million in the first three months of ~~2022.~~2023. Changes in global financial markets could result in net realized investment gains or losses in the Company’s investment portfolio.

The Company had a net pre-tax unrealized investment loss of ~~$1.77~~$4.91 billion ~~($1.39~~($3.87 billion after-tax) in its fixed maturity investment portfolio at March 31, ~~2022,~~2023, compared to ~~a net pre-tax unrealized investment gain of $3.06~~$6.22 billion ($~~2.42~~4.90 billion after-tax) at December 31, ~~2021.~~2022. The net unrealized investment loss is primarily due to the impact of movements in interest rates. The decrease in the net unrealized investment loss in the first quarter of 2023 was due to decreases in interest rates. While the Company does not attempt to predict future interest rate movements, a rising interest rate environment ~~would reduce~~reduces the market value of fixed maturity investments and, therefore, ~~reduce~~reduces shareholders’ equity, and a declining interest rate environment ~~would have~~has the opposite effects. These net

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

unrealized losses are due to recent increases in interest rates; however, the net unrealized loss is considered temporary in nature as it is not due to credit impairments, there is no impact on expected contractual cash flows from fixed maturities, and the Company generally holds its fixed maturity investments to maturity. In addition, given the temporary nature of net unrealized losses combined with the Company’s strong operating cash flows (which include income received on investments) and the proceeds received upon maturity of the investments, the net unrealized investment loss is not expected to meaningfully impact the Company’s assessment of capital adequacy or liquidity. Equity securities, which include common and non-redeemable preferred stocks, are reported at fair value with changes in fair value recognized in net income.

Additionally, disruptions in global financial markets could also impact the market value of the Company’s investment portfolio. The ~~Company's~~Company’s investment portfolio has benefited from certain tax exemptions (primarily those related to interest from municipal bonds) and certain other tax laws, including, but not limited to, those governing dividends-received deductions and tax credits (such as foreign tax credits). Changes in these laws could adversely impact the value of the ~~Company's~~Company’s investment portfolio. See ~~"Our~~“Our businesses are

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued~~

heavily regulated by the states and countries in which we conduct business, including licensing, market conduct and financial supervision, and changes in regulation, including higher tax rates, may reduce our profitability and limit our ~~growth"~~growth” included in “Part I—Item 1A—Risk Factors” in the Company’s ~~2021~~2022 Annual Report.

For further discussion of the Company’s investment portfolio, see “Investment Portfolio.” For a discussion of the risks to the Company’s business during or following a financial market disruption and risks to the Company’s investment portfolio, see the risk factors entitled “During or following a period of financial market disruption or an economic downturn, our business could be materially and adversely affected” and “Our investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses” included in “Part I—Item 1A—Risk Factors” in the Company’s ~~2021~~2022 Annual Report. For a discussion of the risks to the Company’s investments from foreign currency exchange rate fluctuations, see the risk factor entitled “We are subject to additional risks associated with our business outside the United States” included in “Part I—Item 1A—Risk Factors” in the Company’s ~~2021~~2022 Annual Report and see “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk-Foreign Currency Exchange Rate Risk” in the Company’s ~~2021~~2022 Annual Report.

Capital Position. The Company believes it has a strong capital position and, as part of its ongoing efforts to create shareholder value, expects to continue to return capital not needed to support its business operations to its shareholders, subject to the considerations described below. The Company expects that, generally over time, the combination of dividends to common shareholders and common share repurchases will likely not exceed net income. The Company also expects that to the extent that it continues to grow premium volumes, the level of capital to support the ~~Company's~~Company’s financial strength ratings will also increase, and accordingly, the amount of capital returned to shareholders relative to earnings would be somewhat less than it otherwise would have been absent the growth in premium volumes. The timing and actual number of shares to be repurchased in the future will depend on a variety of additional factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, 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, changes in tax laws (including the Inflation Reduction Act) and other factors. For information regarding the Company’s common share repurchases in ~~2022,~~2023, see “Liquidity and Capital Resources” herein. S&P has announced that it intends to change its capital adequacy model. While the proposed model has not been finalized, it could increase the level of capital S&P requires for a particular financial strength rating. As part of its capital management strategy, the Company will continue to make its own assessment of the appropriate level of capital to support the Company’s business operations. For a discussion of the risks to the ~~Company's~~Company’s claims-paying and financial strength ratings, see the risk factor entitled “A downgrade in our claims-paying and financial strength ratings could adversely impact our business volumes, adversely impact our ability to access the capital markets and increase our borrowing costs” included in “Part I—Item 1A—Risk ~~Factors"~~Factors” in the ~~Company's 2021~~Company’s 2022 Annual Report.

As a result of the Company’s business outside of the United States, primarily in Canada, the United Kingdom (including Lloyd’s), the Republic of Ireland and in Brazil through a joint venture, the Company’s capital is also subject to the effects of changes in foreign currency exchange rates. Strengthening of the U.S. dollar in comparison to other currencies could result in a reduction in shareholders’ equity, while a weakening of the U.S. dollar in comparison to other currencies could result in an increase in ~~shareholders'~~shareholders’ equity. For additional discussion of the Company’s foreign exchange market risk exposure, see “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in the Company’s ~~2021~~2022 Annual Report.

Many of the statements in this “Outlook” section and in “Liquidity and Capital Resources” are forward-looking statements, which are subject to risks and uncertainties that are often difficult to predict and beyond the Company’s control. Actual results

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

could differ materially from those expressed or implied by such forward-looking statements. Further, such forward-looking statements speak only as of the date of this report and the Company undertakes no obligation to update them. See “—Forward-Looking Statements.” For a discussion of potential risks and uncertainties that could impact the Company’s results of operations or financial position, see “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations” herein and “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s ~~2021~~2022 Annual Report, in each case as updated by the ~~Company's~~Company’s periodic filings with the SEC.

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued~~

LIQUIDITY AND CAPITAL RESOURCES

Consistent with 2021, the Company's liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the first three months of 2022. For further discussion regarding the potential future impacts of COVID-19 and related economic conditions on the Company's liquidity and capital resources, see “The ongoing impact of COVID-19 and related risks could materially affect our results of operations, financial position and/or liquidity” included in “Part I—Item 1A—Risk Factors” in the Company's 2021 Annual Report.

Liquidity is a measure of a company’s ability to generate sufficient cash flows to meet the cash requirements of its business operations and to satisfy general corporate purposes when needed.

Operating Company Liquidity. The liquidity requirements of the Company’s insurance subsidiaries are met primarily by funds generated from premiums, fees, income received on investments and investment maturities. The Company believes that cash flows from operating activities are sufficient to meet the future liquidity requirements of its insurance subsidiaries. Additionally, investment maturities provide a significant level of available liquidity without requiring the sale of investment securities. For further discussion of operating company liquidity, see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in the Company’s ~~2021~~2022 Annual Report.

Holding Company Liquidity. TRV’s liquidity requirements primarily include shareholder dividends, debt servicing, common share repurchases and, from time to time, contributions to its qualified domestic pension plan. At March 31, ~~2022,~~2023, TRV held total cash and short-term invested assets in the United States aggregating $1.55 billion and having a weighted average maturity of 4128 days. TRV has established a holding company liquidity target equal to its estimated annual pre-tax interest expense and common shareholder dividends (currently approximately ~~$1.22~~$1.27 billion). TRV’s holding company liquidity of $1.55 billion at March 31, ~~2022~~2023 exceeded this target, and it is the opinion of the Company’s management that these assets are sufficient to meet TRV’s current liquidity requirements.

TRV is not dependent on dividends or other forms of repatriation from its foreign operations to support its liquidity needs. The undistributed earnings of the Company’s foreign operations are intended to be permanently reinvested in those operations, and such earnings were not material to the Company’s financial position or liquidity at March 31, ~~2022.~~2023.

TRV has a shelf registration statement filed with the Securities and Exchange Commission (SEC) that expires on June ~~10, 2022~~8, 2025 which permits it to issue securities from time to time. ~~The Company intends to file a new shelf registration statement in the second quarter of 2022.~~ TRV also has a $1.0 billion line of credit facility with a syndicate of financial institutions that expires on June ~~4, 2023.~~15, 2027. At March 31, ~~2022,~~2023, the Company had $100 million of commercial paper outstanding. TRV is not reliant on its commercial paper program to meet its operating cash flow needs. The Company has no senior notes or junior subordinated debentures maturing until April 2026, at which time $200 million of senior notes will mature.

The Company utilized uncollateralized letters of credit issued by major banks with an aggregate limit of ~~$279~~$260 million to provide a portion of the capital needed to support its obligations at Lloyd’s at March 31, ~~2022.~~2023. If uncollateralized letters of credit are not available at a reasonable price or at all in the future, the Company can collateralize these letters of credit or may have to seek alternative means of supporting its obligations at Lloyd’s, which could include utilizing holding company funds on hand.

Operating Activities

Net cash provided by operating activities in the first three months of 2023 and 2022 ~~and 2021~~ was ~~$1.27~~$1.01 billion and ~~$1.19~~$1.27 billion, respectively. The ~~increase~~decrease in cash flows in the first three months of ~~2022~~2023 primarily reflected the impacts of ~~higher levels of cash received for premiums and lower levels of payments for general and administrative expenses, partially offset by~~ higher levels of payments for claims and claim adjustments expenses ~~as well as~~and commissions, partially offset by higher ~~commissions paid.~~levels of cash received for premiums.

Investing Activities

Net cash used in investing activities in the first three months of 2023 and 2022 ~~and 2021~~ was ~~$657~~$455 million and ~~$774~~$657 million, respectively. The Company’s consolidated total investments at March 31, ~~2022 decreased~~2023 increased by ~~$3.71~~$1.58 billion, or ~~4% from~~2% over year-end ~~2021,~~2022, primarily reflecting the impacts of (i) lower net unrealized investment losses ~~on investments at March 31, 2022 as compared with net unrealized gains at December 31, 2021,~~ due to the impact of ~~higher~~lower interest rates during the first three months of ~~2022~~2023 and (ii) net cash ~~used in financing~~flows provided by operating activities, partially offset by (iii) net cash ~~flows provided by operating~~used in financing activities.

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

The Company’s investment portfolio is managed to support its insurance operations; accordingly, the portfolio is positioned to meet obligations to policyholders. As such, the primary goals of the Company’s asset-liability management process are to satisfy the insurance liabilities and maintain sufficient liquidity to cover fluctuations in projected liability cash flows. Generally, the expected principal and interest payments produced by the Company’s fixed maturity portfolio adequately fund the estimated runoff of the Company’s insurance reserves. Although this is not an exact cash flow match in each period, the substantial amount by which the market value of the fixed maturity portfolio exceeds the value of the net insurance liabilities, as well as the positive cash flow from newly sold policies and the large amount of high quality liquid bonds, contributes to the Company’s ability to fund claim payments without having to sell ~~illiquid~~ assets at a loss or access credit facilities.

Financing Activities

Net cash used in financing activities in the first three months of 2023 and 2022 ~~and 2021~~ was ~~$613~~$593 million and ~~$477~~$613 million, respectively. The totals in both ~~2022~~2023 and ~~2021~~2022 reflected common share repurchases and dividends paid to shareholders, partially offset by the net proceeds from employee stock option exercises. Common share repurchases in the first three months of 2023 and 2022 were $460 million and ~~2021 were~~ $559 million, ~~and $397 million,~~ respectively.

Dividends. Dividends paid to shareholders were ~~$213~~$215 million and ~~$214~~$213 million in the first three months of ~~2022~~2023 and ~~2021,~~2022, respectively. The declaration and payment of future dividends to holders of the Company’s common stock will be at the discretion of the Company’s Board of Directors and will depend upon many factors, including the Company’s financial position, earnings, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints and other factors as the Board of Directors deems relevant. Dividends will be paid by the Company only if declared by its Board of Directors out of funds legally available, subject to any other restrictions that may be applicable to the Company. On April 19, ~~2022,~~2023, the Company announced that it would increase its regular quarterly dividend from ~~$0.88~~$0.93 per share to ~~$0.93~~$1.00 per share, ~~a 6%~~an 8% increase. The increased dividend is payable June 30, ~~2022~~2023 to shareholders of record on June ~~10, 2022.~~9, 2023.

Share Repurchases. The Company’s Board of Directors has approved common share repurchase authorizations under which repurchases may be made from time to time in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, in private transactions or otherwise. The authorizations do not have a stated expiration date. The Company expects that, generally over time, the combination of dividends to common shareholders and common share repurchases will likely not exceed net income. The Company also expects that to the extent that it continues to grow premium volumes, the amount of capital returned to shareholders relative to earnings would be somewhat less than it otherwise would have been absent the growth in premium volumes. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, 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, changes in tax laws (including the Inflation Reduction Act) and other factors. During the three months ended March 31, ~~2022,~~2023, the Company repurchased ~~2.9~~2.2 million common shares under its share repurchase authorizations for a total cost of ~~$500~~$400 million. The average cost per share repurchased was ~~$172.10.~~$183.26. On April ~~20, 2021,~~19, 2023, the Board of Directors approved a share repurchase authorization that added an additional $5.0 billion of repurchase capacity to the ~~$805 million~~$1.60 billion of capacity remaining at ~~that date. At~~ March 31, ~~2022,~~2023. Included in the ~~Company had $3.51 billion~~cost of ~~capacity remaining under its~~treasury stock acquired pursuant to common share ~~repurchase authorizations.~~repurchases is the 1% excise tax imposed as part of the Inflation Reduction Act.

Capital Resources. Capital resources reflect the overall financial strength of the Company and its ability to borrow funds at competitive rates and raise new capital to meet its needs. The following table summarizes the components of the Company’s capital structure at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued


(in millions)	(in millions)	March 31, 2022		December 31, 2021		(in millions)	March 31, 2023		December 31, 2022
Debt:	Debt:					Debt:
Short-term	Short-term	$	100	$	100	Short-term	$	100	$	100
Long-term	Long-term	7,254		7,254		Long-term	7,254		7,254
Net unamortized fair value adjustments and debt issuance costs	Net unamortized fair value adjustments and debt issuance costs	(63)		(64)		Net unamortized fair value adjustments and debt issuance costs	(62)		(62)
Total debt	Total debt	7,291		7,290		Total debt	7,292		7,292

Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common stock and retained earnings, less treasury stock	Common stock and retained earnings, less treasury stock	28,133		27,694		Common stock and retained earnings, less treasury stock	28,438		28,005
Accumulated other comprehensive income (loss)		(2,602)		1,193
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(5,386)		(6,445)
Total shareholders’ equity	Total shareholders’ equity	25,531		28,887		Total shareholders’ equity	23,052		21,560
Total capitalization	Total capitalization	$	32,822	$	36,177	Total capitalization	$	30,344	$	28,852

The following table provides a reconciliation of total capitalization presented in the foregoing table to total capitalization excluding net unrealized gains (losses) on investments, net of taxes, included in ~~shareholders'~~shareholders’ equity.


(dollars in millions)	(dollars in millions)	March 31, 2022			December 31, 2021			(dollars in millions)	March 31, 2023			December 31, 2022
Total capitalization	Total capitalization	$	32,822		$	36,177		Total capitalization	$	30,344		$	28,852
Less: net unrealized gains (losses) on investments, net of taxes, included in shareholders' equity		(1,391)			2,415
Total capitalization excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders' equity		$	34,213		$	33,762
Less: net unrealized gains (losses) on investments, net of taxes, included in shareholders’ equity								Less: net unrealized gains (losses) on investments, net of taxes, included in shareholders’ equity	(3,868)			(4,898)
Total capitalization excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders’ equity								Total capitalization excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders’ equity	$	34,212		$	33,750
Debt-to-total capital ratio	Debt-to-total capital ratio	22.2		%	20.2		%	Debt-to-total capital ratio	24.0		%	25.3		%
Debt-to-total capital ratio excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders' equity		21.3		%	21.6		%
Debt-to-total capital ratio excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders’ equity								Debt-to-total capital ratio excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders’ equity	21.3		%	21.6		%

The debt-to-total capital ratio excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders’ equity, is calculated by dividing (a) debt by (b) total capitalization excluding net unrealized gains and losses on investments, net of taxes, included in shareholders’ equity. Net unrealized gains and losses on investments can be significantly impacted by both interest rate movements and other economic factors. Accordingly, in the opinion of the Company’s management, the debt-to-total capital ratio calculated on this basis provides another useful metric for investors to understand the Company’s financial leverage position. The Company’s ratio of debt-to-total capital excluding after-tax net unrealized investment gains (losses) included in shareholders’ equity of 21.3% at March 31, ~~2022~~2023 was within the Company’s target range of 15% to 25%.

RATINGS

Ratings are an important factor in assessing the Company’s competitive position in the insurance industry. The Company receives ratings from the following major rating agencies: A.M. Best Company (A.M. Best), Fitch Ratings (Fitch), Moody’s Investors Service (Moody’s) and S&P Global Ratings (S&P). There have been no rating agency actions taken with respect to the Company since February ~~17, 2022,~~16, 2023, the date on which the ~~Company's 2021~~Company’s 2022 Annual Report was filed with the SEC. For additional discussion of ratings, see “Part I—I—Item 1—Business—Ratings” in the Company’s ~~2021~~2022 Annual Report.

CRITICAL ACCOUNTING ESTIMATES

For a description of the Company’s critical accounting estimates, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in the Company’s ~~2021~~2022 Annual Report. The Company considers its most significant accounting estimates to be those applied to claims and claim adjustment expense reserves and related reinsurance recoverables, and impairments of investments, goodwill and other intangible assets. Except as shown in the table below, there have been no material changes to the Company’s critical accounting estimates since December 31, ~~2021.~~2022.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Claims and Claim Adjustment Expense Reserves

The table below displays the Company’s gross claims and claim adjustment expense reserves by product line. Because establishment of claims and claim adjustment expense reserves is an inherently uncertain process involving estimates and the application of judgment, currently established claims and claim adjustment expense reserves may change. The Company reflects adjustments to the reserves in the results of operations in the period the estimates are changed. These changes in estimates could result in income statement charges that could be material to the Company’s operating results in future periods. In particular, a portion of the Company’s gross claims and claim adjustment expense reserves (totaling $2.03 billion at March 31, ~~2022)~~2023) are for asbestos and environmental claims and related litigation. Asbestos and environmental reserves are included in the General liability, Commercial multi-peril and International and other lines in the summary table below. While the ongoing review of asbestos and environmental claims and associated liabilities considers the inconsistencies of court decisions as to coverage, plaintiffs’ expanded theories of liability and the risks inherent in complex litigation and other uncertainties, in the opinion of the Company’s management, it is possible that the outcome of the continued uncertainties regarding these claims could result in liability in future periods that differs from current insurance reserves by an amount that could be material to the Company’s future operating results. Asbestos and environmental reserves are discussed separately; see “Asbestos Claims and Litigation”, “Environmental Claims and Litigation” and “Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves” in this report.

Gross claims and claim adjustment expense reserves by product line were as follows:


		March 31, 2022						December 31, 2021							March 31, 2023						December 31, 2022
(in millions)	(in millions)	Case		IBNR		Total		Case		IBNR		Total		(in millions)	Case		IBNR		Total		Case		IBNR		Total
General liability	General liability	$	5,503	$	8,907	$	14,410	$	5,351	$	8,863	$	14,214	General liability	$	5,456	$	9,347	$	14,803	$	5,465	$	9,220	$	14,685
Commercial property	Commercial property	1,322		271		1,593		1,220		392		1,612		Commercial property	1,448		351		1,799		1,200		439		1,639
Commercial multi-peril	Commercial multi-peril	2,503		2,535		5,038		2,404		2,573		4,977		Commercial multi-peril	2,725		2,692		5,417		2,624		2,759		5,383
Commercial automobile	Commercial automobile	2,621		2,337		4,958		2,594		2,335		4,929		Commercial automobile	2,606		2,416		5,022		2,625		2,388		5,013
Workers’ compensation	Workers’ compensation	10,058		9,721		19,779		10,152		9,551		19,703		Workers’ compensation	9,968		9,497		19,465		10,034		9,458		19,492
Fidelity and surety	Fidelity and surety	170		460		630		188		436		624		Fidelity and surety	159		542		701		166		496		662
Personal automobile	Personal automobile	2,073		1,763		3,836		2,062		1,765		3,827		Personal automobile	2,151		2,107		4,258		2,139		2,133		4,272
Personal homeowners and other	Personal homeowners and other	1,043		1,392		2,435		1,021		1,395		2,416		Personal homeowners and other	1,230		1,781		3,011		1,095		1,913		3,008
International and other	International and other	2,756		2,128		4,884		2,525		2,070		4,595		International and other	2,447		2,135		4,582		2,420		2,069		4,489
Property-casualty	Property-casualty	28,049		29,514		57,563		27,517		29,380		56,897		Property-casualty	28,190		30,868		59,058		27,768		30,875		58,643
Accident and health	Accident and health	9		—		9		10		—		10		Accident and health	6		—		6		6		—		6
Claims and claim adjustment expense reserves	Claims and claim adjustment expense reserves	$	28,058	$	29,514	$	57,572	$	27,527	$	29,380	$	56,907	Claims and claim adjustment expense reserves	$	28,196	$	30,868	$	59,064	$	27,774	$	30,875	$	58,649

The ~~$665~~$415 million increase in gross claims and claim adjustment expense reserves since December 31, ~~2021~~2022 primarily reflected the impacts of (i) higher volumes of insured exposures, (ii) loss cost trends for the current accident year and (iii) ~~fully reinsured property~~catastrophe losses ~~associated with fronting arrangements and (iv) reduced claim settlement activity largely due to continued disruptions~~ in the ~~judicial system related to COVID-19.~~first three months of 2023, partially offset by (iv) claim payments made during the first three months of 2023 and (v) net favorable prior year reserve development.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

See note 1 of the notes to the unaudited consolidated financial statements contained in this quarterly report and in the Company’s ~~2021~~2022 Annual Report for a discussion of recently issued accounting pronouncements.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

FORWARD-LOOKING STATEMENTS

This report 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,” “probably,” “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, the impact of trends on its business, such as the impact of elevated industrywide loss costs in Personal Insurance, 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;~~decisions;

•share repurchase plans;

•future pension plan contributions;

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

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

•the cost and availability of reinsurance coverage;

•catastrophe losses and modeling, including statements about probabilities or likelihood of exceedance;

•the impact of investment (including changes in interest rates), economic (including inflation, disruption in the banking and commercial real estate sectors, changes in tax ~~law,~~laws, changes in commodity prices and fluctuations in foreign currency exchange rates) and underwriting market conditions;

•the Company’s approach to managing its investment portfolio;

•the impact of changing climate conditions;

•strategic and operational initiatives to improve profitability and competitiveness;

•the ~~Company's~~Company’s competitive advantages and innovation agenda;

•new product offerings;

•the impact of developments in the tort environment, such as increased attorney involvement in insurance claims; and

•the impact of developments in the geopolitical environment.

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:

Insurance-Related Risks

•high levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas and changing climate conditions, 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, including increased inflation, the Company’s financial results could be materially and adversely affected;

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

•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; and

•the effects of emerging claim and coverage issues on the Company’s business are uncertain, and court decisions or legislative changes that take place after the Company issues its policies can result in an unexpected increase in the number of claims and have a material adverse impact on the ~~Company's~~Company’s results of operations.

Financial, Economic and Credit Risks

•during or following a period of financial market disruption or an economic downturn (including as a result of a failure to raise the “debt ceiling”), the Company’s business could be materially and adversely affected;

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

FORWARD-LOOKING STATEMENTS, Continued

•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;

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~FORWARD-LOOKING STATEMENTS, Continued~~

•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;

•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; and

•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.

Business and Operational Risks

•the ongoing impact of COVID-19 and related risks, and any future pandemics (including new variants of COVID-19), could materially affect the ~~Company's~~Company’s results of operations, financial position and/or liquidity, including with respect to revenues, claims and claim adjustment expenses, general and administrative expenses, investments, inflation, adverse legislative and/or regulatory action, operational disruptions and heightened cyber security risks;

•the intense competition that the Company faces, including with respect to attracting and retaining employees, 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;

•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’s efforts to develop new products or services, expand in targeted markets, improve business processes and workflows or make acquisitions 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;

•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; and

•the Company is subject to additional risks associated with its business outside the United States.

Technology and Intellectual Property Risks

•if, as a result of cyber attacks (the risk of which could be exacerbated by geopolitical tensions) or otherwise, the Company experiences difficulties with technology, data and network security, outsourcing relationships or cloud-based technology, the Company’s ability to conduct its business could be negatively impacted;

•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; and

•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.

Regulatory and Compliance Risks

•the ~~Company's~~Company’s businesses are heavily regulated by the states and countries in which it conducts business, including licensing, market conduct and financial supervision, and changes in regulation, including higher tax rates, may reduce the ~~Company's~~Company’s profitability and limit its growth; and

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

In addition, 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 appropriate for the Company’s business operations, 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, changes in tax laws and other factors.~~

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

FORWARD-LOOKING STATEMENTS, Continued

acquisitions and related financings), market conditions, changes in tax laws (including the Inflation Reduction Act) and other factors.

The Company’s forward-looking statements speak only as of the date of this report or as of the date they are made, and the Company undertakes no obligation to update forward-looking statements. For a more detailed discussion of these factors, see the information under the captions “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations” herein and “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s ~~2021~~2022 Annual Report, in each case as updated by the ~~Company's~~Company’s periodic filings with the SEC.

WEBSITE AND SOCIAL MEDIA DISCLOSURE

The Company 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 posted on and accessible through the Company’s website at http://investor.travelers.com, its Facebook page athttps://www.facebook.com/travelers and its Twitter account (@Travelers) at https://twitter.com/Travelers. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Notifications” section under the “Investor Toolkit” section at http://investor.travelers.com.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For the Company’s disclosures about market risk, please see “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in the Company’s ~~2021~~2022 Annual Report filed with the SEC. There have been no material changes to the Company’s disclosures about market risk in Part II—Item 7A of the Company’s ~~2021~~2022 Annual Report.

Item 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, ~~2022.~~2023. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, ~~2022,~~2023, the design and operation of the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

In addition, there was no change in the ~~Company's~~Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, ~~2022~~2023 that has materially affected, or is reasonably likely to materially affect, the ~~Company's~~Company’s internal control over financial reporting.

The Company regularly seeks to identify, develop and implement improvements to its technology systems and business processes, some of which may affect its internal control over financial reporting. These changes may include such activities as implementing new, more efficient systems, updating existing systems or platforms, automating manual processes or utilizing technology developed by third parties. These systems changes are often phased in over multiple periods in order to limit the implementation risk in any one period, and as each change is implemented the Company monitors its effectiveness as part of its internal control over financial reporting.

5658

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The information required with respect to this item can be found under “Contingencies” in note 14 of the notes to the unaudited consolidated financial statements contained in this quarterly report and is incorporated by reference into this Item 1.

Item 1A. RISK FACTORS

For a discussion of the Company’s potential risks or uncertainties, please see “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s ~~2021~~2022 Annual Report and ~~"Part~~“Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein, in each case as updated by the ~~Company's~~Company’s periodic filings with the SEC. There have been no material changes to the risk factors disclosed in Part I—Item 1A of the Company’s ~~2021~~2022 Annual Report.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below sets forth information regarding repurchases by the Company of its common stock during the periods indicated.

ISSUER PURCHASES OF EQUITY SECURITIES
Period Beginning Period Ending Total number of
shares
purchased Average price paid
per share Total number of
shares purchased
as part of
publicly announced
plans or programs Approximate
dollar value of
shares that may
yet be purchased
under the
plans or programs
(in millions)
January 1, 2022 January 31, 2022 164,619 $ 164.68 161,239 $ 3,979
February 1, 2022 February 28, 2022 1,912,556 $ 171.24 1,570,758 $ 3,710
March 1, 2022 March 31, 2022 1,173,912 $ 174.46 1,173,532 $ 3,505
Total 3,251,087 $ 172.07 2,905,529 $ 3,505


Period Beginning	Period Ending	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions)
January 1, 2023	January 31, 2023	225,066	$	190.32	224,014	$	1,962
February 1, 2023	February 28, 2023	1,529,842	$	185.12	1,196,884	$	1,740
March 1, 2023	March 31, 2023	762,541	$	177.67	762,014	$	1,605
Total		2,517,449	$	183.33	2,182,912	$	1,605

The Company’s Board of Directors has approved common share repurchase authorizations under which repurchases may be made from time to time in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, in private transactions or otherwise. ~~The most recent authorization was approved by the Board of Directors on April 20, 2021 and added $5.0 billion of repurchase capacity to the $805 million capacity remaining at that date.~~ The authorizations do not have a stated expiration date. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, 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, changes in tax laws (including the Inflation Reduction Act) and other factors. Included in the cost of treasury stock acquired pursuant to common share repurchases is the 1% excise tax imposed as part of the Inflation Reduction Act. On April 19, 2023, the Board of Directors approved a share repurchase authorization that added an additional $5.0 billion of repurchase capacity to the $1.60 billion of capacity remaining at March 31, 2023.

The Company acquired ~~345,558~~334,537 shares for a total cost of ~~$59~~$62 million during the three months ended March 31, ~~2022~~2023 that were not part of the publicly announced share repurchase authorizations. These shares consisted of shares retained to cover payroll withholding taxes in connection with the vesting of restricted stock unit awards and performance share awards, and shares used by employees to cover the price of certain stock options that were exercised.

For additional information regarding the Company’s share repurchases, see “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

Item 5. OTHER INFORMATION

Executive Ownership and Sales. All of the Company’s executive officers are subject to the Company’s executive stock ownership policy. For a summary of this policy as currently in effect, see “Compensation Discussion and Analysis—Additional

Compensation Information—Stock Ownership Guidelines, Anti-Hedging and Pledging Policies, and Other Trading Restrictions” in the Company’s proxy statement filed with the SEC on April ~~8, 2022.~~7, 2023. From time to time, some of the Company’s executives may determine that it is advisable to diversify their investments for personal financial planning reasons,

~~THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES~~

~~Item 5. OTHER INFORMATION, Continued~~

or may seek liquidity for other reasons, and may, in compliance with the stock ownership policy, sell shares of common stock of the Company on the open market, in private transactions or to the Company. To effect such sales, from time to time, some of the Company’s executives may enter into trading plans designed to comply with the Company’s Securities Trading Policy and the provisions of Rule 10b5-1 under the Securities Exchange Act of 1934. The trading plans will not reduce any of the executives’ ownership of the Company’s shares below the applicable executive stock ownership guidelines. The Company does not undertake any obligation to report Rule 10b5-1 plans that may be adopted by any employee or director of the Company in the future, or to report any modifications or termination of any publicly announced plan. As of the date of this report, none of the ~~Company's "named~~Company’s “named executive ~~officers"~~officers” (i.e., an executive officer included in the compensation disclosures in the ~~Company's~~Company’s most recent proxy statement) has entered into a Rule 10b5-1 trading plan that remains in effect.

Item 6. EXHIBITS


Exhibit Number						Description of Exhibit

3.1						Amended and Restated Articles of Incorporation of The Travelers Companies, Inc., as amended and restated May 23, 2013, were filed as Exhibit 3.1 to the Company’s current report on Form 8-K filed on May 24, 2013, and are incorporated herein by reference.

3.2						Bylaws of The Travelers Companies, Inc. as Amended and Restated ~~October 22, 2019~~December 7, 2022, were filed as Exhibit 3.2 to the ~~Company's quarterly~~Company’s current report on Form ~~10-Q for the fiscal quarter ended September 30, 2019,~~8-K filed on December 12, 2022, and are incorporated herein by reference.

10.1†*						~~The Travelers Severance Plan (as Amended and Restated, effective January 1, 2022).~~



31.1†						Certification of Alan D. Schnitzer, Chairman and Chief Executive Officer of the Company, as required by Section 302 of the Sarbanes-Oxley Act of 2002.

31.2†						Certification of Daniel S. Frey, Executive Vice President and Chief Financial Officer of the Company, as required by Section 302 of the Sarbanes-Oxley Act of 2002.

32.1†						Certification of Alan D. Schnitzer, Chairman and Chief Executive Officer of the Company, as required by Section 906 of the Sarbanes-Oxley Act of 2002.

32.2†						Certification of Daniel S. Frey, Executive Vice President and Chief Financial Officer of the Company, as required by Section 906 of the Sarbanes-Oxley Act of 2002.

101.1†						The following information from The Travelers Companies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2022~~2023 formatted in Inline XBRL: (i) Consolidated Statement of Income for the three months ended March 31, ~~2022~~2023 and ~~2021;~~2022; (ii) Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, ~~2022~~2023 and ~~2021;~~2022; (iii) Consolidated Balance Sheet at March 31, ~~2022~~2023 and December 31, ~~2021;~~2022; (iv) Consolidated Statement of Changes in Shareholders’ Equity for the three months ended March 31, ~~2022~~2023 and ~~2021;~~2022; (v) Consolidated Statement of Cash Flows for the three months ended March 31, ~~2022~~2023 and ~~2021;~~2022; (vi) Notes to Consolidated Financial Statements; and (vii) the cover page.

104.1						Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101.1).

† Filed herewith.

* Management contract or compensatory plan in which directors and/or executive officers are eligible to participate.

The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of the Company does not exceed 10% of the total assets of the Company and its consolidated subsidiaries. Therefore, the Company is not filing any instruments evidencing long-term debt. However, the Company will furnish copies of any such instrument to the Securities and Exchange Commission upon request.

Copies of any of the exhibits referred to above will be furnished to security holders who make written request therefor to The Travelers Companies, Inc., 385 Washington Street, Saint Paul, MN 55102, Attention: Corporate Secretary.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure except for the terms of the agreements or other documents themselves, and you should not rely on them for other than that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and do not apply in any other context or at any time other than the date they were made.

5860

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

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.
		(Registrant)

Date: April 19, ~~2022~~2023	By	/S/ CHRISTINE K. KALLA
		Christine K. Kalla Executive Vice President and General Counsel (Authorized Signatory)

Date: April 19, ~~2022~~2023	By	/S/ DOUGLAS K. RUSSELL
		Douglas K. Russell Senior Vice President and Corporate Controller (Principal Accounting Officer)

5961


	Changes in Net Unrealized Gains (Losses) on Investment Securities
(in millions)	Having No Credit Losses Recognized in the Consolidated Statement of Income		Having Credit Losses Recognized in the Consolidated Statement of Income		Net Benefit Plan Assets and Obligations Recognized in Shareholders’ Equity		Net Unrealized Foreign Currency Translation		Total Accumulated Other Comprehensive Income (Loss)

Balance, December 31, 2021	$	2,233	$	182	$	(473)	$	(749)	$	1,193

Other comprehensive income (loss) (OCI) before reclassifications, net of tax	(3,804)		(1)		1		2		(3,802)
Amounts reclassified from AOCI, net of tax	(1)		—		8		—		7
Net OCI, current period	(3,805)		(1)		9		2		(3,795)
Balance, March 31, 2022	$	(1,572)	$	181	$	(464)	$	(747)	$	(2,602)