TRAVELERS COMPANIES, INC. - FORM 8-K - EX-99.2 - October 20, 2020

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EX-99.1 - EX-99.1 - TRAVELERS COMPANIES, INC.a991pressrelease93020.htm
8-K - 8-K - TRAVELERS COMPANIES, INC.trv-20201020.htm
The Travelers Companies, Inc.                                                image71.gif
Financial Supplement - Third Quarter 2020                                                


Page Number
Consolidated Results
Financial Highlights1
Reconciliation to Net Income (Loss) and Earnings Per Share2
Statement of Income (Loss)3
Net Income (Loss) by Major Component and Combined Ratio4
Core Income (Loss)5
Selected Statistics - Property and Casualty Operations6
Written and Earned Premiums - Property and Casualty Operations7
Business Insurance
Segment Income (Loss)8
Segment Income (Loss) by Major Component and Combined Ratio9
Selected Statistics10
Net Written Premiums11
Bond & Specialty Insurance
Segment Income12
Segment Income by Major Component and Combined Ratio13
Selected Statistics14
Net Written Premiums15
Personal Insurance
Segment Income 16
Segment Income by Major Component and Combined Ratio17
Selected Statistics18
Net Written Premiums19
Selected Statistics - Domestic Agency Automobile20
Selected Statistics - Domestic Agency Homeowners and Other21
Supplemental Detail
Interest Expense and Other22
Consolidated Balance Sheet23
Investment Portfolio24
Investment Portfolio - Fixed Maturities Data25
Investment Income26
Net Realized and Unrealized Investment Gains (Losses) included in Shareholders’ Equity27
Reinsurance Recoverables28
Net Reserves for Losses and Loss Adjustment Expense29
Asbestos and Environmental Reserves30
Capitalization31
Statutory Capital and Surplus to GAAP Shareholders’ Equity Reconciliation32
Statement of Cash Flows33
Statement of Cash Flows (continued)34
Glossary of Financial Measures and Description of Reportable Business Segments35-36
 The information included in the Financial Supplement is unaudited.  This document should be read in conjunction with the Company’s Form 10-Q which will be filed with the Securities and Exchange Commission.
Index
The Travelers Companies, Inc.                                                 image71.gif
Financial Highlights

($ and shares in millions, except for per share data)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Net income (loss)$796 $557 $396 $873 $600 $(40)$827 $1,749 $1,387 
Net income (loss) per share:
Basic$3.01 $2.11 $1.52 $3.37 $2.34 $(0.16)$3.24 $6.65 $5.44 
Diluted$2.99 $2.10 $1.50 $3.35 $2.33 $(0.16)$3.23 $6.59 $5.41 
Core income (loss)$755 $537 $378 $867 $676 $(50)$798 $1,670 $1,424 
Core income (loss) per share:
Basic$2.85 $2.04 $1.45 $3.35 $2.64 $(0.20)$3.13 $6.35 $5.58 
Diluted$2.83 $2.02 $1.43 $3.32 $2.62 $(0.20)$3.12 $6.29 $5.56 
Return on equity13.5 %9.0 %6.2 %13.5 %9.4 %(0.6)%12.1 %9.5 %7.0 %
Core return on equity13.0 %9.2 %6.5 %14.8 %11.5 %(0.8)%13.5 %9.6 %8.1 %
Total assets, at period end$107,246 $108,572 $110,241 $110,122 $109,436 $113,337 $116,384 $110,241 $116,384 
Total equity, at period end$24,340 $25,321 $25,607 $25,943 $25,204 $26,943 $27,849 $25,607 $27,849 
Book value per share, at period end$92.94 $97.26 $99.21 $101.55 $99.69 $106.42 $109.94 $99.21 $109.94 
Less: Net unrealized investment gains, net of tax3.85 7.21 9.12 8.79 7.06 14.41 15.05 9.12 15.05 
Adjusted book value per share, at period end$89.09 $90.05 $90.09 $92.76 $92.63 $92.01 $94.89 $90.09 $94.89 
Weighted average number of common shares outstanding (basic)262.9 261.3 259.2 256.8 254.4 251.6 253.3 261.1 253.5 
Weighted average number of common shares outstanding and common stock equivalents (diluted)264.8 263.7 261.8 259.0 255.9 251.6 254.3 263.4 254.5 
Common shares outstanding at period end261.9 260.3 258.1 255.5 252.8 253.2 253.3 258.1 253.3 
Common stock dividends declared$204 $217 $215 $212 $210 $218 $218 $636 $646 
Common stock repurchased:
Under Board of Directors authorization
Shares2.9 2.6 2.5 2.8 3.5 — — 8.0 3.5 
Cost$375 $375 $375 $375 $425 $— $— $1,125 $425 
Other
Shares0.3 — — 0.1 0.3 — — 0.3 0.3 
Cost$46 $1 $— $1 $46 $— $— $47 $46 




See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.
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The Travelers Companies, Inc.                                                 image71.gif
Reconciliation to Net Income (Loss) and Earnings per Share


($ and shares in millions, except earnings per share)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Net income (loss)
Net income (loss)$796 $557 $396 $873 $600 $(40)$827 $1,749 $1,387 
Adjustments:
Net realized investment (gains) losses, after-tax(41)(20)(18)(6)76 (10)(29)(79)37 
Core income (loss)$755 $537 $378 $867 $676 $(50)$798 $1,670 $1,424 
Basic earnings per share
Net income (loss)$3.01 $2.11 $1.52 $3.37 $2.34 $(0.16)$3.24 $6.65 $5.44 
Adjustments:
Net realized investment (gains) losses, after-tax(0.16)(0.07)(0.07)(0.02)0.30 (0.04)(0.11)(0.30)0.14 
Core income (loss)$2.85 $2.04 $1.45 $3.35 $2.64 $(0.20)$3.13 $6.35 $5.58 
Diluted earnings per share
Net income (loss)$2.99 $2.10 $1.50 $3.35 $2.33 $(0.16)$3.23 $6.59 $5.41 
Adjustments:
Net realized investment (gains) losses, after-tax(0.16)(0.08)(0.07)(0.03)0.29 (0.04)(0.11)(0.30)0.15 
Core income (loss)$2.83 $2.02 $1.43 $3.32 $2.62 $(0.20)$3.12 $6.29 $5.56 
Adjustments to net income (loss) and weighted average shares for net income (loss) EPS calculations: (1)
Basic and Diluted1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Net income (loss), as reported$796 $557 $396 $873 $600 $(40)$827 $1,749 $1,387 
Participating share-based awards - allocated income(5)(4)(3)(7)(5)(1)(6)(12)(9)
Net income (loss) available to common shareholders - basic and diluted$791 $553 $393 $866 $595 $(41)$821 $1,737 $1,378 
Common Shares
Basic
Weighted average shares outstanding262.9 261.3 259.2 256.8 254.4 251.6 253.3 261.1 253.5 
Diluted
Weighted average shares outstanding262.9 261.3 259.2 256.8 254.4 251.6 253.3 261.1 253.5 
Weighted average effects of dilutive securities - stock options and performance shares1.9 2.4 2.6 2.2 1.5 — 1.0 2.3 1.0 
Diluted weighted average shares outstanding264.8 263.7 261.8 259.0 255.9 251.6 254.3 263.4 254.5 

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



See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.
2
The Travelers Companies, Inc.                                                 image71.gif
Statement of Income (Loss) - Consolidated


($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Revenues
Premiums$6,855 $6,988 $7,179 $7,250 $7,229 $6,955 $7,380 $21,022 $21,564 
Net investment income582 648 622 616 611 268 671 1,852 1,550 
Fee income109 116 121 113 108 114 101 346 323 
Net realized investment gains (losses)53 25 23 12 (98)13 37 101 (48)
Other revenues72 57 68 72 58 51 86 197 195 
Total revenues7,671 7,834 8,013 8,063 7,908 7,401 8,275 23,518 23,584 
Claims and expenses
Claims and claim adjustment expenses4,442 4,821 5,230 4,640 4,789 5,107 4,886 14,493 14,782 
Amortization of deferred acquisition costs1,117 1,134 1,169 1,181 1,178 1,173 1,207 3,420 3,558 
General and administrative expenses1,057 1,125 1,098 1,085 1,137 1,121 1,109 3,280 3,367 
Interest expense88 89 84 83 84 85 87 261 256 
Total claims and expenses6,704 7,169 7,581 6,989 7,188 7,486 7,289 21,454 21,963 
Income (loss) before income taxes967 665 432 1,074 720 (85)986 2,064 1,621 
Income tax expense (benefit)171 108 36 201 120 (45)159 315 234 
Net income (loss)$796 $557 $396 $873 $600 $(40)$827 $1,749 $1,387 
Investment impairments
Total net investment impairment (charges) recoveries$(1)$(1)$— $(1)$(16)$(46)$4 $(2)$(58)
Credit loss (charges) recoveries recognized in net realized investment gains (losses)$(1)$(1)$— $(2)$(16)$(46)$4 $(2)$(58)
Non-credit losses recognized in other comprehensive income$— $— $— $1 $— $— $— $— $— 
Other statistics
Effective tax rate on net investment income14.7 %15.4 %15.2 %14.8 %15.1 %6.2 %15.6 %15.1 %13.8 %
Net investment income (after-tax)$496 $548 $528 $525 $519 $251 $566 $1,572 $1,336 
Catastrophes, net of reinsurance:
Pre-tax$193 $367 $241 $85 $333 $854 $397 $801 $1,584 
After-tax$152 $290 $190 $67 $263 $673 $314 $632 $1,250 
Prior year reserve development - favorable (unfavorable):
Pre-tax$51 $123 $(294)$60 $27 $2 $142 $(120)$171 
After-tax$41 $99 $(232)$45 $21 $1 $113 $(92)$135 
See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.
3
The Travelers Companies, Inc.                                                 image71.gif
Net Income (Loss) by Major Component and Combined Ratio - Consolidated


($ in millions, net of tax)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Underwriting gain (loss)$307 $52 $(101)$396 $220 $(232)$281 $258 $269 
Net investment income496 548 528 525 519 251 566 1,572 1,336 
Other income (expense), including interest expense(48)(63)(49)(54)(63)(69)(49)(160)(181)
Core income (loss)755 537 378 867 676 (50)798 1,670 1,424 
Net realized investment gains (losses)41 20 18 6 (76)10 29 79 (37)
Net income (loss)$796 $557 $396 $873 $600 $(40)$827 $1,749 $1,387 
Combined ratio (1) (2)
Loss and loss adjustment expense ratio64.0 %68.2 %72.0 %63.3 %65.5 %72.7 %65.6 %68.1 %67.8 %
Underwriting expense ratio29.7 %30.2 %29.5 %29.1 %30.0 %31.0 %29.3 %29.8 %30.1 %
Combined ratio93.7 %98.4 %101.5 %92.4 %95.5 %103.7 %94.9 %97.9 %97.9 %
Impact on combined ratio:
Net (favorable) unfavorable prior year reserve development(0.7)%(1.8)%4.1 %(0.8)%(0.4)%— %(1.9)%0.6 %(0.8)%
Catastrophes, net of reinsurance2.8 %5.3 %3.3 %1.1 %4.6 %12.3 %5.3 %3.8 %7.3 %
Underlying combined ratio91.6 %94.9 %94.1 %92.1 %91.3 %91.4 %91.5 %93.5 %91.4 %
 
(1)  Before policyholder dividends.
(2)  Billing and policy fees and other, which are a component of other revenues, are allocated as a reduction of underwriting expenses.  In addition, fee income is allocated as a reduction of losses and loss adjustment expenses and underwriting expenses.  In addition, general and administrative expenses include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio.  See following: 
($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Billing and policy fees and other$27 $26 $28 $27 $28 $17 $24 $81 $69 
Fee income:
Loss and loss adjustment expenses$40 $45 $47 $42 $41 $44 $35 $132 $120 
Underwriting expenses69 71 74 71 67 70 66 214 203 
Total fee income$109 $116 $121 $113 $108 $114 $101 $346 $323 
Non-insurance general and administrative expenses$47 $50 $48 $56 $55 $52 $60 $145 $167 
 






See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.
4
The Travelers Companies, Inc.                                                 image71.gif
Core Income (Loss) - Consolidated


($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Revenues
Premiums$6,855 $6,988 $7,179 $7,250 $7,229 $6,955 $7,380 $21,022 $21,564 
Net investment income582 648 622 616 611 268 671 1,852 1,550 
Fee income109 116 121 113 108 114 101 346 323 
Other revenues72 57 68 72 58 51 86 197 195 
Total revenues
7,618 7,809 7,990 8,051 8,006 7,388 8,238 23,417 23,632 
Claims and expenses
Claims and claim adjustment expenses4,442 4,821 5,230 4,640 4,789 5,107 4,886 14,493 14,782 
Amortization of deferred acquisition costs1,117 1,134 1,169 1,181 1,178 1,173 1,207 3,420 3,558 
General and administrative expenses1,057 1,125 1,098 1,085 1,137 1,121 1,109 3,280 3,367 
Interest expense88 89 84 83 84 85 87 261 256 
Total claims and expenses
6,704 7,169 7,581 6,989 7,188 7,486 7,289 21,454 21,963 
Core income (loss) before income taxes914 640 409 1,062 818 (98)949 1,963 1,669 
Income tax expense (benefit)159 103 31 195 142 (48)151 293 245 
Core income (loss)$755 $537 $378 $867 $676 $(50)$798 $1,670 $1,424 
Other statistics
Effective tax rate on net investment income14.7 %15.4 %15.2 %14.8 %15.1 %6.2 %15.6 %15.1 %13.8 %
Net investment income (after-tax)$496 $548 $528 $525 $519 $251 $566 $1,572 $1,336 
Catastrophes, net of reinsurance:
Pre-tax$193 $367 $241 $85 $333 $854 $397 $801 $1,584 
After-tax$152 $290 $190 $67 $263 $673 $314 $632 $1,250 
Prior year reserve development - favorable (unfavorable):
Pre-tax$51 $123 $(294)$60 $27 $2 $142 $(120)$171 
After-tax$41 $99 $(232)$45 $21 $1 $113 $(92)$135 









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

5
The Travelers Companies, Inc.                                      image71.gif    
Selected Statistics - Property and Casualty Operations


($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Statutory underwriting
Gross written premiums$7,839 $7,824 $8,022 $7,378 $8,152 $7,751 $8,243 $23,685 $24,146 
Net written premiums$7,057 $7,450 $7,569 $7,075 $7,346 $7,346 $7,771 $22,076 $22,463 
Net earned premiums$6,855 $6,988 $7,179 $7,250 $7,229 $6,955 $7,380 $21,022 $21,564 
Losses and loss adjustment expenses4,389 4,764 5,166 4,578 4,733 5,053 4,830 14,319 14,616 
Underwriting expenses2,116 2,217 2,179 2,072 2,193 2,212 2,214 6,512 6,619 
Statutory underwriting gain (loss)350 7 (166)600 303 (310)336 191 329 
Policyholder dividends13 9 15 10 12 8 11 37 31 
Statutory underwriting gain (loss) after policyholder dividends$337 $(2)$(181)$590 $291 $(318)$325 $154 $298 
Other statutory statistics
Reserves for losses and loss adjustment expenses$42,581 $42,979 $43,624 $43,743 $43,913 $45,112 $46,181 $43,624 $46,181 
Increase in reserves$172 $398 $645 $119 $170 $1,199 $1,069 $1,215 $2,438 
Statutory capital and surplus$21,074 $21,080 $20,780 $21,330 $20,808 $20,607 $21,230 $20,780 $21,230 
Net written premiums/surplus (1)1.33:11.34:11.38:11.37:11.41:1 1.42:1 1.39:1 1.38:11.39:1

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

















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

6
The Travelers Companies, Inc.                                                 image71.gif
Written and Earned Premiums - Property and Casualty Operations

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Written premiums
Gross$7,839 $7,824 $8,022 $7,378 $8,152 $7,751 $8,243 $23,685 $24,146 
Ceded(782)(374)(453)(303)(806)(405)(472)(1,609)(1,683)
Net$7,057 $7,450 $7,569 $7,075 $7,346 $7,346 $7,771 $22,076 $22,463 
Earned premiums
Gross$7,282 $7,429 $7,636 $7,723 $7,683 $7,446 $7,898 $22,347 $23,027 
Ceded(427)(441)(457)(473)(454)(491)(518)(1,325)(1,463)
Net$6,855 $6,988 $7,179 $7,250 $7,229 $6,955 $7,380 $21,022 $21,564 






























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

7
The Travelers Companies, Inc.                                                 image71.gif
Segment Income (Loss) - Business Insurance

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Revenues
Premiums$3,742 $3,783 $3,882 $3,893 $3,864 $3,735 $3,841 $11,407 $11,440 
Net investment income427 481 457 451 453 180 498 1,365 1,131 
Fee income104 111 114 108 102 108 95 329 305 
Other revenues43 30 39 43 31 36 58 112 125 
Total revenues
4,316 4,405 4,492 4,495 4,450 4,059 4,492 13,213 13,001 
Claims and expenses
Claims and claim adjustment expenses2,580 2,686 3,028 2,669 2,791 2,880 2,804 8,294 8,475 
Amortization of deferred acquisition costs615 618 634 636 636 622 633 1,867 1,891 
General and administrative expenses632 686 657 652 685 656 651 1,975 1,992 
Total claims and expenses
3,827 3,990 4,319 3,957 4,112 4,158 4,088 12,136 12,358 
Segment income (loss) before income taxes489 415 173 538 338 (99)404 1,077 643 
Income tax expense (benefit)75 64 (6)90 49 (41)39 133 47 
Segment income (loss)$414 $351 $179 $448 $289 $(58)$365 $944 $596 
Other statistics
Effective tax rate on net investment income14.6 %15.3 %15.1 %14.8 %15.0 %6.3 %15.6 %15.0 %13.9 %
Net investment income (after-tax)$365 $407 $389 $384 $385 $169 $421 $1,161 $975 
Catastrophes, net of reinsurance:
Pre-tax$95 $211 $116 $48 $195 $377 $97 $422 $669 
After-tax$75 $167 $91 $37 $154 $298 $76 $333 $528 
Prior year reserve development - favorable (unfavorable):
Pre-tax$(21)$71 $(316)$8 $5 $— $(220)$(266)$(215)
After-tax$(16)$57 $(249)$5 $3 $— $(173)$(208)$(170)












See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.
8
The Travelers Companies, Inc.                                                 image71.gif
Segment Income (Loss) by Major Component and Combined Ratio - Business Insurance



($ in millions, net of tax)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Underwriting gain (loss)$44 $(48)$(210)$65 $(84)$(221)$(59)$(214)$(364)
Net investment income365 407 389 384 385 169 421 1,161 975 
Other income (expense)5 (8)— (1)(12)(6)3 (3)(15)
Segment income (loss)$414 $351 $179 $448 $289 $(58)$365 $944 $596 
Combined ratio (1) (2)
Loss and loss adjustment expense ratio67.6 %69.6 %76.6 %67.3 %70.9 %75.8 %71.8 %71.3 %72.8 %
Underwriting expense ratio30.5 %31.5 %30.4 %30.2 %31.3 %31.3 %30.5 %30.8 %31.0 %
Combined ratio98.1 %101.1 %107.0 %97.5 %102.2 %107.1 %102.3 %102.1 %103.8 %
Impact on combined ratio:
Net (favorable) unfavorable prior year reserve development0.6 %(1.9)%8.1 %(0.2)%(0.1)%— %5.8 %2.3 %1.9 %
Catastrophes, net of reinsurance2.5 %5.6 %3.0 %1.3 %5.0 %10.1 %2.5 %3.7 %5.8 %
Underlying combined ratio95.0 %97.4 %95.9 %96.4 %97.3 %97.0 %94.0 %96.1 %96.1 %
 
(1)  Before policyholder dividends.
(2)  Billing and policy fees and other, which are a component of other revenues, are allocated as a reduction of underwriting expenses.  In addition, fee income is allocated as a reduction of losses and loss adjustment expenses and underwriting expenses.  In addition, general and administrative expenses include non-insurance expenses that are excluded from underwriting expenses, and accordingly are excluded in calculating the combined ratio.  See following:
 
($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Billing and policy fees and other$4 $3 $5 $4 $4 $3 $4 $12 $11 
Fee income:
Loss and loss adjustment expenses$40 $45 $47 $42 $41 $44 $35 $132 $120 
Underwriting expenses64 66 67 66 61 64 60 197 185 
Total fee income$104 $111 $114 $108 $102 $108 $95 $329 $305 
Non-insurance general and administrative expenses$38 $41 $39 $43 $47 $42 $52 $118 $141 
 






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

9
The Travelers Companies, Inc.                                                 image71.gif
Selected Statistics - Business Insurance

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Statutory underwriting
Gross written premiums$4,730 $4,193 $4,271 $3,957 $4,794 $4,127 $4,230 $13,194 $13,151 
Net written premiums$4,163 $3,874 $3,889 $3,703 $4,190 $3,777 $3,833 $11,926 $11,800 
Net earned premiums$3,742 $3,783 $3,882 $3,893 $3,864 $3,735 $3,841 $11,407 $11,440 
Losses and loss adjustment expenses2,529 2,631 2,969 2,608 2,737 2,828 2,750 8,129 8,315 
Underwriting expenses1,226 1,226 1,164 1,133 1,247 1,167 1,145 3,616 3,559 
Statutory underwriting gain (loss)(13)(74)(251)152 (120)(260)(54)(338)(434)
Policyholder dividends11 7 11 7 10 6 9 29 25 
Statutory underwriting gain (loss) after policyholder dividends$(24)$(81)$(262)$145 $(130)$(266)$(63)$(367)$(459)





























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

10
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Net Written Premiums - Business Insurance


($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Net written premiums by market       
Domestic       
Select Accounts$785 $756 $695 $675 $799 $734 $658 $2,236 $2,191 
Middle Market2,410 2,009 2,150 2,061 2,408 1,960 2,131 6,569 6,499 
National Accounts304 223 273 251 301 215 239 800 755 
National Property and Other387 588 553 437 428 585 602 1,528 1,615 
Total Domestic3,886 3,576 3,671 3,424 3,936 3,494 3,630 11,133 11,060 
International277 298 218 279 254 283 203 793 740 
Total$4,163 $3,874 $3,889 $3,703 $4,190 $3,777 $3,833 $11,926 $11,800 
Net written premiums by product line       
Domestic       
Workers’ compensation$1,191 $893 $905 $817 $1,096 $780 $774 $2,989 $2,650 
Commercial automobile719 677 674 666 755 667 689 2,070 2,111 
Commercial property389 583 568 474 433 620 603 1,540 1,656 
General liability678 548 611 579 683 531 630 1,837 1,844 
Commercial multi-peril902 871 885 884 956 892 899 2,658 2,747 
Other7 4 28 4 13 4 35 39 52 
Total Domestic3,886 3,576 3,671 3,424 3,936 3,494 3,630 11,133 11,060 
International277 298 218 279 254 283 203 793 740 
Total$4,163 $3,874 $3,889 $3,703 $4,190 $3,777 $3,833 $11,926 $11,800 














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

11
The Travelers Companies, Inc.                                                 image71.gif
Segment Income - Bond & Specialty Insurance


($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Revenues
Premiums$606 $632 $653 $674 $667 $693 $723 $1,891 $2,083 
Net investment income56 58 59 60 55 42 58 173 155 
Other revenues6 6 7 7 5 5 7 19 17 
Total revenues668 696 719 741 727 740 788 2,083 2,255 
Claims and expenses
Claims and claim adjustment expenses266 238 303 287 327 403 392 807 1,122 
Amortization of deferred acquisition costs112 118 123 125 124 128 133 353 385 
General and administrative expenses117 120 124 122 125 123 124 361 372 
Total claims and expenses495 476 550 534 576 654 649 1,521 1,879 
Segment income before income taxes173 220 169 207 151 86 139 562 376 
Income tax expense35 46 30 40 29 14 24 111 67 
Segment income$138 $174 $139 $167 $122 $72 $115 $451 $309 
Other statistics
Effective tax rate on net investment income14.4 %14.8 %14.9 %13.2 %14.7 %3.0 %14.8 %14.7 %11.6 %
Net investment income (after-tax)$47 $50 $50 $52 $47 $41 $49 $147 $137 
Catastrophes, net of reinsurance:
Pre-tax$3 $— $1 $1 $1 $7 $2 $4 $10 
After-tax$2 $— $1 $1 $1 $5 $2 $3 $8 
Prior year reserve development - favorable (unfavorable):
Pre-tax$3 $39 $3 $20 $— $(33)$— $45 $(33)
After-tax$2 $31 $2 $16 $— $(26)$— $35 $(26)












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

12
The Travelers Companies, Inc.                                                image71.gif
Segment Income by Major Component and Combined Ratio - Bond & Specialty Insurance

($ in millions, net of tax)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Underwriting gain$86 $120 $85 $111 $72 $29 $61 $291 $162 
Net investment income47 50 50 52 47 41 49 147 137 
Other income5 4 4 4 3 2 5 13 10 
Segment income$138 $174 $139 $167 $122 $72 $115 $451 $309 
Combined ratio (1)
Loss and loss adjustment expense ratio43.5 %37.4 %45.7 %42.4 %48.8 %57.8 %54.0 %42.2 %53.6 %
Underwriting expense ratio37.6 %37.5 %37.6 %36.2 %37.1 %36.0 %35.3 %37.6 %36.1 %
Combined ratio81.1 %74.9 %83.3 %78.6 %85.9 %93.8 %89.3 %79.8 %89.7 %
Impact on combined ratio:
Net (favorable) unfavorable prior year reserve development(0.5)%(6.2)%(0.5)%(2.9)%— %4.7 %— %(2.3)%1.5 %
Catastrophes, net of reinsurance0.5 %0.1 %0.2 %0.2 %0.2 %1.0 %0.3 %0.2 %0.5 %
Underlying combined ratio81.1 %81.0 %83.6 %81.3 %85.7 %88.1 %89.0 %81.9 %87.7 %


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



($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Non-insurance general and administrative expenses$1 $1 $1 $2 $1 $1 $2 $3 $4 














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

13
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Selected Statistics - Bond & Specialty Insurance

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Statutory underwriting       
Gross written premiums$662 $747 $770 $752 $750 $770 $803 $2,179 $2,323 
Net written premiums$587 $710 $728 $714 $663 $734 $754 $2,025 $2,151 
Net earned premiums$606 $632 $653 $674 $667 $693 $723 $1,891 $2,083 
Losses and loss adjustment expenses264 236 298 286 325 401 390 798 1,116 
Underwriting expenses233 251 261 242 254 253 261 745 768 
Statutory underwriting gain109 145 94 146 88 39 72 348 199 
Policyholder dividends2 2 4 3 2 2 2 8 6 
Statutory underwriting gain after policyholder dividends$107 $143 $90 $143 $86 $37 $70 $340 $193 
 




























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

14
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Net Written Premiums - Bond & Specialty Insurance

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Net written premiums by market
Domestic
Management Liability$367 $403 $424 $411 $401 $438 $467 $1,194 $1,306 
Surety184 244 232 206 215 220 208 660 643 
Total Domestic551 647 656 617 616 658 675 1,854 1,949 
International36 63 72 97 47 76 79 171 202 
Total$587 $710 $728 $714 $663 $734 $754 $2,025 $2,151 
Net written premiums by product line
Domestic
Fidelity & surety$239 $298 $292 $260 $272 $274 $268 $829 $814 
General liability262 292 293 301 289 326 339 847 954 
Other50 57 71 56 55 58 68 178 181 
Total Domestic551 647 656 617 616 658 675 1,854 1,949 
International36 63 72 97 47 76 79 171 202 
Total$587 $710 $728 $714 $663 $734 $754 $2,025 $2,151 



















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

15
The Travelers Companies, Inc.                                                 image71.gif
Segment Income - Personal Insurance


($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Revenues
Premiums$2,507 $2,573 $2,644 $2,683 $2,698 $2,527 $2,816 $7,724 $8,041 
Net investment income99 109 106 105 103 46 115 314 264 
Fee income5 5 7 5 6 6 6 17 18 
Other revenues22 21 22 22 22 10 21 65 53 
Total revenues2,633 2,708 2,779 2,815 2,829 2,589 2,958 8,120 8,376 
Claims and expenses
Claims and claim adjustment expenses1,596 1,897 1,899 1,684 1,671 1,824 1,690 5,392 5,185 
Amortization of deferred acquisition costs390 398 412 420 418 423 441 1,200 1,282 
General and administrative expenses300 311 309 300 320 333 328 920 981 
Total claims and expenses2,286 2,606 2,620 2,404 2,409 2,580 2,459 7,512 7,448 
Segment income before income taxes347 102 159 411 420 9 499 608 928 
Income tax expense (benefit)69 14 28 84 84 (1)107 111 190 
Segment income$278 $88 $131 $327 $336 $10 $392 $497 $738 
Other statistics
Effective tax rate on net investment income15.4 %16.1 %15.8 %15.6 %15.8 %9.1 %16.2 %15.8 %14.8 %
Net investment income (after-tax)$84 $91 $89 $89 $87 $41 $96 $264 $224 
Catastrophes, net of reinsurance:
Pre-tax$95 $156 $124 $36 $137 $470 $298 $375 $905 
After-tax$75 $123 $98 $29 $108 $370 $236 $296 $714 
Prior year reserve development - favorable:
Pre-tax$69 $13 $19 $32 $22 $35 $362 $101 $419 
After-tax$55 $11 $15 $24 $18 $27 $286 $81 $331 












See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.
16
The Travelers Companies, Inc.                                                 image71.gif
Segment Income by Major Component and Combined Ratio - Personal Insurance


($ in millions, net of tax)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Underwriting gain (loss)$177 $(20)$24 $220 $232 $(40)$279 $181 $471 
Net investment income84 91 89 89 87 41 96 264 224 
Other income17 17 18 18 17 9 17 52 43 
Segment income$278 $88 $131 $327 $336 $10 $392 $497 $738 
Combined ratio (1)
Loss and loss adjustment expense ratio63.7 %73.7 %71.8 %62.8 %61.9 %72.2 %60.0 %69.8 %64.5 %
Underwriting expense ratio26.4 %26.5 %26.2 %25.7 %26.3 %29.1 %26.4 %26.4 %27.2 %
Combined ratio90.1 %100.2 %98.0 %88.5 %88.2 %101.3 %86.4 %96.2 %91.7 %
Domestic Agency combined ratio88.9 %98.8 %97.2 %88.2 %86.9 %100.4 %86.0 %95.0 %90.8 %
Impact on combined ratio:
Net favorable prior year reserve development(2.8)%(0.5)%(0.7)%(1.2)%(0.8)%(1.3)%(12.8)%(1.3)%(5.2)%
Catastrophes, net of reinsurance3.8 %6.1 %4.7 %1.3 %5.0 %18.6 %10.5 %4.9 %11.3 %
Underlying combined ratio89.1 %94.6 %94.0 %88.4 %84.0 %84.0 %88.7 %92.6 %85.6 %

(1)  Billing and policy fees and other, which are a component of other revenues, and fee income are allocated as a reduction of underwriting expenses.
 
($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Billing and policy fees and other$23 $23 $23 $23 $24 $14 $20 $69 $58 
Fee income$5 $5 $7 $5 $6 $6 $6 $17 $18 















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

17
The Travelers Companies, Inc.                                                 image71.gif
Selected Statistics - Personal Insurance


($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Statutory underwriting
Gross written premiums$2,447 $2,884 $2,981 $2,669 $2,608 $2,854 $3,210 $8,312 $8,672 
Net written premiums$2,307 $2,866 $2,952 $2,658 $2,493 $2,835 $3,184 $8,125 $8,512 
Net earned premiums$2,507 $2,573 $2,644 $2,683 $2,698 $2,527 $2,816 $7,724 $8,041 
Losses and loss adjustment expenses1,596 1,897 1,899 1,684 1,671 1,824 1,690 5,392 5,185 
Underwriting expenses657 740 754 697 692 792 808 2,151 2,292 
Statutory underwriting gain (loss)$254 $(64)$(9)$302 $335 $(89)$318 $181 $564 
Policies in force (in thousands)
Automobile2,981 2,980 2,979 2,973 2,970 2,993 3,015 2,979 3,015 
Homeowners and Other5,163 5,263 5,361 5,444 5,534 5,679 5,790 5,361 5,790 




























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

18
The Travelers Companies, Inc.                                                 image71.gif
Net Written Premiums - Personal Insurance

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Net written premiums by market
Domestic
Agency
Automobile$1,224 $1,300 $1,347 $1,253 $1,260 $1,141 $1,402 $3,871 $3,803 
Homeowners and Other837 1,258 1,300 1,145 990 1,419 1,482 3,395 3,891 
Total Agency2,061 2,558 2,647 2,398 2,250 2,560 2,884 7,266 7,694 
Direct-to-Consumer95 103 115 99 100 102 124 313 326 
Total Domestic2,156 2,661 2,762 2,497 2,350 2,662 3,008 7,579 8,020 
International151 205 190 161 143 173 176 546 492 
Total$2,307 $2,866 $2,952 $2,658 $2,493 $2,835 $3,184 $8,125 $8,512 




























See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.
19
The Travelers Companies, Inc.                                                 image71.gif
Selected Statistics - Personal Insurance - Domestic Agency Automobile (1)

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Statutory underwriting
Gross written premiums$1,240 $1,304 $1,352 $1,258 $1,272 $1,145 $1,407 $3,896 $3,824 
Net written premiums$1,224 $1,300 $1,347 $1,253 $1,260 $1,141 $1,402 $3,871 $3,803 
Net earned premiums$1,228 $1,249 $1,271 $1,276 $1,279 $1,091 $1,316 $3,748 $3,686 
Losses and loss adjustment expenses810 876 891 971 842 627 742 2,577 2,211 
Underwriting expenses296 312 310 299 301 317 323 918 941 
Statutory underwriting gain$122 $61 $70 $6 $136 $147 $251 $253 $534 
Other statistics
Combined ratio (2):
Loss and loss adjustment expense ratio66.0 %70.1 %70.1 %76.1 %65.9 %57.5 %56.4 %68.8 %60.0 %
Underwriting expense ratio23.4 %23.9 %22.9 %23.1 %23.5 %28.2 %23.4 %23.4 %24.8 %
Combined ratio89.4 %94.0 %93.0 %99.2 %89.4 %85.7 %79.8 %92.2 %84.8 %
Impact on combined ratio:
Net favorable prior year reserve development(3.4)%(1.1)%(0.5)%(0.5)%(0.4)%(1.0)%(1.6)%(1.6)%(1.1)%
Catastrophes, net of reinsurance0.7 %1.3 %0.8 %0.1 %0.6 %2.5 %0.4 %1.0 %1.1 %
Underlying combined ratio92.1 %93.8 %92.7 %99.6 %89.2 %84.2 %81.0 %92.8 %84.8 %
Catastrophe losses, net of reinsurance:
Pre-tax$9 $16 $11 $1 $7 $27 $6 $36 $40 
After-tax$7 $13 $8 $1 $6 $21 $4 $28 $31 
Prior year reserve development - favorable:
Pre-tax$42 $13 $5 $6 $6 $11 $22 $60 $39 
After-tax$33 $10 $5 $4 $5 $9 $17 $48 $31 
Policies in force (in thousands)2,516 2,517 2,524 2,532 2,540 2,570 2,596 
Change from prior year quarter(0.1)%— %0.2 %0.6 %1.0 %2.1 %2.9 %
Change from prior quarter(0.1)%— %0.3 %0.3 %0.3 %1.2 %1.0 %
(1)  Represents Automobile policies sold through agents, brokers and other intermediaries, and excludes direct to consumer.
(2)  Billing and policy fees and other, which are a component of other revenues, and fee income are allocated as a reduction of underwriting expenses.
($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Billing and policy fees and other$12 $12 $12 $11 $12 $7 $10 $36 $29 
Fee income$3 $3 $4 $3 $3 $4 $4 $10 $11 
See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.
20
The Travelers Companies, Inc.                                                 image71.gif
Selected Statistics - Personal Insurance - Domestic Agency Homeowners and Other (1)

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Statutory underwriting
Gross written premiums$954 $1,268 $1,316 $1,147 $1,086 $1,432 $1,495 $3,538 $4,013 
Net written premiums$837 $1,258 $1,300 $1,145 $990 $1,419 $1,482 $3,395 $3,891 
Net earned premiums$1,011 $1,050 $1,089 $1,125 $1,145 $1,188 $1,227 $3,150 $3,560 
Losses and loss adjustment expenses604 801 801 542 642 1,010 792 2,206 2,444 
Underwriting expenses277 335 349 314 310 385 392 961 1,087 
Statutory underwriting gain (loss)$130 $(86)$(61)$269 $193 $(207)$43 $(17)$29 
Other statistics
Combined ratio (2):
Loss and loss adjustment expense ratio59.8 %76.3 %73.6 %48.2 %56.1 %85.0 %64.5 %70.0 %68.7 %
Underwriting expense ratio28.4 %28.2 %28.4 %27.6 %28.1 %28.9 %28.3 %28.4 %28.4 %
Combined ratio88.2 %104.5 %102.0 %75.8 %84.2 %113.9 %92.8 %98.4 %97.1 %
Impact on combined ratio:
Net favorable prior year reserve development(2.4)%(1.3)%(1.4)%(0.8)%(1.5)%(1.7)%(27.2)%(1.7)%(10.4)%
Catastrophes, net of reinsurance8.0 %12.9 %9.9 %3.0 %10.8 %34.2 %23.6 %10.3 %23.0 %
Underlying combined ratio82.6 %92.9 %93.5 %73.6 %74.9 %81.4 %96.4 %89.8 %84.5 %
Catastrophe losses, net of reinsurance:
Pre-tax$80 $136 $107 $34 $123 $407 $289 $323 $819 
After-tax$63 $107 $85 $27 $97 $322 $228 $255 $647 
Prior year reserve development - favorable:
Pre-tax$25 $13 $15 $9 $17 $21 $333 $53 $371 
After-tax$19 $11 $12 $7 $14 $16 $263 $42 $293 
Policies in force (in thousands)4,726 4,825 4,927 5,016 5,111 5,255 5,365 
Change from prior year quarter6.1 %6.5 %7.1 %7.8 %8.1 %8.9 %8.9 %
Change from prior quarter1.6 %2.1 %2.1 %1.8 %1.9 %2.8 %2.1 %
(1)  Represents Homeowners and Other Lines sold through agents, brokers and other intermediaries, and excludes direct to consumer.
(2)  Billing and policy fees and other, which are a component of other revenues, and fee income are allocated as a reduction of underwriting expenses.
($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Billing and policy fees and other$8 $8 $8 $8 $8 $5 $7 $24 $20 
Fee income$2 $2 $3 $2 $2 $3 $3 $7 $8 
See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.
21
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Interest Expense and Other

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Revenues
Other revenues$1 $— $— $— $— $— $— $1 $— 
Claims and expenses
Interest expense88 89 84 83 84 85 87 261 256 
General and administrative expenses8 8 8 11 7 9 6 24 22 
Total claims and expenses96 97 92 94 91 94 93 285 278 
Loss before income tax benefit(95)(97)(92)(94)(91)(94)(93)(284)(278)
Income tax benefit(20)(21)(21)(19)(20)(20)(19)(62)(59)
Loss$(75)$(76)$(71)$(75)$(71)$(74)$(74)$(222)$(219)




























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

22
The Travelers Companies, Inc.                                                 image71.gif
Consolidated Balance Sheet

($ in millions)September 30,
2020		December 31,
2019
Assets
Fixed maturities, available for sale, at fair value (amortized cost $67,736 and $65,281; allowance for expected credit losses of $4 at September 30, 2020)
$72,574 $68,134 
Equity securities, at fair value (cost $381 and $376)
410 425 
Real estate investments957 963 
Short-term securities6,329 4,943 
Other investments3,291 3,419 
Total investments83,561 77,884 
Cash583 494 
Investment income accrued554 618 
Premiums receivable (net of allowance for expected credit losses of $96 at September 30, 2020)
8,225 7,909 
Reinsurance recoverables (net of allowance for estimated uncollectible reinsurance of $140 at September 30, 2020)
8,317 8,235 
Ceded unearned premiums902 689 
Deferred acquisition costs2,406 2,273 
Contractholder receivables (net of allowance for expected credit losses of $21 at September 30, 2020)
4,347 4,599 
Goodwill3,945 3,961 
Other intangible assets318 330 
Other assets3,226 3,130 
Total assets$116,384 $110,122 
Liabilities
Claims and claim adjustment expense reserves$54,418 $51,849 
Unearned premium reserves15,542 14,604 
Contractholder payables4,368 4,619 
Payables for reinsurance premiums555 363 
Deferred taxes448 137 
Debt7,050 6,558 
Other liabilities6,154 6,049 
Total liabilities88,535 84,179 
Shareholders’ equity
Common stock (1,750.0 shares authorized; 253.3 and 255.5 shares issued and outstanding)
23,646 23,469 
Retained earnings37,679 36,977 
Accumulated other comprehensive income2,138 640 
Treasury stock, at cost (525.9 and 522.1 shares)
(35,614)(35,143)
Total shareholders’ equity27,849 25,943 
Total liabilities and shareholders’ equity$116,384 $110,122 
Note: Certain reclassifications have been made to the 2019 consolidated balance sheet to conform to the 2020 presentation.

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Investment Portfolio

(at carrying value, $ in millions)September 30,
2020		Pre-tax Book
Yield (1)		December 31,
2019		Pre-tax Book
Yield (1)
Investment portfolio
Taxable fixed maturities (including redeemable preferred stock)$39,479 2.99 %$38,570 3.17 %
Tax-exempt fixed maturities33,095 2.87 %29,564 3.12 %
Total fixed maturities72,574 2.94 %68,134 3.15 %
Non-redeemable preferred stocks42 5.06 %42 5.04 %
Public common stocks368 383 
Total equity securities410 425 
Real estate investments957 963 
Short-term securities6,329 0.19 %4,943 1.82 %
Private equities2,206 2,236 
Hedge funds185 186 
Real estate partnerships694 658 
Other investments206 339 
Total other investments3,291 3,419 
Total investments$83,561 $77,884 
Net unrealized investment gains, net of tax, included in shareholders’ equity$3,812 $2,246 

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


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Investment Portfolio - Fixed Maturities Data

(at carrying value, $ in millions)September 30,
2020		December 31,
2019
Fixed maturities
U.S. Treasury securities and obligations of U.S. Government corporations and agencies$2,126 $2,095 
Obligations of states and political subdivisions:
Pre-refunded2,618 2,056 
All other32,223 27,861 
Total34,841 29,917 
Debt securities issued by foreign governments979 1,173 
Mortgage-backed securities - principally obligations of U.S. Government agencies2,730 3,280 
Corporates (including redeemable preferreds)31,898 31,669 
Total fixed maturities$72,574 $68,134 
 
Fixed Maturities
Quality Characteristics (1)
 
 September 30, 2020December 31, 2019
 Amount% of TotalAmount% of Total
Quality Ratings
Aaa$31,177 42.9 %$29,164 42.9 %
Aa17,750 24.5 15,819 23.2 
A12,656 17.4 12,148 17.8 
Baa9,563 13.2 9,541 14.0 
Total investment grade71,146 98.0 66,672 97.9 
Ba895 1.3 846 1.2 
B434 0.6 511 0.7 
Caa and lower99 0.1 105 0.2 
Total below investment grade1,428 2.0 1,462 2.1 
Total fixed maturities$72,574 100.0 %$68,134 100.0 %
Average weighted quality Aa2, AA Aa2, AA
Weighted average duration of fixed maturities and short-term securities, net of securities lending activities and net receivables and payables on investment sales and purchases3.8 4.0 

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

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Gross investment income
Fixed maturities$511 $514 $520 $525 $511 $498 $502 $1,545 $1,511 
Short-term securities28 27 26 24 22 13 6 81 41 
Other53 118 85 77 88 (234)173 256 27 
592 659 631 626 621 277 681 1,882 1,579 
Investment expenses10 11 9 10 10 9 10 30 29 
Net investment income, pre-tax582 648 622 616 611 268 671 1,852 1,550 
Income taxes86 100 94 91 92 17 105 280 214 
Net investment income, after-tax$496 $548 $528 $525 $519 $251 $566 $1,572 $1,336 
Effective tax rate14.7 %15.4 %15.2 %14.8 %15.1 %6.2 %15.6 %15.1 %13.8 %
Average invested assets (1)$74,040$74,370$74,910$75,996$76,191$76,635$78,722$74,475$77,304
Average yield pre-tax (1)3.1 %3.5 %3.3 %3.2 %3.2 %1.4 %3.4 %3.3 %2.7 %
Average yield after-tax2.7 %2.9 %2.8 %2.8 %2.7 %1.3 %2.9 %2.8 %2.3 %

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

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

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Net realized investment gains (losses)
Fixed maturities$16 $13 $14 $12 $(2)$10 $23 $43 $31 
Equity securities 41 10 8 14 (88)43 16 59 (29)
Other (1)(4)2 1 (14)(8)(40)(2)(1)(50)
Realized investment gains (losses) before tax53 25 23 12 (98)13 37 101 (48)
Related taxes12 5 5 6 (22)3 8 22 (11)
Net realized investment gains (losses)$41 $20 $18 $6 $(76)$10 $29 $79 $(37)
Gross investment gains (1)$65 $31 $30 $32 $31 $69 $41 $126 $141 
Gross investment losses before impairments (1)(11)(5)(7)(18)(113)(10)(8)(23)(131)
Net investment gains (losses) before impairments54 26 23 14 (82)59 33 103 10 
Net credit impairment (charges) recoveries(1)(1)— (2)(16)(46)4 (2)(58)
Net realized investment gains (losses) before tax53 25 23 12 (98)13 37 101 (48)
Related taxes12 5 5 6 (22)3 8 22 (11)
Net realized investment gains (losses)$41 $20 $18 $6 $(76)$10 $29 $79 $(37)
($ in millions)March 31,
2019		June 30,
2019		September 30,
2019		December 31,
2019		March 31,
2020		June 30,
2020		September 30,
2020
Net unrealized investment gains, net of tax, included in shareholders’ equity, by asset type
Fixed maturities$1,284 $2,388 $2,990 $2,853 $2,271 $4,632 $4,842 
Equity securities & other— 1 1 — 2 2 2 
Unrealized investment gains before tax1,284 2,389 2,991 2,853 2,273 4,634 4,844 
Related taxes 277 511 637 607 488 988 1,032 
Balance, end of period$1,007 $1,878 $2,354 $2,246 $1,785 $3,646 $3,812 
(1)  Includes the following gross investment gains and gross investment losses related to U.S. Treasury futures, which are settled daily:
Gross investment Treasury future gains$1 $— $— $— $5 $— $— $1 $5 
Gross investment Treasury future losses$1 $— $— $— $12 $— $— $1 $12 
The Company entered into these arrangements as part of its strategy to manage the duration of its fixed maturity portfolio.  In a changing interest rate environment, the change in the value of the futures contracts can be expected to partially offset changes in the value of the fixed maturity portfolio.
 

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Reinsurance Recoverables

($ in millions)September 30, 2020December 31, 2019
Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses (1)$3,727 $3,476 
Gross structured settlements (2)2,912 2,965 
Mandatory pools and associations (3) 1,818 1,886 
Gross reinsurance recoverables (4)8,457 84578,327 
Allowance for estimated uncollectible reinsurance (5)(140)(92)
Net reinsurance recoverables$8,317 $8,235 
(1)  The Company’s top five reinsurer groups, including retroactive reinsurance, included in gross reinsurance recoverables is as follows:
ReinsurerA.M. Best Rating of Group's Predominant ReinsurerSeptember 30, 2020
Swiss Re Group A+ second highest of 16 ratings$529 
Berkshire HathawayA++ highest of 16 ratings342 
Munich Re GroupA+ second highest of 16 ratings291 
Alleghany GroupA+ second highest of 16 ratings204 
Axa Group A+ second highest of 16 ratings182 
The gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses represent the current and estimated future amounts due from reinsurers on known and incurred but not reported claims.  The ceded reserves are estimated in a manner consistent with the underlying direct and assumed reserves.  Although this total comprises recoverables due from nearly one thousand different reinsurance entities, about half is attributable to 10 reinsurer groups.

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

The Company’s top five groups included in gross structured settlements is as follows:
GroupA.M. Best Rating of Group's Predominant InsurerSeptember 30, 2020
Fidelity & Guaranty Life Group  A- fourth highest of 16 ratings$761 
Genworth Financial Group (a) B seventh highest of 16 ratings325 
John Hancock Group A+ second highest of 16 ratings268 
Brighthouse Financial, Inc. A third highest of 16 ratings238 
Symetra Financial Corporation A third highest of 16 ratings232 

(a) On October 23, 2016, Genworth Financial (Genworth) announced that they have entered into a definitive agreement under which China Oceanwide Holdings Group Co., Ltd. (China Oceanwide) agreed to acquire all of the outstanding shares of Genworth. China Oceanwide is a privately held, family-owned international financial holding group headquartered in Beijing, China. On March 7, 2017, Genworth stockholders adopted the merger agreement, and the acquisition is pending the receipt of required regulatory approvals. On October 1, 2020, the parties agreed to extend the closing deadline for the transaction until November 30, 2020.

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

(4) Of the total reinsurance recoverables at September 30, 2020, after deducting mandatory pools and associations and before allowances for estimated uncollectible reinsurance, $5.82 billion, or 88%, were rated by A.M. Best Company.  The Company utilizes updated A.M. Best credit ratings on a quarterly basis when determining the allowance. Of the total rated by A.M. Best Company, 93% were rated A- or better.  The remaining 12% 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 5% were balances from other companies not rated by A.M. Best Company.  Certain of the Company's reinsurance recoverables are collateralized by letters of credit, funds held or trust agreements.

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

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Statutory Reserves for Losses and Loss Adjustment Expenses
Business Insurance
Beginning of period$33,857 $34,086 $34,377 $34,963 $35,142 $35,415 $36,210 $33,857 $35,142 
Incurred2,529 2,631 2,969 2,608 2,737 2,828 2,750 8,129 8,315 
Paid(2,320)(2,345)(2,354)(2,482)(2,364)(2,067)(2,054)(7,019)(6,485)
Foreign exchange and other20 5 (29)53 (100)34 40 (4)(26)
End of period$34,086 $34,377 $34,963 $35,142 $35,415 $36,210 $36,946 $34,963 $36,946 
Bond & Specialty Insurance
Beginning of period$2,987 $3,068 $3,042 $3,074 $3,094 $3,085 $3,276 $2,987 $3,094 
Incurred264 236 298 286 325 401 390 798 1,116 
Paid(189)(260)(256)(290)(300)(216)(237)(705)(753)
Foreign exchange and other6 (2)(10)24 (34)6 18 (6)(10)
End of period$3,068 $3,042 $3,074 $3,094 $3,085 $3,276 $3,447 $3,074 $3,447 
Personal Insurance
Beginning of period$5,565 $5,427 $5,560 $5,587 $5,507 $5,413 $5,626 $5,565 $5,507 
Incurred1,596 1,897 1,899 1,684 1,671 1,824 1,690 5,392 5,185 
Paid(1,751)(1,781)(1,862)(1,782)(1,693)(1,644)(1,546)(5,394)(4,883)
Foreign exchange and other17 17 (10)18 (72)33 18 24 (21)
End of period$5,427 $5,560 $5,587 $5,507 $5,413 $5,626 $5,788 $5,587 $5,788 
Total
Beginning of period$42,409 $42,581 $42,979 $43,624 $43,743 $43,913 $45,112 $42,409 $43,743 
Incurred4,389 4,764 5,166 4,578 4,733 5,053 4,830 14,319 14,616 
Paid(4,260)(4,386)(4,472)(4,554)(4,357)(3,927)(3,837)(13,118)(12,121)
Foreign exchange and other43 20 (49)95 (206)73 76 14 (57)
End of period$42,581 $42,979 $43,624 $43,743 $43,913 $45,112 $46,181 $43,624 $46,181 
Prior Year Reserve Development: Unfavorable (Favorable)
Business Insurance
Asbestos$— $— $220 $— $— $— $295 $220 $295 
Environmental— 60 8 8 17 17 4 68 38 
All other21 (131)88 (16)(22)(17)(79)(22)(118)
Total Business Insurance (1)21 (71)316 (8)(5)— 220 266 215 
Bond & Specialty Insurance(3)(39)(3)(20)— 33 — (45)33 
Personal Insurance(69)(13)(19)(32)(22)(35)(362)(101)(419)
Total$(51)$(123)$294 $(60)$(27)$(2)$(142)$120 $(171)
(1)  Excludes accretion of discount.

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

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Asbestos reserves
Beginning reserves:
Gross$1,608 $1,564 $1,474 $1,685 $1,601 $1,530 $1,470 $1,608 $1,601 
Ceded(327)(321)(295)(334)(322)(316)(301)(327)(322)
Net1,281 1,243 1,179 1,351 1,279 1,214 1,169 1,281 1,279 
Incurred losses and loss expenses:
Gross— — 268 — — — 362 268 362 
Ceded— — (48)— — — (67)(48)(67)
Paid loss and loss expenses:
Gross44 90 57 86 69 60 61 191 190 
Ceded(6)(26)(9)(12)(6)(15)(2)(41)(23)
Foreign exchange and other:
Gross— — — 2 (2)— 1 — (1)
Ceded— — — — — — 1 — 1 
Ending reserves:
Gross1,564 1,474 1,685 1,601 1,530 1,470 1,772 1,685 1,772 
Ceded(321)(295)(334)(322)(316)(301)(365)(334)(365)
Net$1,243 $1,179 $1,351 $1,279 $1,214 $1,169 $1,407 $1,351 $1,407 
Environmental reserves
Beginning reserves:
Gross$358 $338 $388 $374 $350 $350 $356 $358 $350 
Ceded(24)(24)(29)(29)(29)(27)(26)(24)(29)
Net334 314 359 345 321 323 330 334 321 
Incurred losses and loss expenses:
Gross— 67 8 9 19 17 15 75 51 
Ceded— (7)— (1)(2)— (11)(7)(13)
Paid loss and loss expenses:
Gross20 16 22 34 18 11 21 58 50 
Ceded— (1)— (1)(4)(1)— (1)(5)
Foreign exchange and other:
Gross— (1)— 1 (1)— 1 (1)— 
Ceded— 1 — — — — — 1 — 
Ending reserves:
Gross338 388 374 350 350 356 351 374 351 
Ceded(24)(29)(29)(29)(27)(26)(37)(29)(37)
Net$314 $359 $345 $321 $323 $330 $314 $345 $314 
See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.
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Capitalization

($ in millions)September 30,
2020		December 31,
2019
Debt
Short-term debt
Commercial paper$100 $100 
3.90% Senior notes due November 1, 2020 (1)500 500 
Total short-term debt600 600 
Long-term debt
7.75% Senior notes due April 15, 2026200 200 
7.625% Junior subordinated debentures due December 15, 2027125 125 
6.375% Senior notes due March 15, 2033 (1)500 500 
6.75% Senior notes due June 20, 2036 (1)400 400 
6.25% Senior notes due June 15, 2037 (1)800 800 
5.35% Senior notes due November 1, 2040 (1)750 750 
4.60% Senior notes due August 1, 2043 (1)500 500 
4.30% Senior notes due August 25, 2045 (1)400 400 
8.50% Junior subordinated debentures due December 15, 204556 56 
3.75% Senior notes due May 15, 2046 (1)500 500 
8.312% Junior subordinated debentures due July 1, 204673 73 
4.00% Senior notes due May 30, 2047 (1)700 700 
4.05% Senior notes due March 7, 2048 (1)500 500 
4.10% Senior notes due March 4, 2049 (1)500 500 
2.55% Senior notes due April 27, 2050 (1)500 — 
Total long-term debt6,504 6,004 
Unamortized fair value adjustment42 43 
Unamortized debt issuance costs(96)(89)
6,450 5,958 
Total debt7,050 6,558 
Common equity (excluding net unrealized investment gains, net of tax, included in shareholders’ equity)24,037 23,697 
Total capital (excluding net unrealized investment gains, net of tax, included in shareholders’ equity)$31,087 $30,255 
Total debt to capital (excluding net unrealized investment gains, net of tax, included in shareholders’ equity)22.7 %21.7 %
(1)  Redeemable anytime with “make-whole” premium. 


See Glossary of Financial Measures and Description of Reportable Business Segments on pages 35 and 36.
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Statutory Capital and Surplus to GAAP Shareholders' Equity Reconciliation

($ in millions)September 30,
2020 (1)		December 31,
2019
Statutory capital and surplus$21,230 $21,330 
GAAP adjustments  
Goodwill and intangible assets3,569 3,589 
Investments5,031 3,130 
Noninsurance companies(3,828)(4,111)
Deferred acquisition costs2,406 2,273 
Deferred federal income tax(1,445)(1,144)
Current federal income tax(33)(29)
Reinsurance recoverables47 47 
Furniture, equipment & software691 676 
Agents balances69 212 
Other112 (30)
Total GAAP adjustments6,619 4,613 
GAAP shareholders’ equity$27,849 $25,943 

(1) Estimated and Preliminary
 




















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


($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Cash flows from operating activities
Net income (loss)$796 $557 $396 $873 $600 $(40)$827 $1,749 $1,387 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net realized investment (gains) losses(53)(25)(23)(12)98 (13)(37)(101)48 
Depreciation and amortization211 190 180 182 203 188 186 581 577 
Deferred federal income tax expense (benefit)32 (22)(20)(23)6 (77)4 (10)(67)
Amortization of deferred acquisition costs1,117 1,134 1,169 1,181 1,178 1,173 1,207 3,420 3,558 
Equity in (income) loss from other investments(34)(98)(64)(55)(67)253 (154)(196)32 
Premiums receivable(434)(345)168 227 (326)(245)247 (611)(324)
Reinsurance recoverables98 53 61 (55)(15)75 (210)212 (150)
Deferred acquisition costs(1,185)(1,223)(1,211)(1,128)(1,215)(1,238)(1,241)(3,619)(3,694)
Claims and claim adjustment expense reserves(2)331 598 120 388 1,067 1,218 927 2,673 
Unearned premium reserves551 407 392 (342)414 229 317 1,350 960 
Other(458)194 355 444 (636)292 (38)91 (382)
Net cash provided by operating activities639 1,153 2,001 1,412 628 1,664 2,326 3,793 4,618 
Cash flows from investing activities
Proceeds from maturities of fixed maturities1,556 1,482 1,857 1,950 1,461 1,610 2,170 4,895 5,241 
Proceeds from sales of investments:
Fixed maturities769 726 306 386 388 832 774 1,801 1,994 
Equity securities39 32 28 41 33 21 22 99 76 
Other investments105 135 106 113 64 75 45 346 184 
Purchases of investments:
Fixed maturities(2,914)(2,794)(2,526)(2,477)(2,630)(2,160)(5,161)(8,234)(9,951)
Equity securities(22)(19)(21)(32)(35)(24)(21)(62)(80)
Real estate investments(77)(8)(10)(12)(16)(8)(9)(95)(33)
Other investments(146)(116)(107)(128)(103)(125)(93)(369)(321)
Net sales (purchases) of short-term securities(109)606 (1,114)(340)906 (2,053)(240)(617)(1,387)
Securities transactions in course of settlement295 (72)209 (274)85 9 428 432 522 
Other(82)(87)(74)(82)(69)(75)(78)(243)(222)
Net cash provided by (used in) investing activities(586)(115)(1,346)(855)84 (1,898)(2,163)(2,047)(3,977)

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Statement of Cash Flows (Continued)

($ in millions)1Q20192Q20193Q20194Q20191Q20202Q20203Q2020YTD 3Q2019YTD 3Q2020
Cash flows from financing activities
Treasury stock acquired - share repurchase authorization(375)(375)(375)(375)(425)— — (1,125)(425)
Treasury stock acquired - net employee share-based compensation(46)(1)— (1)(46)— — (47)(46)
Dividends paid to shareholders(205)(214)(214)(211)(210)(216)(217)(633)(643)
Payment of debt— (500)— — — — — (500)— 
Issuance of debt492 — — — — 490 — 492 490 
Issuance of common stock - employee share options63 111 32 7 31 34 7 206 72 
Net cash provided by (used in) financing activities(71)(979)(557)(580)(650)308 (210)(1,607)(552)
Effect of exchange rate changes on cash2 — (6)9 (12)5 7 (4)— 
Net increase (decrease) in cash(16)59 92 (14)50 79 (40)135 89 
Cash at beginning of period373 357 416 508 494 544 623 373 494 
Cash at end of period$357 $416 $508 $494 $544 $623 $583 $508 $583 
Income taxes paid$5 $320 $42 $61 $15 $2 $396 $367 $413 
Interest paid$50 $121 $60 $107 $60 $106 $60 $231 $226 

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Glossary of Financial Measures and Description of Reportable Business Segments
The following measures are used by the Company’s management to evaluate financial performance against historical results, to establish performance targets on a consolidated basis, and for other reasons as discussed below.  In some cases, these measures are considered non-GAAP financial measures under applicable SEC rules because they are not displayed as separate line items in the consolidated financial statements or are not required to be disclosed in the notes to financial statements or, in some cases, include or exclude certain items not ordinarily included or excluded in the most comparable GAAP financial measure.
 
In the opinion of the Company’s management, a discussion of these measures provides investors, financial analysts, rating agencies and other financial statement users with a better understanding of the significant factors that comprise the Company’s periodic results of operations and how management evaluates the Company’s financial performance. 
 
Some of these measures exclude net realized investment gains (losses), net of tax, and/or net unrealized investment gains (losses), net of tax, included in shareholders’ equity, which can be significantly impacted by both discretionary and other economic factors and are not necessarily indicative of operating trends.
 
Other companies may calculate these measures differently, and, therefore, their measures may not be comparable to those used by the Company’s management.
 
Core income (loss) is consolidated net income (loss) excluding the after-tax impact of net realized investment gains (losses), discontinued operations, the effect of a change in tax laws and tax rates at enactment, and cumulative effect of changes in accounting principles when applicable.  Segment income (loss) is determined in the same manner as core income (loss) on a segment basis.  Management uses segment income (loss) to analyze each segment’s performance and as a tool in making business decisions.  Financial statement users also consider core income (loss) when analyzing the results and trends of insurance companies.  Core income (loss) per share is core income (loss) on a per common share basis.
 
Average shareholders’ equity is (a) the sum of total shareholders’ equity at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.  Adjusted shareholders’ equity is shareholders’ equity excluding net realized investment gains (losses), net of tax, net unrealized investment gains (losses), net of tax, included in shareholders’ equity for the periods presented and the effect of a change in tax laws and tax rates at enactment (excluding the portion related to net unrealized investment gains (losses)).  Adjusted average shareholders’ equity is (a) the sum of total adjusted shareholders’ equity at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.
 
Return on equity is the ratio of annualized net income (loss) to average shareholders’ equity for the periods presented.  Core return on equity is the ratio of annualized core income (loss) to adjusted average shareholders’ equity for the periods presented.  In the opinion of the Company’s management, these are important indicators of how well management creates value for its shareholders through its operating activities and its capital management.
 
Underwriting gain (loss) is net earned premiums and fee income less claims and claim adjustment expenses and insurance-related expenses.  In the opinion of the Company’s management, it is important to measure the profitability of each segment excluding the results of investing activities, which are managed separately from the insurance business.  This measure is used to assess each segment’s business performance and as a tool in making business decisions.
 
A catastrophe is a severe loss designated a catastrophe by internationally recognized organizations that track and report on insured losses resulting from catastrophic events, such as Property Claim Services (PCS) for events in the United States and Canada.  Catastrophes can be caused by various natural events, including, among others, hurricanes, tornadoes and other windstorms, earthquakes, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions and other naturally-occurring events, such as solar flares. Catastrophes can also be man-made, such as terrorist attacks and other intentionally destructive acts including those involving nuclear, biological, chemical and radiological events, cyber events, explosions and destruction of infrastructure.  Each catastrophe has unique characteristics and catastrophes are not predictable as to timing or amount.  Their effects are included in net and core income and claims and claim adjustment expense reserves upon occurrence.  A catastrophe may result in the payment of reinsurance reinstatement premiums and assessments from various pools.  The Company’s threshold for disclosing catastrophes is primarily determined at the reportable segment level. If a threshold for one segment or a combination thereof is exceeded and the other segments have losses from the same event, losses from the event are identified as catastrophe losses in the segment results and for the consolidated results of the Company.  Additionally, an aggregate threshold is applied for international business across all reportable segments. The threshold for 2020 ranges from approximately $20 million to $30 million of losses before reinsurance and taxes.
 
Net favorable (unfavorable) prior year loss reserve development is the increase or decrease in incurred claims and claim adjustment expenses as a result of the re-estimation of claims and claim adjustment expense reserves at successive valuation dates for a given group of claims, which may be related to one or more prior years.  In the opinion of the Company’s management, a discussion of loss reserve development is meaningful to users of the financial statements as it allows them to assess the impact between prior and current year development on incurred claims and claim adjustment expenses, net and core income (loss), and changes in claims and claim adjustment expense reserve levels from period to period.
 
Combined ratio  For Statutory Accounting Practices (SAP), the combined ratio is the sum of the SAP loss and LAE ratio and the SAP underwriting expense ratio as defined in the statutory financial statements required by insurance regulators.  The combined ratio, as used in this financial supplement, is the equivalent of, and is calculated in the same manner as, the SAP combined ratio except that the SAP underwriting expense ratio is based on net written premiums and the underwriting expense ratio as used in this financial supplement is based on net earned premiums.  For SAP, the loss and LAE ratio is the ratio of incurred losses and loss adjustment expenses less certain administrative services fee income to net earned premiums as defined in the statutory financial statements required by insurance regulators. The loss and LAE ratio as used in this financial supplement is calculated in the same manner as the SAP ratio.  For SAP, the underwriting expense ratio is the ratio of underwriting expenses incurred (including commissions paid), less certain administrative services fee income and billing and policy fees and other, to net written premiums as defined in the statutory financial statements required by insurance regulators. The underwriting expense ratio as used in this financial supplement, is the ratio of underwriting expenses (including the amortization of deferred acquisition costs), less certain administrative services fee income and billing and policy fees, to net earned premiums.  Underlying combined ratio is the combined ratio adjusted to exclude the impact of prior year reserve development and catastrophes, net of reinsurance.
 
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The Travelers Companies, Inc.                                                 image71.gif
Glossary of Financial Measures and Description of Reportable Business Segments
The combined ratio, loss and LAE ratio, and underwriting expense ratio are used as indicators of the Company’s underwriting discipline, efficiency in acquiring and servicing its business and overall underwriting profitability. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.
 
Other companies’ method of computing similarly titled measures may not be comparable to the Company’s method of computing these ratios.
 
Gross written premiums reflect the direct and assumed contractually determined amounts charged to policyholders for the effective period of the contract based on the terms and conditions of the insurance contract.  Net written premiums reflect gross written premiums less premiums ceded to reinsurers.
 
Book value per share is total common shareholders’ equity divided by the number of common shares outstanding.  Adjusted book value per share is total common shareholders’ equity excluding net unrealized investment gains and losses, net of tax, included in shareholders’ equity, divided by the number of common shares outstanding. In the opinion of the Company’s management, adjusted book value per share is useful in an analysis of a property casualty company’s book value per share as it removes the effect of changing prices on invested assets, (i.e., net unrealized investment gains (losses), net of tax) which do not have an equivalent impact on unpaid claims and claim adjustment expense reserves.
 
Total capital is the sum of total shareholders’ equity and debt.  Debt-to-capital ratio excluding net unrealized gain (loss) on investments, net of tax, included in shareholders’ equity is the ratio of debt to total capital excluding net unrealized investment gains and losses, net of tax, included in shareholders’ equity.  In the opinion of the Company’s management, the debt to capital ratio is useful in an analysis of the Company’s financial leverage.
 
Statutory capital and surplus represents the excess of an insurance company’s admitted assets over its liabilities, including loss reserves, as determined in accordance with statutory accounting practices.
 
Travelers has organized its businesses into the following reportable business segments:
 
Business Insurance - Business Insurance offers a broad array of property and casualty insurance and insurance-related services to its customers, primarily in the United States, as well as in Canada, the United Kingdom, the Republic of Ireland and throughout other parts of the world as a corporate member of Lloyd’s.  Business Insurance is organized as follows:  Select Accounts; Middle Market including Commercial Accounts, Construction, Technology, Public Sector Services, Oil & Gas, Excess Casualty, Inland Marine, Ocean Marine, and Boiler & Machinery; National Accounts; National Property and Other including National Property, Northland Transportation, Northfield, National Programs, and Agribusiness; and International including Global Services.  Business Insurance also includes Simply Business, a leading provider of small business insurance policies primarily in the United Kingdom that was acquired in August 2017, as well as Business Insurance Other, which primarily comprises the Company’s asbestos and environmental liabilities, and the assumed reinsurance and certain other runoff operations.
 
Bond & Specialty Insurance - Bond & Specialty Insurance provides surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to its customers in the United States and certain specialty insurance products in Canada, the United Kingdom, the Republic of Ireland and Brazil (through a joint venture as described below), utilizing various degrees of financially-based underwriting approaches.  The range of coverages includes performance, payment and commercial surety and fidelity bonds for construction and general commercial enterprises; management liability coverages including directors’ and officers’ liability, employee dishonesty, employment practices liability, fiduciary liability and cyber risk for public corporations, private companies, not-for-profit organizations and financial institutions; professional liability coverage for a variety of professionals including, among others, lawyers and design professionals; and in the United States only, property, workers’ compensation, auto and general liability for financial institutions.
 
Bond & Specialty Insurance surety business in Brazil and Colombia is conducted through Junto Holding Brasil S.A. (Junto) and Junto Holding Latam S.A. in Brazil. The Company owns 49.5% of both Junto, a market leader in surety coverages in Brazil, and Junto Holding Latam S.A., a Colombian start-up surety provider. These joint venture investments are accounted for using the equity method and are included in “other investments” on the consolidated balance sheet.
 
Personal Insurance - Personal Insurance writes a broad range of property and casualty insurance covering individuals’ personal risks, primarily in the United States, as well as in Canada. The primary products of automobile and homeowners insurance are complemented by a broad suite of related coverages.

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TRAVELERS COMPANIES, INC. Reports