Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES


			Page
Report of Independent Registered Public Accounting Firm (KPMG LLP, New York, NY, Auditor Firm ID: 185)			119
Consolidated Financial Statements:
Statement of Income for the years ended December 31, 202 3 , 202 2 and 2 021			121
Statement of Comprehensive Income (Loss) for the years ended December 31, 202 3 , 202 2 and 202 1			122
Balance Sheet at December 31, 202 3 and 202 2			123
Statement of Changes in Shareholders’ Equity for the years ended December 31, 202 3 , 202 2 and 202 1			124
Statement of Cash Flows for the years ended December 31, 202 3 , 202 2 and 202 1			125
Notes to Consolidated Financial Statements			126
Schedules:
Schedule II - Condensed Financial Information of Registrant (Parent Company Only)			212
Schedule III - Supplementary Insurance Information			217
Schedule V - Valuation and Qualifying Accounts			218
Schedule VI - Supplementary Information Concerning Property-Casualty Insurance Operations			219

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

The Travelers Companies, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of The Travelers Companies, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2023, and the related notes and financial statement schedules as listed in the accompanying index to consolidated financial statements and schedules (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 15, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of the estimate of claims and claim adjustment expense reserves

As discussed in Notes 1 and 8 to the consolidated financial statements, the claims and claim adjustment expense reserves represent the Company’s estimate of the ultimate liability for unpaid losses and loss adjustment expenses for claims that have been reported and claims that have been incurred but not yet reported as of the balance sheet date. The Company’s claims and claim adjustment expense reserves balance at December 31, 2023 was $61.6 billion.

We identified the evaluation of the estimate of claims and claim adjustment expense reserves as a critical audit matter. The process of evaluating the estimate of claims and claim adjustment expense reserves involves significant auditor judgment due to the inherent uncertainty in the ultimate amounts and timing of claim payments, which may be affected by a number of internal and external considerations, such as:

changes in claims handling procedures
economic inflation and changes in the tort environment
legislative changes, among others.

Evaluating the impact of these considerations on the ultimate costs of claims and claim adjustment expenses requires specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s reserving process for claims and claim adjustment expense reserves. This included controls related to the actuarial analyses and the determination of the Company’s estimate of the claims and claim adjustment expense reserves. We involved actuarial professionals with specialized skills and knowledge who assisted in:

assessing the assumptions and methodologies underlying the Company’s claims and claim adjustment expense reserve estimate
evaluating the Company’s estimates by performing independent analyses of claims and claim adjustment expense reserves for certain lines of business
assessing the Company’s internally prepared actuarial analyses in comparison to the Company’s internal experience and related industry trends for selected other lines of business
developing an overall range of reserve estimates and assessing the position of the Company’s recorded reserve relative to the range.


/s/ KPMG LLP
KPMG LLP

We have served as the Company’s auditor since 1994.

New York, New York

February 15, 2024

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

(in millions, except per share amounts)


For the year ended December 31,	2023		2022		2021
Revenues
Premiums	$	37,761	$	33,763	$	30,855
Net investment income	2,922		2,562		3,033
Fee income	433		412		402
Net realized investment gains (losses)	(105)		(204)		171
Other revenues	353		351		355
Total revenues	41,364		36,884		34,816
Claims and expenses
Claims and claim adjustment expenses	26,215		22,854		20,298
Amortization of deferred acquisition costs	6,226		5,515		5,043
General and administrative expenses	5,176		4,810		4,677
Interest expense	376		351		340
Total claims and expenses	37,993		33,530		30,358
Income before income taxes	3,371		3,354		4,458
Income tax expense	380		512		796
Net income	$	2,991	$	2,842	$	3,662
Net income per share
Basic	$	12.93	$	11.91	$	14.63
Diluted	$	12.79	$	11.77	$	14.49
Weighted average number of common shares outstanding
Basic	229.7		237.0		248.5
Diluted	232.2		239.7		250.8

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(in millions)


For the year ended December 31,	2023		2022		2021
Net income	$	2,991	$	2,842	$	3,662
Other comprehensive income (loss):
Changes in net unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income	2,249		(9,276)		(2,115)
Having credit losses recognized in the consolidated statement of income	1		(4)		—
Net changes in benefit plan assets and obligations	106		(87)		455
Net changes in unrealized foreign currency translation	138		(273)		(11)
Other comprehensive income (loss) before income taxes	2,494		(9,640)		(1,671)
Income tax expense (benefit)	520		(2,002)		(362)
Other comprehensive income (loss), net of taxes	1,974		(7,638)		(1,309)
Comprehensive income (loss)	$	4,965	$	(4,796)	$	2,353

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)


At December 31,	2023		2022
Assets
Fixed maturities, available for sale, at fair value (amortized cost $81,781 and $77,380; allowance for expected credit losses of $5 and $3)	$	77,807	$	71,160
Equity securities, at fair value (cost $553 and $747)	608		807
Real estate investments	959		952
Short-term securities	5,137		3,470
Other investments	4,299		4,065
Total investments	88,810		80,454
Cash	650		799
Investment income accrued	688		650
Premiums receivable (net of allowance for expected credit losses of $69 and $77)	10,282		8,922
Reinsurance recoverables (net of allowance for estimated uncollectible reinsurance of $118 and $132)	8,143		8,063
Ceded unearned premiums	1,150		1,024
Deferred acquisition costs	3,306		2,836
Deferred taxes	1,504		1,877
Contractholder receivables (net of allowance for expected credit losses of $20 and $17)	3,249		3,579
Goodwill	3,976		3,952
Other intangible assets	277		287
Other assets	3,943		3,274
Total assets	$	125,978	$	115,717
Liabilities
Claims and claim adjustment expense reserves	$	61,627	$	58,649
Unearned premium reserves	20,872		18,240
Contractholder payables	3,269		3,596
Payables for reinsurance premiums	518		419

Debt	8,031		7,292
Other liabilities	6,740		5,961
Total liabilities	101,057		94,157
Shareholders’ equity
Common stock (1,750.0 shares authorized; 228.2 and 232.1 shares issued and outstanding)	24,906		24,565
Retained earnings	45,591		43,516
Accumulated other comprehensive loss	(4,471)		(6,445)
Treasury stock, at cost (559.2 and 553.5 shares)	(41,105)		(40,076)
Total shareholders’ equity	24,921		21,560
Total liabilities and shareholders’ equity	$	125,978	$	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

(in millions)


For the year ended December 31,	2023		2022		2021
Common stock
Balance, beginning of year	$	24,565	$	24,154	$	23,743
Employee share-based compensation	125		227		247
Compensation amortization under share-based plans and other changes	216		184		164
Balance, end of year	24,906		24,565		24,154
Retained earnings
Balance, beginning of year	43,516		41,555		38,771

Net income	2,991		2,842		3,662
Dividends	(915)		(880)		(876)
Other	(1)		(1)		(2)
Balance, end of year	45,591		43,516		41,555
Accumulated other comprehensive income (loss), net of tax
Balance, beginning of year	(6,445)		1,193		2,502
Other comprehensive income (loss)	1,974		(7,638)		(1,309)
Balance, end of year	(4,471)		(6,445)		1,193
Treasury stock, at cost
Balance, beginning of year	(40,076)		(38,015)		(35,815)
Treasury stock acquired — share repurchase authorizations	(965)		(2,000)		(2,156)
Net shares acquired related to employee share-based compensation plans	(64)		(61)		(44)
Balance, end of year	(41,105)		(40,076)		(38,015)
Total shareholders’ equity	$	24,921	$	21,560	$	28,887
Common shares outstanding
Balance, beginning of year	232.1		241.2		252.4
Treasury stock acquired — share repurchase authorizations	(5.4)		(11.6)		(13.9)
Net shares issued under employee share-based compensation plans	1.5		2.5		2.7
Balance, end of year	228.2		232.1		241.2

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)


For the year ended December 31,	2023		2022		2021
Cash flows from operating activities
Net income	$	2,991	$	2,842	$	3,662
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment (gains) losses	105		204		(171)
Depreciation and amortization	722		826		870
Deferred federal income tax expense (benefit)	(163)		(186)		62
Amortization of deferred acquisition costs	6,226		5,515		5,043
Equity in income from other investments	(157)		(336)		(993)
Premiums receivable	(1,341)		(877)		(258)
Reinsurance recoverables	(63)		344		(101)
Deferred acquisition costs	(6,689)		(5,824)		(5,227)
Claims and claim adjustment expense reserves	2,843		2,050		2,388
Unearned premium reserves	2,590		1,862		1,249
Other	647		45		750
Net cash provided by operating activities	7,711		6,465		7,274
Cash flows from investing activities
Proceeds from maturities of fixed maturities	6,371		6,837		8,852
Proceeds from sales of investments:
Fixed maturities	4,981		5,657		3,165
Equity securities	138		138		102
Real estate investments	—		10		31
Other investments	255		302		427
Purchases of investments:
Fixed maturities	(15,690)		(15,908)		(18,153)
Equity securities	(105)		(136)		(407)
Real estate investments	(67)		(41)		(28)
Other investments	(495)		(574)		(520)
Net sales (purchases) of short-term securities	(1,664)		355		1,671
Securities transactions in the course of settlement	(83)		21		(19)
Acquisitions, net of cash acquired	—		(4)		(38)
Other	(462)		(385)		(279)
Net cash used in investing activities	(6,821)		(3,728)		(5,196)
Cash flows from financing activities
Treasury stock acquired — share repurchase authorizations	(958)		(2,000)		(2,156)
Treasury stock acquired — net employee share-based compensation	(64)		(61)		(44)
Dividends paid to shareholders	(908)		(875)		(869)

Issuance of debt	738		—		739
Issuance of common stock — employee share options	141		267		293

Net cash used in financing activities	(1,051)		(2,669)		(2,037)
Effect of exchange rate changes on cash	12		(30)		(1)
Net increase (decrease) in cash	(149)		38		40
Cash at beginning of year	799		761		721
Cash at end of year	$	650	$	799	$	761
Supplemental disclosure of cash flow information
Income taxes paid	$	201	$	817	$	707
Interest paid	$	370	$	349	$	337

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of The Travelers Companies, Inc. (together with its subsidiaries, the Company). The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (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 consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period. Actual results could differ from those estimates. All material intercompany transactions and balances have been eliminated. To the extent that the Company changes its accounting for or presentation of items in the financial statements, the presentation of such amounts in prior periods is changed to conform to the current period presentation, if appropriate, and a disclosure is provided, if material.

On November 3, 2023, the Company announced an agreement to acquire Corvus Insurance Holdings, Inc. (Corvus), a cyber insurance managing general underwriter. On January 2, 2024, the Company completed its acquisition of all issued and outstanding shares of Corvus for consideration transferred of approximately $426 million. The Company funded this transaction from internal resources.

Accounting Policies

Investments

Fixed Maturities

Fixed maturities include bonds, notes and redeemable preferred stocks. Fixed maturities, including instruments subject to securities lending agreements, are classified as available for sale and reported at fair value, with unrealized investment gains and losses, net of income taxes, charged or credited directly to other comprehensive income.

Equity Securities

Equity securities, which include public and non-public common and non-redeemable preferred stocks, are reported at fair value with changes in fair value recognized in net realized investment gains (losses).

Real Estate Investments

The Company’s real estate investments include warehouses, office buildings and other commercial land and properties that are directly owned. Real estate is recorded on the purchase date at the purchase price, which generally represents fair value, and is supported by internal analysis or external appraisals that use discounted cash flow analyses and other acceptable valuation techniques. Real estate held for investment purposes is subsequently carried at cost less accumulated depreciation.

Buildings are depreciated on a straight-line basis over the shorter of the expected useful life of the building or 39 years. Real estate held for sale is carried at lower of cost or fair value, less estimated costs to sell.

Short-term Securities

Short-term securities have an original maturity of less than one year and are carried at amortized cost, which approximates fair value.

Other Investments

Investments in Private Equity Limited Partnerships, Hedge Funds and Real Estate Partnerships

The Company uses the equity method of accounting for investments in private equity limited partnerships, hedge funds and real estate partnerships. The partnerships and the hedge funds generally report investments on their balance sheet at fair value. The financial statements prepared by the investee are received by the Company on a lag basis, with the lag period generally dependent upon the type of underlying investments. The private equity and real estate partnerships provide financial

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

information quarterly which is generally available to investors, including the Company, within three months following the date of the reporting period. The hedge funds provide financial information monthly, which is generally available to investors within one month following the date of the reporting period. The Company regularly requests financial information from the partnerships prior to the receipt of the partnerships’ financial statements and records any material information obtained from these requests in its consolidated financial statements.

Other

Derivatives are also included in other investments. The Company’s derivative financial instruments are carried at fair value, with the changes in fair value reflected in the consolidated statement of income in net realized investment gains (losses). For a further discussion of the derivatives used by the Company, see note 3.

Net Investment Income

Investment income from fixed maturities is recognized based on the constant effective yield method which includes an adjustment for estimated principal pre-payments, if any. The effective yield used to determine amortization for fixed maturities subject to prepayment risk (e.g., asset-backed, loan-backed and structured securities) is recalculated and adjusted periodically based upon actual historical and/or projected future cash flows, which are obtained from a widely-accepted securities data provider. The adjustments to the yield for highly rated prepayable fixed maturities are accounted for using the retrospective method. The adjustments to the yield for non-highly rated prepayable fixed maturities are accounted for using the prospective method. Dividends on equity securities (including those with transfer restrictions) are recognized in income when declared. Rental income on real estate is recognized on a straight-line basis over the lease term. See the section titled: Real Estate in note 3 for further discussion. Investments in private equity limited partnerships, hedge funds, real estate partnerships and joint ventures are accounted for using the equity method of accounting, whereby the Company’s share of the investee’s earnings or losses in the fund is reported in net investment income.

Accrual of income is suspended on non-securitized fixed maturities that are in default, or on which it is likely that future payments will not be made as scheduled. Interest income on investments in default is recognized only when payments are received. Investments included in the consolidated balance sheet that were not income-producing for the preceding 12 months were not material.

Net Realized Investment Gains and Losses

Net realized investment gains and losses include net realized gains (losses) from the sale of investments, credit impairment losses on investment assets, changes in the fair value of equity securities, foreign currency transaction gains and losses and changes in the fair value of derivative financial instruments. Net realized investment gains (losses) on the sale of investments are included as a component of pre-tax revenues based upon specific identification of the investments sold on the trade date.

Investment Impairments

The Company conducts a periodic review to identify and evaluate invested assets that may have credit impairments.

Credit Impairments Related to Fixed Maturity Investments

Some of the factors considered in assessing impairment of fixed maturity investments due to credit-related factors include: (1) the extent to which the fair value has been less than amortized cost; (2) the financial condition, near-term and long-term prospects for the issuer, including the relevant industry conditions and trends, and implications of rating agency actions and offering prices; (3) the likelihood of the recoverability of principal and interest; and (4) whether it is more likely than not that the Company will be required to sell the investment prior to an anticipated recovery in value.

For fixed maturity investments that the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before an anticipated recovery in value, the Company separates the credit loss component of the impairment from the amount related to all other factors and reports the credit loss component in net realized investment gains (losses). The impairment related to all other factors (non-credit factors) is reported in other comprehensive income. The allowance is adjusted for any additional credit losses and subsequent recoveries. Upon recognizing a credit loss, the cost basis is not adjusted.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

For fixed maturity investments where the Company records a credit loss, a determination is made as to the cause of the impairment and whether the Company expects a recovery in the value. For fixed maturity investments where the Company expects a recovery in value, the constant effective yield method is utilized, and the investment is amortized to par.

For fixed maturity investments the Company intends to sell or for which it is more likely than not that the Company will be required to sell before an anticipated recovery in value, the full amount of the impairment is included in net realized investment gains (losses). The new cost basis of the investment is the previous amortized cost basis less the impairment recognized in net realized investment gains (losses). The new cost basis is not adjusted for any subsequent recoveries in fair value.

The Company reports investment income accrued separately from fixed maturity investments, available for sale, and has elected not to measure an allowance for credit losses for investment income accrued. Investment income accrued is written off through net realized investment gains (losses) at the time the issuer of the bond defaults or is expected to default on payments.

Uncollectible available-for-sale debt securities are written-off when the Company determines that no additional payments of principal or interest will be received.

Determination of Credit Loss — Fixed Maturities

The Company determines the credit loss component of fixed maturity investments by utilizing discounted cash flow modeling to determine the present value of the security and comparing the present value with the amortized cost of the security. If the amortized cost is greater than the present value of the expected cash flows, the difference is considered a credit loss and recognized as an impairment loss in net realized investment gains (losses).

For non-structured fixed maturities (U.S. Treasury securities, obligations of U.S. government and government agencies and authorities, obligations of states, municipalities and political subdivisions, debt securities issued by foreign governments and certain corporate debt), the estimate of expected cash flows is determined by projecting a recovery value and a recovery time frame and assessing whether further principal and interest will be received. The determination of recovery value incorporates an issuer valuation assumption utilizing one or a combination of valuation methods as deemed appropriate by the Company. The Company determines the undiscounted recovery value by allocating the estimated value of the issuer to the Company’s assessment of the priority of claims. The present value of the cash flows is determined by applying the effective yield of the security at the date of acquisition (or the most recent implied rate used to accrete the security if the implied rate has changed as a result of a previous impairment) and an estimated recovery time frame. Generally, that time frame for securities for which the issuer is in bankruptcy is 12 months. For securities for which the issuer is financially troubled but not in bankruptcy, that time frame is generally 24 months. Included in the present value calculation are expected principal and interest payments; however, for securities for which the issuer is classified as bankrupt or in default, the present value calculation assumes no interest payments and a single recovery amount.

In estimating the recovery value, significant judgment is involved in the development of assumptions relating to a myriad of factors related to the issuer including, but not limited to, revenue, margin and earnings projections, the likely market or liquidation values of assets, potential additional debt to be incurred pre- or post-bankruptcy/restructuring, the ability to shift existing or new debt to different priority layers, the amount of restructuring/bankruptcy expenses, the size and priority of unfunded pension obligations, litigation or other contingent claims, the treatment of intercompany claims and the likely outcome with respect to inter-creditor conflicts.

For structured fixed maturity securities (primarily residential and commercial mortgage-backed securities and asset-backed securities), the Company estimates the present value of the security by projecting future cash flows of the assets underlying the securitization, allocating the flows to the various tranches based on the structure of the securitization and determining the present value of the cash flows using the effective yield of the security at the date of acquisition (or the most recent implied rate used to accrete the security if the implied rate has changed as a result of a previous impairment or changes in expected cash flows). The Company incorporates levels of delinquencies, defaults and severities as well as credit attributes of the remaining assets in the securitization, along with other economic data, to arrive at its estimate of the parameters applied to the assets underlying the securitization.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Real Estate Investments

On at least an annual basis, the Company obtains independent appraisals for substantially all of its real estate investments. In addition, the carrying value of all real estate investments is reviewed for impairment on a quarterly basis or when events or changes in circumstances indicate that the carrying amount may not be recoverable. The review for impairment considers the valuation from the independent appraisal, when applicable, and incorporates an estimate of the undiscounted cash flows expected to result from the use and eventual disposition of the real estate property. An impairment loss is recognized if the expected future undiscounted cash flows are less than the carrying value of the real estate property. The impairment loss is the amount by which the carrying amount exceeds fair value.

Other Investments

The Company reviews its investments in private equity limited partnerships, hedge funds and real estate partnerships for impairment no less frequently than quarterly and monitors the performance throughout the year through discussions with the managers/general partners. If the Company becomes aware of an impairment of a partnership’s investments at the balance sheet date prior to receiving the partnership’s financial statements, it will recognize an impairment by recording a reduction in the carrying value of the partnership with a corresponding charge to net investment income.

Changes in Intent to Sell Temporarily Impaired Assets

The Company may, from time to time, sell invested assets subsequent to the balance sheet date that it did not intend to sell at the balance sheet date. Conversely, the Company may not sell invested assets that it asserted that it intended to sell at the balance sheet date. Such changes in intent are due to events occurring subsequent to the balance sheet date. The types of events that may result in a change in intent include, but are not limited to, significant changes in the economic facts and circumstances related to the invested asset (e.g., a downgrade or upgrade from a rating agency), significant unforeseen changes in liquidity needs, or changes in tax laws or the regulatory environment.

Securities Lending

The Company has, from time to time, engaged in securities lending activities from which it generates net investment income by lending certain of its investments to other institutions for short periods of time. Borrowers of these securities provide collateral equal to at least 102% of the market value of the loaned securities plus accrued interest. This collateral is held by a third-party custodian, and the Company has the right to access the collateral only in the event that the institution borrowing the Company’s securities is in default under the lending agreement (i.e., the Company is not permitted to re-pledge or sell any such collateral). Therefore, the Company does not recognize the receipt of the collateral held by the third-party custodian or the obligation to return the collateral. The loaned securities remain a recorded asset of the Company. The Company accepts only cash as collateral for securities on loan and restricts the manner in which that cash is invested.

Reinsurance Recoverables

Amounts recoverable from reinsurers are estimated in a manner consistent with the associated claim liability. Included in reinsurance recoverables are amounts related to certain structured settlements. The Company reports its reinsurance recoverables net of an allowance for amounts that are estimated to be uncollectible. 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. Amounts deemed to be uncollectible, including amounts due from known insolvent reinsurers, are written off against the allowance. Changes in the allowance, as well as any subsequent collections of amounts previously written off, are reported as part of claims and claim adjustment expenses. The Company evaluates and monitors the financial condition of its reinsurers under voluntary reinsurance arrangements to minimize its exposure to significant losses from reinsurer insolvencies.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Deferred Acquisition Costs

Incremental direct costs of acquired, new and renewal insurance contracts, consisting of commissions (other than contingent commissions) and premium-related taxes, are capitalized and charged to expense pro rata over the contract periods in which the related premiums are earned. Deferred acquisition costs are reviewed to determine if they are recoverable from future income and, if not, are charged to expense. Future investment income attributable to related premiums is taken into account in measuring the recoverability of the carrying value of this asset. All other acquisition expenses are charged to operations as incurred.

Contractholder Receivables and Payables

Under certain workers’ compensation insurance contracts with deductible features, the Company is obligated to pay the claimant for the full amount of the claim. The Company is subsequently reimbursed by the policyholder for the deductible amount. These amounts are included on a gross basis in the consolidated balance sheet in both contractholder payables and contractholder receivables. Contractholder receivables are reported net of an allowance for expected credit losses. The allowance is based upon the Company’s ongoing review of amounts outstanding, changes in policyholder credit standing, and other relevant factors. A probability-of-default methodology, which reflects current and forecasted economic conditions, is used to estimate the allowance for expected credit losses.

Goodwill and Other Intangible Assets

The Company performs a review, on at least an annual basis, of goodwill held by the reporting units which are the Company’s three operating and reportable segments: Business Insurance; Bond & Specialty Insurance; and Personal Insurance. The Company estimates the fair value of its reporting units and compares it to their carrying value, including goodwill. If the carrying values of the reporting units were to exceed their fair value, the amount of the impairment would be calculated and goodwill adjusted accordingly.

The Company uses a discounted cash flow model to estimate the fair value of its reporting units. The discounted cash flow model is an income approach to valuation that is based on a detailed cash flow analysis for deriving a current fair value of reporting units and is representative of the Company’s reporting units’ current and expected future financial performance. The discount rate assumptions reflect the Company’s assessment of the risks inherent in the projected future cash flows and the Company’s weighted-average cost of capital, and are compared against available market data for reasonableness.

Other indefinite-lived intangible assets held by the Company are also reviewed for impairment on at least an annual basis. The classification of the asset as indefinite-lived is reassessed and an impairment is recognized if the carrying amount of the asset exceeds its fair value.

Intangible assets that are deemed to have a finite useful life are amortized over their useful lives. The carrying amount of intangible assets with a finite useful life is regularly reviewed for indicators of impairment in value. Impairment is recognized only if the carrying amount of the intangible asset is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and the fair value of the asset.

As a result of the reviews performed for the years ended December 31, 2023, 2022 and 2021, the Company determined that the estimated fair value substantially exceeded the respective carrying value of its reporting units for those years and that goodwill was not impaired. The Company also determined during its reviews for each year that its other indefinite-lived intangible assets and finite-lived intangible assets were not impaired.

Internal-Use Software

In the ordinary course of business, the Company develops and purchases software as well as enters into arrangements to utilize software as a service under cloud computing arrangements. These software costs and any costs related to the implementation and set-up of the cloud computing arrangements are capitalized and reported within other assets in the consolidated balance sheet.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Claims and Claim Adjustment Expense Reserves

Claims and claim adjustment expense reserves represent management’s estimate of the ultimate liability for unpaid losses and loss adjustment expenses for claims that have been reported and claims that have been incurred but not yet reported (IBNR) as of the balance sheet date. The reserves are adjusted regularly based upon experience. Included in the claims and claim adjustment expense reserves in the consolidated balance sheet are reserves for long-term disability and annuity claim payments, primarily arising from workers’ compensation insurance and workers’ compensation excess insurance policies, that are discounted to the present value of estimated future payments.

The Company performs a continuing review of its claims and claim adjustment expense reserves, including its reserving techniques and the impact of reinsurance. The reserves are also reviewed regularly by qualified actuaries employed by the Company. Since the reserves are based on estimates, the ultimate liability may be more or less than such reserves. The effects of changes in such estimated reserves are included in the results of operations in the period in which the estimates are changed. Such changes in estimates could occur in a future period and may be material to the Company’s results of operations and financial position in such period.

Other Liabilities

Included in other liabilities in the consolidated balance sheet is the Company’s estimate of its liability for guaranty fund and other insurance-related assessments. The liability for expected state guaranty fund and other premium-based assessments is recognized as the Company writes or becomes obligated to write or renew the premiums on which the assessments are expected to be based. The liability for loss-based assessments is recognized as the related losses are incurred. At December 31, 2023 and 2022, the Company had a liability of $183 million and $177 million, respectively, for guaranty fund and other insurance-related assessments and related recoverables of $26 million and $17 million, respectively. The liability for such assessments and the related recoverables are not discounted for the time value of money. The loss-based assessments are expected to be paid over a period ranging from one year to the life expectancy of certain workers’ compensation claimants and the recoveries are expected to occur over the same period of time.

Also included in other liabilities is an accrual for policyholder dividends. Certain insurance contracts, primarily workers’ compensation, are participating whereby dividends are paid to policyholders in accordance with contract provisions. Net written premiums for participating dividend policies were approximately 1% of total net written premiums for each of the years ended December 31, 2023, 2022 and 2021. Policyholder dividends are accrued against earnings using best available estimates of amounts to be paid. The liability accrued for policyholder dividends totaled $77 million and $69 million at December 31, 2023 and 2022, respectively.

Treasury Stock

The cost of common stock repurchased by the Company is reported as treasury stock and represents authorized and unissued shares of the Company under the Minnesota Business Corporation Act.

Statutory Accounting Practices

The Company’s U.S. insurance subsidiaries, domiciled principally in the State of Connecticut, are required to prepare statutory financial statements in accordance with the accounting practices prescribed or permitted by the insurance departments of the states of domicile. Prescribed statutory accounting practices are those practices that are incorporated directly or by reference in state laws, regulations, and general administrative rules applicable to all insurance enterprises domiciled in a particular state. The State of Connecticut requires insurers domiciled in Connecticut to prepare their statutory financial statements in accordance with National Association of Insurance Commissioners’ (NAIC) statutory accounting practices.

Permitted statutory accounting practices are those practices that differ either from state-prescribed statutory accounting practices or NAIC statutory accounting practices.

The Company does not apply any statutory accounting practices that would be considered a prescribed or permitted statutory accounting practice that differs from NAIC statutory accounting practices.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company’s non-U.S. insurance subsidiaries file financial statements prepared in accordance with the regulatory reporting requirements of their respective local jurisdiction.

Premiums and Unearned Premium Reserves

Premiums are recognized as revenues over the period of the contract in proportion to the amount of insurance protection provided, which is generally pro rata over the policy period. Unearned premium reserves represent the unexpired portion of policy premiums. Accrued retrospective premiums are included in premium balances receivable. Premium balances receivable are reported net of an allowance for expected credit losses. The allowance is based upon the Company’s ongoing review of amounts outstanding, historical loss data, including delinquencies and write-offs, current and forecasted economic conditions and other relevant factors. Credit risk is partially mitigated by the Company’s ability to cancel the policy if the policyholder does not pay the premium.

Ceded premiums are charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. Prepaid reinsurance premiums represent the unexpired portion of premiums ceded to reinsurers and are reported as ceded unearned premiums, an asset on the consolidated balance sheet.

Fee Income

Fee income includes revenues from risk and claims management services provided to the Company’s insureds and third-party non-insureds, as well as policy issuance and claims management services to workers’ compensation residual market pools. Fee income is earned over the policy period for the services provided to the Company’s insureds, and either over the contract period or as the Company completes its service obligations for the services provided to third-party non-insureds.

Other Revenues

Other revenues include revenues from premium installment charges, which are recognized as collected, gains and losses on dispositions of assets and redemption of debt, and other miscellaneous revenues, including gains recognized as a result of settlements of reinsurance disputes and claim-related legal matters.

Other revenues also include revenues from noninsurance subsidiaries (other than fee income) for insurance-related services and on-line insurance brokerage services and is recognized as the service is provided to the customer.

Income Taxes

The Company recognizes deferred income tax assets and liabilities for the expected future tax effects attributable to temporary differences between the financial statement and tax return bases of assets and liabilities, based on enacted tax rates and other provisions of the tax law. The effect of a change in tax laws or rates on deferred tax assets and liabilities is recognized in income in the period in which such change is enacted. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax assets will not be realized.

Foreign Currency

The Company assigns functional currencies to its foreign operations, which are generally the currencies of the local operating environment. Foreign currency amounts are remeasured to the functional currency, and the resulting foreign exchange gains or losses are reported in net realized investment gains (losses). Functional currency amounts are then translated into U.S. dollars. The foreign currency remeasurement and translation are calculated using current exchange rates for items reported in the balance sheet and average exchange rates for items recorded in earnings. The change in unrealized foreign currency translation gain or loss during the year, net of tax, is a component of other comprehensive income.

Foreign currency gains and losses related to the changes in fair value of available-for-sale fixed maturities are reported in other comprehensive income. All other foreign currency transaction gains and losses are reported in earnings.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Share-Based Compensation

The Company has an employee stock incentive compensation plan that permits grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, deferred stock, stock units, performance awards and other share-based or share-denominated awards with respect to the Company’s common stock.

Compensation cost is measured based on the grant-date fair value of an award*,* utilizing the assumptions discussed in note 14. Compensation cost is recognized for financial reporting purposes over the period in which the employee is required to provide service in exchange for the award (generally the vesting period). In connection with certain share-based awards, participants are entitled to receive dividends during the vesting period, either in cash or dividend equivalent shares, commensurate with the dividends paid to common shareholders. Dividends and dividend equivalent shares on awards that are expected to vest are recorded in retained earnings. Dividends paid on awards that are not expected to vest as part of the Company’s forfeiture estimate are recorded as compensation expense.

Nature of Operations

Business Insurance

Business Insurance offers a broad array of property and casualty insurance products and 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, including as a corporate member of Lloyd’s. Business Insurance is organized as follows:

Domestic

*•*Select Accounts provides small businesses with property and casualty insurance products and services, including commercial multi-peril, workers’ compensation, commercial automobile, general liability and commercial property.

*•*Middle Market provides mid-sized businesses with property and casualty insurance products and services, including workers’ compensation, general liability, commercial multi-peril, commercial automobile and commercial property, as well as risk management, claims handling and other services. Middle Market generally provides these products to mid-sized businesses through Commercial Accounts, as well as to targeted industries through Construction, Technology & Life Sciences, Public Sector Services and Oil & Gas, and additionally, provides mono-line umbrella and excess coverage insurance through Excess Casualty. Middle Market also provides insurance for goods in transit and movable objects, as well as builders’ risk insurance, through Inland Marine; insurance for the marine transportation industry and related services, as well as other businesses involved in international trade, through Ocean Marine; and comprehensive breakdown for equipment, including property and business interruption, through Boiler & Machinery.

*•*National Accounts provides large companies with casualty insurance products and services, including workers’ compensation, commercial automobile and general liability, generally utilizing loss-sensitive products, on both a bundled and unbundled basis, as well as risk management, claims administration and other insurance-related services. National Accounts also includes the Company’s commercial residual market business, which primarily offers workers’ compensation claims, policy management and other administrative services related to the involuntary market. National Accounts also offers insurance-related services, such as claims administration, risk management, loss control and risk management information services through Constitution State Services LLC, a wholly-owned subsidiary of the Company.

*•*National Property and Other provides traditional and customized commercial property insurance programs to large and mid-sized customers through National Property. National Property and Other also provides insurance coverage for the commercial trucking industry through Northland Transportation and serves small- to medium-sized agricultural businesses, including farms, ranches and other agricultural-related operations through Agribusiness. National Property and Other also includes commercial property and general liability policies for small, difficult to place commercial business primarily on an excess and surplus lines basis through Northfield, and also offers tailored property and casualty insurance programs on an admitted basis for customers with common risk characteristics or coverage requirements through National Programs.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

International

International, through its operations in Canada, the United Kingdom and the Republic of Ireland, provides property and casualty insurance and risk management services to several customer groups, including, among others, those in the technology, manufacturing and public services industry sectors. International also provides insurance for both the foreign exposures of United States organizations and the United States exposures of foreign organizations through Global Services. At its Lloyd’s syndicate (Syndicate 5000), for which the Company provides 100% of the capital, International underwrites five principal businesses — marine, energy, property, aviation and special risks.

Business Insurance also includes Simply Business, a leading provider of small business insurance policies primarily in the United Kingdom, and 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 offers surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to its customers, primarily in the United States, and certain surety and specialty insurance products in Canada, the United Kingdom, the Republic of Ireland and Brazil (through a joint venture, as described below), in each case utilizing various degrees of financially-based underwriting approaches. The range of coverages includes performance, payment and commercial surety bonds for construction and general commercial enterprises; management liability coverages including directors’ and officers’ liability, employment practices liability, fidelity 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; in the United States only, property, workers’ compensation, auto and general liability for financial institutions; and transactional liability coverages to public and private companies.

Bond & Specialty Insurance’s 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., which owns a majority interest in JMalucelli Travelers Seguros S.A., a Colombian 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 offers a broad range of property and casualty insurance products and services covering individuals’ personal risks, primarily in the United States, as well as in Canada. Personal Insurance’s primary products of automobile and homeowners insurance are complemented by a broad suite of related coverages.

Automobile policies provide coverage for liability to others for both bodily injury and property damage, uninsured motorist protection, and for physical damage to an insured’s own vehicle from collision, fire, flood, hail and theft. In addition, many states require policies to provide first-party personal injury protection, frequently referred to as no-fault coverage.

Homeowners and Other policies provide protection against losses to dwellings and contents from a variety of perils (excluding flooding) as well as coverage for personal liability. The Company writes homeowners insurance for dwellings, condominiums and tenants, and rental properties. The Company also writes coverage for boats and yachts, valuable personal items such as jewelry, umbrella liability, and weddings and special events.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SEGMENT INFORMATION

The accounting policies used to prepare the segment reporting data for the Company’s three reportable business segments are the same as those described in the Summary of Significant Accounting Policies in note 1.

Except as described below for certain legal entities, the Company allocates its invested assets and the related net investment income to its reportable business segments. Pre-tax net investment income is allocated based upon an investable funds concept, which takes into account liabilities (net of non-invested assets) and appropriate capital considerations for each segment. For investable funds, a benchmark investment yield is developed that reflects the estimated duration of the loss reserves’ future cash flows, the interest rate environment at the time the losses were incurred and A+ rated corporate debt instrument yields. For capital, a benchmark investment yield is developed that reflects the average yield on the total investment portfolio. The benchmark investment yields are applied to each segment’s investable funds and capital, respectively, to produce a total notional investment income by segment. The Company’s actual net investment income is allocated to each segment in proportion to the respective segment’s notional investment income to total notional investment income. There are certain legal entities within the Company that are dedicated to specific reportable business segments. The invested assets and related net investment income from these legal entities are reported in the applicable business segment and are not allocated among the other business segments.

The cost of the Company’s catastrophe treaty program is included in the Company’s ceded premiums and is allocated among reportable business segments based on an estimate of actual market reinsurance pricing using expected losses calculated by the Company’s catastrophe model, adjusted for any experience adjustments.

The following tables summarize the components of the Company’s revenues, income (loss), net written premiums and total assets by reportable business segments.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SEGMENT INFORMATION (Continued)


(for the year ended December 31, in millions)	Business Insurance		Bond & Specialty Insurance		Personal Insurance		Total Reportable Segments
2023
Premiums	$	19,144	$	3,655	$	14,962	$	37,761
Net investment income	2,085		328		509		2,922
Fee income	400		—		33		433
Other revenues	232		25		96		353
Total segment revenues (1)	$	21,861	$	4,008	$	15,600	$	41,469
Amortization and depreciation	$	3,640	$	744	$	2,558	$	6,942
Income tax expense (benefit)	368		227		(103)		492
Segment income (loss) (1)	2,583		942		(128)		3,397
2022
Premiums	$	17,095	$	3,418	$	13,250	$	33,763
Net investment income	1,864		258		440		2,562
Fee income	382		—		30		412
Other revenues	248		20		83		351
Total segment revenues (1)	$	19,589	$	3,696	$	13,803	$	37,088
Amortization and depreciation	$	3,344	$	697	$	2,293	$	6,334
Income tax expense (benefit)	536		195		(90)		641
Segment income (loss) (1)	2,531		908		(140)		3,299
2021
Premiums	$	15,734	$	3,138	$	11,983	$	30,855
Net investment income	2,265		247		521		3,033
Fee income	375		—		27		402
Other revenues	235		23		97		355
Total segment revenues (1)	$	18,609	$	3,408	$	12,628	$	34,645
Amortization and depreciation	$	3,180	$	643	$	2,084	$	5,907
Income tax expense	499		165		179		843
Segment income (1)	2,385		668		760		3,813

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SEGMENT INFORMATION (Continued)

Net written premiums by market were as follows:


(for the year ended December 31, in millions)	2023		2022		2021
Business Insurance:
Domestic:
Select Accounts	$	3,477	$	3,099	$	2,833
Middle Market	11,045		9,923		8,933
National Accounts	1,135		1,085		987
National Property and Other	3,008		2,467		2,265
Total Domestic	18,665		16,574		15,018
International	1,765		1,061		1,074
Total Business Insurance	20,430		17,635		16,092
Bond & Specialty Insurance:
Domestic:
Management Liability	2,156		2,112		1,983
Surety	1,147		1,081		888
Total Domestic	3,303		3,193		2,871
International	539		539		505
Total Bond & Specialty Insurance	3,842		3,732		3,376
Personal Insurance:
Domestic:
Automobile	7,330		6,482		5,827
Homeowners and Other	7,949		6,916		5,980
Total Domestic	15,279		13,398		11,807
International	650		649		684
Total Personal Insurance	15,929		14,047		12,491
Total consolidated net written premiums	$	40,201	$	35,414	$	31,959

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SEGMENT INFORMATION (Continued)

Business Segment Reconciliations


(for the year ended December 31, in millions)	2023		2022		2021
Revenue reconciliation
Earned premiums
Business Insurance:
Domestic:
Workers’ compensation	$	3,467	$	3,425	$	3,227
Commercial automobile	3,215		2,976		2,855
Commercial property	3,154		2,611		2,275
General liability	3,146		2,875		2,576
Commercial multi-peril	4,686		4,109		3,667
Other	76		76		65
Total Domestic	17,744		16,072		14,665
International	1,400		1,023		1,069
Total Business Insurance	19,144		17,095		15,734
Bond & Specialty Insurance:
Domestic:
Fidelity and surety	1,290		1,173		1,091
General liability	1,639		1,556		1,415
Other	225		222		220
Total Domestic	3,154		2,951		2,726
International	501		467		412
Total Bond & Specialty Insurance	3,655		3,418		3,138
Personal Insurance:
Domestic
Automobile	6,923		6,170		5,687
Homeowners and Other	7,404		6,426		5,608
Total Domestic	14,327		12,596		11,295
International	635		654		688
Total Personal Insurance	14,962		13,250		11,983
Total earned premiums	37,761		33,763		30,855
Net investment income	2,922		2,562		3,033
Fee income	433		412		402
Other revenues	353		351		355
Total segment revenues	41,469		37,088		34,645

Net realized investment gains (losses)	(105)		(204)		171
Total revenues	$	41,364	$	36,884	$	34,816
Income reconciliation, net of tax
Total segment income	$	3,397	$	3,299	$	3,813
Interest Expense and Other (1)	(325)		(301)		(291)
Core income	3,072		2,998		3,522
Net realized investment gains (losses)	(81)		(156)		132
Impact of changes in tax laws and/or tax rates (2)	—		—		8
Net income	$	2,991	$	2,842	$	3,662

(1) The primary component of Interest Expense and Other was after-tax interest expense of $297 million, $277 million and $269 million in 2023, 2022 and 2021, respectively.

(2) Impact is recognized in the accounting period in which the change is enacted.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SEGMENT INFORMATION (Continued)


(at December 31, in millions)	2023		2022
Asset reconciliation:
Business Insurance	$	93,565	$	86,522
Bond & Specialty Insurance	11,478		10,119
Personal Insurance	20,072		18,275
Total assets for reportable segments	125,115		114,916
Other assets (1)	863		801
Total consolidated assets	$	125,978	$	115,717

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

Enterprise-Wide Disclosures

The Company does not have revenue from transactions with a single customer amounting to 10 percent or more of its revenues.

The following table presents revenues of the Company’s operations based on location:


(for the year ended December 31, in millions)	2023		2022		2021
U.S.	$	39,086	$	34,822	$	32,596
Non-U.S.:
Canada	1,281		1,300		1,351
Other Non-U.S.	997		762		869
Total Non-U.S.	2,278		2,062		2,220
Total revenues	$	41,364	$	36,884	$	34,816

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVESTMENTS

Fixed Maturities

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


	Amortized		Allowance for Expected Credit Losses			Gross Unrealized						Fair
(at December 31, 2023, in millions)	Cost				Gains			Losses			Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	6,591	$	—		$	8		$	231		$	6,368
Obligations of U.S. states, municipalities and political subdivisions:
Local general obligation	18,374		—			90			1,265			17,199
Revenue	9,748		—			52			616			9,184
State general obligation	1,209		—			7			59			1,157
Pre-refunded	963		—			5			2			966
Total obligations of U.S. states, municipalities and political subdivisions	30,294		—			154			1,942			28,506
Debt securities issued by foreign governments	1,035		—			2			31			1,006
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	7,874		—			120			176			7,818
Corporate and all other bonds	35,987		5			187			2,060			34,109
Total	$	81,781	$	5		$	471		$	4,440		$	77,807


	Amortized		Allowance for Expected Credit Losses			Gross Unrealized						Fair
(at December 31, 2022, in millions)	Cost				Gains			Losses			Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	5,798	$	—		$	3		$	363		$	5,438
Obligations of U.S. states, municipalities and political subdivisions:
Local general obligation	19,615		—			33			1,825			17,823
Revenue	11,076		—			29			907			10,198
State general obligation	1,104		—			3			88			1,019
Pre-refunded	2,323		—			17			1			2,339
Total obligations of U.S. states, municipalities and political subdivisions	34,118		—			82			2,821			31,379
Debt securities issued by foreign governments	1,049		—			—			55			994
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	2,178		—			13			200			1,991
Corporate and all other bonds	34,237		3			37			2,913			31,358
Total	$	77,380	$	3		$	135		$	6,352		$	71,160

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVESTMENTS (Continued)

The amortized cost and fair value of fixed maturities by contractual maturity follow. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


(at December 31, 2023, in millions)	Amortized Cost		Fair Value
Due in one year or less	$	5,004	$	4,965
Due after 1 year through 5 years	25,328		24,592
Due after 5 years through 10 years	21,407		19,740
Due after 10 years	22,168		20,692
	73,907		69,989
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	7,874		7,818
Total	$	81,781	$	77,807

Pre-refunded bonds of $966 million and $2.34 billion at December 31, 2023 and 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.

The Company’s fixed maturity investment portfolio at December 31, 2023 and 2022 included $7.82 billion and $1.99 billion, respectively, of residential mortgage-backed securities, which include pass-through securities and collateralized mortgage obligations (CMOs). Included in the totals at December 31, 2023 and 2022 were $6.23 billion and $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 $1.59 billion and $1.07 billion at December 31, 2023 and 2022, respectively. Approximately 33% and 40% of the Company’s CMO holdings at December 31, 2023 and 2022, respectively, were guaranteed by or fully collateralized by securities issued by GNMA, FNMA or FHLMC. The weighted average credit rating of the $1.07 billion and $647 million of non-guaranteed CMO holdings at December 31, 2023 and 2022, respectively, was “Aaa" and "Aaa/Aa1”, respectively. The weighted average credit rating of all of the above securities was “Aaa/Aa1” at both December 31, 2023 and 2022.

At December 31, 2023 and 2022, the Company held commercial mortgage-backed securities (CMBS, including FHA project loans) of $1.04 billion and $1.14 billion, respectively, which are included in “Corporate and all other bonds” in the tables above. At December 31, 2023 and 2022, approximately $116 million and $131 million of these securities, respectively, or the loans backing such securities, contained guarantees by the U.S. government or a government-sponsored enterprise. The weighted average credit rating of the $922 million and $1.01 billion of non-guaranteed securities at December 31, 2023 and 2022, respectively, was “Aaa” at both dates. The CMBS portfolio is supported by loans that are diversified across economic sectors and geographical areas. The weighted average credit rating of the CMBS portfolio was “Aaa” at both December 31, 2023 and 2022.

At December 31, 2023 and 2022, the Company had $421 million and $445 million, respectively, of securities on loan as part of a tri-party lending agreement.

Proceeds from the sales of fixed maturities classified as available for sale were $4.98 billion, $5.66 billion and $3.17 billion in 2023, 2022 and 2021, respectively. Gross gains of $26 million, $27 million and $74 million and gross losses of $119 million, $99 million and $5 million were realized on those sales in 2023, 2022 and 2021, respectively.

At December 31, 2023 and 2022, the Company’s insurance subsidiaries had $4.04 billion and $3.94 billion, respectively, of securities on deposit at financial institutions in certain states pursuant to the respective states’ insurance regulatory requirements. Funds deposited with third parties to be used as collateral to secure various liabilities on behalf of insureds, cedants and other creditors had a fair value of $54 million and $53 million at December 31, 2023 and 2022, respectively. In addition, the Company utilizes Lloyd’s trust deposits, whereby owned securities with a fair value of approximately $31 million and $28 million held by a wholly-owned subsidiary at December 31, 2023 and 2022, respectively, and $85 million and $58

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVESTMENTS (Continued)

million held by TRV at December 31, 2023 and 2022, respectively, were pledged into Lloyd’s trust accounts to provide a portion of the capital needed to support the Company’s obligations at Lloyd’s.

Equity Securities

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


(at December 31, 2023, in millions)	Cost		Gross Gains		Gross Losses		Fair Value
Common stock	$	508	$	93	$	41	$	560
Non-redeemable preferred stock	45		3		—		48
Total	$	553	$	96	$	41	$	608


(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

The Company recognized $16 million and $(61) million of net gains (losses) on equity securities still held as of December 31, 2023 and 2022, respectively.

Real Estate

The Company’s real estate investments include warehouses, office buildings and other commercial land and properties that are directly owned. The Company negotiates commercial leases with individual tenants through unrelated, licensed real estate brokers. Negotiated terms and conditions include, among others, rental rates, length of lease period and improvements to the premises to be provided by the landlord.

Proceeds from the sales of real estate investments were $0 million in 2023, $10 million in 2022 and $31 million in 2021. Gains of $4 million and $8 million were realized on those sales in 2022 and 2021, respectively. Net realized investment gains (losses) in 2023 and 2022 included $9 million and $12 million, respectively, of impairment charges related to real estate. Accumulated depreciation on real estate held for investment purposes was $556 million and $519 million at December 31, 2023 and 2022, respectively.

Future minimum rental income on operating leases relating to the Company’s real estate properties is expected to be $138 million, $114 million, $87 million, $67 million and $48 million for 2024, 2025, 2026, 2027 and 2028, respectively, and $69 million for 2029 and thereafter.

Short-term Securities

The Company’s short-term securities consist of Aaa-rated registered money market funds, U.S. Treasury securities, high-quality commercial paper (primarily A1/P1) and high-quality corporate securities purchased within a year to their maturity with a combined average of 25 days to maturity at December 31, 2023. The amortized cost of these securities, which totaled $5.14 billion and $3.47 billion at December 31, 2023 and 2022, respectively, approximated their fair value.

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 financial statements on a quarter lag basis.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVESTMENTS (Continued)

Variable Interest Entities

Entities which do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as variable interest entities (VIE). A VIE is consolidated by the variable interest holder that is determined to have the controlling financial interest (primary beneficiary) as a result of having both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations and purpose and the Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis.

The Company is a passive investor in limited partner equity interests issued by third party VIEs. These include certain of the Company’s investments in private equity limited partnerships, hedge funds and real estate partnerships where the Company is not related to the general partner. These investments are generally accounted for under the equity method and reported in the Company’s consolidated balance sheet as other investments unless the Company is deemed the primary beneficiary. These equity interests generally cannot be redeemed. Distributions from these investments are received by the Company as a result of liquidation of the underlying investments of the funds and/or as income distribution. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying amounts reported in the Company’s consolidated balance sheet and any unfunded commitment. The Company considers an investment in a VIE in which it has a 20% or greater equity interest as a significant VIE. Neither the Company’s carrying amounts nor the unfunded commitments related to these significant VIE’s are material individually or in the aggregate.

Unrealized Investment Losses

The following tables summarize, for all fixed maturities classified as available for sale in an unrealized loss position at December 31, 2023 and 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. The Company also relies upon estimates of several factors in its review and evaluation of individual investments, using the process described in note 1, in determining whether a credit loss impairment exists.


	Less than 12 months				12 months or longer				Total
(at December 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	$	1,864	$	7	$	2,985	$	224	$	4,849	$	231
Obligations of U.S. states, municipalities and political subdivisions	3,868		31		14,351		1,911		18,219		1,942
Debt securities issued by foreign governments	30		—		763		31		793		31
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	1,215		9		1,433		167		2,648		176
Corporate and all other bonds	1,016		9		26,444		2,051		27,460		2,060
Total	$	7,993	$	56	$	45,976	$	4,384	$	53,969	$	4,440

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVESTMENTS (Continued)


	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 following tables summarize, for all fixed maturities reported at fair value for which fair value was less than 80% of amortized cost at December 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 December 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	—		2		31		642		675
Debt securities issued by foreign governments	—		—		—		—		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	—		—		—		—		—
Corporate and all other bonds	1		3		22		25		51
Total	$	1	$	5	$	53	$	667	$	726

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVESTMENTS (Continued)


	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

Increases in interest rates resulted in the gross unrealized investment losses disclosed in the tables 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.

Impairment Charges

Credit impairment charges included in net realized investment gains (losses) in the consolidated statement of income were as follows:


(for the year ended December 31, in millions)	2023		2022		2021
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	—	$	12	$	—
Obligations of U.S. states, municipalities and political subdivisions	1		14		—
Debt securities issued by foreign governments	—		—		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	—		—		—
Corporate and all other bonds	2		—		2
Total fixed maturities	$	3	$	26	$	2

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVESTMENTS (Continued)

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 Twelve Months Ended December 31, 2023		At and For the Twelve Months Ended December 31, 2022

Balance, beginning of period	$	3	$	3
Additions for expected credit losses on securities where no credit losses were previously recognized	1		—
Additions for expected credit losses on securities where credit losses were previously recognized	1		1
Reductions due to sales/defaults of credit-impaired securities	—		(1)
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	$	5	$	3

Total net impairment charges, including credit impairments, reported in net realized investment gains (losses) in the consolidated statement of income, were $12 million, $38 million and $2 million for the years ended December 31, 2023, 2022 and 2021, respectively. Net realized investment gains (losses) in 2023 and 2022 included $9 million and $12 million, respectively, of realized losses related to real estate. Credit losses related to the fixed maturity portfolio for 2023 and 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 at both December 31, 2023 and 2022.

Concentrations and Credit Quality

Concentrations of credit risk arise from exposure to counterparties that are engaged in similar activities and have similar economic characteristics that could cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company seeks to mitigate credit risk by actively monitoring the creditworthiness of counterparties, obtaining collateral as deemed appropriate and applying controls that include credit approvals, limits of credit exposure and other monitoring procedures.

At December 31, 2023 and 2022, other than U.S. Treasury securities and obligations of U.S. government and government agencies and authorities, the Company was not exposed to any concentration of credit risk of a single issuer greater than 5% of the Company’s shareholders’ equity.

Included in fixed maturities are below investment grade securities totaling $982 million and $930 million at December 31, 2023 and 2022, respectively. The Company defines its below investment grade securities as those securities rated below investment grade by external rating agencies, or the equivalent by the Company when a public rating does not exist. Such securities include below investment grade bonds that are publicly traded and certain other privately issued bonds that are classified as below investment grade loans.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVESTMENTS (Continued)

Net Investment Income


(for the year ended December 31, in millions)	2023		2022		2021
Gross investment income
Fixed maturities	$	2,472	$	2,113	$	1,989
Equity securities	18		17		19
Short-term securities	241		73		7
Real estate investments	64		66		59
Other investments	171		336		999
Gross investment income	2,966		2,605		3,073
Investment expenses	44		43		40
Net investment income	$	2,922	$	2,562	$	3,033

Changes in net unrealized gains (losses) on investment securities that are included as a separate component of other comprehensive income (loss) were as follows:


(at and for the year ended December 31, in millions)	2023		2022		2021
Changes in net unrealized investment gains (losses)
Fixed maturities	$	2,248	$	(9,279)	$	(2,113)

Other investments	2		(1)		(2)
Change in net pre-tax unrealized gains (losses) on investment securities	2,250		(9,280)		(2,115)
Related tax expense (benefit)	481		(1,967)		(456)
Change in net unrealized gains (losses) on investment securities	1,769		(7,313)		(1,659)


Balance, beginning of year	(4,898)		2,415		4,074
Balance, end of year	$	(3,129)	$	(4,898)	$	2,415

Derivative Financial Instruments

From time to time, the Company enters into certain derivative financial instruments that are reported on the balance sheet at fair value. The change in fair value of these investments is reported in net realized investment gains and losses.

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 (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.

Valuation of Investments Reported at Fair Value in Financial Statements

The fair value of a financial instrument is the estimated amount at which the instrument could be exchanged in an orderly transaction between knowledgeable, unrelated, willing parties, i.e., not in a forced transaction. The estimated fair value of a financial instrument may differ from the amount that could be realized if the security was sold in an immediate sale, e.g., a forced transaction. Additionally, the valuation of investments is more subjective when markets are less liquid due to the lack of market based inputs, which may increase the potential that the estimated fair value of an investment is not reflective of the price at which an actual transaction would occur.

For investments that have quoted market prices in active markets, the Company uses the unadjusted quoted market prices as fair value and includes these prices in the amounts disclosed in Level 1 of the hierarchy. The Company receives the quoted market prices from third party, nationally recognized pricing services. When quoted market prices are unavailable, the Company utilizes these pricing services to determine an estimate of fair value. The fair value estimates provided from these pricing services are included in the amount disclosed in Level 2 of the hierarchy. If quoted market prices and an estimate from a pricing service are unavailable, the Company produces an estimate of fair value based on internally developed valuation techniques, which, depending on the level of observable market inputs, will render the fair value estimate as Level 2 or Level 3. The Company bases all of its estimates of fair value for assets on the bid price as it represents what a third-party market participant would be willing to pay in an arm’s length transaction.

Fixed Maturities

The Company utilized a pricing service to estimate fair value measurements for approximately 99% of its fixed maturities at both December 31, 2023 and 2022. The pricing service utilizes market quotations for fixed maturity securities that have quoted prices in active markets. Since fixed maturities other than U.S. Treasury securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements for these securities using its proprietary pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Additionally, the pricing service uses an Option Adjusted Spread model to develop prepayment and interest rate scenarios.

The pricing service evaluates each asset class based on relevant market information, relevant credit information, perceived market movements and sector news. The market inputs utilized in the pricing evaluation, listed in the approximate order of priority, include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. The extent of the use of each market input depends on the asset class and the market conditions. Depending on the security, the priority of the use of inputs may change or some market inputs may not be relevant. For some securities, additional inputs may be necessary.

The pricing service utilized by the Company has indicated that it will only produce an estimate of fair value if there is objectively verifiable information to produce a valuation. If the pricing service discontinues pricing an investment, the Company would be required to produce an estimate of fair value using some of the same methodologies as the pricing service but would have to make assumptions for any market-based inputs that were unavailable due to market conditions. The Company reviews the estimates of fair value provided by the pricing service and compares the estimates to the Company’s knowledge of the market to determine if the estimates obtained are representative of the prices in the market. In addition, the Company has periodic discussions with the pricing service to discuss and understand any changes in process and their responsiveness to changes occurring in the markets. The Company also monitors all monthly price changes and further evaluates any securities whose value changed more than 10% from the prior month. The Company has implemented various other processes including randomly selecting purchased or sold securities and comparing execution prices to the estimates from the pricing service as well as reviewing securities whose valuation did not change from their previous valuation (stale price review). The Company also uses a second independent pricing service to further test the primary pricing service’s valuation of the Company’s fixed maturity portfolio. These processes have not highlighted any significant issues with the fair value estimates received from the primary pricing service.

The fair value estimates of most fixed maturity investments are based on observable market information rather than market quotes. Accordingly, the estimates of fair value for such fixed maturities, other than U.S. Treasury securities, provided by the

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. FAIR VALUE MEASUREMENTS (Continued)

pricing service are included in the amount disclosed in Level 2 of the hierarchy. The estimated fair value of U.S. Treasury securities is included in the amount disclosed in Level 1 as the estimates are based on unadjusted market prices.

The Company also holds certain fixed maturity investments which are not priced by the pricing service and, accordingly, estimates the fair value of such fixed maturities using an internal matrix that is based on market information regarding interest rates, credit spreads and liquidity. The underlying source data for calculating the matrix of credit spreads relative to the U.S. Treasury curve are observable market-based indices that relate to corporate and high-yield fixed maturity investments. The Company includes the fair value estimates of these corporate bonds in Level 2, since all significant inputs are market observable.

While the vast majority of the Company’s fixed maturities are included in Level 2, the Company holds a number of 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.

Equity Securities — Common Stock and Non-Redeemable Preferred Stock

For public common stock and non-redeemable preferred stocks, the Company receives prices from pricing services that are based on observable market transactions and includes these estimates in the amount disclosed in Level 1. When current market quotes in active markets are unavailable for certain non-redeemable preferred stocks held by the Company, the Company receives an estimate of fair value from the pricing services. The services utilize similar methodologies to price the non-redeemable preferred stocks as they do for the fixed maturities. The Company includes the fair value estimate for these non-redeemable preferred stocks in the amount disclosed in Level 2.

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 related to the 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 $37 million and $371 million for these investments at December 31, 2023 and 2022, respectively, in the amounts disclosed in Level 3.

Other Investments

The Company holds investments in various publicly-traded securities which are reported in other investments. These investments include mutual funds and other small holdings. The $18 million and $15 million fair value of these investments at December 31, 2023 and 2022, respectively, was disclosed in Level 1.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. FAIR VALUE MEASUREMENTS (Continued)

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.


(at December 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	$	6,368	$	6,368	$	—	$	—
Obligations of U.S. states, municipalities and political subdivisions	28,506		—		28,506		—
Debt securities issued by foreign governments	1,006		—		1,006		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	7,818		—		7,818		—
Corporate and all other bonds	34,109		—		33,851		258
Total fixed maturities	77,807		6,368		71,181		258
Equity securities
Common stock	560		553		—		7
Non-redeemable preferred stock	48		16		2		30
Total equity securities	608		569		2		37
Other investments	18		18		—		—
Total	$	78,433	$	6,955	$	71,183	$	295


(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

Transfers out of Level 3 during the year ended December 31, 2023 included $182 million of privately held common stock that the Company exchanged during the first quarter of 2023 for shares in an investment that is reported using the equity method of accounting (and as a result is excluded from the December 31, 2023 table above), and $151 million of common stock in a company that had been privately held but became publicly traded during the second quarter of 2023, valued using an unadjusted

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. FAIR VALUE MEASUREMENTS (Continued)

quoted market price and now disclosed in Level 1. There was no other significant activity in Level 3 of the hierarchy during the year ended December 31, 2023.

The following tables present the changes in the Level 3 fair value category for the years ended December 31, 2023 and 2022.


(in millions)	Fixed Maturities		Equity Securities		Other Investments		Total
Balance at December 31, 2022	$	303	$	371	$	1	$	675
Total realized and unrealized investment gains (losses):
Reported in net realized investment gains (losses) (1)	(1)		(5)		—		(6)
Reported in other comprehensive income (loss)	6		—		—		6
Purchases, sales and settlements/maturities:
Purchases	25		4		—		29
Sales	—		—		(1)		(1)
Settlements/maturities	(26)		—		—		(26)
Gross transfers into Level 3	—		—		—		—
Gross transfers out of Level 3	(49)		(333)		—		(382)
Balance at December 31, 2023	$	258	$	37	$	—	$	295
Amount of total realized investment gains (losses) for the period included in the consolidated statement of income attributable to changes in the fair value of assets still held at the reporting date	$	—	$	—	$	—	$	—

(1)Includes impairments on investments held at the end of the period as well as amortization on fixed maturities.


(in millions)	Fixed Maturities		Equity Securities		Other Investments		Total
Balance at December 31, 2021	$	248	$	343	$	5	$	596
Total realized and unrealized investment gains (losses):
Reported in net realized investment gains (losses) (1)	1		33		2		36
Reported in other comprehensive income (loss)	(13)		—		—		(13)
Purchases, sales and settlements/maturities:
Purchases	226		7		—		233
Sales	—		—		(1)		(1)
Settlements/maturities	(55)		—		(2)		(57)
Gross transfers into Level 3	—		3		—		3
Gross transfers out of Level 3	(104)		(15)		(3)		(122)
Balance at December 31, 2022	$	303	$	371	$	1	$	675
Amount of total realized investment gains (losses) for the period included in the consolidated statement of income attributable to changes in the fair value of assets still held at the reporting date	$	—	$	33	$	1	$	34

(1)Includes impairments on investments held at the end of the period as well as amortization on fixed maturities.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. FAIR VALUE MEASUREMENTS (Continued)

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 December 31, 2023, in millions)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Short-term securities	$	5,137	$	5,137	$	1,171	$	3,912	$	54
Financial liabilities:
Debt	$	7,931	$	7,645	$	—	$	7,645	$	—
Commercial paper	100		100		—		100		—


(at December 31, 2022, in millions)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Short-term securities	$	3,470	$	3,470	$	871	$	2,546	$	53
Financial liabilities:
Debt	$	7,192	$	6,509	$	—	$	6,509	$	—
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 years ended December 31, 2023 and 2022.

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 December 31, 2023 and 2022, and the changes in the allowance for expected credit losses for the twelve months ended December 31, 2023 and 2022.


	At and For the Twelve Months Ended December 31, 2023				At and For the Twelve Months Ended December 31, 2022
(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	$	8,922	$	77	$	8,085	$	107

Current period change for expected credit losses			42				54
Write-offs of uncollectible premiums receivable			50				84
Balance, end of period	$	10,282	$	69	$	8,922	$	77

Reinsurance Recoverables

The following table presents the balances of reinsurance recoverables, net of the allowance for estimated uncollectible reinsurance, at December 31, 2023 and 2022, and the changes in the allowance for estimated uncollectible reinsurance for the twelve months ended December 31, 2023 and 2022.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. ALLOWANCE FOR EXPECTED CREDIT LOSSES (Continued)


	At and For the Twelve Months Ended December 31, 2023				At and For the Twelve Months Ended December 31, 2022
(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	$	8,063	$	132	$	8,452	$	141


Current period change for estimated uncollectible reinsurance			(14)				(9)
Write-offs of uncollectible reinsurance recoverables			—				—
Balance, end of period	$	8,143	$	118	$	8,063	$	132

Of the total reinsurance recoverables at December 31, 2023, $5.74 billion, or 87%, were rated by A.M. Best Company, after deducting mandatory pools and associations and before allowances for estimated uncollectible 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 13% of reinsurance recoverables were comprised of the following: 6% related to captive insurance companies, 1% related to the Company’s participation in voluntary pools, and 6% were balances from other companies not rated by A.M. Best Company. Certain of the Company’s reinsurance recoverables are collateralized by letters of credit, funds held or trust agreements.

Contractholder Receivables

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


	At and For the Twelve Months Ended December 31, 2023				At and For the Twelve Months Ended December 31, 2022
(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	$	3,579	$	17	$	3,890	$	21

Current period change for expected credit losses			3				(3)
Write-offs of uncollectible contractholder receivables			—				1

Balance, end of period	$	3,249	$	20	$	3,579	$	17

6. REINSURANCE

The Company’s consolidated financial statements reflect the effects of assumed and ceded reinsurance transactions. Assumed reinsurance refers to the acceptance of certain insurance risks that other insurance companies have underwritten. Ceded reinsurance involves transferring certain insurance risks (along with the related written and earned premiums) the Company has underwritten to other insurance companies who agree to share these risks. The primary purpose of ceded reinsurance is to protect the Company, at a cost, from losses in excess of the amount it is prepared to accept and to protect the Company’s capital. Reinsurance is placed on both a quota-share and excess-of-loss basis. Ceded reinsurance arrangements do not discharge the Company as the primary insurer, except for instances where the primary policy or policies have been novated, such as in certain structured settlement agreements.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. REINSURANCE (Continued)

The Company utilizes a corporate catastrophe excess-of-loss reinsurance treaty with unaffiliated reinsurers to manage its exposure to losses resulting from catastrophes and to protect its capital. In addition to the coverage provided under this treaty, the Company also utilizes a reinsurance agreement entered into in connection with catastrophe bonds issued by Long Point Re IV to protect against certain weather-related and earthquake losses in the Northeastern United States and a Northeast property catastrophe excess-of-loss reinsurance treaty to protect against losses resulting from weather-related and earthquake catastrophes in the Northeastern United States. The Company also utilizes excess-of-loss treaties to protect against earthquake losses up to a certain threshold in Business Insurance (for certain markets) and for Personal Insurance, and several reinsurance treaties specific to its international operations.

The Company monitors the financial condition of its reinsurers under voluntary reinsurance arrangements to evaluate the collectability of amounts due from reinsurers and as a basis for determining the reinsurers with which the Company conducts ongoing business. In addition, in the ordinary course of business, the Company may become involved in coverage disputes with its reinsurers. Some of these disputes could result in lawsuits and arbitrations brought by or against the reinsurers to determine the Company’s rights and obligations under the various reinsurance agreements. The Company employs dedicated specialists and strategies to manage reinsurance collections and disputes.

Included in reinsurance recoverables are amounts related to involuntary reinsurance arrangements. The Company is required to participate in various involuntary reinsurance arrangements through assumed reinsurance, principally with regard to residual market mechanisms in workers’ compensation and automobile insurance, as well as homeowners’ insurance in certain coastal areas. In addition, the Company provides services for several of these involuntary arrangements (mandatory pools and associations) under which it writes such residual market business directly, then cedes 100% of this business to the mandatory pool. Such participations and servicing arrangements are arranged to mitigate credit risk to the Company, as any ceded balances are jointly backed by all the pool members.

Also included in reinsurance recoverables are amounts related to certain structured settlements. Structured settlements are 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 structured settlement is included in reinsurance recoverables and the related claim cost is included in the liability for claims and claim adjustment expense reserves, as the Company retains the contingent liability to the claimant. If it is expected that the life insurance company is not able to pay, the Company would recognize an impairment of the related reinsurance recoverable if, and to the extent, the purchased annuities are not covered by state guaranty associations. In the event that the life insurance company fails to make the required annuity payments, the Company would be required to make such payments.

The following is a summary of reinsurance financial data reflected in the consolidated statement of income:


(for the year ended December 31, in millions)	2023			2022			2021
Written premiums
Direct	$	40,983		$	36,648		$	33,180
Assumed	1,989			1,228			1,064
Ceded	(2,771)			(2,462)			(2,285)
Total net written premiums	$	40,201		$	35,414		$	31,959
Earned premiums
Direct	$	38,796		$	34,948		$	31,977
Assumed	1,614			1,145			1,032
Ceded	(2,649)			(2,330)			(2,154)
Total net earned premiums	$	37,761		$	33,763		$	30,855
Percentage of assumed earned premiums to net earned premiums	4.3		%	3.4		%	3.3		%
Ceded claims and claim adjustment expenses incurred	$	1,462		$	1,187		$	1,184

Ceded premiums include the premiums paid for coverage provided by the Company’s catastrophe bonds.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. REINSURANCE (Continued)

Reinsurance recoverables include amounts recoverable on both paid and unpaid claims and claim adjustment expenses and were as follows:


(at December 31, in millions)	2023		2022
Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses	$	3,895	$	3,792
Gross structured settlements	2,707		2,802
Mandatory pools and associations	1,659		1,601
Gross reinsurance recoverables	8,261		8,195
Allowance for estimated uncollectible reinsurance	(118)		(132)
Net reinsurance recoverables	$	8,143	$	8,063

Terrorism Risk Insurance Program

The Terrorism Risk Insurance Program is a Federal program administered by the Department of the Treasury authorized through December 31, 2027 that provides for a system of shared public and private compensation for certain insured losses resulting from certified acts of terrorism.

In order for a loss to be covered under the program (subject losses), the loss must meet certain aggregate industry loss minimums and must be the result of an event that is certified as an act of terrorism by the U.S. Secretary of the Treasury, in consultation with the Secretary of Homeland Security and the Attorney General of the United States. The annual aggregate industry loss minimum under the program is $200 million. The program excludes from participation the following types of insurance: Federal crop insurance, private mortgage insurance, financial guaranty insurance, medical malpractice insurance, health or life insurance, flood insurance, reinsurance, commercial automobile, professional liability (other than directors’ and officers’), surety, burglary and theft, and farm-owners multi-peril. In the case of a war declared by Congress, only workers’ compensation losses are covered by the program. All commercial property and casualty insurers licensed in the United States are generally required to participate in the program. Under the program, a participating insurer, in exchange for making terrorism insurance available, is entitled to be reimbursed by the Federal Government for 80% of subject losses, after an insurer deductible, subject to an annual cap.

The deductible for any calendar year is equal to 20% of the insurer’s direct earned premiums for covered lines for the preceding calendar year. The Company’s estimated deductible under the program is $3.48 billion for 2024. The annual cap limits the amount of aggregate subject losses for all participating insurers to $100 billion. Once subject losses have reached the $100 billion aggregate during a program year, participating insurers will not be liable under the program for additional covered terrorism losses for that program year. There have been no terrorism-related losses that have triggered program coverage since the program was established. Given that the law establishing the program remains untested, there is substantial uncertainty as to how it will be applied if an act of terrorism is certified under the program. In addition, application of the program to a specific event will depend upon whether the government has designated such event as a covered event. It is also possible that future legislative action could change or eliminate the program. Further, given the unpredictable frequency and severity of terrorism losses, as well as the limited terrorism coverage in the Company’s own reinsurance program, future losses from acts of terrorism, particularly involving nuclear, biological, chemical or radiological events, could be material to the Company’s operating results, financial position and/or liquidity in future periods. In addition, the Company may not have sufficient resources to respond to claims arising from a high frequency of high severity natural catastrophes and/or of man-made catastrophic events involving conventional means. While the Company seeks to manage its exposure to man-made catastrophic events involving conventional means, the Company may not have sufficient resources to respond to claims arising out of one or more man-made catastrophic events involving nuclear, biological, chemical or radiological means.

7. 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.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)


(at December 31, in millions)	2023		2022
Business Insurance	$	2,585	$	2,565
Bond & Specialty Insurance	550		550
Personal Insurance	815		811
Other	26		26
Total	$	3,976	$	3,952

Other Intangible Assets

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


(at December 31, 2023, in millions)	Gross Carrying Amount		Accumulated Amortization		Net
Subject to amortization
Customer-related	$	100	$	59	$	41
Contract-based (1)	204		194		10
Total subject to amortization	304		253		51
Not subject to amortization	226		—		226
Total	$	530	$	253	$	277


(at December 31, 2022, in millions)	Gross Carrying Amount		Accumulated Amortization		Net
Subject to amortization
Customer-related	$	96	$	48	$	48
Contract-based (1)	204		191		13
Total subject to amortization	300		239		61
Not subject to amortization	226		—		226
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 $12 million, $13 million and $14 million for the years ended December 31, 2023, 2022 and 2021, respectively. Amortization expense for all intangible assets subject to amortization is estimated to be $12 million in 2024, $11 million in 2025, $11 million in 2026, $8 million in 2027 and $2 million in 2028. Amortization expense for intangible assets arising from insurance contracts acquired in a business combination is estimated to be $2 million in 2024, $2 million in 2025, $1 million in 2026, $1 million in 2027 and $1 million in 2028.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES

Claims and claim adjustment expense reserves were as follows:


(at December 31, in millions)	2023		2022
Property-casualty	$	61,621	$	58,643
Accident and health	6		6
Total	$	61,627	$	58,649

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


(at and for the year ended December 31, in millions)	2023		2022		2021
Claims and claim adjustment expense reserves at beginning of year	$	58,643	$	56,897	$	54,510
Less reinsurance recoverables on unpaid losses	7,790		8,209		8,153

Net reserves at beginning of year	50,853		48,688		46,357
Estimated claims and claim adjustment expenses for claims arising in the current year	26,159		23,308		20,698
Estimated decrease in claims and claim adjustment expenses for claims arising in prior years	(38)		(537)		(484)
Total increases	26,121		22,771		20,214
Claims and claim adjustment expense payments for claims arising in:
Current year	10,852		9,406		8,401
Prior years	12,424		10,945		9,470
Total payments	23,276		20,351		17,871

Unrealized foreign exchange loss (gain)	106		(255)		(12)
Net reserves at end of year	53,804		50,853		48,688
Plus reinsurance recoverables on unpaid losses	7,817		7,790		8,209
Claims and claim adjustment expense reserves at end of year	$	61,621	$	58,643	$	56,897

Gross claims and claim adjustment expense reserves at December 31, 2023 increased by $2.98 billion over December 31, 2022, primarily reflecting the impacts of (i) catastrophe losses in 2023, (ii) higher volumes of insured exposures and (iii) loss cost trends for the current accident year, partially offset by (iv) claim payments made during 2023 and (v) net favorable prior year reserve development. Gross claims and claim adjustment expense reserves at December 31, 2022 increased by $1.75 billion over December 31, 2021, 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 2022, partially offset by (iv) claim payments made during 2022 and (v) net favorable prior year reserve development.

Reinsurance recoverables on unpaid losses at December 31, 2023 increased by $27 million over December 31, 2022, primarily reflecting the impact of catastrophe losses in 2023 and a higher level of recoverables from mandatory pools and associations, partially offset by cash collections and a decrease in structured settlements. Reinsurance recoverables on unpaid losses at December 31, 2022 decreased by $419 million from December 31, 2021, primarily reflecting cash collections and decreases in mandatory pools and associations and structured settlements.

Included in the claims and claim adjustment expense reserves are reserves for long-term disability and annuity claim payments, primarily arising from workers’ compensation insurance and workers’ compensation excess insurance policies, that are discounted to the present value of the estimated future payments. The discount rates used were a range of 3.5% to 5.0% at both December 31, 2023 and 2022. Total reserves net of the discount were $2.68 billion and $2.72 billion, and the related amount of discount was $1.10 billion and $1.12 billion, at December 31, 2023 and 2022, respectively. Accretion of the discount is reported as part of “claims and claim adjustment expenses” in the consolidated statement of income and was $45 million, $46 million and $48 million for the years ended December 31, 2023, 2022 and 2021.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Prior Year Reserve Development

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

2023

In 2023*,* estimated claims and claim adjustment expenses incurred included $38 million of net favorable development for claims arising in prior years, including $143 million of net favorable prior year reserve development and $45 million of accretion of discount that impacted the Company’s results of operations.

Business Insurance. Net unfavorable prior year reserve development in 2023 totaled $289 million, primarily driven by (i) higher than expected loss experience in the domestic operations’ general liability product line (excluding asbestos) for multiple accident years, including additions to reserves attributable to childhood sexual molestation and environmental claims in the Company’s run-off operations, (ii) an addition to asbestos reserves of $284 million and (iii) higher than expected loss experience in the domestic operations’ commercial automobile product line for recent accident years, partially offset by (iv) better than expected loss experience in the domestic operations’ workers’ compensation product line for multiple accident years.

Bond & Specialty Insurance. Net favorable prior year reserve development in 2023 totaled $285 million, primarily driven by better than expected loss experience in the domestic operations’ fidelity and surety product lines and in the general liability product line for management liability coverages for recent accident years.

Personal Insurance. Net favorable prior year reserve development in 2023 totaled $147 million, primarily driven by better than expected loss experience in the domestic operations’ homeowners and other product line for recent accident years.

2022

In 2022, estimated claims and claim adjustment expenses incurred included $537 million of net favorable development for claims arising in prior years, including $649 million of net favorable prior year reserve development and $46 million of accretion of discount that impacted the Company’s results of operations.

Business Insurance. Net favorable prior year reserve development in 2022 totaled $381 million, primarily driven by the following:

*•*Workers’ compensation - better than expected loss experience in domestic operations for multiple accident years;

*•*Commercial property - better than expected loss experience in domestic operations for recent accident years; and

*•*Commercial multi-peril (excluding asbestos and environmental) - better than expected loss experience in domestic operations for recent accident years;

Partially offset by:

*•*Asbestos reserves - an addition of $212 million, primarily in the domestic operations’ general liability product line;

*•*General liability (excluding asbestos and environmental) - higher than expected loss experience in domestic operations for excess coverages for multiple accident years, as well as an increase to general liability reserves in the Company’s run-off operations; and

*•*Environmental reserves - an addition primarily in the domestic operations’ general liability product line.

Bond & Specialty Insurance. Net favorable prior year reserve development in 2022 totaled $222 million, primarily driven by better than expected loss experience in the domestic operations’ fidelity and surety product lines for recent accident years.

Personal Insurance. Net favorable prior year reserve development in 2022 totaled $46 million.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

2021

In 2021, estimated claims and claim adjustment expenses incurred included $484 million of net favorable development for claims arising in prior years, including $538 million of net favorable prior year reserve development and $48 million of accretion of discount that impacted the Company’s results of operations.

Business Insurance. Net favorable prior year reserve development in 2021 totaled $173 million, primarily driven by the following:

*•*Workers’ compensation - better than expected loss experience in domestic operations for multiple accident years;

*•*Commercial property - better than expected loss experience in domestic operations for recent accident years;

*•*International - better than expected loss experience for recent accident years; and

*•*Commercial automobile - better than expected loss experience in domestic operations for recent accident years;

Partially offset by:

*•*Asbestos reserves - an addition of $225 million, primarily in the domestic operations’ general liability product line;

*•*Other reserves - an addition related to run-off operations; and

*•*Environmental reserves - an addition primarily in the domestic operations’ general liability product line.

Bond & Specialty Insurance. Net favorable prior year reserve development in 2021 totaled $105 million, primarily driven by better than expected loss experience in the domestic operations’ fidelity and surety product lines for multiple accident years, partially offset by higher than expected loss experience in the general liability product line for management liability coverages for multiple accident years.

Personal Insurance. Net favorable prior year reserve development in 2021 totaled $260 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.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Claims Development

The following is a summary of claims and claim adjustment expense reserves, including certain components, for the Company’s major product lines by reporting segment at December 31, 2023.


(at December 31, 2023, in millions)	Net Undiscounted Claims and Claim Adjustment Expense Reserves		Discount (Net of Reinsurance)		Subtotal: Net Claims and Claim Adjustment Expense Reserves		Reinsurance Recoverables on Unpaid Losses (4)		Claims and Claim Adjustment Expense Reserves
Business Insurance
General liability	$	10,251	$	(132)	$	10,119	$	1,052	$	11,171
Commercial property	1,160		—		1,160		464		1,624
Commercial multi-peril	5,205		—		5,205		207		5,412
Commercial automobile	4,263		—		4,263		299		4,562
Workers’ compensation (1)	16,104		(912)		15,192		614		15,806
Bond & Specialty Insurance
General liability	2,432		—		2,432		276		2,708
Fidelity and surety	611		—		611		24		635
Personal Insurance
Automobile	4,095		—		4,095		345		4,440
Homeowners (excluding Other)	2,439		—		2,439		64		2,503
International - Canada	765		—		765		18		783
Subtotal — claims and allocated claim adjustment expenses for the products presented in the development tables below	47,325		(1,044)		46,281		3,363		49,644
Other insurance contracts (2)	4,753		(4)		4,749		1,814		6,563
Unallocated loss adjustment expense reserves	2,689		—		2,689		14		2,703
Structured settlements (3)	—		—		—		2,663		2,663
Other	85		—		85		(37)		48
Total property-casualty	54,852		(1,048)		53,804		7,817		61,621
Accident and health	—		—		—		6		6
Total	$	54,852	$	(1,048)	$	53,804	$	7,823	$	61,627

(1)Net discount amount includes discount of $48 million on reinsurance recoverables for long-term disability and annuity claim payments.

(2)Primarily includes residual market, international (other than operations in Canada within the Personal Insurance segment) and runoff assumed reinsurance business.

(3)Includes structured settlements in cases where the Company did not receive a release from the claimant.

(4)Total reinsurance recoverables (on paid and unpaid losses) at December 31, 2023 were $8.14 billion.

The claim development tables that follow present, by accident year, incurred and cumulative paid claims and allocated claim adjustment expense on a historical basis. This claim development information is presented on an undiscounted, net of reinsurance basis for ten years, or the number of years for which claims incurred typically remain outstanding if less than ten years. The claim development tables also provide the historical average annual percentage payout of incurred claims by age, net of reinsurance, as supplementary information (identified as unaudited in the tables below). The historical average annual percentage payout for incurred claims is subject to variability due to the impact of both large claim activity and subrogation recoveries, among other items.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Business Insurance

General Liability


	(dollars in millions)
	For the Years Ended December 31,
	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Unaudited
Accident Year																					IBNR Reserves Dec 31, 2023		Cumulative Number of Reported Claims
2014	$	976	$	989	$	983	$	948	$	956	$	1,013	$	988	$	979	$	971	$	968	$	70	22,665
2015			998		956		923		967		1,057		1,087		1,072		1,082		1,110		94		21,845
2016					1,075		1,058		1,087		1,187		1,204		1,179		1,185		1,183		116		20,755
2017							1,133		1,143		1,196		1,234		1,226		1,243		1,288		151		19,578
2018									1,253		1,312		1,344		1,395		1,477		1,530		195		19,870
2019											1,447		1,486		1,498		1,567		1,706		362		19,232
2020													1,467		1,493		1,470		1,577		496		16,317
2021															1,591		1,589		1,628		780		14,682
2022																	1,696		1,736		1,079		16,311
2023																			1,998		1,789		11,949
																	Total		$	14,724


	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year	Unaudited
2014	$	37	$	163	$	321	$	515	$	640	$	750	$	805	$	832	$	849	$	868
2015			36		137		336		558		740		828		875		927		975
2016					35		191		421		649		758		858		951		991
2017							40		180		378		552		724		914		1,029		Liability for Claims
2018									42		202		441		709		939		1,146		And Allocated Claim
2019											51		233		482		816		1,074		Adjustment Expenses,
2020													61		244		458		770		Net of Reinsurance
2021															67		231		493
2022																	81		302		2014 -		Before
2023																			54		2023		2014
																	Total		$	7,702	$	7,022	$	3,229
																			Total net liability				$	10,251


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	Unaudited
Years	1		2		3		4		5		6		7		8		9		10
	3.4	%	11.3	%	16.1	%	18.5	%	13.7	%	11.2	%	6.7	%	3.6	%	3.1	%	2.0	%

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Commercial Property


	(dollars in millions)
	For the Years Ended December 31,
	2019		2020		2021		2022		2023
	Incurred Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance
	Unaudited
Accident Year											IBNR Reserves December 31, 2023		Cumulative Number of Reported Claims
2019	$	1,069	$	1,034	$	1,031	$	1,039	$	1,031	$	2	25,453
2020			1,107		1,025		1,005		993		32		25,692
2021					1,236		1,190		1,190		(11)		25,743
2022							1,309		1,369		(15)		28,594
2023									1,268		160		25,396
							Total		$	5,851


	Cumulative Paid Claims and Allocated Claim
	Adjustment Expenses, Net of Reinsurance
	Unaudited
											Liability for Claims
Accident Year											And Allocated Claim
2019	$	610	$	957	$	1,001	$	1,012	$	1,013	Adjustment Expenses,
2020			580		857		907		932		Net of Reinsurance
2021					645		1,068		1,141
2022							624		1,113		2019 -		Before
2023									614		2023		2019
							Total		$	4,813	$	1,038	$	122
									Total net liability				$	1,160


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	Unaudited
Years	1		2		3		4		5
	53.2	%	33.2	%	5.2	%	1.8	%	—	%

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Commercial Multi-Peril


	(dollars in millions)
	For the Years Ended December 31,
	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Unaudited
Accident Year																					IBNR Reserves December 31, 2023		Cumulative Number of Reported Claims
2014	$	1,663	$	1,627	$	1,625	$	1,617	$	1,626	$	1,627	$	1,627	$	1,622	$	1,619	$	1,619	$	18	78,565
2015			1,568		1,625		1,593		1,597		1,606		1,593		1,584		1,571		1,563		18		72,444
2016					1,662		1,623		1,598		1,590		1,601		1,587		1,579		1,578		29		69,551
2017							1,872		1,928		1,956		1,919		1,935		1,943		1,930		61		72,592
2018									1,976		2,114		2,092		2,112		2,121		2,127		76		79,965
2019											2,017		2,087		2,089		2,103		2,103		114		68,272
2020													2,142		2,141		2,126		2,111		310		70,349
2021															2,164		2,097		2,097		357		57,321
2022																	2,502		2,533		550		52,447
2023																			2,781		1,080		44,311
																	Total		$	20,442


	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year	Unaudited
2014	$	628	$	956	$	1,154	$	1,328	$	1,448	$	1,512	$	1,544	$	1,560	$	1,577	$	1,589
2015			595		970		1,144		1,310		1,409		1,452		1,489		1,512		1,523
2016					585		950		1,133		1,278		1,373		1,437		1,477		1,510
2017							716		1,199		1,388		1,531		1,674		1,763		1,815		Liability for Claims
2018									792		1,302		1,500		1,669		1,815		1,917		And Allocated Claim
2019											707		1,187		1,423		1,628		1,801		Adjustment Expenses,
2020													791		1,180		1,373		1,547		Net of Reinsurance
2021															744		1,206		1,437
2022																	817		1,476		2014 -		Before
2023																			935		2023		2014
																	Total		$	15,550	$	4,892	$	313
																			Total net liability				$	5,205


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	Unaudited
Years	1		2		3		4		5		6		7		8		9		10
	36.1	%	22.9	%	10.7	%	9.1	%	7.0	%	4.0	%	2.4	%	1.6	%	0.8	%	0.8	%

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Commercial Automobile


	(dollars in millions)
	For the Years Ended December 31,
	2019		2020		2021		2022		2023
	Incurred Claims and Allocated Claims Adjustment
	Expenses, Net of Reinsurance
	Unaudited
Accident Year											IBNR Reserves December 31, 2023		Cumulative Number of Reported Claims
2019	$	1,835	$	1,951	$	1,976	$	1,992	$	2,041	$	90	207,380
2020			1,788		1,677		1,621		1,558		180		143,035
2021					1,741		1,757		1,786		323		148,739
2022							1,939		2,040		636		158,945
2023									2,245		1,238		149,934
							Total		$	9,670


	Cumulative Paid Claims and Allocated Claim
	Adjustment Expenses, Net of Reinsurance
	Unaudited
											Liability for Claims
Accident Year											And Allocated Claim
2019	$	539	$	934	$	1,269	$	1,577	$	1,794	Adjustment Expenses,
2020			437		696		958		1,192		Net of Reinsurance
2021					453		800		1,135
2022							540		966		2019 -		Before
2023									589		2023		2019
							Total		$	5,676	$	3,994	$	269
									Total net liability				$	4,263


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	Unaudited
Years	1		2		3		4		5
	26.5	%	19.1	%	17.3	%	15.1	%	10.6	%

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Workers’ Compensation


	(dollars in millions)
	For the Years Ended December 31,
	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Unaudited
Accident Year																					IBNR Reserves December 31, 2023		Cumulative Number of Reported Claims
2014	$	2,554	$	2,553	$	2,547	$	2,476	$	2,430	$	2,393	$	2,352	$	2,336	$	2,277	$	2,234	$	300	131,666
2015			2,644		2,585		2,505		2,441		2,372		2,279		2,220		2,155		2,097		349		131,239
2016					2,768		2,690		2,569		2,473		2,372		2,300		2,235		2,151		315		132,006
2017							2,779		2,681		2,584		2,483		2,439		2,342		2,243		403		129,555
2018									2,744		2,687		2,599		2,503		2,416		2,318		478		126,699
2019											2,680		2,714		2,699		2,632		2,521		566		120,548
2020													2,559		2,530		2,433		2,271		670		96,891
2021															2,356		2,349		2,294		721		95,329
2022																	2,293		2,294		966		102,371
2023																			2,373		1,386		88,578
																	Total		$	22,796


	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year	Unaudited
2014	$	455	$	944	$	1,224	$	1,399	$	1,505	$	1,581	$	1,634	$	1,672	$	1,703	$	1,728
2015			430		893		1,154		1,310		1,411		1,470		1,520		1,547		1,574
2016					421		873		1,118		1,272		1,367		1,433		1,486		1,522
2017							433		890		1,154		1,314		1,418		1,490		1,544		Liability for Claims
2018									440		919		1,169		1,330		1,440		1,516		And Allocated Claim
2019											466		951		1,229		1,402		1,518		Adjustment Expenses,
2020													389		794		1,017		1,164		Net of Reinsurance
2021															427		848		1,076
2022																	388		830		2014 -		Before
2023																			444		2023		2014
																	Total		$	12,916	$	9,880	$	6,224
																			Total net liability				$	16,104


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	Unaudited
Years	1		2		3		4		5		6		7		8		9		10
	18.9	%	20.1	%	11.2	%	7.1	%	4.7	%	3.1	%	2.4	%	1.6	%	1.3	%	1.1	%

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Bond & Specialty Insurance

General Liability


	(dollars in millions)
	For the Years Ended December 31,
	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023
	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	Unaudited
Accident Year																					IBNR Reserves December 31, 2023		Cumulative Number of Reported Claims
2014	$	549	$	571	$	563	$	518	$	473	$	452	$	450	$	449	$	451	$	453	$	15	4,383
2015			528		524		486		437		395		414		413		414		407		15		4,233
2016					512		511		504		520		514		510		511		509		18		4,412
2017							534		517		526		493		524		554		565		46		4,616
2018									530		548		585		595		605		612		62		4,883
2019											588		653		665		670		662		79		5,466
2020													772		753		741		698		145		5,446
2021															812		756		683		256		5,568
2022																	803		763		402		4,819
2023																			862		605		4,199
																	Total		$	6,214


	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year	Unaudited
2014	$	38	$	150	$	239	$	312	$	367	$	407	$	418	$	426	$	431	$	434
2015			38		141		234		310		338		348		381		383		387
2016					30		141		233		313		378		446		463		472
2017							38		155		262		340		404		450		488		Liability for Claims
2018									49		182		290		383		458		504		And Allocated Claim
2019											51		189		323		410		513		Adjustment Expenses,
2020													52		210		333		447		Net of Reinsurance
2021															78		210		316
2022																	69		212		2014 -		Before
2023																			90		2023		2014
																	Total		$	3,863	$	2,351	$	81
																			Total net liability				$	2,432


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	Unaudited
Years	1		2		3		4		5		6		7		8		9		10
	8.4	%	21.7	%	18.8	%	15.6	%	11.8	%	8.1	%	5.1	%	1.4	%	1.0	%	0.6	%

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Fidelity and Surety


	(dollars in millions)
	For the Years Ended December 31,
	2019		2020		2021		2022		2023		IBNR Reserves December 31, 2023		Cumulative Number of Reported Claims
	Incurred Claims and Allocated Claims Adjustment
	Expenses, Net of Reinsurance
Accident Year	Unaudited
2019	$	203	$	193	$	200	$	185	$	175	$	8	896
2020			274		203		219		222		71		805
2021					284		172		93		33		602
2022							310		261		147		715
2023									353		175		682
							Total		$	1,104


	Cumulative Paid Claims and Allocated Claim
	Adjustment Expenses, Net of Reinsurance
Accident Year	Unaudited										Liability for Claims
											And Allocated Claim
2019	$	49	$	121	$	147	$	154	$	162	Adjustment Expenses,
2020			50		79		110		125		Net of Reinsurance
2021					25		50		57
2022							36		82		2019 -		Before
2023									96		2023		2019
							Total		$	522	$	582	$	29
									Total net liability				$	611


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	Unaudited
Years	1		2		3		4		5
	23.7	%	24.7	%	12.0	%	5.5	%	4.3	%

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Personal Insurance

Automobile


	(dollars in millions)
	For the Years Ended December 31,
	2019		2020		2021		2022		2023		IBNR Reserves December 31, 2023		Cumulative Number of Reported Claims
	Incurred Claims and Allocated Claims Adjustment
	Expenses, Net of Reinsurance
Accident Year	Unaudited
2019	$	3,362	$	3,361	$	3,333	$	3,339	$	3,343	$	29	1,033,672
2020			2,829		2,764		2,729		2,717		73		810,855
2021					3,716		3,770		3,751		192		1,000,225
2022							4,755		4,784		511		1,128,273
2023									5,206		1,535		1,009,660
							Total		$	19,801


	Cumulative Paid Claims and Allocated Claim
	Adjustment Expenses, Net of Reinsurance
Accident Year	Unaudited										Liability for Claims
											And Allocated Claim
2019	$	1,933	$	2,650	$	2,958	$	3,159	$	3,259	Adjustment Expenses,
2020			1,571		2,126		2,411		2,561		Net of Reinsurance
2021					2,062		2,981		3,350
2022							2,683		3,855		2019 -		Before
2023									2,888		2023		2019
							Total		$	15,913	$	3,888	$	207
									Total net liability				$	4,095


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	Unaudited
Years	1		2		3		4		5
	56.4	%	22.7	%	9.9	%	5.8	%	3.0	%

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Homeowners (excluding Other)


	(dollars in millions)
	For the Years Ended December 31,
	2019		2020		2021		2022		2023		IBNR Reserves December 31, 2023		Cumulative Number of Reported Claims
	Incurred Claims and Allocated Claims Adjustment
	Expenses, Net of Reinsurance
Accident Year	Unaudited
2019	$	2,297	$	2,344	$	2,343	$	2,341	$	2,334	$	—	181,521
2020			3,019		2,967		2,909		2,869		26		221,208
2021					3,463		3,486		3,444		52		233,584
2022							4,277		4,184		167		233,740
2023									5,171		1,367		233,201
							Total		$	18,002


	Cumulative Paid Claims and Allocated Claim
	Adjustment Expenses, Net of Reinsurance
Accident Year	Unaudited										Liability for Claims
											And Allocated Claim
2019	$	1,613	$	2,179	$	2,269	$	2,300	$	2,316	Adjustment Expenses,
2020			2,019		2,673		2,755		2,802		Net of Reinsurance
2021					2,334		3,235		3,344
2022							2,537		3,828		2019 -		Before
2023									3,369		2023		2019
							Total		$	15,659	$	2,343	$	96
									Total net liability				$	2,439


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	Unaudited
Years	1		2		3		4		5
	66.6	%	26.0	%	3.3	%	1.5	%	0.7	%

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

International - Canada


	(dollars in millions)
	For the Years Ended December 31,																				IBNR Reserves December 31, 2023			Cumulative
	2014		2015		2016		2017		2018		2019		2020		2021		2022		2023				Number of
Accident	Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance																						Reported
Year	Unaudited																						Claims
2014	$	420	$	436	$	436	$	425	$	418	$	415	$	414	$	411	$	420	$	421	$	(3)		52,032
2015			353		353		353		349		351		350		345		345		346		1			44,955
2016					354		401		401		411		411		409		411		412		(3)			45,502
2017							339		374		395		395		395		398		401		2			46,521
2018									431		453		454		459		462		465		3			50,328
2019											436		431		452		454		456		6			47,916
2020													340		327		314		308		24			30,036
2021															342		329		321		41			28,042
2022																	379		388		59			32,872
2023																			446		106			30,774
																	Total		$	3,964


Accident	Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Year	Unaudited
2014	$	186	$	260	$	296	$	324	$	355	$	376	$	393	$	407	$	411		$	416
2015			158		221		249		277		301		315		329		336			339
2016					207		278		303		337		360		377		390			396
2017							178		252		291		314		340		361			375		Liability for Claims
2018									215		299		333		372		403			420		And Allocated Claim
2019											212		283		319		357			387		Adjustment Expenses,
2020													141		190		214			233		Net of Reinsurance
2021															126		185			214
2022																	165			239		2014 -		Before
2023																				200		2023		2014
																	Total			$	3,219	$	745	$	20
																			Total net liability					$	765


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	Unaudited
Years	1		2		3		4		5		6		7		8		9		10
	45.0	%	17.6	%	8.0	%	7.4	%	6.7	%	4.5	%	3.6	%	2.3	%	0.8	%	1.2	%

The incurred and paid amounts have been translated from the local currency to U.S. dollars using the December 31, 2023 spot rate for all years presented in the table above in order to isolate changes in foreign exchange rates from loss development.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

Methodology for Estimating Incurred But Not Reported (IBNR) Reserves

Claims and claim adjustment expense reserves represent management’s estimate of the ultimate liability for unpaid losses and loss adjustment expenses for claims that have been reported and claims that have been incurred but not yet reported (IBNR) as of the balance sheet date. Claims and claim adjustment expense reserves do not represent an exact calculation of the liability, but instead represent management estimates, primarily utilizing actuarial expertise and projection methods that develop estimates for the ultimate cost of claims and claim adjustment expenses. Because the establishment of claims and claim adjustment expense reserves is an inherently uncertain process involving estimates and judgment, currently estimated claims and claim adjustment expense reserves may change. The Company reflects changes to the reserves in the results of operations in the period the estimates are changed.

Cumulative amounts paid and case reserves held as of the balance sheet date are subtracted from the estimate of the ultimate cost of claims and claim adjustment expenses to derive incurred but not reported (IBNR) reserves. Accordingly, IBNR reserves include the cost of unreported claims, development on known claims and re-opened claims. This approach to estimating IBNR reserves has been in place for many years, with no material changes in methodology in the past year.

Detailed claim data is typically insufficient to produce a reliable indication of the initial estimate for ultimate claims and claim adjustment expenses for an accident year. As a result, the initial estimate for an accident year is generally based on an exposure-based method using either the loss ratio projection or the expected loss method. The loss ratio projection method, which is typically used for guaranteed-cost business, develops an initial estimate of ultimate claims and claim adjustment expenses for an accident year by multiplying earned premium for the accident year by a projected loss ratio. The projected loss ratio is determined by analyzing prior period experience, and adjusting for loss cost trends, rate level differences, mix of business changes and other known or observed factors influencing the accident year relative to prior accident years. The expected loss method, which is typically used for loss sensitive business, develops an initial estimate of ultimate claims and claim adjustment expenses for an accident year by analyzing exposures by account.

For prior accident years, the following estimation and analysis methods are principally used by the Company’s actuaries to estimate the ultimate cost of claims and claim adjustment expenses. These estimation and analysis methods are typically referred to as conventional actuarial methods.

The paid loss development method assumes that the future change (positive or negative) in cumulative paid losses for a given cohort of claims will occur in a stable, predictable pattern from year-to-year, consistent with the pattern observed in past cohorts.
The case incurred development method is the same as the paid loss development method but is based on cumulative case-incurred losses rather than paid losses.
The Bornhuetter-Ferguson method uses an initial estimate of ultimate losses for a given product line reserve component, typically expressed as a ratio to earned premium. The method assumes that the ratio of additional claim activity to earned premium for that component is relatively stable and predictable over time and that actual claim activity to date is not a credible predictor of further activity for that component. The method is used most often for more recent accident years where claim data is sparse and/or volatile, with a transition to other methods as the underlying claim data becomes more voluminous and therefore more credible.
The average value analysis combined with the reported claim development method assumes that average claim values are stable and predictable over time for a particular cohort of claims. It is typically limited to analysis at more granular levels, such as coverage or hazard/peril, where a more homogeneous subset of claims produce a more stable and fairly predictable average value. The reported claim development method is the same as the paid loss development method but uses changes in cumulative claim counts to produce estimates of ultimate claim counts rather than ultimate dollars. The resulting estimate of ultimate claim counts by cohort is multiplied by an average value per claim from an average value analysis to obtain estimated ultimate claims and claim adjustment expenses.

While these are the principal methods utilized, the Company’s actuaries have available to them the full range of actuarial methods developed by the casualty actuarial profession. The Company’s actuaries are also regularly monitoring developments within the profession for advances in existing techniques or the creation of new techniques that might improve current and future estimates. Most actuarial methods assume that past patterns demonstrated in the data will repeat themselves in the

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

future. For certain reserve components where this assumption may not hold, such as asbestos and environmental reserves, conventional actuarial methods are not utilized by the Company.

Methodology for Determining Cumulative Number of Reported Claims

A claim file is created when the Company is notified of an actual demand for payment, notified of an event that may lead to a demand for payment or when it is determined that a demand for payment could possibly lead to a future demand for payment on another coverage on the same policy or on another policy. Claim files are generally created for a policy at the claimant by coverage level, depending on the particular facts and circumstances of the underlying event.

For Business Insurance and for Personal Insurance, claim file information is summarized such that the Company generally recognizes one count for each policy claim event by internal regulatory line of business, regardless of the number of claimants or coverages involved. The claims counts are then accumulated and reported by product line. While the methodology is generally consistent within each segment for the product lines displayed, there are some minor differences between and within segments. For Bond & Specialty Insurance, the Company generally recognizes one count per coverage per policy claim event and one count per bond per surety claim event.

For purposes of the claims development tables above, claims reported for direct business are counted even if they eventually close with no loss payment, except in the case of (i) deductible business, where the claim is not counted until the case incurred claim estimate is above the deductible and (ii) International-Canada reported claim counts where claims closed with no loss payment are not counted. Note that claims with zero claim dollars may still generate some level of claim adjustment expenses. Claim counts for assumed business are included only to the extent such counts are available. The Company generally does not receive claim count information for which the underlying claim activity is handled by others, including pools and associations. The Company does not generate claim counts for ceded business. The methods used to summarize claim counts have not changed significantly over the time periods reported in the tables above.

The Company cautions against using the summarized claim count information provided in this disclosure in attempting to project ultimate loss payouts by product line. The Company generally finds claim count data to be useful only on a more granular basis than the aggregated basis disclosed in the claim development tables above, as the risks, average values and other dynamics of the claim process can vary materially by the cause of loss and coverage within product line. For example, in Personal Automobile, the introduction of roadside assistance coverage resulted in a significant increase in claim counts with a low average claim cost. For this reason the Company varies its approach to, and in many cases the level of aggregation for, counting claims for internal analysis purposes depending on the particular granular analysis performed.

Asbestos and Environmental Reserves

At December 31, 2023 and 2022, the Company’s claims and claim adjustment expense reserves included $1.76 billion and $1.68 billion, respectively, for asbestos and environmental-related claims, net of reinsurance.

It is difficult to estimate the reserves for asbestos and environmental-related claims due to the vagaries of court coverage decisions, plaintiffs’ expanded theories of liability, the risks inherent in complex litigation and other uncertainties, including, without limitation, those which are set forth below.

Asbestos Reserves. 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 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.

In the third quarter of 2023, the Company completed its annual in-depth asbestos claim review, including a review of policyholders with open claims and litigation cases for potential product and “non-product” liability. The number of policyholders with open asbestos claims was relatively flat compared to 2022, while net asbestos payments were slightly lower

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

than 2022. Payments on behalf of these policyholders continue to be influenced by an increase in severity for certain policyholders and a high level of litigation activity in a limited number of jurisdictions where individuals alleging serious asbestos-related injury, primarily mesothelioma, continue to target defendants who were not traditionally primary targets of asbestos litigation.

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 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.

The completion of these reviews and analyses in 2023, 2022 and 2021 resulted in $284 million, $212 million and $225 million increases, respectively, to the Company’s net asbestos reserves. In each year, the reserve increases were primarily driven by increases in the Company’s estimate of projected settlement and defense costs related to a broad number of policyholders. The increase in the estimate of projected settlement and defense costs primarily resulted from payment trends that continue to be higher than previously anticipated due to the continued high level of mesothelioma claim filings and the impact of the current litigation environment surrounding those claims discussed above. The 2023 charge also included an additional increase to strengthen the Company’s carried reserve position relative to the range of reasonable estimates. 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 2023, 2022 and 2021 were $212 million, $245 million and $221 million, respectively. Approximately 1%, 2% and 9% of total net paid losses in 2023, 2022 and 2021, respectively, related to policyholders with whom the Company entered into settlement agreements that limit those policyholders’ ability to present future claims to the Company.

Environmental Reserves. In establishing environmental reserves, the Company evaluates the exposure presented by each policyholder and the anticipated cost of resolution, if any. These claims are mainly brought pursuant to various state or federal statutes that require a liable party to undertake or pay for environmental remediation. Liability under these statutes may be joint and several with other responsible parties. 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,

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. INSURANCE CLAIM RESERVES (Continued)

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, in 2023, 2022 and 2021, the Company increased its net environmental reserves by $93 million, $132 million and $89 million, respectively.

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. 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.

Catastrophe Exposure

The Company has geographic exposure to catastrophe losses, which include hurricanes, tornadoes and other windstorms, earthquakes, hail, wildfires, severe winter weather, floods, tsunamis, volcanic eruptions, solar flares and other naturally-occurring events. Catastrophes can also result from terrorist attacks and other intentionally destructive acts including those involving cyber events, nuclear, biological, chemical and radiological events, civil unrest, explosions and destruction of infrastructure. The incidence and severity of catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most catastrophes are restricted to small geographic areas; however, hurricanes, earthquakes, wildfires and cyber attacks may produce significant damage in larger areas, especially those that are heavily populated. The Company generally seeks to mitigate its exposure to catastrophes through individual risk selection and the purchase of catastrophe reinsurance.

There are also risks which impact the estimation of ultimate costs for catastrophes. For example, the estimation of reserves related to hurricanes can be affected by the inability of the Company and its insureds to access portions of the impacted areas, the complexity of factors contributing to the losses, the legal and regulatory uncertainties and the nature of the information available to establish the reserves. Complex factors include, but are not limited to: determining whether damage was caused by flooding versus wind; evaluating general liability and pollution exposures; estimating additional living expenses; the impact of demand surge; the potential impact of changing climate conditions, including higher frequency and severity of weather-related events; infrastructure disruption; fraud; the effect of mold damage and business income interruption costs; and reinsurance collectibility. The timing of a catastrophe’s occurrence, such as at or near the end of a reporting period, can also affect the information available to the Company in estimating reserves for that reporting period. The estimates related to catastrophes are adjusted as actual claims emerge.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. DEBT

Debt outstanding was as follows:


(at December 31, in millions)	2023		2022
Short-term:
Commercial paper	$	100	$	100
Total short-term debt	100		100
Long-term:
7.75% Senior notes due April 15, 2026	200		200
7.625% Junior subordinated debentures due December 15, 2027	125		125
6.375% Senior notes due March 15, 2033	500		500
6.75% Senior notes due June 20, 2036	400		400
6.25% Senior notes due June 15, 2037	800		800
5.35% Senior notes due November 1, 2040	750		750
4.60% Senior notes due August 1, 2043	500		500
4.30% Senior notes due August 25, 2045	400		400
8.50% Junior subordinated debentures due December 15, 2045	56		56
3.75% Senior notes due May 15, 2046	500		500
8.312% Junior subordinated debentures due July 1, 2046	73		73
4.00% Senior notes due May 30, 2047	700		700
4.05% Senior notes due March 7, 2048	500		500
4.10% Senior notes due March 4, 2049	500		500
2.55% Senior notes due April 27, 2050	500		500
3.05% Senior notes due June 8, 2051	750		750
5.45% Senior notes due May 25, 2053	750		—
Total long-term debt	8,004		7,254
Total debt principal	8,104		7,354
Unamortized fair value adjustment	35		38
Unamortized debt issuance costs	(108)		(100)
Total debt	$	8,031	$	7,292

2023 Debt Issuance. On May 25, 2023, the Company issued $750 million aggregate principal amount of 5.45% senior notes that will mature on May 25, 2053. The net proceeds of the issuance, after the deduction of the underwriting discount and expenses payable by the Company, totaled approximately $738 million. Interest on the senior notes is payable semi-annually in arrears on May 25 and November 25. Prior to November 25, 2052, the senior notes may be redeemed, in whole or in part, at the Company’s option, at any time or from time to time, at a redemption price equal to the greater of (a) 100% of the principal amount of any senior notes to be redeemed or (b) the sum of the present values of the remaining scheduled payments of principal and interest to but excluding November 25, 2052 on any senior notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the then current Treasury rate (as defined in the senior notes), plus 25 basis points. On or after November 25, 2052, the senior notes may be redeemed, in whole or in part, at the Company’s option, at any time or from time to time, at a redemption price equal to 100% of the principal amount of any senior notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

2021 Debt Issuance. On June 8, 2021, the Company issued $750 million aggregate principal amount of 3.05% senior notes that will mature on June 8, 2051. The net proceeds of the issuance, after the deduction of the underwriting discount and expenses payable by the Company, totaled approximately $739 million. Interest on the senior notes is payable semi-annually in arrears on June 8 and December 8. Prior to December 8, 2050, the senior notes may be redeemed, in whole or in part, at the Company’s

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. DEBT (Continued)

option, at any time or from time to time, at a redemption price equal to the greater of (a) 100% of the principal amount of any senior notes to be redeemed or (b) the sum of the present values of the remaining scheduled payments of principal and interest to but excluding December 8, 2050 on any senior notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the then current Treasury rate (as defined in the senior notes), plus 15 basis points. On or after December 8, 2050, the senior notes may be redeemed, in whole or in part, at the Company’s option, at any time or from time to time, at a redemption price equal to 100% of the principal amount of any senior notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Description of Debt

Commercial Paper—The Company maintains an $800 million commercial paper program. Interest rates on commercial paper issued in 2023 ranged from 4.29% to 5.34%, and in 2022 ranged from 0.10% to 4.29%.

Senior Notes—The Company’s various senior debt issues are unsecured obligations that rank equally with one another. Interest payments are made semi-annually. The Company generally may redeem some or all of the notes prior to maturity in accordance with terms unique to each debt instrument.

The Travelers Companies, Inc. fully and unconditionally guarantees the payment of all principal, premiums, if any, and interest on certain debt obligations of its subsidiaries Travelers Property Casualty Corp. (TPC) and Travelers Insurance Group Holdings Inc. (TIGHI). The guarantees pertain to the $200 million 7.75% notes due 2026 and the $500 million 6.375% notes due 2033.

Junior Subordinated Debentures—The Company’s three junior subordinated debenture instruments are all similar in nature to each other. Three separate business trusts issued preferred securities to investors and used the proceeds to purchase the Company’s junior subordinated debentures. Interest on each of the instruments is paid semi-annually.

The Company’s consolidated balance sheet includes the debt instruments acquired in a business acquisition, which were recorded at fair value as of the acquisition date. The resulting fair value adjustment is being amortized over the remaining life of the respective debt instruments using the effective-interest method. The amortization of the fair value adjustment reduced interest expense by $3 million and $1 million for the years ended December 31, 2023 and 2022, respectively.

The following table presents merger-related unamortized fair value adjustments and the related effective interest rate:


				Unamortized Fair Value Purchase Adjustment at December 31,				Effective Interest Rate to Maturity
(in millions)	Issue Rate		Maturity Date	2023		2022
Junior subordinated debentures	7.625	%	Dec. 2027	$	6	$	7	6.147	%
	8.500	%	Dec. 2045	13		14		6.362	%
	8.312	%	Jul. 2046	16		17		6.362	%
Total				$	35	$	38

Maturities—Other than commercial paper, the amount of debt obligations that become due in each of the next five years is as follows: 2024, $0; 2025, $0; 2026, $200 million; 2027, $125 million; and 2028, $0.

Credit Agreement

On June 15, 2022, the Company entered into to a five-year, $1.0 billion revolving credit agreement with a syndicate of financial institutions, replacing its five-year, $1.0 billion credit agreement that was due to expire on June 4, 2023. Pursuant to the credit agreement covenants, the Company must maintain a minimum consolidated net worth, defined as shareholders’ equity determined in accordance with GAAP (excluding accumulated other comprehensive income (loss)) plus (a) trust preferred securities (not to exceed 15% of total capital) and (b) mandatorily convertible securities (combined with trust preferred securities, not to exceed 25% of total capital), less goodwill and other intangible assets. That threshold is fixed during the term of the credit agreement at an amount equal to $13.9 billion (57.5% of the Company’s net worth at March 31, 2022). In addition, the credit agreement contains other customary restrictive covenants as well as certain customary events of default, including with respect to a change in control, which would occur upon the acquisition of 35% or more of the Company’s voting

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. DEBT (Continued)

stock or certain changes in the composition of the Company’s Board of Directors. At December 31, 2023, the Company was in compliance with these covenants. Generally, the cost of borrowing under this agreement will range from the Secured Overnight Financing Rate (SOFR) plus 85 basis points (including a credit spread adjustment) to SOFR plus 147.5 basis points (including a credit spread adjustment), depending on the Company’s credit ratings. At December 31, 2023, that cost would have been SOFR plus 110 basis points (including a credit spread adjustment), had there been any amounts outstanding under the credit agreement.

The Company has uncollateralized letters of credit with an aggregate limit of $305 million at December 31, 2023, including $260 million that provides a portion of the capital needed to support the Company’s obligations at Lloyd’s.

Shelf Registration

The Company has a shelf registration statement filed with the Securities and Exchange Commission that expires on June 8, 2025 which permits it to issue securities from time to time at prices and on other terms to be determined at the time of offering.

10. SHAREHOLDERS’ EQUITY AND DIVIDEND AVAILABILITY

Authorized Shares

The number of authorized shares of the Company is 1.755 billion, consisting of five million shares of preferred stock, 1.745 billion shares of voting common stock and five million undesignated shares. The Company’s Articles of Incorporation authorize the Board of Directors to establish, from the undesignated shares, one or more classes and series of shares, and to further designate the type of shares and terms thereof.

Preferred Stock

The Company’s Articles of Incorporation provide authority to issue up to five million shares of preferred stock.

Common Stock

The Company is governed by the Minnesota Business Corporation Act. All authorized shares of voting common stock have no par value. Shares of common stock reacquired are considered authorized and unissued shares.

Treasury Stock

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 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. In April 2023, the Board of Directors approved a share repurchase authorization that added an additional $5.0 billion of repurchase capacity. During 2023, the Company repurchased 5.4 million shares under its share repurchase authorizations, for a total of $965 million. The average cost per share repurchased was $179.95. At December 31, 2023, the Company had $6.04 billion of capacity remaining under its share repurchase authorizations. The cost of treasury stock acquired pursuant to common share repurchases includes the 1% excise tax imposed on common share repurchase activity, net of common share issuances, as part of the Inflation Reduction Act of 2022.

The Company’s Amended and Restated 2004 Stock Incentive Plan, the Amended and Restated 2014 Stock Incentive Plan and the 2023 Stock Incentive Plan provide settlement alternatives to employees in which the Company retains shares 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. During the years ended December 31, 2023 and 2022, the Company acquired $64 million and $61 million, respectively, of its common stock under these plans.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. SHAREHOLDERS’ EQUITY AND DIVIDEND AVAILABILITY (Continued)

Common shares acquired are reported as treasury stock in the consolidated balance sheet.

Dividend Availability

The Company’s U.S. insurance subsidiaries, domiciled principally in the State of Connecticut, are subject to various regulatory restrictions that limit the maximum amount of dividends available to be paid by each insurance subsidiary to its respective parent company without prior approval of insurance regulatory authorities. A maximum of $2.73 billion is available by the end of 2024 for such dividends to ultimately be paid to the holding company, TRV, without prior approval of the Connecticut Insurance Department. The Company may choose to accelerate the timing within 2024 and/or increase the amount of dividends from its insurance subsidiaries in 2024, which could result in certain dividends being subject to approval by the Connecticut Insurance Department prior to payment.

Each of the Company’s U.S. insurance subsidiaries had policyholders’ surplus at December 31, 2023 significantly above the level at which any regulatory action would occur. Regulators in the jurisdictions in which the Company’s foreign insurance subsidiaries are located require insurance companies to maintain certain levels of capital depending on, among other things, the type and amount of insurance policies written. Each of the Company’s foreign insurance subsidiaries also had capital significantly above their respective regulatory requirements at December 31, 2023.

In addition to the regulatory restrictions on the amount of dividends that can be paid by the Company’s U.S. insurance subsidiaries, the maximum amount of dividends that may be paid to the Company’s shareholders is also limited, to a lesser degree, by certain covenants contained in its line of credit agreement with a syndicate of financial institutions that require the Company to maintain a minimum consolidated net worth as described in note 9.

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 December 31, 2023.

The U.S. insurance subsidiaries paid dividends of $1.17 billion, $2.90 billion and $2.18 billion during 2023, 2022 and 2021, respectively.

For the years ended December 31, 2023, 2022 and 2021, TRV declared cash dividends per common share of $3.93, $3.67 and $3.49, respectively, and paid cash dividends of $908 million, $875 million and $869 million, respectively.

Statutory Net Income and Statutory Capital and Surplus

Statutory net income of the Company’s domestic and international insurance subsidiaries was $2.85 billion, $2.62 billion and $3.41 billion for the years ended December 31, 2023, 2022 and 2021, respectively. Statutory capital and surplus of the Company’s domestic and international insurance subsidiaries was $25.11 billion and $23.68 billion at December 31, 2023 and 2022, respectively.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. 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 years ended December 31, 2023, 2022 and 2021.


	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, 2020	$	3,892	$	182	$	(832)	$	(740)	$	2,502
Other comprehensive income (loss) (OCI) before reclassifications, net of tax	(1,606)		—		278		(9)		(1,337)
Amounts reclassified from AOCI, net of tax	(53)		—		81		—		28
Net OCI, current period	(1,659)		—		359		(9)		(1,309)
Balance, December 31, 2021	2,233		182		(473)		(749)		1,193
OCI before reclassifications, net of tax	(7,387)		(3)		(102)		(256)		(7,748)
Amounts reclassified from AOCI, net of tax	77		—		33		—		110
Net OCI, current period	(7,310)		(3)		(69)		(256)		(7,638)
Balance, December 31, 2022	(5,077)		179		(542)		(1,005)		(6,445)
OCI before reclassifications, net of tax	1,692		1		94		121		1,908
Amounts reclassified from AOCI, net of tax	76		—		(10)		—		66
Net OCI, current period	1,768		1		84		121		1,974
Balance, December 31, 2023	$	(3,309)	$	180	$	(458)	$	(884)	$	(4,471)

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. 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).


(for the year ended December 31, in millions)	2023		2022		2021
Changes in net unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income	$	2,249	$	(9,276)	$	(2,115)
Income tax expense (benefit)	481		(1,966)		(456)
Net of taxes	1,768		(7,310)		(1,659)
Having credit losses recognized in the consolidated statement of income	1		(4)		—
Income tax benefit	—		(1)		—
Net of taxes	1		(3)		—
Net changes in benefit plan assets and obligations	106		(87)		455
Income tax expense (benefit)	22		(18)		96
Net of taxes	84		(69)		359
Net changes in unrealized foreign currency translation	138		(273)		(11)
Income tax expense (benefit)	17		(17)		(2)
Net of taxes	121		(256)		(9)
Total other comprehensive income (loss)	2,494		(9,640)		(1,671)
Income tax expense (benefit)	520		(2,002)		(362)
Total other comprehensive income (loss), net of taxes	$	1,974	$	(7,638)	$	(1,309)

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. 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.


(for the year ended December 31, in millions)	2023		2022		2021
Reclassification adjustments related to unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income (1)	$	96	$	98	$	(67)
Income tax (expense) benefit (2)	20		21		(14)
Net of taxes	76		77		(53)
Having credit losses recognized in the consolidated statement of income (1)	—		—		—
Income tax benefit (2)	—		—		—
Net of taxes	—		—		—
Reclassification adjustment related to benefit plan assets and obligations:
Claims and claim adjustment expenses (benefit) (3)	(5)		17		41
General and administrative expenses (benefit) (3)	(8)		24		61
Total	(13)		41		102
Income tax (expense) benefit (2)	(3)		8		21
Net of taxes	(10)		33		81
Reclassification adjustment related to foreign currency translation (1)	—		—		—
Income tax benefit (2)	—		—		—
Net of taxes	—		—		—
Total reclassifications	83		139		35
Total income tax benefit	17		29		7
Total reclassifications, net of taxes	$	66	$	110	$	28

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

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

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. EARNINGS PER SHARE

Basic earnings per share was computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share reflected the effect of potentially dilutive securities and excludes the effect of any anti-dilutive shares.

Potentially dilutive securities include restricted stock units, deferred stock units, stock options and performance share awards related to the employee share-based incentive compensation programs. The restricted stock units and deferred stock units contain non-forfeitable rights to dividends and are included as participating securities in the calculation of basic and diluted earnings per share using the two-class method. Stock option and performance share awards are included in the calculation of diluted earnings per share using the treasury stock method.

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


(for the year ended December 31, in millions, except per share amounts)	2023		2022		2021
Basic and Diluted
Net income, as reported	$	2,991	$	2,842	$	3,662
Participating share-based awards — allocated income	(22)		(20)		(27)
Net income available to common shareholders — basic and diluted	$	2,969	$	2,822	$	3,635
Common Shares
Basic
Weighted average shares outstanding	229.7		237.0		248.5
Diluted
Weighted average shares outstanding	229.7		237.0		248.5
Weighted average effects of dilutive securities:
Stock options and performance shares	2.5		2.7		2.3
Total	232.2		239.7		250.8
Net income Per Common Share	0
Basic	$	12.93	$	11.91	$	14.63
Diluted	$	12.79	$	11.77	$	14.49

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. INCOME TAXES

Components of Income Tax Expense

The following table presents the components of income tax expense (benefit) included in the amounts reported in the Company’s consolidated financial statements:


(for the year ended December 31, in millions)	2023		2022		2021
Composition of income tax expense included in the consolidated statement of income
Current expense:
Federal	$	477	$	636	$	659
Foreign	20		97		67
State	7		8		6
Total current tax expense	504		741		732
Deferred expense (benefit):
Federal	(163)		(186)		62
Foreign	39		(43)		2
Total deferred tax expense (benefit)	(124)		(229)		64
Total income tax expense included in the consolidated statement of income	380		512		796
Composition of income tax expense (benefit) included in shareholders’ equity
Expense (benefit) relating to changes in the unrealized gain (loss) on investments, unrealized loss on foreign exchange and other items in other comprehensive income (loss)	520		(2,002)		(362)
Total income tax expense (benefit) included in the consolidated financial statements	$	900	$	(1,490)	$	434

The following is a reconciliation of income tax expense at the U.S. federal statutory income tax rate to the income tax expense reported in the Company’s consolidated statement of income:


(for the year ended December 31, in millions)	2023			2022			2021
Income before income taxes
U.S.	$	3,122		$	3,101		$	4,107
Foreign	249			253			351
Total income before income taxes	3,371			3,354			4,458
Effective tax rate
Statutory tax rate	21		%	21		%	21		%
Expected federal income tax expense	708			704			936
Tax effect of:
Nontaxable investment income	(132)			(149)			(147)
Audit reserve	(205)			(40)			1
Other, net	9			(3)			6
Total income tax expense	$	380		$	512		$	796
Effective tax rate	11		%	15		%	18		%

The Company recognized a one-time tax benefit of $211 million in the first quarter of 2023 due to the expiration of the statute

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. INCOME TAXES (Continued)

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. This amount is included in the Audit reserve line in the table above.

The Company paid income taxes of $201 million, $817 million and $707 million during the years ended December 31, 2023, 2022 and 2021, respectively. The current income tax payable of $285 million at December 31, 2023 was included in other liabilities in the consolidated balance sheet. The current income tax receivable of $32 million at December 31, 2022, was included in other assets in the consolidated balance sheet.

Deferred Tax Asset

The net deferred tax asset comprises the tax effects of temporary differences related to the following assets and liabilities:


(at December 31, in millions)	2023		2022
Deferred tax assets
Investments	$	532	$	999
Claims and claim adjustment expense reserves	665		660
Unearned premium reserves	772		673
Internally developed software	204		65

Other	258		293
Total gross deferred tax assets	2,431		2,690
Less: valuation allowance	35		27
Adjusted gross deferred tax assets	2,396		2,663
Deferred tax liabilities
Claims and claim adjustment expense reserve discounting (transition rule)	39		58
Deferred acquisition costs	627		539

Intangibles	70		65
Depreciation	125		105
Other	31		19
Total gross deferred tax liabilities	892		786
Net deferred tax asset	$	1,504	$	1,877

If the Company determines that any of its deferred tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of these assets that are not expected to be realized. The net change in the valuation allowance for deferred tax assets was an increase of $8 million in 2023, primarily driven by a $7 million increase in the Company’s Canadian subsidiary and an increase of $1 million in the Company’s Republic of Ireland subsidiary. Based upon a review of the Company’s anticipated future taxable income, and also including all other available evidence, both positive and negative, the Company’s management concluded that it is more likely than not that the net deferred tax assets will be realized.

U.S. income taxes have not been recognized on any undistributed earnings that are intended to be permanently reinvested. Any potential U.S. income tax on these amounts is immaterial.

The Organization for Economic Cooperation and Development (OECD) has developed guidance known as base erosion and profit shifting as part of its initiative to address corporate tax planning strategies used by some multinationals to shift profits from higher-tax jurisdictions to lower-tax jurisdictions or no-tax locations. This guidance generally imposes rules with a global minimum tax of 15%, which is expected to be effective in 2024 for several of the jurisdictions in which the Company operates. The Company does not expect to be subject to any global minimum taxes imposed by these rules in 2024.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. INCOME TAXES (Continued)

Net Operating Losses

For tax return purposes, as of December 31, 2023, the Company had net operating loss (NOL) carryforwards in the United States, Canada, the Republic of Ireland and the United Kingdom. The amount and timing of realizing the benefits of NOL carryforwards depend on future taxable income and limitations imposed by tax laws. Only the benefits of the United Kingdom NOL carryforwards have been recognized in the consolidated financial statements and are included in net deferred tax assets. The NOL amounts by jurisdiction and year of expiration are as follows:


(in millions)	Amount		Year of expiration
United States	$	2	2035 - 2036

Canada	$	74	2035 - 2043
Republic of Ireland	$	123	None
United Kingdom	$	248	None

Uncertain Tax Positions

The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2023 and 2022:


(in millions)	2023		2022
Balance at January 1	$	9	$	48
Additions for tax positions of prior years	3		3
Reductions for tax positions of prior years	—		(44)
Additions based on tax positions related to current year	3		2
Expiration of statute of limitations	(1)		—
Balance at December 31	$	14	$	9

Included in the balances at December 31, 2023 and 2022 were $12 million and $8 million, respectively, of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate. Also included in the balances at those dates were $2 million and $1 million, respectively, of tax positions for which the ultimate deductibility is certain, but for which there is uncertainty about the timing of deductibility. The timing of such deductibility could affect the annual effective tax rate depending on the year of deduction and tax rate at the time.

The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in income taxes. During the years ended December 31, 2023, 2022 and 2021, the Company recognized approximately $3 million, $(13) million and $3 million in interest, respectively. The Company had approximately $6 million and $3 million accrued for the payment of interest at December 31, 2023 and 2022, respectively.

The IRS has completed examination of the Company’s U.S. income tax returns for all years through 2018. The statute of limitations for federal income tax purposes has closed for all tax years prior to 2020. The Company does not expect any significant changes to its liability for unrecognized tax benefits during the next twelve months.

Enactment of the Inflation Reduction Act of 2022

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (IRA) which, among other changes, created a new corporate alternative minimum tax (CAMT) based on adjusted financial statement income and imposes a 1% excise tax on the cost of treasury stock acquired pursuant to common share repurchases. The effective date of these provisions was January 1, 2023. The IRA did not have any impact on the Company’s financial statements upon enactment. While the Company is an applicable corporation subject to the CAMT beginning in 2023 based on its reported GAAP earnings for the past three years, the Company expects any current or future year CAMT incurred to be treated as a taxable temporary difference and have no direct impact on total income tax expense, subject to any additional guidance or regulations that may be issued.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. SHARE-BASED INCENTIVE COMPENSATION

The Company has a share-based incentive compensation plan, The Travelers Companies, Inc. 2023 Stock Incentive Plan (the 2023 Incentive Plan), the purposes of which are to align the interests of the Company’s non-employee directors, executive officers and other employees with those of the Company’s shareholders and to attract and retain personnel by providing incentives in the form of share-based awards. The 2023 Incentive Plan permits grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock, deferred stock units, performance awards and other share-based or share-denominated awards with respect to the Company’s common stock. The Company has a policy of issuing new shares to settle the exercise of stock option awards and the vesting of other equity awards.

In connection with the adoption of the 2023 Incentive Plan, The Travelers Companies, Inc. Amended and Restated 2014 Stock Incentive Plan, as amended (the 2014 Incentive Plan) was terminated, joining several other legacy share-based incentive compensation plans that had been terminated in prior years (together, the legacy plans). Outstanding grants were not affected by the termination of the legacy plans. The 2023 Incentive Plan is currently the only plan pursuant to which future stock-based awards may be granted.

The number of shares of the Company’s common stock initially authorized for grant under the 2023 Incentive Plan was 5,789,184 shares. The following are not counted towards the combined 5,789,184 shares available and will be available for future grants under the 2023 Incentive Plan: (i) shares of common stock subject to awards that expire unexercised, that are forfeited, terminated or canceled, that are settled in cash or other forms of property, or otherwise do not result in the issuance of shares of common stock, in whole or in part; (ii) shares that are used to pay the exercise price of stock options and shares used to pay withholding taxes on awards generally; and (iii) shares purchased by the Company on the open market using cash option exercise proceeds; provided, however, that the increase in the number of shares of common stock available for grant pursuant to such market purchases shall not be greater than the number that could be repurchased at fair market value on the date of exercise of the stock option giving rise to such option proceeds. In addition, the 5,789,184 shares authorized by shareholders for issuance under the 2023 Incentive Plan will be increased by any shares subject to awards under the 2014 Incentive Plan that were outstanding as of May 24, 2023 and subsequently expire, are forfeited, canceled, settled in cash or otherwise terminate without the issuance of shares.

The Company also has a compensation program for non-employee directors (the Director Compensation Program). Under the Director Compensation Program, non-employee directors’ compensation consists of an annual retainer, a deferred stock award, committee chair fees and a lead director fee. Each non-employee director may choose to receive all or a portion of his or her annual retainer, committee chair fee and lead director fee, as applicable, in the form of cash or deferred stock units which vest upon grant. The annual deferred stock awards vest in full one day prior to the date of the Company’s annual meeting of shareholders occurring in the year following the year of the grant date, subject to continued service. The annual deferred stock awards, including dividend equivalents, accumulate until distribution either in a lump sum or, if the director so elects, in annual installments, in each case beginning at least six months following termination of service as a director. The deferred stock units issued under the Director Compensation Program are awarded under the 2023 Incentive Plan.

Stock Option Awards

Stock option awards granted to eligible officers and key employees have a ten-year term. All stock options are granted with an exercise price equal to the closing price of the Company’s common stock on the date of grant. The stock options granted generally vest upon meeting certain years of service criteria. Except as the Compensation Committee of the Board of Directors may allow in the future, stock options cannot be sold or transferred by the participant. Stock options outstanding under the 2023 Incentive Plan and the 2014 Incentive Plan generally vest three years after grant date (cliff vest).

The fair value of each option award is estimated on the date of grant by application of a variation of the Black-Scholes option pricing model using the assumptions noted in the following table. The expected term of newly granted stock options is the time to vest plus half the remaining time to expiration. This considers the vesting restrictions and represents an even pattern of exercise behavior over the remaining term. The expected volatility assumption is based on the historical volatility of the Company’s common stock for the same period as the estimated option term generally using the volatility of the week prior to the stock option grant. The expected dividend is based upon the Company’s current quarter dividend annualized and assumed to be constant over the expected option term. The risk-free interest rate for each option is the interpolated market yield of a U.S.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. SHARE-BASED INCENTIVE COMPENSATION (Continued)

Treasury bill with a term comparable to the expected option term for the same week used for measuring volatility. The following table provides information about options granted:


(for the year ended December 31,)	2023			2022			2021
Assumptions used in estimating fair value of options on grant date
Expected term of stock options	6 years			6 years			6 years
Expected volatility of Company’s stock	25.63% - 25.99%			24.81		%	24.22% - 24.53%
Weighted average volatility	25.63		%	24.81		%	24.22		%
Expected annual dividend per share	$3.72			$3.52			$3.40 - $3.52
Risk-free rate	3.63% - 3.89%			1.83		%	0.59% - 1.08%
Additional information
Weighted average grant-date fair value of options granted (per share)	$	47.77		$	35.70		$	23.32
Total intrinsic value of options exercised during the year (in millions)	$	58		$	110		$	94

A summary of stock option activity under the 2023 Incentive Plan and the legacy plans as of and for the year ended December 31, 2023 is as follows:


Stock Options	Number	Weighted Average Exercise Price		Weighted Average Contractual Life Remaining	Aggregate Intrinsic Value ($ in millions)
Outstanding, beginning of year	8,558,864	$	134.92
Original grants	875,760	189.00
Exercised	(944,913)	121.73
Forfeited or expired	(66,729)	160.27
Outstanding, end of year	8,422,982	$	141.82	5.8 years	$	410
Vested at end of year (1)	7,312,505	$	138.44	5.5 years	$	381
Exercisable at end of year	5,181,130	$	128.55	4.5 years	$	321

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

On February 6, 2024, the Company, under the 2023 Incentive Plan, granted 770,664 stock option awards with an exercise price of $213.01 per share. The fair value attributable to the stock option awards on the date of grant was $56.45 per share.

Restricted Stock Units, Deferred Stock Units and Performance Share Award Programs

The Company issues restricted stock unit awards to eligible officers and key employees under the Equity Awards program established pursuant to the 2023 Incentive Plan. A restricted stock unit represents the right to receive a share of common stock. These restricted stock unit awards are granted at market price, generally vest three years from the date of grant, do not have voting rights and the underlying shares of common stock are not issued until the vesting criteria is satisfied. In addition, members of the Company’s Board of Directors can be issued deferred stock units from (i) an annual award; (ii) deferred compensation (in lieu of cash retainer, committee chair fees and lead director fees); and (iii) dividend equivalents earned on outstanding deferred compensation.

The Company also has a Performance Share Awards program established pursuant to the Amended and Restated 2004 Stock Incentive Plan, as amended, which continued pursuant to the 2014 Incentive Plan and which continues pursuant to the 2023 Incentive Plan. Under the program, the Company may issue performance share awards to certain employees of the Company who hold positions of Vice President (or its equivalent) or above. The performance share awards provide the recipient the right to earn shares of the Company’s common stock based upon the Company’s attainment of certain performance goals and the

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. SHARE-BASED INCENTIVE COMPENSATION (Continued)

recipient meeting certain years of service criteria. The performance goals for performance share awards are based on the Company’s adjusted return on equity over a three-year performance period. Vesting of performance shares is contingent upon the Company attaining the relevant performance period minimum threshold return on equity and the recipient meeting certain years of service criteria, generally three years for full vesting. If the performance period return on equity is below the minimum threshold, none of the performance shares will vest. If performance meets or exceeds the minimum performance threshold, a range of performance shares will vest (50% to 200% for awards granted in 2022, 2023 and 2024), depending on the actual return on equity attained.

The fair value of restricted stock units, deferred stock units and performance shares is measured at the market price of the Company stock at date of grant. Under terms of the 2023 Incentive Plan, holders of deferred stock units and performance shares may receive dividend equivalents.

The total fair value of shares that vested during the years ended December 31, 2023, 2022 and 2021 was $164 million, $159 million and $124 million, respectively.

A summary of restricted stock units, deferred stock units and performance share activity under the 2023 Incentive Plan and the legacy plans as of and for the year ended December 31, 2023 is as follows:


	Restricted and Deferred Stock Units				Performance Shares
Other Equity Instruments	Number		Weighted Average Grant-Date Fair Value		Number		Weighted Average Grant-Date Fair Value
Nonvested, beginning of year	1,034,422		$	149.53	1,062,924		$	154.49
Granted	523,442		187.61		306,220		189.01
Vested	(491,023)	(1)	150.34		(604,560)	(2)	139.94
Forfeited	(41,146)		164.41		(17,101)		164.50
Performance-based adjustment	—		—		257,316	(3)	182.88
Nonvested, end of year	1,025,695		$	167.98	1,004,799		$	180.87

(1)Represents awards for which the requisite service has been rendered.

(2)Reflects the number of performance shares attributable to the performance goals attained over the completed performance period (three years) and for which service conditions have been met.

(3)Represents the current year change in estimated performance shares to reflect the attainment of performance goals for the awards that were granted in each of the years 2021 through 2023.

In addition to the nonvested shares presented in the above table, there are related nonvested dividend equivalent shares. The number of nonvested dividend equivalent shares related to deferred stock units was 269 at the beginning of the year and 260 at the end of the year and the number of nonvested dividend equivalent shares related to performance shares was 36,719 at the beginning of the year and 33,757 at the end of the year. The dividend equivalent shares are subject to the same vesting terms as the deferred stock units and performance shares.

On February 6, 2024, the Company, under the 2023 Incentive Plan, granted 745,834 common stock awards in the form of restricted stock units, deferred stock units and performance share awards to participating officers, non-employee directors and other key employees. The restricted stock units and deferred stock units totaled 462,913 shares and the performance share awards totaled 282,921 shares. The fair value per share attributable to the common stock awards on the date of grant was $213.01.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. SHARE-BASED INCENTIVE COMPENSATION (Continued)

Share-Based Compensation Cost Recognition

The amount of compensation cost for awards subject to a service condition is based on the number of shares expected to be issued and is recognized over the time period for which service is to be provided (requisite service period), generally the vesting period. Awards granted to retiree-eligible employees or to employees who become retiree-eligible before an award’s vesting date are considered to have met the requisite service condition if the vesting terms are accelerated upon retirement. The compensation cost for awards subject to a performance condition is based upon the probable outcome of the performance condition, which on the grant date reflects an estimate of attaining 100% of the performance shares granted. The compensation cost reflects an estimated annual forfeiture rate from 1.5% to 3.5% over the requisite service period of the awards. That estimate is revised if subsequent information indicates that the actual number of instruments expected to vest is likely to differ from previous estimates. Compensation costs for awards are recognized on a straight-line basis over the requisite service period. For awards that have graded vesting terms, the compensation cost is recognized on a straight-line basis over the requisite service period for each separate vesting portion of the award as if the award was, in substance, multiple awards. The total compensation cost for all share-based incentive compensation awards recognized in earnings for the years ended December 31, 2023, 2022 and 2021 was $214 million, $183 million and $162 million, respectively. Included in these amounts are compensation cost adjustments of $39 million, $23 million and $12 million, for the years ended December 31, 2023, 2022 and 2021, respectively, that reflected the cost associated with the updated estimate of performance shares due to attaining certain performance levels from the date of the initial grant of the performance awards. The related tax benefits recognized in earnings were $36 million, $31 million and $28 million for the years ended December 31, 2023, 2022 and 2021, respectively.

At December 31, 2023, there was $200 million of total unrecognized compensation cost related to all nonvested share-based incentive compensation awards. This includes stock options, restricted and deferred stock units and performance shares granted under the 2023 Incentive Plan. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 1.7 years. Cash received from the exercise of employee stock options under share-based compensation plans totaled $141 million, $267 million and $293 million in 2023, 2022 and 2021, respectively. The tax benefit for tax deductions from employee stock options exercised during 2023, 2022 and 2021 totaled $11 million, $22 million and $19 million, respectively.

15. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS

The Company sponsors a qualified non-contributory defined benefit pension plan (the qualified domestic pension plan), which covers substantially all U.S. domestic employees and provides benefits under a cash balance formula, except that certain limited groups of legacy participants are covered by a prior traditional final average pay formula. In addition, the Company sponsors a nonqualified defined benefit pension plan which covers certain highly-compensated employees, pension plans for employees of its foreign subsidiaries, and a postretirement health and life insurance benefit plan for employees satisfying certain age and service requirements and for certain retirees.

Obligations and Funded Status

The following tables summarize the funded status, obligations and amounts recognized in the consolidated balance sheet for the Company’s benefit plans. The Company uses a December 31 measurement date for its pension and postretirement benefit plans.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued)


(at and for the year ended December 31, in millions)		Qualified Domestic Pension Plan						Nonqualified and Foreign Pension Plans						Total
	2023			2022			2023			2022			2023			2022
Change in projected benefit obligation:
Benefit obligation at beginning of year		$	3,400		$	4,212		$	180		$	259		$	3,580		$	4,471
Benefits earned		104			137			4			8			108			145
Interest cost on benefit obligation		167			95			9			6			176			101
Actuarial (gain) loss		123			(781)			1			(64)			124			(845)
Benefits paid		(340)			(263)			(13)			(14)			(353)			(277)
Settlement		—			—			—			(3)			—			(3)

Foreign currency exchange rate change		—			—			3			(12)			3			(12)
Benefit obligation at end of year		$	3,454		$	3,400		$	184		$	180		$	3,638		$	3,580
Change in plan assets:
Fair value of plan assets at beginning of year		$	3,938		$	4,902		$	95		$	134		$	4,033		$	5,036
Actual return on plan assets		551			(701)			(2)			(22)			549			(723)
Company contributions		—			—			13			13			13			13
Benefits paid		(340)			(263)			(13)			(14)			(353)			(277)
Settlement		—			—			—			(3)			—			(3)
Foreign currency exchange rate change		—			—			4			(13)			4			(13)
Fair value of plan assets at end of year		4,149			3,938			97			95			4,246			4,033
Funded status of plan at end of year		$	695		$	538		$	(87)		$	(85)		$	608		$	453
Amounts recognized in the consolidated balance sheet consist of:
Accrued over-funded benefit plan assets		$	695		$	538		$	27		$	23		$	722		$	561
Accrued under-funded benefit plan liabilities		—			—			(114)			(108)			(114)			(108)
Total		$	695		$	538		$	(87)		$	(85)		$	608		$	453
Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial loss		$	663		$	785		$	13		$	5		$	676		$	790
Prior service cost (benefit)		—			(1)			1			1			1			—
Total		$	663		$	784		$	14		$	6		$	677		$	790

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued)


	Postretirement Benefit Plans
(at and for the year ended December 31, in millions)	2023		2022
Change in accumulated benefit obligation:
Benefit obligation at beginning of year	$	99	$	149
Benefits earned	—		—
Interest cost on benefit obligation	5		3
Actuarial gain	(6)		(45)
Benefits paid	(6)		(7)
Foreign currency exchange rate change	—		(1)
Benefit obligation at end of year	$	92	$	99
Change in plan assets:
Fair value of plan assets at beginning of year	$	8	$	9
Actual return on plan assets	—		—
Company contributions	5		6
Benefits paid	(6)		(7)
Fair value of plan assets at end of year	7		8
Funded status of plan at end of year	$	(85)	$	(91)
Amounts recognized in the consolidated balance sheet consist of:
Accrued under-funded benefit plan liability	$	(85)	$	(91)
Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial gain	$	(91)	$	(94)
Prior service benefit	(8)		(11)
Total	$	(99)	$	(105)

The total accumulated benefit obligation for the Company’s defined benefit pension plans was $3.47 billion and $3.44 billion at December 31, 2023 and 2022, respectively. The qualified domestic pension plan accounted for $3.30 billion and $3.27 billion of the total accumulated benefit obligation at December 31, 2023 and 2022, respectively, whereas the nonqualified and foreign plans accounted for $176 million and $170 million of the total accumulated benefit obligation at December 31, 2023 and 2022, respectively.

For pension plans with a projected benefit obligation in excess of plan assets, the aggregate projected benefit obligation was $114 million and $108 million at December 31, 2023 and 2022, respectively, and the aggregate plan assets were $0 million at both December 31, 2023 and 2022. For pension plans with an accumulated benefit obligation in excess of plan assets, the aggregate accumulated benefit obligation was $106 million and $99 million at December 31, 2023 and 2022, respectively, and the aggregate plan assets were $0 million at both December 31, 2023 and 2022. For postretirement benefit plans with an accumulated benefit obligation in excess of plan assets, the aggregate accumulated benefit obligation was $92 million and $99 million at December 31, 2023 and 2022, respectively, and the aggregate plan assets were $7 million and $8 million at December 31, 2023 and 2022, respectively.

The $123 million actuarial loss experienced in 2023 for the qualified domestic pension plan was largely driven by the decrease in the assumed discount rate from the prior year that was used to determine the projected benefit obligation at December 31, 2023. The $781 million actuarial gain experienced in 2022 for the qualified domestic pension plan was largely driven by the increase in the assumed discount rate from the prior year that was used to determine the projected benefit obligation at December 31, 2022.

The Company has discretion regarding whether to provide additional funding and when to provide such funding to its qualified domestic pension plan. In 2023, 2022 and 2021, there were no required or voluntary contributions to the qualified domestic pension plan. There is no required contribution to the qualified domestic pension plan during 2024, and the Company has not

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued)

determined whether additional funding will be made during 2024. With respect to the Company’s foreign pension plans, there are no significant required contributions in 2024.

The following table summarizes the components of net periodic benefit cost (benefit) and other amounts recognized in other comprehensive income (loss) related to the benefit plans.


	Pension Plans						Postretirement Benefit Plans
(for the year ended December 31, in millions)	2023		2022		2021		2023		2022		2021
Net Periodic Benefit Cost (Benefit):
Service cost	$	108	$	145	$	141	$	—	$	—	$	—
Non-service cost (benefit):
Interest cost on benefit obligation	176		101		83		5		3		3
Expected return on plan assets	(311)		(296)		(274)		—		—		—

Amortization of unrecognized:
Prior service benefit	(1)		(1)		(1)		(3)		(3)		(4)
Net actuarial (gain) loss	—		49		109		(9)		(4)		(2)
Total non-service cost (benefit)	(136)		(147)		(83)		(7)		(4)		(3)
Net periodic benefit cost (benefit)	(28)		(2)		58		(7)		(4)		(3)
Other Changes in Benefit Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss):
Prior service benefit	—		—		—		—		—		—
Net actuarial (gain) loss	(114)		174		(338)		(6)		(45)		(16)
Foreign currency exchange rate change	—		(2)		—		—		1		—

Amortization of prior service benefit	1		1		1		3		3		4
Amortization of net actuarial gain (loss)	—		(49)		(109)		9		4		2
Total other changes recognized in other comprehensive income (loss)	(113)		124		(446)		6		(37)		(10)
Total other changes recognized in net periodic benefit cost (benefit) and other comprehensive income (loss)	$	(141)	$	122	$	(388)	$	(1)	$	(41)	$	(13)

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued)

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 years ended December 31, 2023, 2022 and 2021.


	Pension Plans						Postretirement Benefit Plans
(for the year ended December 31, in millions)	2023		2022		2021		2023		2022		2021
Service Cost:
Net investment income	$	—	$	1	$	1	$	—	$	—	$	—
Claims and claim adjustment expenses	44		58		57		—		—		—
General and administrative expenses	64		86		83		—		—		—
Total service cost	108		145		141		—		—		—

Non-Service Cost (Benefit):
Net investment income	(1)		(1)		—		—		—		—
Claims and claim adjustment expenses	(54)		(59)		(34)		(3)		(2)		(1)
General and administrative expenses	(81)		(87)		(49)		(4)		(2)		(2)
Total non-service cost (benefit)	(136)		(147)		(83)		(7)		(4)		(3)
Net periodic benefit cost (benefit)	$	(28)	$	(2)	$	58	$	(7)	$	(4)	$	(3)

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued)

Assumptions

The following table summarizes assumptions used with regard to the Company’s qualified and nonqualified domestic pension plans and the domestic postretirement benefit plans.


(at and for the year ended December 31,)	2023		2022
Assumptions used to determine benefit obligations
Discount rate:
Qualified domestic pension plan	5.02	%	5.19	%
Nonqualified domestic pension plan	4.94	%	5.13	%
Domestic postretirement benefit plan	4.88	%	5.08	%
Cash balance interest crediting rate	4.01	%	4.01	%
Future compensation increase rate	4.00	%	4.00	%
Assumptions used to determine net periodic benefit cost
Discount rate:
Qualified domestic pension plan:
Service cost	5.27	%	3.18	%
Interest cost	5.18	%	2.34	%
Nonqualified domestic pension plan:
Service cost	5.16	%	2.92	%
Interest cost	5.11	%	2.23	%
Domestic postretirement benefit plan:
Interest cost	5.03	%	2.08	%
Expected long-term rate of return on assets:
Pension plan	7.00	%	6.50	%
Postretirement benefit plan	4.00	%	4.00	%
Assumed health care cost trend rates (1)
Following year	(2.78)	%	9.50	%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)	4.50	%	4.50	%
Year that the rate reaches the ultimate trend rate	2033		2032

(1)The 2024 assumed health care cost trend rate of (2.78)% reflects known negotiated medical premium rate changes to the Company's baseline health care cost trend rate of 8.00%. After 2024, assumed health care cost trend rates are expected to increase in the subsequent year and then are expected to decrease in a linear pattern until the rate reaches the ultimate trend rate of 4.50% in 2033.

The discount rate assumption used to determine the benefit obligation is based on a yield-curve approach. Under this approach, individual spot rates from the yield curve of a hypothetical portfolio of high quality fixed maturity corporate bonds (rated Aa) available at the year-end valuation date, for which the timing and amount of cash outflows correspond with the timing and amount of the estimated benefit payouts of the Company’s benefit plan, are applied to expected future benefits payments in measuring the projected benefit obligation. The discount rate assumption used to determine benefit obligations disclosed above represents the weighted average of the individual spot rates.

The discount rate assumption used to determine the net periodic benefit cost is the single weighted average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the year.

In choosing the expected long-term rate of return on plan assets, the Company selected the rate that reflected the Company’s current expectations with regard to long-term returns in the capital markets, taking into account the pension plan’s asset allocation targets, the historical performance and current valuation of U.S. and international equities, and the level of long term interest rate and inflation expectations.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued)

The assumptions made for the Company’s foreign pension and foreign postretirement benefit plans are not materially different from those of the Company’s qualified domestic pension plan and the domestic postretirement benefit plan.

Plan Assets

The qualified domestic pension plan assets are invested for the exclusive benefit of the plan participants and beneficiaries and are intended, over time, to satisfy the benefit obligations under the plan. Risk tolerance is established through consideration of plan liabilities, plan funded status and corporate financial position. The asset mix guidelines have been established and are reviewed quarterly. These guidelines are intended to serve as tools to facilitate the investment of plan assets to maximize long-term total return and the ongoing oversight of the plan’s investment performance. Investment risk is measured and monitored on an ongoing basis through daily and monthly investment portfolio reviews, annual liability measurements and periodic asset/liability studies.

The Company’s overall investment strategy for the qualified domestic pension plan is to achieve a mix of approximately 85% to 90% of investments for long-term growth and 10% to 15% for near-term benefit payments with a diversification of asset types, fund strategies and fund managers. The current target allocations for plan assets are 55% to 65% equity securities and 20% to 40% fixed income securities, with the remainder allocated to short-term securities. Equity securities primarily include investments in large, medium and small-cap companies primarily located in the United States. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities, U.S. Treasury securities and debt securities issued by foreign governments.

Assets of the Company’s foreign pension plans are not significant.

Fair Value Measurement — Pension Plans and Other Postretirement Benefit Assets

For a discussion of the methods employed by the Company to measure the fair value of invested assets, see note 4. The following discussion of fair value measurements applies exclusively to the Company’s pension plans and other postretirement benefit assets.

Fair value estimates for equity and bond mutual funds held by the pension plans reflect prices received from an external pricing service that are based on observable market transactions. These estimates are primarily included in Level 1.

Short-term securities are carried at fair value which approximates cost plus accrued interest or amortized discount. The fair value or market value of these is periodically compared to this amortized cost and is based on significant observable inputs as determined by an external pricing service. Accordingly, the estimates of fair value for such short-term securities, other than U.S. Treasury securities and money market mutual funds, provided by an external pricing service are included in the amount disclosed in Level 2 of the hierarchy. The estimated fair value of U.S. Treasury securities and money market mutual funds is included in the amount disclosed in Level 1 as the estimates are based on unadjusted market prices.

Fair Value Hierarchy — Pension Plans

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued)


(at December 31, 2023, in millions)	Total		Level 1		Level 2		Level 3
Invested assets:
Fixed maturities
Obligations of U.S. states, municipalities and political subdivisions	$	105	$	—	$	105	$	—
Debt securities issued by foreign governments	32		—		32		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	8		—		8		—
Corporate and all other bonds	776		—		776		—
Total fixed maturities	921		—		921		—
Mutual funds
Equity mutual funds	1,207		1,201		6		—
Bond mutual funds	658		655		3		—
Total mutual funds	1,865		1,856		9		—
Equity securities	1,302		1,302		—		—
Other investments	1		—		—		1
Cash and short-term securities
U.S. Treasury securities	—		—		—		—

Other	157		114		43		—
Total cash and short-term securities	157		114		43		—
Total	$	4,246	$	3,272	$	973	$	1


(at December 31, 2022, in millions)	Total		Level 1		Level 2		Level 3
Invested assets:
Fixed maturities
Obligations of U.S. states, municipalities and political subdivisions	$	80	$	—	$	80	$	—
Debt securities issued by foreign governments	25		—		25		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	4		—		4		—
Corporate and all other bonds	713		—		713		—
Total fixed maturities	822		—		822		—
Mutual funds
Equity mutual funds	1,157		1,151		6		—
Bond mutual funds	754		751		3		—
Total mutual funds	1,911		1,902		9		—
Equity securities	1,116		1,116		—		—
Other investments	1		—		—		1
Cash and short-term securities
U.S. Treasury securities	—		—		—		—

Other	183		131		52		—
Total cash and short-term securities	183		131		52		—
Total	$	4,033	$	3,149	$	883	$	1

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS (Continued)

Other Postretirement Benefit Plans

The Company’s overall investment strategy is to achieve a mix of approximately 35% to 65% of investments for long-term growth and 35% to 65% for near-term insurance payments with a wide diversification of asset types, fund strategies and fund managers. The current target allocations for plan assets are 25% to 75% fixed income securities, with the remainder allocated to short-term securities. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities and U.S. Treasuries.

Fair Value — Other Postretirement Benefit Plans

The Company’s other postretirement benefit plans had financial assets of $7 million and $8 million at December 31, 2023 and 2022, respectively, which are measured at fair value on a recurring basis. The assets are primarily corporate bonds, which are categorized as level 2 in the fair value hierarchy.

Estimated Future Benefit Payments

The following table presents the estimated benefits expected to be paid by the Company’s pension and postretirement benefit plans for the next ten years (reflecting estimated future employee service).


	Benefits Expected to be Paid
(in millions)	Pension Plans		Postretirement Benefit Plans
2024	$	285	$	8
2025	283		8
2026	288		8
2027	290		8
2028	291		8
2029 through 2033	1,424		38

Savings Plan

Substantially all U.S. domestic Company employees are eligible to participate in The Travelers 401(k) Savings Plan (the Savings Plan). Eligible employees can contribute to the Savings Plan, and the Company makes a matching contribution into the employee’s Savings Plan account, subject to limitations described below. In addition, when an eligible U.S. employee makes a payment toward their student loans, the Company makes a contribution of that amount into the employee’s Savings Plan account, subject to limitations described below. The total annual amount of the Company’s matching contributions, student loan repayment contributions or a combination of both is the lesser of 5% of eligible pay or $7,500, which becomes 100% vested after three years of service. All Company contributions to the Savings Plan are made in cash and invested according to the employee’s current investment elections and can be reinvested into other investment options in accordance with the terms of the Savings Plan. The Company’s non-U.S. employees and certain domestic employees participate in separate savings plans. The total expense related to all of the savings plans was $154 million, $139 million and $133 million for the years ended December 31, 2023, 2022 and 2021, respectively.

All common shares held by the Savings Plan are considered outstanding for basic and diluted EPS computations and dividends paid on all shares are charged to retained earnings.

16. 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 discretion. The operating lease liability includes lease payments related to options to extend or renew the lease term if the

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. LEASES (Continued)

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.

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:


(for the year ended December 31, in millions)	2023			2022			2021

Lease cost
Operating leases	$	76		$	81		$	89
Short-term leases (1)	3			2			1

Lease expense	79			83			90
Less: sublease income (2)	—			—			—
Net lease cost	$	79		$	83		$	90

Other information on operating leases

Cash payments to settle a lease liability reported in cash flows	$	87		$	93		$	104
Right-of-use assets obtained in exchange for new lease liabilities	$	37		$	30		$	59
Weighted average discount rate	2.79		%	2.39		%
Weighted average remaining lease term	4.1 years			4.4 years

(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.

The following table presents the contractual maturities of the Company’s lease liabilities:


(in millions)	Real Estate Lease Liability

2024	$	81
2025	58
2026	51
2027	36
2028	19
Thereafter	15
Total undiscounted lease payments	260
Less: present value adjustment	17
Operating lease liability	$	243

17. 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.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. CONTINGENCIES, COMMITMENTS AND GUARANTEES (Continued)

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 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.

Other Commitments and Guarantees

Commitments

Investment Commitments — The Company has unfunded commitments to private equity limited partnerships, real estate partnerships and other investments. These commitments totaled $2.05 billion and $1.80 billion at December 31, 2023 and 2022, respectively.

Guarantees

In the ordinary course of selling businesses to third parties, the Company has agreed to indemnify purchasers for losses arising out of breaches of representations and warranties, obligations arising from certain liabilities and any breach or failure to perform certain covenants with respect to the businesses being sold. Such indemnification provisions generally are applicable from the closing date to the expiration of the relevant statutes of limitations, although, in some cases, there may be agreed upon term limitations or no term limitations. Certain of these contingent obligations are subject to deductibles which have to be incurred by the obligee before the Company is obligated to make payments. The maximum amount of the Company’s contingent obligation for indemnifications related to the sale of businesses that are quantifiable was $351 million at December 31, 2023.

The Company also has contingent obligations for guarantees related to certain investments, certain insurance policy obligations of former insurance subsidiaries and various other indemnifications. The Company also provides standard indemnifications that it utilizes with service providers in the normal course of business. The indemnification clauses are often standard contractual terms. 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 December 31, 2023, all of which is indemnified by a third party.

Certain of the guarantees and indemnifications described above have no stated or notional amounts or limitation to the maximum potential future payments, and, accordingly, the Company is unable to provide an estimate of the maximum potential payments for such arrangements.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. NONCASH INVESTING AND FINANCING ACTIVITIES

There were no material noncash financing or investing activities during the years ended December 31, 2023, 2022 and 2021.

Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE