Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (Unaudited)

(in millions, except per share amounts)


	Three Months Ended March 31,
	2024		2023
Revenues
Premiums	$	10,126	$	8,854
Net investment income	846		663
Fee income	109		106
Net realized investment gains	35		6
Other revenues	112		75
Total revenues	11,228		9,704
Claims and expenses
Claims and claim adjustment expenses	6,656		5,959
Amortization of deferred acquisition costs	1,698		1,462
General and administrative expenses	1,406		1,267
Interest expense	98		88
Total claims and expenses	9,858		8,776
Income before income taxes	1,370		928
Income tax expense (benefit)	247		(47)
Net income	$	1,123	$	975
Net income per share
Basic	$	4.87	$	4.18
Diluted	$	4.80	$	4.13
Weighted average number of common shares outstanding
Basic	229.0		231.7
Diluted	232.0		234.4

Cash dividends declared per common share	$	1.00	$	0.93

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

(in millions)


	Three Months Ended March 31,
	2024		2023
Net income	$	1,123	$	975
Other comprehensive income (loss):
Changes in net unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income	(752)		1,308
Having credit losses recognized in the consolidated statement of income	2		—
Net changes in benefit plan assets and obligations	(1)		(3)
Net changes in unrealized foreign currency translation	(71)		37
Other comprehensive income (loss) before income taxes	(822)		1,342
Income tax expense (benefit)	(162)		283
Other comprehensive income (loss), net of taxes	(660)		1,059
Comprehensive income	$	463	$	2,034

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)


	March 31, 2024		December 31, 2023
	(Unaudited)
Assets
Fixed maturities, available for sale, at fair value (amortized cost $82,712 and $81,781; allowance for expected credit losses of $3 and $5)	$	77,991	$	77,807
Equity securities, at fair value (cost $557 and $553)	689		608
Real estate investments	958		959
Short-term securities	4,682		5,137
Other investments	4,337		4,299
Total investments	88,657		88,810
Cash	667		650
Investment income accrued	648		688
Premiums receivable (net of allowance for expected credit losses of $68 and $69)	10,829		10,282
Reinsurance recoverables (net of allowance for estimated uncollectible reinsurance of $117 and $118)	8,100		8,143
Ceded unearned premiums	1,535		1,150
Deferred acquisition costs	3,380		3,306
Deferred taxes	1,639		1,504
Contractholder receivables (net of allowance for expected credit losses of $19 and $20)	3,266		3,249
Goodwill	4,251		3,976
Other intangible assets	376		277
Other assets	4,062		3,943
Total assets	$	127,410	$	125,978
Liabilities
Claims and claim adjustment expense reserves	$	62,487	$	61,627
Unearned premium reserves	21,307		20,872
Contractholder payables	3,285		3,269
Payables for reinsurance premiums	887		518
Debt	8,032		8,031
Other liabilities	6,390		6,740
Total liabilities	102,388		101,057
Shareholders’ equity
Common stock (1,750.0 shares authorized; 229.0 and 228.2 shares issued and outstanding)	25,163		24,906
Retained earnings	46,483		45,591
Accumulated other comprehensive loss	(5,131)		(4,471)
Treasury stock, at cost (561.0 and 559.2 shares)	(41,493)		(41,105)
Total shareholders’ equity	25,022		24,921
Total liabilities and shareholders’ equity	$	127,410	$	125,978

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(in millions)


	Three Months Ended March 31,
	2024		2023
Common stock
Balance, beginning of period	$	24,906	$	24,565
Employee share-based compensation	179		68
Compensation amortization under share-based plans and other changes	78		70
Balance, end of period	25,163		24,703
Retained earnings
Balance, beginning of period	45,591		43,516


Net income	1,123		975
Dividends	(232)		(218)
Other	1		—
Balance, end of period	46,483		44,273
Accumulated other comprehensive loss, net of tax
Balance, beginning of period	(4,471)		(6,445)


Other comprehensive income (loss)	(660)		1,059
Balance, end of period	(5,131)		(5,386)
Treasury stock, at cost
Balance, beginning of period	(41,105)		(40,076)
Treasury stock acquired — share repurchase authorizations	(250)		(400)
Net shares acquired related to employee share-based compensation plans	(138)		(62)
Balance, end of period	(41,493)		(40,538)
Total shareholders’ equity	$	25,022	$	23,052
Common shares outstanding
Balance, beginning of period	228.2		232.1
Treasury stock acquired — share repurchase authorizations	(1.2)		(2.2)
Net shares issued under employee share-based compensation plans	2.0		1.1
Balance, end of period	229.0		231.0

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

(in millions)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities
Net income	$	1,123	$	975
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment gains	(35)		(6)
Depreciation and amortization	196		204
Deferred federal income tax expense	42		32
Amortization of deferred acquisition costs	1,698		1,462
Equity in income from other investments	(68)		(30)
Premiums receivable	(557)		(557)
Reinsurance recoverables	33		(24)
Deferred acquisition costs	(1,776)		(1,629)
Claims and claim adjustment expense reserves	928		381
Unearned premium reserves	457		893
Other	(583)		(689)
Net cash provided by operating activities	1,458		1,012
Cash flows from investing activities
Proceeds from maturities of fixed maturities	1,709		1,538
Proceeds from sales of investments:
Fixed maturities	942		2,364
Equity securities	21		28

Other investments	55		64
Purchases of investments:
Fixed maturities	(3,738)		(4,335)
Equity securities	(26)		(34)
Real estate investments	(13)		(14)
Other investments	(90)		(139)
Net sales of short-term securities	454		228
Securities transactions in the course of settlement	111		(35)
Acquisition, net of cash acquired	(381)		—
Other	(81)		(120)
Net cash used in investing activities	(1,037)		(455)
Cash flows from financing activities
Treasury stock acquired — share repurchase authorizations	(250)		(398)
Treasury stock acquired — net employee share-based compensation	(110)		(62)
Dividends paid to shareholders	(229)		(215)


Issuance of common stock — employee share options	190		82
Net cash used in financing activities	(399)		(593)
Effect of exchange rate changes on cash	(5)		4
Net increase (decrease) in cash	17		(32)
Cash at beginning of year	650		799
Cash at end of period	$	667	$	767
Supplemental disclosure of cash flow information
Income taxes paid (received)	$	24	$	(16)
Interest paid	$	60	$	60
Supplemental disclosure of noncash financing activities
Issuance of common stock — net share settlement of employee options	$	28	$	—

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Basis of Presentation

The interim consolidated financial statements include the accounts of The Travelers Companies, Inc. (together with its subsidiaries, the Company). These financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP) and are unaudited. In the opinion of the Company’s management, all adjustments necessary for a fair presentation have been reflected. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted. All material intercompany transactions and balances have been eliminated. The accompanying interim consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the Company’s 2023 Annual Report).

The preparation of the interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period. Actual results could differ from those estimates. 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 disclosed, if material.

On January 2, 2024, the Company completed its previously announced acquisition of all issued and outstanding shares of Corvus Insurance Holdings, Inc. (Corvus), a cyber insurance managing general underwriter, for consideration transferred of approximately $427 million. The acquisition provides the Company the opportunity to renew Corvus’s book of business and to leverage Corvus’s capabilities to enhance the return profile of Travelers’ existing cyber portfolio. At the acquisition date, the Company recorded at fair value $478 million of assets acquired and $51 million of liabilities assumed as part of purchase accounting, including $390 million of identifiable intangible assets and goodwill. The assets acquired from Corvus were included in the Company’s Bond & Specialty Insurance segment, effective at the acquisition date. The Company funded this transaction from internal resources. A provisional amount of $19 million has been recorded as a deferred tax asset and included on the consolidated balance sheet. As the tax return for Corvus for the 2023 fiscal year will not be finalized until the third quarter of 2024, a measurement period adjustment is expected to be recorded in the third quarter of 2024.

Income Taxes

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

2. SEGMENT INFORMATION

Nature of Operations

The Company’s results are reported in the following three business segments — Business Insurance, Bond & Specialty Insurance and Personal Insurance. These segments reflect the manner in which the Company’s businesses are currently managed and represent an aggregation of products and services based on the type of customer, how the business is marketed and the manner in which risks are underwritten. For more information regarding the Company’s nature of operations, see the “Nature of Operations*”* section of note 1 of the notes to the consolidated financial statements in the Company’s 2023 Annual Report.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

2. SEGMENT INFORMATION, Continued

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


(For the three months ended March 31, in millions)	Business Insurance		Bond & Specialty Insurance		Personal Insurance		Total Reportable Segments
2024
Premiums	$	5,160	$	956	$	4,010	$	10,126
Net investment income	609		90		147		846
Fee income	101		—		8		109
Other revenues	77		9		26		112
Total segment revenues (1)	$	5,947	$	1,055	$	4,191	$	11,193
Segment income (1)	$	764	$	195	$	220	$	1,179

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

(1)Segment revenues for reportable business segments exclude net realized investment gains (losses) and revenues included in “interest expense and other.” Segment income 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 (Unaudited), Continued

2. SEGMENT INFORMATION, Continued

Business Segment Reconciliations


	Three Months Ended March 31,
(in millions)	2024		2023
Revenue reconciliation
Earned premiums
Business Insurance:
Domestic:
Workers’ compensation	$	880	$	850
Commercial automobile	860		761
Commercial property	873		709
General liability	847		760
Commercial multi-peril	1,270		1,100
Other	17		18
Total Domestic	4,747		4,198
International	413		279
Total Business Insurance	5,160		4,477
Bond & Specialty Insurance:
Domestic:
Fidelity and surety	340		306
General liability	426		398
Other	56		54
Total Domestic	822		758
International	134		117
Total Bond & Specialty Insurance	956		875
Personal Insurance:
Domestic:
Automobile	1,874		1,624
Homeowners and Other	1,972		1,724
Total Domestic	3,846		3,348
International	164		154
Total Personal Insurance	4,010		3,502
Total earned premiums	10,126		8,854
Net investment income	846		663
Fee income	109		106
Other revenues	112		75
Total segment revenues	11,193		9,698

Net realized investment gains	35		6
Total revenues	$	11,228	$	9,704
Income reconciliation, net of tax
Total segment income	$	1,179	$	1,046
Interest Expense and Other (1)	(83)		(76)
Core income	1,096		970
Net realized investment gains	27		5

Net income	$	1,123	$	975

(1)The primary component of Interest Expense and Other was after-tax interest expense of $77 million and $70 million for the three months ended March 31, 2024 and 2023, respectively.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

2. SEGMENT INFORMATION, Continued


(in millions)	March 31, 2024		December 31, 2023
Asset reconciliation
Business Insurance	$	94,393	$	93,565
Bond & Specialty Insurance	12,136		11,478
Personal Insurance	20,003		20,072
Total assets by reportable segment	126,532		125,115
Other assets (1)	878		863
Total consolidated assets	$	127,410	$	125,978

(1)The primary components of other assets at both March 31, 2024 and December 31, 2023 were the over-funded benefit plan assets related to the Company’s qualified domestic pension plan and other intangible assets.

3. INVESTMENTS

Fixed Maturities

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


	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Fair Value
(at March 31, 2024, in millions)			Gains		Losses
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities	$	6,489	$	—	$	1	$	250	$	6,240
Obligations of U.S. states, municipalities and political subdivisions:
Local general obligation	18,138		—		41		1,455		16,724
Revenue	9,419		—		27		700		8,746
State general obligation	1,156		—		3		67		1,092
Pre-refunded	952		—		2		4		950
Total obligations of U.S. states, municipalities and political subdivisions	29,665		—		73		2,226		27,512
Debt securities issued by foreign governments	970		—		1		32		939
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	9,076		—		68		224		8,920
Corporate and all other bonds	36,512		3		103		2,232		34,380
Total	$	82,712	$	3	$	246	$	4,964	$	77,991

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

3. INVESTMENTS, Continued


	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Fair Value
(at December 31, 2023, in millions)			Gains		Losses
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

Pre-refunded bonds of $950 million and $966 million at March 31, 2024 and December 31, 2023, respectively, were bonds for which U.S. states or municipalities have established irrevocable trusts that are almost exclusively comprised of U.S. Treasury securities and obligations of U.S. government and government agencies and authorities. These trusts were created to fund the payment of principal and interest due under the bonds.

Proceeds from the sales of fixed maturities classified as available for sale were $942 million and $2.36 billion during the three months ended March 31, 2024 and 2023, respectively. Gross gains of $2 million and $17 million and gross losses of $39 million and $27 million were realized on those sales during the three months ended March 31, 2024 and 2023, respectively.

Equity Securities

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



(at March 31, 2024, in millions)	Cost		Gross Gains		Gross Losses		Fair Value
Common stock	$	512	$	142	$	13	$	641
Non-redeemable preferred stock	45		3		—		48
Total	$	557	$	145	$	13	$	689


(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

For the three months ended March 31, 2024 and 2023, the Company recognized $79 million and $17 million of net gains on equity securities still held as of March 31, 2024 and 2023, respectively.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

3. INVESTMENTS, Continued

Unrealized Investment Losses

The following tables summarize, for all fixed maturities classified as available for sale in an unrealized loss position at March 31, 2024 and December 31, 2023, the aggregate fair value and gross unrealized loss by the length of time those securities have been continuously in an unrealized loss position. The fair value amounts reported in the tables are estimates that are prepared using the process described in note 4 herein and in note 4 of the notes to the consolidated financial statements in the Company’s 2023 Annual Report. The Company also relies upon estimates of several factors in its review and evaluation of individual investments, using the process described in note 1 of the notes to the consolidated financial statements in the Company’s 2023 Annual Report to determine whether a credit loss impairment exists.


	Less than 12 months				12 months or longer				Total
(at March 31, 2024, 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	$	2,866	$	17	$	2,869	$	233	$	5,735	$	250
Obligations of U.S. states, municipalities and political subdivisions	6,958		67		15,198		2,159		22,156		2,226
Debt securities issued by foreign governments	134		1		696		31		830		32
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	3,106		29		1,689		195		4,795		224
Corporate and all other bonds	2,957		28		25,668		2,204		28,625		2,232
Total	$	16,021	$	142	$	46,120	$	4,822	$	62,141	$	4,964


	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 (Unaudited), Continued

3. INVESTMENTS, Continued

The following tables summarize, for all fixed maturities reported at fair value for which fair value was less than 80% of amortized cost at March 31, 2024 and December 31, 2023, the gross unrealized investment loss by length of time those securities have continuously been in an unrealized loss position of greater than 20% of amortized cost:


	Period For Which Fair Value is Less Than 80% of Amortized Cost
(at March 31, 2024, 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	224		—		8		708		940
Debt securities issued by foreign governments	—		—		—		—		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	44		—		—		—		44
Corporate and all other bonds	41		2		1		23		67
Total	$	309	$	2	$	9	$	731	$	1,051


	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

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.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

3. INVESTMENTS, Continued

Impairment Charges

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


	Fixed Maturities
	Corporate and All Other Bonds
	At and For the Three Months Ended
(in millions)	March 31, 2024		March 31, 2023

Balance, beginning of period	$	5	$	3
Additions for expected credit losses on securities where no credit losses were previously recognized	3		—
Additions for expected credit losses on securities where credit losses were previously recognized	—		1
Reductions due to sales/defaults of credit-impaired securities	(5)		—
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	$	3	$	4

Total net impairment charges, including credit impairments, reported in net realized investment gains in the consolidated statement of income, were $3 million and $1 million for the three months ended March 31, 2024 and 2023, respectively. Credit losses related to the fixed maturity portfolio for both the three months ended March 31, 2024 and 2023 represented less than 1% of the fixed maturity portfolio on a pre-tax basis and less than 1% of shareholders’ equity on an after-tax basis.

Other Investments

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

4. FAIR VALUE MEASUREMENTS

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

Level 1 - Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.
Level 3 - Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company’s own assumptions about the inputs that market participants would use.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

4. FAIR VALUE MEASUREMENTS, Continued

Valuation of Investments Reported at Fair Value in Financial Statements

The Company utilized a pricing service to estimate fair value measurements for approximately 99% of its fixed maturities at both March 31, 2024 and December 31, 2023.

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.

For certain investments in non-public common and preferred equity securities, the fair value estimate is determined either internally or by an external fund manager based on the impact of recent observable transactions on the investment, 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 for these investments at both March 31, 2024 and December 31, 2023 in the amounts disclosed in Level 3.

For more information regarding the valuation of the Company’s fixed maturities, equity securities and other investments, see note 4 of the notes to the consolidated financial statements in the Company’s 2023 Annual Report.

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 March 31, 2024, 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	$	6,240	$	6,240	$	—	$	—
Obligations of U.S. states, municipalities and political subdivisions	27,512		—		27,512		—
Debt securities issued by foreign governments	939		—		939		—
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities	8,920		—		8,899		21
Corporate and all other bonds	34,380		—		34,125		255
Total fixed maturities	77,991		6,240		71,475		276
Equity securities
Common stock	641		634		—		7
Non-redeemable preferred stock	48		15		3		30
Total equity securities	689		649		3		37
Other investments	18		18		—		—
Total	$	78,698	$	6,907	$	71,478	$	313

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

4. FAIR VALUE MEASUREMENTS, Continued


(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

There was no significant activity in Level 3 of the hierarchy during the three months ended March 31, 2024.

Financial Instruments Disclosed, But Not Carried, At Fair Value

The following tables present the carrying value and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value, and the level within the fair value hierarchy at which such assets and liabilities are categorized.


(at March 31, 2024, in millions)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets
Short-term securities	$	4,682	$	4,682	$	999	$	3,634	$	49
Financial liabilities
Debt	$	7,932	$	7,406	$	—	$	7,406	$	—
Commercial paper	100		100		—		100		—


(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		—

The Company had no material assets or liabilities that were measured at fair value on a non-recurring basis during the three months ended March 31, 2024 or the year ended December 31, 2023.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

5. ALLOWANCE FOR EXPECTED CREDIT LOSSES

Premiums Receivable

The following table presents the balances of premiums receivable, net of the allowance for expected credit losses, at March 31, 2024 and 2023, and the changes in the allowance for expected credit losses for the three months ended March 31, 2024 and 2023.


	At and For the Three Months Ended March 31, 2024				At and For the Three Months Ended March 31, 2023
(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	$	10,282	$	69	$	8,922	$	77

Current period change for expected credit losses			12				10
Write-offs of uncollectible premiums receivable			13				10
Balance, end of period	$	10,829	$	68	$	9,483	$	77

Reinsurance Recoverables

The following table presents the balances of reinsurance recoverables, net of the allowance for estimated uncollectible reinsurance, at March 31, 2024 and 2023, and the changes in the allowance for estimated uncollectible reinsurance for the three months ended March 31, 2024 and 2023.


	At and For the Three Months Ended March 31, 2024				At and For the Three Months Ended March 31, 2023
(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	$	8,143	$	118	$	8,063	$	132


Current period change for estimated uncollectible reinsurance			(1)				(1)
Write-offs of uncollectible reinsurance recoverables			—				—
Balance, end of period	$	8,100	$	117	$	8,091	$	131

Of the total reinsurance recoverables at March 31, 2024, $5.70 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 comprised 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.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

5. ALLOWANCE FOR EXPECTED CREDIT LOSSES, Continued

Contractholder Receivables

The following table presents the balances of contractholder receivables, net of the allowance for expected credit losses, at March 31, 2024 and 2023, and the changes in the allowance for expected credit losses for the three months ended March 31, 2024 and 2023.


	At and For the Three Months Ended March 31, 2024				At and For the Three Months Ended March 31, 2023
(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	$	3,249	$	20	$	3,579	$	17

Current period change for expected credit losses			(1)				2
Write-offs of uncollectible contractholder receivables			—				—

Balance, end of period	$	3,266	$	19	$	3,598	$	19

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

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


(in millions)	March 31, 2024		December 31, 2023
Business Insurance	$	2,579	$	2,585
Bond & Specialty Insurance (1)	835		550
Personal Insurance	811		815
Other	26		26
Total	$	4,251	$	3,976

(1)Goodwill at March 31, 2024 included $285 million associated with the acquisition of Corvus in the first quarter of 2024, which is primarily attributable to Corvus’s cyber underwriting and support capabilities and workforce, and it is not deductible for tax purposes.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

6. GOODWILL AND OTHER INTANGIBLE ASSETS, Continued

Other Intangible Assets

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


(at March 31, 2024, in millions)	Gross Carrying Amount		Accumulated Amortization		Net
Subject to amortization
Customer-related (1)	$	186	$	63	$	123
Contract-based (2)	204		194		10
Marketing-related (3)	18		1		17
Total subject to amortization	408		258		150
Not subject to amortization	226		—		226
Total	$	634	$	258	$	376


(at December 31, 2023, in millions)	Gross Carrying Amount		Accumulated Amortization		Net
Subject to amortization
Customer-related	$	100	$	59	$	41
Contract-based (2)	204		194		10
Total subject to amortization	304		253		51
Not subject to amortization	226		—		226
Total	$	530	$	253	$	277

(1)Customer-related intangibles of $87 million were recorded in connection with the acquisition of Corvus in the first quarter of 2024. The customer-related intangible assets include Corvus’s broker and policyholder relationships and were valued using the excess earnings method income approach, a valuation technique that provides an estimate of fair value based on the cash flows that the asset can be expected to generate over its remaining useful life. Broker relationships represent the relationships Corvus has with its existing brokers through which new business is placed with policyholders. Policyholder relationships represent the renewal of existing policies. Significant inputs to the fair valuation include estimates of revenue growth, broker retention rates, policyholder attrition rates and weighted average cost of capital.

(2)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.

(3)Marketing-related intangibles of $18 million were recorded in connection with the acquisition of Corvus in the first quarter of 2024. The marketing-related intangible assets include trade names and a non-compete agreement. The trade names were valued using a relief from royalty method, a valuation technique which estimates the fair value of an asset based on the present value of the royalties saved because the company owns the asset. Significant inputs to the fair valuation include estimates of future revenue, appropriate rates of return associated with certain assets and weighted average cost of capital. The fair value of the non-compete agreement is based on an estimate of the income that would be lost if the agreement were not in place and the individual chose to compete. Significant inputs to the fair valuation include estimates of projected cash flows and weighted average cost of capital.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

6. GOODWILL AND OTHER INTANGIBLE ASSETS, Continued

The following table presents a summary of the other intangible assets recorded in connection with the acquisition of Corvus by major asset class as of the acquisition date.


(in millions)	Amount		Weighted Average Amortization Period
Subject to amortization
Customer-related	$	87	14 years
Marketing-related	18		7 years
Total	$	105	13 years

7. INSURANCE CLAIM RESERVES

Claims and claim adjustment expense reserves were as follows:


(in millions)	March 31, 2024		December 31, 2023
Property-casualty	$	62,482	$	61,621
Accident and health	5		6
Total	$	62,487	$	61,627

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


	Three Months Ended March 31,
(in millions)	2024		2023
Claims and claim adjustment expense reserves at beginning of year	$	61,621	$	58,643
Less reinsurance recoverables on unpaid losses	7,817		7,790

Net reserves at beginning of year	53,804		50,853
Estimated claims and claim adjustment expenses for claims arising in the current year	6,679		6,025
Estimated decrease in claims and claim adjustment expenses for claims arising in prior years	(49)		(90)
Total increases	6,630		5,935
Claims and claim adjustment expense payments for claims arising in:
Current year	1,275		1,177
Prior years	4,435		4,382
Total payments	5,710		5,559
Unrealized foreign exchange (gain) loss	(61)		28
Net reserves at end of period	54,663		51,257
Plus reinsurance recoverables on unpaid losses	7,819		7,801
Claims and claim adjustment expense reserves at end of period	$	62,482	$	59,058

Gross claims and claim adjustment expense reserves at March 31, 2024 increased by $861 million from December 31, 2023, primarily reflecting the impacts of (i) catastrophe losses in the first three months of 2024, (ii) higher volumes of insured exposures and (iii) loss cost trends for the current accident year, partially offset by (iv) claim payments made during the first three months of 2024 and (v) net favorable prior year reserve development.

Reinsurance recoverables on unpaid losses at March 31, 2024 increased by $2 million from December 31, 2023.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

7. INSURANCE CLAIM RESERVES, Continued

Prior Year Reserve Development

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

For the three months ended March 31, 2024 and 2023, estimated claims and claim adjustment expenses incurred included $49 million and $90 million, respectively, of net favorable development for claims arising in prior years, including $91 million and $105 million, respectively, of net favorable prior year reserve development, and $11 million of accretion of discount in each period.

Business Insurance. There was no net prior year reserve development in the first quarter of 2024, as better than expected loss experience in the domestic operations’ workers’ compensation product line for multiple accident years was offset primarily by higher than expected loss experience in the general liability product line for recent accident years, as well as an addition to reserves related to run-off operations. Net favorable prior year reserve development in the first quarter of 2023 totaled $19 million, primarily driven by better than expected loss experience in the domestic operations’ workers’ compensation product line for multiple accident years, partially offset by higher than expected loss experience in the general liability product line for excess coverages for multiple accident years.

Bond & Specialty Insurance. Net favorable prior year reserve development in the first quarter of 2024 totaled $24 million, primarily driven by better than expected loss experience in multiple product lines within domestic operations. Net favorable prior year reserve development in the first quarter of 2023 totaled $58 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 the first quarter of 2024 totaled $67 million, primarily driven by better than expected loss experience in the domestic operations’ automobile product line for recent accident years. Net favorable prior year reserve development in the first quarter of 2023 totaled $28 million, primarily driven by better than expected loss experience in the domestic operations’ homeowners and other product line for recent accident years.

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

The following table presents the changes in the Company’s accumulated other comprehensive income (loss) (AOCI) for the three months ended March 31, 2024.


	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, 2023	$	(3,309)	$	180	$	(458)	$	(884)	$	(4,471)
Other comprehensive income (loss) (OCI) before reclassifications, net of tax	(626)		2		—		(67)		(691)
Amounts reclassified from AOCI, net of tax	32		—		(1)		—		31
Net OCI, current period	(594)		2		(1)		(67)		(660)
Balance, March 31, 2024	$	(3,903)	$	182	$	(459)	$	(951)	$	(5,131)

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

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

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


	Three Months Ended March 31,
(in millions)	2024		2023
Changes in net unrealized losses on investment securities:
Having no credit losses recognized in the consolidated statement of income	$	(752)	$	1,308
Income tax expense (benefit)	(158)		278
Net of taxes	(594)		1,030
Having credit losses recognized in the consolidated statement of income	2		—
Income tax expense	—		—
Net of taxes	2		—
Net changes in benefit plan assets and obligations	(1)		(3)
Income tax expense (benefit)	—		(1)
Net of taxes	(1)		(2)
Net changes in unrealized foreign currency translation	(71)		37
Income tax expense (benefit)	(4)		6
Net of taxes	(67)		31
Total other comprehensive income (loss)	(822)		1,342
Total income tax expense (benefit)	(162)		283
Total other comprehensive income (loss), net of taxes	$	(660)	$	1,059

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

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

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


	Three Months Ended March 31,
(in millions)	2024		2023
Reclassification adjustments related to unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income (1)	$	40	$	11
Income tax benefit (2)	8		2
Net of taxes	32		9
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)	—		(1)
General and administrative expenses (benefit) (3)	(1)		(2)
Total	(1)		(3)
Income tax (expense) benefit (2)	—		—
Net of taxes	(1)		(3)
Reclassification adjustment related to foreign currency translation (1)	—		—
Income tax benefit (2)	—		—
Net of taxes	—		—
Total reclassifications	39		8
Total income tax benefit	8		2
Total reclassifications, net of taxes	$	31	$	6

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

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

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

9. COMMON SHARE REPURCHASES

During the three months ended March 31, 2024, the Company repurchased 1.2 million common shares under its share repurchase authorizations for a total cost of $250 million. The average cost per share repurchased was $217.31. In addition, the Company acquired 0.6 million common shares for a total cost of $138 million during the three months ended March 31, 2024 that were not part of its publicly announced share repurchase authorizations. These shares consisted of shares retained to cover payroll withholding taxes in connection with the vesting of restricted stock unit awards and performance share awards, and shares used by employees to cover the exercise price, as well as the related payroll withholding taxes, with respect to certain stock options that were exercised. Included in the cost of treasury stock acquired pursuant to common share repurchases is the 1% excise tax imposed on common share repurchase activity, net of common share issuances, as part of the Inflation Reduction Act of 2022. During the three months ended March 31, 2024, there was no net excise tax included in the cost of treasury stock acquired, as common share issuances exceeded common share repurchase activity. At March 31, 2024, the Company had $5.79 billion of capacity remaining under its share repurchase authorizations.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

10. EARNINGS PER SHARE

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


	Three Months Ended March 31,
(in millions, except per share amounts)	2024		2023
Basic and Diluted
Net income, as reported	$	1,123	$	975
Participating share-based awards — allocated income	(8)		(7)
Net income available to common shareholders — basic and diluted	$	1,115	$	968
Common Shares
Basic
Weighted average shares outstanding	229.0		231.7
Diluted
Weighted average shares outstanding	229.0		231.7
Weighted average effects of dilutive securities — stock options and performance shares	3.0		2.7
Total	232.0		234.4
Net Income per Common Share
Basic	$	4.87	$	4.18
Diluted	$	4.80	$	4.13

11. SHARE-BASED INCENTIVE COMPENSATION

The following information relates to fully vested stock option awards at March 31, 2024:


Stock Options	Number	Weighted Average Exercise Price		Weighted Average Contractual Life Remaining	Aggregate Intrinsic Value ($ in millions)
Vested at end of period (1)	6,832,710	$	146.39	6.0 years	$	572
Exercisable at end of period	5,162,950	$	132.57	5.1 years	$	504

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

The total compensation cost for all share-based incentive compensation awards recognized in earnings was $79 million and $69 million for the three months ended March 31, 2024 and 2023, respectively. The related tax benefits recognized in earnings were $12 million and $11 million for the three months ended March 31, 2024 and 2023, respectively.

The total unrecognized compensation cost related to all nonvested share-based incentive compensation awards at March 31, 2024 was $380 million, which is expected to be recognized over a weighted-average period of 2.2 years.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

12. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS

The following table summarizes the components of net periodic benefit cost (benefit) for the Company’s pension and postretirement benefit plans recognized in the consolidated statement of income for the three months ended March 31, 2024 and 2023.


	Pension Plans				Postretirement Benefit Plans
(for the three months ended March 31, in millions)	2024		2023		2024		2023
Net Periodic Benefit Cost (Benefit):
Service cost	$	29	$	27	$	—	$	—
Non-service cost (benefit):
Interest cost on benefit obligation	43		44		1		1
Expected return on plan assets	(75)		(78)		—		—

Amortization of unrecognized:
Prior service benefit	—		—		(1)		(1)
Net actuarial (gain) loss	2		—		(2)		(2)
Total non-service cost (benefit)	(30)		(34)		(2)		(2)
Net periodic benefit cost (benefit)	$	(1)	$	(7)	$	(2)	$	(2)

The following table indicates the line items in which the respective service cost and non-service cost (benefit) are presented in the consolidated statement of income for the three months ended March 31, 2024 and 2023.


	Pension Plans				Postretirement Benefit Plans
(for the three months ended March 31, in millions)	2024		2023		2024		2023
Service Cost:
Claims and claim adjustment expenses	$	11	$	11	$	—	$	—
General and administrative expenses	18		16		—		—
Total service cost	29		27		—		—
Non-Service Cost (Benefit):
Claims and claim adjustment expenses	(12)		(14)		(1)		(1)
General and administrative expenses	(18)		(20)		(1)		(1)
Total non-service cost (benefit)	(30)		(34)		(2)		(2)
Net periodic benefit cost (benefit)	$	(1)	$	(7)	$	(2)	$	(2)

13. LEASES

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

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

13. LEASES, Continued

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


	Three Months Ended March 31,
(in millions)		2024			2023
Lease cost
Operating leases		$	19		$	19
Short-term leases (1)		1			1

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

Other information on operating leases

Cash payments to settle a lease liability reported in cash flows		$	22		$	21
Right-of-use assets obtained in exchange for new lease liabilities		$	10		$	10
Weighted average discount rate		2.91		%	2.44		%
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.

14. CONTINGENCIES, COMMITMENTS AND GUARANTEES

Contingencies

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

Asbestos and Environmental Claims and Litigation

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

Other Proceedings Not Arising Under Insurance Contracts or Reinsurance Agreements

The Company is involved in other lawsuits, including lawsuits alleging extra-contractual damages relating to insurance contracts or reinsurance agreements, that do not arise under insurance contracts or reinsurance agreements. The legal costs associated with such lawsuits are expensed in the period in which the costs are incurred. Based upon currently available information, the Company does not believe it is reasonably possible that any such lawsuit or related lawsuits would be material to the Company’s results of operations or would have a material adverse effect on the Company’s financial position or liquidity.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

14. CONTINGENCIES, COMMITMENTS AND GUARANTEES, Continued

Other Commitments and Guarantees

Commitments

Investment Commitments — The Company has unfunded commitments to private equity limited partnerships, real estate partnerships and other investments. These commitments totaled $1.59 billion and $2.05 billion at March 31, 2024 and December 31, 2023, respectively.

Guarantees

The maximum amount of the Company’s contingent obligation for indemnifications related to the sale of businesses that are quantifiable was $351 million at March 31, 2024.

The maximum amount of the Company’s obligation related to the guarantee of certain insurance policy obligations of a former insurance subsidiary was $480 million at March 31, 2024, all of which is indemnified by a third party. For more information regarding the Company’s guarantees, see note 17 of the notes to the consolidated financial statements in the Company’s 2023 Annual Report.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

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