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

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

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

FINANCIAL HIGHLIGHTS

2024 Second Quarter Consolidated Results of Operations

Net income of $534 million, or $2.32 per share basic and $2.29 per share diluted
Net earned premiums of $10.24 billion
Catastrophe losses of $1.51 billion ($1.19 billion after-tax)
Net favorable prior year reserve development of $230 million ($182 million after-tax)
Combined ratio of 100.2%
Net investment income of $885 million ($727 million after-tax)
Net realized investment losses of $65 million ($51 million after-tax)
Operating cash flows of $1.68 billion

2024 Second Quarter Consolidated Financial Condition

Total investments of $89.51 billion; fixed maturities and short-term securities comprised 93% of total investments
Total assets of $129.32 billion
Total debt of $8.03 billion, resulting in a debt-to-total capital ratio of 24.4% (21.8% excluding net unrealized investment losses, net of tax)
Total capital returned to shareholders of $498 million, comprising $253 million of share repurchases and $245 million of dividends
Shareholders’ equity of $24.86 billion
Net unrealized investment losses of $5.04 billion ($3.98 billion after-tax)
Book value per common share of $109.08
Holding company liquidity of $1.73 billion

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

CONSOLIDATED OVERVIEW

Consolidated Results of Operations


	Three Months Ended June 30,						Six Months Ended June 30,
(in millions, except ratio and per share amounts)	2024			2023			2024			2023
Revenues
Premiums	$	10,243		$	9,216		$	20,369		$	18,070
Net investment income	885			712			1,731			1,375
Fee income	115			106			224			212
Net realized investment losses	(65)			(35)			(30)			(29)
Other revenues	105			99			217			174
Total revenues	11,283			10,098			22,511			19,802
Claims and expenses
Claims and claim adjustment expenses	7,373			7,227			14,029			13,186
Amortization of deferred acquisition costs	1,678			1,519			3,376			2,981
General and administrative expenses	1,478			1,308			2,884			2,575
Interest expense	98			92			196			180
Total claims and expenses	10,627			10,146			20,485			18,922
Income (loss) before income taxes	656			(48)			2,026			880
Income tax expense (benefit)	122			(34)			369			(81)
Net income (loss)	$	534		$	(14)		$	1,657		$	961
Net income (loss) per share
Basic	$	2.32		$	(0.07)		$	7.19		$	4.14
Diluted	$	2.29		$	(0.07)		$	7.09		$	4.09
Combined ratio
Loss and loss adjustment expense ratio	71.4		%	77.9		%	68.4		%	72.4		%
Underwriting expense ratio	28.8			28.6			28.7			28.7
Combined ratio	100.2		%	106.5		%	97.1		%	101.1		%

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

Overview

Diluted net income per share was $2.29 in the second quarter of 2024, compared to a diluted net loss per share of $0.07 in the same period of 2023. Net income was $534 million in the second quarter of 2024, compared to a net loss of $14 million in the same period of 2023. The increase in income before income taxes in the second quarter of 2024 primarily reflected the pre-tax impacts of (i) higher underwriting margins excluding catastrophe losses and prior year reserve development (“underlying underwriting margins”), (ii) higher net investment income and (iii) higher net favorable prior year reserve development, partially offset by (iv) higher catastrophe losses and (v) higher net realized investment losses. Catastrophe losses in the second quarters of 2024 and 2023 were $1.51 billion and $1.48 billion, respectively. Net favorable prior year reserve development in the second quarters of 2024 and 2023 was $230 million and $60 million, respectively. The higher underlying underwriting margins in the second quarter of 2024 were driven by Personal Insurance, Business Insurance and Bond & Specialty Insurance. The Company recorded income tax expense in the second quarter of 2024 compared with an income tax benefit in the same period of 2023. The change in income taxes primarily reflected the impact of the increase in income before income taxes.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Diluted net income per share of $7.09 in the first six months of 2024 increased by 73% over diluted net income per share of $4.09 in the same period of 2023. Net income of $1.66 billion in the first six months of 2024 increased by 72% over net income of $961 million in the same period of 2023. The higher rate of increase in diluted net income per share reflected the impact of share repurchases in recent periods. The increase in income before income taxes primarily reflected the pre-tax impacts of (i) higher underlying underwriting margins, (ii) higher net investment income and (iii) higher net favorable prior year reserve development, partially offset by (iv) higher catastrophe losses. Catastrophe losses in the first six months of 2024 and 2023 were $2.22 billion and $2.02 billion, respectively. Net favorable prior year reserve development in the first six months of 2024 and 2023 was $321 million and $165 million, respectively. The higher underlying underwriting margins in the first six months of 2024 were driven by Personal Insurance, Business Insurance and Bond & Specialty Insurance. The Company recorded income tax expense in the first six months of 2024 compared with an income tax benefit in the same period of 2023. The change in income taxes primarily reflected the impact of the increase in income before income taxes and 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.

The Company has insurance operations in Canada, the United Kingdom, the Republic of Ireland and throughout other parts of the world as a corporate member of Lloyd’s, as well as in Brazil and Colombia through joint ventures. Because these operations are conducted in local currencies other than the U.S. dollar, the Company is subject to changes in foreign currency exchange rates. For the three months and six months ended June 30, 2024 and 2023, changes in foreign currency exchange rates impacted reported line items in the statement of income (loss) by insignificant amounts. The impact of these changes was not material to the Company’s net income (loss) or segment income (loss) for the periods reported.

Revenues

Earned Premiums

Earned premiums in the second quarter of 2024 were $10.24 billion, $1.03 billion or 11% higher than in the same period of 2023. Earned premiums in the first six months of 2024 were $20.37 billion, $2.30 billion or 13% higher than in the same period of 2023. In Business Insurance, earned premiums in the second quarter and first six months of 2024 increased by 11% and 13%, respectively, over the same periods of 2023. In Bond & Specialty Insurance, earned premiums in the second quarter and first six months of 2024 increased by 7% and 8%, respectively, over the same periods of 2023. In Personal Insurance, earned premiums in the second quarter and first six months of 2024 increased by 12% and 13%, respectively, over the same periods of 2023. Factors contributing to the changes in earned premiums in each segment are discussed in more detail in the segment discussions that follow.

Net Investment Income

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


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2024			2023			2024			2023
Average investments (1)	$	95,402		$	89,536		$	95,062		$	89,208
Pre-tax net investment income	885			712			1,731			1,375
After-tax net investment income	727			594			1,425			1,151
Average pre-tax yield (2)	3.7		%	3.2		%	3.6		%	3.1		%
Average after-tax yield (2)	3.0		%	2.7		%	3.0		%	2.6		%

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

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

Net investment income in the second quarter of 2024 was $885 million, $173 million or 24% higher than in the same period of 2023. Net investment income in the first six months of 2024 was $1.73 billion, $356 million or 26% higher than in the same period of 2023. Net investment income from fixed maturity investments in the second quarter and first six months of 2024 was $709 million and $1.40 billion, respectively, $118 million and $235 million higher, respectively, than in the same periods of 2023. The increases in both periods of 2024 primarily resulted from higher long-term average yields and a higher average level of fixed maturity investments. Net investment income from short-term securities in the second quarter and first six months of 2024 was $70 million and $140 million, respectively, $15 million and $38 million higher, respectively, than in the same periods of 2023. The increase in the second quarter of 2024 primarily resulted from a higher level of short-term investments. The

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

increase in the first six months of 2024 primarily resulted from a higher level of short-term investments and higher short-term average yields. The Company’s remaining investment portfolios had net investment income of $118 million and $216 million, respectively, in the second quarter and first six months of 2024, $40 million and $85 million higher, respectively, than in the same periods of 2023. The increases in both periods of 2024 primarily reflected higher private equity partnership returns. Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income from these other investments is generally reflected in the Company’s financial statements on a quarter lag basis.

Fee Income

Fee income in the second quarter of 2024 was $115 million, $9 million higher than in the same period of 2023. Fee income in the first six months of 2024 was $224 million, $12 million higher than in the same period of 2023. The National Accounts market in Business Insurance is the primary source of the Company’s fee-based business and is discussed in the Business Insurance segment discussion that follows.

Net Realized Investment Gains (Losses)

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


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Impairment gains (losses):
Fixed maturities	$	—	$	—	$	(3)	$	(1)

Net realized investment gains (losses) on equity securities still held	(28)		(14)		51		3
Other net realized investment gains (losses), including from sales	(37)		(21)		(78)		(31)
Total	$	(65)	$	(35)	$	(30)	$	(29)

Net realized investment losses on equity securities still held of $28 million in the second quarter of 2024 were driven by a net unfavorable change in fair value on an individual security held in the Company’s portfolio, partially offset by the impact of changes in fair value attributable to favorable equity markets. Net realized investment gains on equity securities still held of $51 million in the first six months of 2024 were driven by the impact of changes in fair value attributable to favorable equity markets. Net realized investment losses on equity securities still held of $14 million in the second quarter of 2023 were driven by the impact of changes in fair value attributable to unfavorable equity markets. Net realized investment gains on equity securities still held of $3 million in the first six months of 2023 were driven by the impact of changes in fair value attributable to favorable equity markets.

Other Revenues

Other revenues in the second quarter of 2024 were $105 million, $6 million higher than in the same period of 2023. Other revenues in the first six months of 2024 were $217 million, $43 million higher than in the same period of 2023. Other revenues include revenues from Simply Business, installment premium charges and other policyholder service charges.

Claims and Expenses

Claims and Claim Adjustment Expenses

Claims and claim adjustment expenses in the second quarter of 2024 were $7.37 billion, $146 million or 2% higher than in the same period of 2023, primarily reflecting the impacts of (i) higher business volumes and (ii) higher catastrophe losses, partially offset by (iii) higher net favorable prior year reserve development, (iv) lower fire and non-weather water losses in the homeowners and other product line and lower physical damage losses in the automobile product line in Personal Insurance and (v) the comparison to an elevated level of losses in the prior year quarter from a small number of surety accounts in Bond & Specialty Insurance. Catastrophe losses in the second quarter of both 2024 and 2023 primarily resulted from numerous severe wind and hail storms in multiple states.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Claims and claim adjustment expenses in the first six months of 2024 were $14.03 billion, $843 million or 6% higher than in the same period of 2023, primarily reflecting the impacts of (i) higher business volumes and (ii) higher catastrophe losses, partially offset by (iii) lower fire and non-weather water losses in the homeowners and other product line and lower physical damage losses in the automobile product line in Personal Insurance, (iv) higher net favorable prior year reserve development and (v) the comparison to an elevated level of losses in the same period of 2023 from both a small number of surety accounts and loss activity related to the disruption in the banking sector in Bond & Specialty Insurance. Catastrophe losses in the first six months of 2024 included the second quarter events described above, as well as severe wind and hail storms in the central and eastern regions of the United States in the first three months of 2024.

Factors contributing to net prior year reserve development during the second quarters and first six months of 2024 and 2023 are discussed in more detail in note 7 of the notes to the unaudited consolidated financial statements.

Significant Catastrophe Losses

The following table presents the amount of losses recorded by the Company for significant catastrophes that occurred in the three months and six months ended June 30, 2024 and 2023, the amount of net unfavorable (favorable) prior year reserve development recognized in the three months and six months ended June 30, 2024 and 2023 for significant catastrophes that occurred in 2023 and 2022, and the estimate of ultimate losses for those catastrophes at June 30, 2024 and December 31, 2023. For purposes of the table, a significant catastrophe is an event for which the Company estimates its ultimate losses will be $100 million or more after reinsurance and before taxes. The Company’s threshold for disclosing catastrophes is primarily determined at the reportable segment level and for 2024 ranged from $20 million to $30 million of losses before reinsurance and taxes. For the Company’s definition of a catastrophe, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations— Consolidated Overview” in the Company’s 2023 Annual Report.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued


		Losses Incurred/Unfavorable (Favorable) Prior Year Reserve Development
		Three Months Ended June 30,				Six Months Ended June 30,
	Estimated Ultimate Losses
(in millions, pre-tax and net of reinsurance) (1)	2024		2023		2024		2023	June 30, 2024	December 31, 2023









































2022
PCS Serial Number:
33 — Severe wind and hail storms		(6)		(1)		(5)		(8)	133	138
35 — Severe wind and hail storms		(1)		(2)		1		(4)	185	184
43 — Severe wind and hail storms		(1)		(1)		—		(11)	116	116
61 — Hurricane Ian		2		(21)		—		(74)	151	151
73 — Winter storm		4		25		9		168	679	670
2023
PCS Serial Number:
25 — Severe wind and hail storms		—		4		(2)		152	151	153
32 — Severe wind and hail storms		(1)		19		—		138	140	140
33 — Severe wind and hail storms		(4)		76		(4)		172	195	199
35 — Severe wind and hail storms		(1)		109		(3)		109	137	140
38 — Severe wind and hail storms		2		n/a		2		n/a	112	110
42 — Severe wind and hail storms		(6)		146		3		146	136	133
48 — Severe wind and hail storms		(6)		149		(6)		149	144	150
49 — Severe wind and hail storms		(3)		155		(4)		155	129	133
51 — Severe wind and hail storms		(21)		270		(21)		270	244	265
63 — Severe wind and hail storms		(7)		n/a		(7)		n/a	118	125
75 — Severe wind and hail storms		(12)		n/a		(11)		n/a	179	190
2024
PCS Serial Number:
26 — Severe wind and hail storms		(8)		n/a		251		n/a	251	n/a
39 — Severe wind and hail storms		221		n/a		221		n/a	221	n/a
42 — Severe wind and hail storms		189		n/a		189		n/a	189	n/a
44 — Severe wind and hail storms		204		n/a		204		n/a	204	n/a
45 — Severe wind and hail storms		164		n/a		164		n/a	164	n/a
46 — Severe wind and hail storms		158		n/a		158		n/a	158	n/a

n/a: not applicable.

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

Amortization of Deferred Acquisition Costs

Amortization of deferred acquisition costs in the second quarter of 2024 was $1.68 billion, $159 million or 10% higher than in the same period of 2023. Amortization of deferred acquisition costs in the first six months of 2024 was $3.38 billion, $395 million or 13% higher than in the same period of 2023. The increases in both periods were generally consistent with the increases in earned premiums. Amortization of deferred acquisition costs is discussed in more detail in the segment discussions that follow.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

General and Administrative Expenses

General and administrative expenses in the second quarter of 2024 were $1.48 billion, $170 million or 13% higher than in the same period of 2023. General and administrative expenses in the first six months of 2024 were $2.88 billion, $309 million or 12% higher than in the same period of 2023. The increases in both periods of 2024 primarily reflected the impact of costs associated with higher business volumes. General and administrative expenses are discussed in more detail in the segment discussions that follow.

Interest Expense

Interest expense in the second quarter and first six months of 2024 was $98 million and $196 million, respectively, compared with $92 million and $180 million, respectively, in the same periods of 2023.

Income Tax Expense (Benefit)

Income tax expense in the second quarter of 2024 was $122 million, compared with an income tax benefit of $34 million in the same period of 2023. The change in income taxes primarily reflected the impact of the $704 million increase in income before income taxes in the second quarter of 2024. Income tax expense in the first six months of 2024 was $369 million, compared with an income tax benefit of $81 million in the same period of 2023. The change in income taxes primarily reflected the impact of the $1.15 billion increase in income before income taxes in the first six months of 2024 and the 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.

The Company’s effective tax rate was 19% and 71% in the second quarters of 2024 and 2023, respectively. The Company’s effective tax rate was 18% and (9)% in the first six months of 2024 and 2023, respectively. The effective tax rate in the first six months of 2023 was reduced by the impact of the one-time tax benefit discussed above. The effective tax rate for all periods reflected the impact of tax-exempt investment income on the calculation of the Company’s income tax provision.

Combined Ratio

The combined ratio of 100.2% in the second quarter of 2024 was 6.3 points lower than the combined ratio of 106.5% in the same period of 2023. The loss and loss adjustment expense ratio of 71.4% in the second quarter of 2024 was 6.5 points lower than the loss and loss adjustment expense ratio of 77.9% in the same period of 2023. The underwriting expense ratio of 28.8% in the second quarter of 2024 was 0.2 points higher than the underwriting expense ratio of 28.6% in the same period of 2023.

Catastrophe losses in the second quarters of 2024 and 2023 accounted for 14.7 points and 16.1 points, respectively, of the combined ratio. Net favorable prior year reserve development in the second quarters of 2024 and 2023 provided 2.2 points and 0.7 points of benefit, respectively, to the combined ratio. The combined ratio excluding prior year reserve development and catastrophe losses (“underlying combined ratio”) in the second quarter of 2024 was 3.4 points lower than the 2023 ratio on the same basis, primarily reflecting the impact of the benefit of earned pricing.

The combined ratio of 97.1% in the first six months of 2024 was 4.0 points lower than the combined ratio of 101.1% in the same period of 2023. The loss and loss adjustment expense ratio of 68.4% for the first six months of 2024 was 4.0 points lower than the loss and loss adjustment expense ratio of 72.4% in the same period of 2023. The underwriting expense ratio of 28.7% for the first six months of 2024 was comparable with the underwriting expense ratio in the same period of 2023.

Catastrophe losses in the first six months of 2024 and 2023 accounted for 10.9 points and 11.2 points, respectively, of the combined ratio. Net favorable prior year reserve development in the first six months of 2024 and 2023 provided 1.5 points and 0.9 points of benefit, respectively, to the combined ratio. The underlying combined ratio in the first six months of 2024 was 3.1 points lower than the 2023 ratio on the same basis, primarily reflecting the impact of the benefit of earned pricing.

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Written Premiums

Consolidated gross and net written premiums were as follows:


	Gross Written Premiums
	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Business Insurance	$	6,169	$	5,662	$	12,552	$	11,490
Bond & Specialty Insurance	1,127		1,035		2,203		2,045
Personal Insurance	4,569		4,210		8,420		7,719
Total	$	11,865	$	10,907	$	23,175	$	21,254


	Net Written Premiums
	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Business Insurance	$	5,539	$	5,175	$	11,135	$	10,332
Bond & Specialty Insurance	1,040		964		1,983		1,850
Personal Insurance	4,536		4,179		8,179		7,532
Total	$	11,115	$	10,318	$	21,297	$	19,714

Gross and net written premiums in the second quarter of 2024 increased by 9% and 8%, respectively, over the same period of 2023. Gross and net written premiums in the first six months of 2024 increased by 9% and 8%, respectively, over the same period of 2023. Factors contributing to the changes in gross and net written premiums in each segment are discussed in more detail in the segment discussions that follow.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

RESULTS OF OPERATIONS BY SEGMENT

Business Insurance

Results of Business Insurance were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2024			2023			2024			2023
Revenues
Earned premiums	$	5,168		$	4,644		$	10,328		$	9,121
Net investment income	632			509			1,241			982
Fee income	105			98			206			197
Other revenues	77			67			154			114
Total revenues	5,982			5,318			11,929			10,414
Total claims and expenses	5,167			4,833			10,180			9,216
Segment income before income taxes	815			485			1,749			1,198
Income tax expense	159			83			329			40
Segment income	$	656		$	402		$	1,420		$	1,158

Loss and loss adjustment expense ratio	66.2		%	70.0		%	64.9		%	66.9		%
Underwriting expense ratio	29.9			30.1			29.8			30.0
Combined ratio	96.1		%	100.1		%	94.7		%	96.9		%

Overview

Segment income in the second quarter of 2024 was $656 million, $254 million or 63% higher than segment income of $402 million in the same period of 2023. The increase in segment income before income taxes primarily reflected the pre-tax impacts of (i) net favorable prior year reserve development compared to net unfavorable prior year reserve development in the same period of 2023, (ii) higher net investment income and (iii) higher underlying underwriting margins. Net favorable prior year reserve development in the second quarter of 2024 was $34 million. Net unfavorable prior year reserve development in the second quarter of 2023 was $101 million. Catastrophe losses in the second quarters of 2024 and 2023 were $389 million and $396 million, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) higher business volumes and (ii) the benefit of earned pricing, partially offset by (iii) higher other losses and (iv) higher general and administrative expenses. Income tax expense in the second quarter of 2024 was higher than in the same period of 2023, primarily reflecting the impact of the increase in segment income before income taxes.

Segment income in the first six months of 2024 was $1.42 billion, $262 million or 23% higher than segment income of $1.16 billion in the same period of 2023. The increase in segment income before income taxes primarily reflected the pre-tax impacts of (i) higher net investment income, (ii) higher underlying underwriting margins and (iii) net favorable prior year reserve development compared to net unfavorable prior year reserve development in the same period of 2023. Net favorable prior year reserve development in the first six months of 2024 was $34 million. Net unfavorable prior year reserve development in the first six months of 2023 was $82 million. Catastrophe losses in the first six months of 2024 and 2023 were $598 million and $595 million, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) higher business volumes and (ii) the benefit of earned pricing, partially offset by (iii) higher other losses and (iv) higher general and administrative expenses. Income tax expense in the first six months of 2024 was higher than in the same period of 2023, primarily reflecting a one-time tax benefit of $171 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item and the impact of the increase in income before income taxes.

Revenues

Earned Premiums

Earned premiums in the second quarter of 2024 were $5.17 billion, $524 million or 11% higher than in the same period of 2023. Earned premiums in the first six months of 2024 were $10.33 billion, $1.21 billion or 13% higher than in the same period of 2023. The increases in both periods of 2024 primarily reflected the increase in net written premiums over the preceding twelve months.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Net Investment Income

Net investment income in the second quarter of 2024 was $632 million, $123 million or 24% higher than in the same period of 2023. Net investment income in the first six months of 2024 was $1.24 billion, $259 million or 26% higher than in the same period of 2023. Refer to the “Revenues—Net Investment Income” section of the “Consolidated Results of Operations” discussion herein for a description of the factors contributing to the increases in the Company’s consolidated net investment income in the second quarter and first six months of 2024 compared with the same periods of 2023. In addition, refer to note 2 of the notes to the consolidated financial statements in the Company’s 2023 Annual Report for a discussion of the Company’s net investment income allocation methodology.

Fee Income

National Accounts is the primary source of fee income due to revenue from its large deductible policies and service businesses, which include risk management, claims administration, loss control and risk management information services provided to third parties, as well as policy issuance and claims management services to workers’ compensation residual market pools. Fee income in the second quarter of 2024 was $105 million, $7 million or 7% higher than in the same period of 2023. Fee income in the first six months of 2024 was $206 million, $9 million or 5% higher than in the same period of 2023.

Other Revenues

Other revenues in the second quarter of 2024 were $77 million, $10 million higher than in the same period of 2023. Other revenues in the first six months of 2024 were $154 million, $40 million higher than in the same period of 2023. Other revenues include revenues from Simply Business, installment premium charges and other policyholder service charges.

Claims and Expenses

Claims and Claim Adjustment Expenses

Claims and claim adjustment expenses in the second quarter of 2024 were $3.47 billion, $175 million or 5% higher than in the same period of 2023, primarily reflecting the impacts of (i) higher business volumes and (ii) loss cost trends, partially offset by (iii) net favorable prior year reserve development compared to net unfavorable prior year reserve development in the same period of 2023.

Claims and claim adjustment expenses in the first six months of 2024 were $6.80 billion, $599 million or 10% higher than in the same period of 2023, primarily reflecting the impacts of (i) higher business volumes and (ii) loss cost trends, partially offset by (iii) net favorable prior year reserve development compared to net unfavorable prior year reserve development in the same period of 2023.

Amortization of Deferred Acquisition Costs

Amortization of deferred acquisition costs in the second quarter of 2024 was $861 million, $88 million or 11% higher than the same period of 2023. Amortization of deferred acquisition costs in the first six months of 2024 was $1.73 billion, $210 million or 14% higher than the same period of 2023. The increases in both periods of 2024 were generally consistent with the increases in earned premiums.

General and Administrative Expenses

General and administrative expenses in the second quarter of 2024 were $835 million, $71 million or 9% higher than in the same period of 2023. General and administrative expenses in the first six months of 2024 were $1.65 billion, $155 million or 10% higher than in the same period of 2023. The increases in both periods of 2024 were primarily in support of business growth.

Income Tax Expense

Income tax expense in the second quarter of 2024 was $159 million, $76 million higher than the same period of 2023, primarily reflecting the impact of the $330 million increase in income before income taxes. Income tax expense in the first six months of 2024 was $329 million, $289 million higher than in the same period of 2023, primarily reflecting the one-time tax benefit of $171 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item and the impact of the $551 million increase in income before income taxes.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Combined Ratio

The combined ratio of 96.1% in the second quarter of 2024 was 4.0 points lower than the combined ratio of 100.1% in the same period of 2023. The loss and loss adjustment expense ratio of 66.2% in the second quarter of 2024 was 3.8 points lower than the loss and loss adjustment expense ratio of 70.0% in the same period of 2023. The underwriting expense ratio of 29.9% in the second quarter of 2024 was 0.2 points lower than the underwriting expense ratio of 30.1% in the same period of 2023.

Catastrophe losses in the second quarters of 2024 and 2023 accounted for 7.5 points and 8.5 points, respectively, of the combined ratio. Net favorable prior year reserve development in the second quarter 2024 provided 0.6 points of benefit to the combined ratio. Net unfavorable prior year reserve development in the second quarter 2023 accounted for 2.2 points of the combined ratio. The underlying combined ratio in the second quarter of 2024 was 0.2 points lower than the 2023 ratio on the same basis.

The combined ratio of 94.7% in the first six months of 2024 was 2.2 points lower than the combined ratio of 96.9% in the same period of 2023. The loss and loss adjustment expense ratio of 64.9% in the first six months of 2024 was 2.0 points lower than the loss and loss adjustment expense ratio of 66.9% in the same period of 2023. The underwriting expense ratio of 29.8% for the first six months of 2024 was 0.2 points lower than the underwriting expense ratio of 30.0% in the same period of 2023.

Catastrophe losses in the first six months of 2024 and 2023 accounted for 5.8 points and 6.5 points, respectively, of the combined ratio. Net favorable prior year reserve development in the first six months of 2024 provided 0.3 points of benefit to the combined ratio. Net unfavorable prior year reserve development in the first six months of 2023 accounted for 0.9 points of the combined ratio. The underlying combined ratio in the first six months of 2024 was 0.3 points lower than the 2023 ratio on the same basis.

Written Premiums

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


	Gross Written Premiums
	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Domestic:
Select Accounts	$	978	$	886	$	1,982	$	1,810
Middle Market	3,104		2,840		6,556		5,969
National Accounts	418		380		945		873
National Property and Other	1,033		967		1,884		1,714
Total Domestic	5,533		5,073		11,367		10,366
International	636		589		1,185		1,124
Total Business Insurance	$	6,169	$	5,662	$	12,552	$	11,490


	Net Written Premiums
	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Domestic:
Select Accounts	$	975	$	883	$	1,949	$	1,791
Middle Market	2,769		2,618		5,982		5,544
National Accounts	312		277		639		571
National Property and Other	912		862		1,554		1,452
Total Domestic	4,968		4,640		10,124		9,358
International	571		535		1,011		974
Total Business Insurance	$	5,539	$	5,175	$	11,135	$	10,332

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Gross and net written premiums in the second quarter of 2024 increased by 9% and 7%, respectively, over the same period of 2023. Gross and net written premiums in the first six months of 2024 increased by 9% and 8%, respectively, over the same period of 2023.

Select Accounts. Net written premiums of $975 million and $1.95 billion in the second quarter and first six months of 2024, respectively, increased by 10% and 9%, respectively, over the same periods of 2023. Retention rates remained strong in the second quarter of 2024 but decreased from the same period of 2023. Retention rates remained strong in the first six months of 2024 but decreased slightly from the same period of 2023. Renewal premium changes in the second quarter and first six months of 2024 remained positive and were higher than the same periods of 2023. New business premiums in the second quarter and first six months of 2024 increased over the same periods of 2023.

Middle Market. Net written premiums of $2.77 billion and $5.98 billion in the second quarter and first six months of 2024, respectively, increased by 6% and 8%, respectively, over the same periods of 2023. Retention rates remained strong in the second quarter of 2024 but decreased slightly from the same period of 2023. Retention rates remained strong in the first six months of 2024 but decreased from the same period of 2023. Renewal premium changes in the second quarter of 2024 remained positive but were slightly lower than the same period of 2023. Renewal premium changes in the first six months of 2024 remained positive and were slightly higher than the same period of 2023. New business premiums in the second quarter and first six months of 2024 increased over the same periods of 2023.

National Accounts. Net written premiums of $312 million and $639 million in the second quarter and first six months of 2024, respectively, increased by 13% and 12%, respectively, over the same periods of 2023. Retention rates remained strong in the second quarter of 2024 and increased slightly over the same period of 2023. Retention rates remained strong in the first six months of 2024 and increased over the same period of 2023. Renewal premium changes in the second quarter and first six months of 2024 remained positive but were lower than the same periods of 2023. New business premiums in the second quarter of 2024 decreased from the same period of 2023. New business premiums in the first six months of 2024 increased over the same period of 2023.

National Property and Other. Net written premiums of $912 million and $1.55 billion in the second quarter and first six months of 2024, respectively, increased by 6% and 7%, respectively, over the same periods of 2023. Retention rates remained strong in the second quarter and first six months of 2024 but decreased from the same periods of 2023. Renewal premium changes in the second quarter and first six months of 2024 remained positive but were lower than in the same periods of 2023. New business premiums in the second quarter and first six months of 2024 increased over the same periods of 2023.

International. Net written premiums of $571 million and $1.01 billion in the second quarter and first six months of 2024, respectively, increased by 7% and 4%, respectively, over the same periods of 2023.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Bond & Specialty Insurance

Results of Bond & Specialty Insurance were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2024			2023			2024			2023
Revenues
Earned premiums	$	977		$	911		$	1,933		$	1,786
Net investment income	94			78			184			151
Other revenues	6			7			15			12
Total revenues	1,077			996			2,132			1,949
Total claims and expenses	863			707			1,678			1,412
Segment income before income taxes	214			289			454			537
Income tax expense	44			59			89			100
Segment income	$	170		$	230		$	365		$	437

Loss and loss adjustment expense ratio	48.0		%	39.8		%	46.2		%	41.4		%
Underwriting expense ratio	39.7			37.3			39.9			37.1
Combined ratio	87.7		%	77.1		%	86.1		%	78.5		%

Overview

Segment income in the second quarter of 2024 was $170 million, $60 million or 26% lower than segment income of $230 million in the same period of 2023. The decrease in segment income before income taxes primarily reflected the pre-tax impacts of (i) lower net favorable prior year reserve development and (ii) higher catastrophe losses, partially offset by (iii) higher underlying underwriting margins and (iv) higher net investment income. Net favorable prior year reserve development in the second quarters of 2024 and 2023 was $24 million and $119 million, respectively. Catastrophe losses in the second quarters of 2024 and 2023 were $40 million and $21 million, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) higher business volumes and (ii) the comparison to an elevated level of losses in the prior year quarter from a small number of surety accounts, partially offset by (iii) higher general and administrative expenses. Income tax expense in the second quarter of 2024 was lower than in the same period of 2023, primarily reflecting the impact of the decrease in segment income before income taxes.

Segment income in the first six months of 2024 was $365 million, $72 million or 16% lower than segment income of $437 million in the same period of 2023. The decrease in segment income before income taxes primarily reflected the pre-tax impacts of (i) lower net favorable prior year reserve development and (ii) higher catastrophe losses, partially offset by (iii) higher net investment income and (iv) higher underlying underwriting margins. Net favorable prior year reserve development in the first six months of 2024 and 2023 was $48 million and $177 million, respectively. Catastrophe losses in the first six months of 2024 and 2023 were $45 million and $26 million, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) higher business volumes and (ii) the comparison to an elevated level of losses in the same period of 2023 from both a small number of surety accounts and loss activity related to the disruption in the banking sector, partially offset by (iii) higher general and administrative expenses. Income tax expense in the first six months of 2024 was lower than in the same period of 2023, primarily reflecting the impact of the decrease in segment income before income taxes and a one-time tax benefit of $9 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item.

Revenues

Earned Premiums

Earned premiums in the second quarter of 2024 were $977 million, $66 million or 7% higher than in the same period of 2023. Earned premiums in the first six months of 2024 were $1.93 billion, $147 million or 8% higher than in the same period of 2023. The increases in both periods of 2024 primarily reflected increases in net written premiums in prior quarters, including the impact of longer duration surety bonds and multi-year management liability policies.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Net Investment Income

Net investment income in the second quarter of 2024 was $94 million, $16 million or 21% higher than in the same period of 2023. Net investment income in the first six months of 2024 was $184 million, $33 million or 22% higher than in the same period of 2023. Included in Bond & Specialty Insurance are certain legal entities whose invested assets and related net investment income are reported exclusively in this segment and not allocated among all business segments. Refer to the “Revenues—Net Investment Income” section of “Consolidated Results of Operations” herein for a discussion of the factors contributing to the increases in the Company’s consolidated net investment income in the second quarter and first six months of 2024 compared with the same periods of 2023. In addition, refer to note 2 of the notes to the consolidated financial statements in the Company’s 2023 Annual Report for a discussion of the Company’s net investment income allocation methodology.

Claims and Expenses

Claims and Claim Adjustment Expenses

Claims and claim adjustment expenses in the second quarter of 2024 were $473 million, $107 million or 29% higher than in the same period of 2023, primarily reflecting the impacts of (i) lower net favorable prior year reserve development, (ii) higher business volumes and (iii) higher catastrophe losses, partially offset by (iv) the comparison to an elevated level of losses in the prior year quarter from a small number of surety accounts.

Claims and claim adjustment expenses in the first six months of 2024 were $901 million, $155 million or 21% higher than in the same period of 2023, primarily reflecting the impacts of (i) lower net favorable prior year reserve development, (ii) higher business volumes and (iii) higher catastrophe losses, partially offset by (iv) the comparison to an elevated level of losses in the same period of 2023 from both a small number of surety accounts and loss activity related to the disruption in the banking sector.

Factors contributing to net favorable prior year reserve development during the second quarters and first six months of 2024 and 2023 are discussed in more detail in note 7 of the notes to the unaudited consolidated financial statements.

Amortization of Deferred Acquisition Costs

Amortization of deferred acquisition costs in the second quarter of 2024 was $183 million, $15 million or 9% higher than in the same period of 2023. Amortization of deferred acquisition costs in the first six months of 2024 was $365 million, $37 million or 11% higher than in the same period of 2023. The increases in both periods of 2024 were generally consistent with the increases in earned premiums.

General and Administrative Expenses

General and administrative expenses in the second quarter of 2024 were $207 million, $34 million or 20% higher than in the same period of 2023. General and administrative expenses in the first six months of 2024 were $412 million, $74 million or 22% higher than in the same period of 2023. The increases in both periods of 2024 primarily reflected the acquisition of Corvus in the first quarter of 2024, as well as higher employee and technology related expenses.

Income Tax Expense

Income tax expense in the second quarter of 2024 was $44 million, $15 million or 25% lower than in the same period of 2023, primarily reflecting the impact of the $75 million decrease in segment income before income taxes. Income tax expense in the first six months of 2024 was $89 million, $11 million or 11% lower than in the same period of 2023, primarily reflecting the impact of the $83 million decrease in segment income before income taxes and the one-time tax benefit of $9 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item.

Combined Ratio

The combined ratio of 87.7% in the second quarter of 2024 was 10.6 points higher than the combined ratio of 77.1% in the same period of 2023. The loss and loss adjustment expense ratio of 48.0% in the second quarter of 2024 was 8.2 points higher than the loss and loss adjustment expense ratio of 39.8% in the same period of 2023. The underwriting expense ratio of 39.7% in the second quarter of 2024 was 2.4 points higher than the underwriting expense ratio of 37.3% in the same period of 2023.

Net favorable prior year reserve development in the second quarters of 2024 and 2023 provided 2.5 points and 13.0 points of benefit, respectively, to the combined ratio. Catastrophe losses in the second quarters of 2024 and 2023 accounted for 4.1 points and 2.3 points, respectively, of the combined ratio. The underlying combined ratio in the second quarter of 2024 was 1.7 points lower than the 2023 ratio on the same basis, primarily reflecting the impacts of (i) the comparison to an elevated level of losses in the prior year quarter from a small number of surety accounts, partially offset by (ii) a higher expense ratio.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

The combined ratio of 86.1% in the first six months of 2024 was 7.6 points higher than the combined ratio of 78.5% in the same period of 2023. The loss and loss adjustment expense ratio of 46.2% in the first six months of 2024 was 4.8 points higher than the loss and loss adjustment expense ratio of 41.4% in the same period of 2023. The underwriting expense ratio of 39.9% in the first six months of 2024 was 2.8 points higher than the underwriting expense ratio of 37.1% in the same period of 2023.

Net favorable prior year reserve development in the first six months of 2024 and 2023 provided 2.5 points and 9.9 points of benefit, respectively, to the combined ratio. Catastrophe losses in the first six months of 2024 and 2023 accounted for 2.3 points and 1.5 points, respectively, of the combined ratio. The underlying combined ratio in the first six months of 2024 was 0.6 points lower than the 2023 ratio on the same basis, primarily reflecting the impacts of (i) the comparison to an elevated level of losses in the same period of 2023 from both a small number of surety accounts and loss activity related to the disruption in the banking sector, partially offset by (ii) a higher expense ratio.

Written Premiums

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


	Gross Written Premiums
	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Domestic:
Management Liability	$	657	$	598	$	1,268	$	1,162
Surety	338		300		687		603
Total Domestic	995		898		1,955		1,765
International	132		137		248		280
Total Bond & Specialty Insurance	$	1,127	$	1,035	$	2,203	$	2,045


	Net Written Premiums
	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Domestic:
Management Liability	$	586	$	541	$	1,129	$	1,052
Surety	325		293		621		550
Total Domestic	911		834		1,750		1,602
International	129		130		233		248
Total Bond & Specialty Insurance	$	1,040	$	964	$	1,983	$	1,850

Domestic. Net written premiums of $911 million and $1.75 billion in the second quarter and first six months of 2024, respectively, both increased by 9% over the same periods of 2023. Excluding the surety line of business, for which the following are not relevant measures, retention rates remained strong in the second quarter of 2024 but decreased slightly from the same period of 2023. Retention rates remained strong in the first six months of 2024 and were comparable with the same period of 2023. Renewal premium changes in the second quarter and first six months of 2024 remained positive but were lower than in the same periods of 2023. New business premiums in the second quarter and first six months of 2024 increased over the same periods of 2023.

International. Net written premiums of $129 million in the second quarter of 2024 decreased by 1% from the same period of 2023. Net written premiums of $233 million in the first six months of 2024 decreased by 6% from the same period of 2023, primarily driven by decreases in the United Kingdom and broader Europe, partially offset by increases in Canada.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Personal Insurance

Results of Personal Insurance were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2024			2023			2024			2023
Revenues
Earned premiums	$	4,098		$	3,661		$	8,108		$	7,163
Net investment income	159			125			306			242
Fee income	10			8			18			15
Other revenues	22			25			48			48
Total revenues	4,289			3,819			8,480			7,468
Total claims and expenses	4,487			4,504			8,411			8,095
Segment income (loss) before income taxes	(198)			(685)			69			(627)
Income tax expense (benefit)	(45)			(147)			2			(172)
Segment income (loss)	$	(153)		$	(538)		$	67		$	(455)

Loss and loss adjustment expense ratio	83.7		%	97.4		%	78.0		%	87.1		%
Underwriting expense ratio	24.8			24.6			24.8			24.9
Combined ratio	108.5		%	122.0		%	102.8		%	112.0		%

Overview

Segment loss in the second quarter of 2024 was $153 million, compared with a segment loss of $538 million in the same period of 2023. The decrease in segment loss before income taxes was driven by the pre-tax impacts of (i) higher underlying underwriting margins, (ii) higher net favorable prior year reserve development and (iii) higher net investment income, partially offset by (iv) higher catastrophe losses. Catastrophe losses in the second quarters of 2024 and 2023 were $1.08 billion and $1.06 billion, respectively. Net favorable prior year reserve development in the second quarters of 2024 and 2023 was $172 million and $42 million, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) the benefit of earned pricing, (ii) lower fire and non-weather water losses in the homeowners and other product line, (iii) higher business volumes and (iv) lower physical damage losses in the automobile product line. The income tax benefit in the second quarter of 2024 was lower than in the same period of 2023, primarily reflecting the impact of the decrease in segment loss before income taxes.

Segment income in the first six months of 2024 was $67 million, compared with a segment loss of $455 million in the same period of 2023. The increase in segment income before income taxes was driven by the pre-tax impacts of (i) higher underlying underwriting margins, (ii) higher net favorable prior year reserve development and (iii) higher net investment income, partially offset by (iv) higher catastrophe losses. Catastrophe losses in the first six months of 2024 and 2023 were $1.58 billion and $1.40 billion, respectively. Net favorable prior year reserve development in the first six months of 2024 and 2023 was $239 million and $70 million, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) the benefit of earned pricing, (ii) higher business volumes, (iii) lower fire and non-weather water losses in the homeowners and other product line and (iv) lower physical damage losses in the automobile product line. The segment recorded income tax expense in the first six months of 2024 compared with an income tax benefit in the same period of 2023. The change in income taxes primarily reflected the impact of the increase in segment income before income taxes and a one-time tax benefit of $31 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item.

Revenues

Earned Premiums

Earned premiums in the second quarter of 2024 were $4.10 billion, $437 million or 12% higher than in the same period of 2023. Earned premiums in the first six months of 2024 were $8.11 billion, $945 million or 13% higher than in the same period of 2023. The increases in both periods of 2024 primarily reflected the increase in net written premiums over the preceding twelve months.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Net Investment Income

Net investment income in the second quarter of 2024 was $159 million, $34 million or 27% higher than in the same period of 2023. Net investment income in the first six months of 2024 was $306 million, $64 million or 26% higher than in the same period of 2023. Refer to the “Revenues—Net Investment Income” section of the “Consolidated Results of Operations” discussion herein for a description of the factors contributing to the increases in the Company’s consolidated net investment income in the second quarter and first six months of 2024 compared with the same periods of 2023. In addition, refer to note 2 of the notes to the consolidated financial statements in the Company’s 2023 Annual Report for a discussion of the Company’s net investment income allocation methodology.

Other Revenues

Other revenues in the second quarters and first six months of 2024 and 2023 primarily consisted of installment premium charges.

Claims and Expenses

Claims and Claim Adjustment Expenses

Claims and claim adjustment expenses in the second quarter of 2024 were $3.43 billion, $136 million or 4% lower than in the same period of 2023, primarily reflecting the impacts of (i) higher net favorable prior year reserve development, (ii) lower fire and non-weather water losses in the homeowners and other product line and (iii) lower physical damage losses in the automobile product line, partially offset by (iv) higher business volumes.

Claims and claim adjustment expenses in the first six months of 2024 were $6.33 billion, $89 million or 1% higher than in the same period of 2023, primarily reflecting the impacts of (i) higher business volumes and (ii) higher catastrophe losses, partially offset by (iii) higher net favorable prior year reserve development, (iv) lower fire and non-weather water losses in the homeowners and other product line and (v) lower physical damage losses in the automobile product line.

Amortization of Deferred Acquisition Costs

Amortization of deferred acquisition costs in the second quarter of 2024 was $634 million, $56 million or 10% higher than in the same period of 2023. Amortization of deferred acquisition costs in the first six months of 2024 was $1.29 billion, $148 million or 13% higher than in the same period of 2023. The increases in both periods of 2024 were generally consistent with the increases in earned premiums.

General and Administrative Expenses

General and administrative expenses in the second quarter of 2024 were $424 million, $63 million or 17% higher than in the same period of 2023. General and administrative expenses in the first six months of 2024 were $799 million, $79 million or 11% higher than in the same period of 2023. The increases in both periods of 2024 primarily reflected higher contingent commissions, as well as higher employee and technology related expenses.

Income Tax Expense (Benefit)

The income tax benefit in the second quarter of 2024 was $45 million, compared with $147 million in the same period of 2023, primarily reflecting the impact of the $487 million decrease in segment loss before income taxes. Income tax expense in the first six months of 2024 was $2 million, compared with an income tax benefit of $172 million in the same period of 2023, primarily reflecting the impact of the $696 million increase in segment income before income taxes and the one-time tax benefit of $31 million in the first quarter of 2023 due to the expiration of the statute of limitations with respect to a tax item.

Combined Ratio

The combined ratio of 108.5% in the second quarter of 2024 was 13.5 points lower than the combined ratio of 122.0% in the same period of 2023. The loss and loss adjustment expense ratio of 83.7% in the second quarter of 2024 was 13.7 points lower than the loss and loss adjustment expense ratio of 97.4% in the same period of 2023. The underwriting expense ratio of 24.8% in the second quarter of 2024 was 0.2 points higher than the underwriting expense ratio of 24.6% in the same period of 2023.

Catastrophe losses in the second quarters of 2024 and 2023 accounted for 26.4 points and 29.1 points, respectively, of the combined ratio. Net favorable prior year reserve development in the second quarters of 2024 and 2023 provided 4.2 points and 1.2 points of benefit, respectively, to the combined ratio. The underlying combined ratio in the second quarter of 2024 was 7.8 points lower than the 2023 ratio on the same basis, primarily reflecting the impacts of (i) the benefit of earned pricing, (ii) lower

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

fire and non-weather water losses in the homeowners and other product line and (iii) lower physical damage losses in the automobile product line.

The combined ratio of 102.8% in the first six months of 2024 was 9.2 points lower than the combined ratio of 112.0% in the same period of 2023. The loss and loss adjustment expense ratio of 78.0% in the first six months of 2024 was 9.1 points lower than the loss and loss adjustment expense ratio of 87.1% in the same period of 2023. The underwriting expense ratio of 24.8% in the first six months of 2024 was 0.1 points lower than the underwriting expense ratio of 24.9% in the same period of 2023.

Catastrophe losses in the first six months of 2024 and 2023 both accounted for 19.5 points of the combined ratio. Net favorable prior year reserve development in the first six months of 2024 and 2023 provided 2.9 points and 1.0 points of benefit, respectively, to the combined ratio. The underlying combined ratio in the first six months of 2024 was 7.3 points lower than the 2023 ratio on the same basis, primarily reflecting the impacts of (i) the benefit of earned pricing, (ii) lower fire and non-weather water losses in the homeowners and other product line and (iii) lower physical damage losses in the automobile product line.

Written Premiums

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


	Gross Written Premiums
	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Domestic:
Automobile	$	2,006	$	1,828	$	3,873	$	3,489
Homeowners and Other	2,369		2,195		4,200		3,906
Total Domestic	4,375		4,023		8,073		7,395
International	194		187		347		324
Total Personal Insurance	$	4,569	$	4,210	$	8,420	$	7,719


	Net Written Premiums
	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Domestic:
Automobile	$	2,001	$	1,823	$	3,860	$	3,477
Homeowners and Other	2,347		2,173		3,982		3,738
Total Domestic	4,348		3,996		7,842		7,215
International	188		183		337		317
Total Personal Insurance	$	4,536	$	4,179	$	8,179	$	7,532

Gross and net written premiums in the second quarter of 2024 both increased by 9% over the same period of 2023. Gross and net written premiums in the first six months of 2024 both increased by 9% over the same period of 2023.

Domestic

Automobile net written premiums of $2.00 billion and $3.86 billion in the second quarter and first six months of 2024, respectively, increased by 10% and 11%, respectively, over the same periods of 2023. Retention rates remained strong in the second quarter and first six months of 2024 and were comparable with the same periods of 2023. Renewal premium changes in the second quarter of 2024 remained positive but were lower than in the same period of 2023. Renewal premium changes in the first six months of 2024 remained positive but were slightly lower than in the same period of 2023. New business premiums in the second quarter and first six months of 2024 decreased from the same periods of 2023.

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Homeowners and Other net written premiums of $2.35 billion and $3.98 billion in the second quarter and first six months of 2024, respectively, increased by 8% and 7%, respectively, over the same periods of 2023. Retention rates remained strong in the second quarter of 2024 and were comparable with the same period of 2023. Retention rates remained strong in the first six months of 2024 and increased slightly over the same period of 2023. Renewal premium changes in the second quarter and first six months of 2024 remained positive but were lower than in the same periods of 2023. New business premiums in the second quarter and first six months of 2024 decreased from the same periods of 2023.

For its Domestic business, Personal Insurance had approximately 8.9 million and 9.1 million active policies at June 30, 2024 and 2023, respectively.

International

International net written premiums of $188 million and $337 million in the second quarter and first six months of 2024, respectively, increased by 3% and 6%, respectively, over the same periods of 2023, driven by increases in the automobile and homeowners and other product lines.

For its International business, Personal Insurance had approximately 441,000 and 448,000 active policies at June 30, 2024 and 2023, respectively.

Interest Expense and Other


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Income (loss)	$	(88)	$	(79)	$	(171)	$	(155)

The Income (loss) for Interest Expense and Other in the second quarters of 2024 and 2023 was $(88) million and $(79) million, respectively. Pre-tax interest expense for the second quarters of 2024 and 2023 was $98 million and $92 million, respectively. After-tax interest expense for the second quarters of 2024 and 2023 was $78 million and $72 million, respectively. The Income (loss) for Interest Expense and Other in the first six months of 2024 and 2023 was $(171) million and $(155) million, respectively. Pre-tax interest expense in the first six months of 2024 and 2023 was $196 million and $180 million, respectively. After-tax interest expense in the first six months of 2024 and 2023 was $155 million and $142 million, respectively.

ASBESTOS CLAIMS AND LITIGATION

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

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

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

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

Because each policyholder presents different liability and coverage issues, the Company generally reviews the exposure presented by each policyholder with open claims at least annually. Among the factors the Company may consider in the course of this review are: available insurance coverage, including the role of any umbrella or excess insurance the Company has issued to the policyholder; limits and deductibles; an analysis of the policyholder’s potential liability; the jurisdictions involved; past and anticipated future claim activity and loss development on pending claims; past settlement values of similar claims; allocated claim adjustment expense; the potential role of other insurance; the role, if any, of non-asbestos claims or potential non-asbestos claims in any resolution process; and applicable coverage defenses or determinations, if any, including the determination as to whether or not an asbestos claim is a products/completed operation claim subject to an aggregate limit and the available coverage, if any, for that claim.

The Company’s quarterly asbestos reserve reviews include an analysis of exposure and claim payment patterns by policyholder, as well as recent settlements, policyholder bankruptcies, judicial rulings and legislative actions. The Company also analyzes developing payment patterns among policyholders and the assumed reinsurance component of reserves, as well as projected reinsurance billings and recoveries. In addition, the Company reviews its historical gross and net loss and expense paid experience, year-by-year, to assess any emerging trends, fluctuations, or characteristics suggested by the aggregate paid activity. Conventional actuarial methods are not utilized to establish asbestos reserves, and the Company’s evaluations have not resulted in a reliable method to determine a meaningful average asbestos defense or indemnity payment.

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

Net asbestos paid loss and loss expenses in the first six months of 2024 and 2023 were $135 million and $89 million, respectively. Net asbestos reserves were $1.24 billion and $1.22 billion at June 30, 2024 and 2023, respectively.

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

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


(at and for the six months ended June 30, in millions)	2024		2023
Beginning reserves:
Gross	$	1,768	$	1,674
Ceded	(390)		(369)
Net	1,378		1,305
Incurred losses and loss expenses:
Gross	—		—
Ceded	—		—
Net	—		—
Paid loss and loss expenses:
Gross	156		123
Ceded	(21)		(34)
Net	135		89
Foreign exchange and other:
Gross	—		1
Ceded	1		1
Net	1		2
Ending reserves:
Gross	1,612		1,552
Ceded	(368)		(334)
Net	$	1,244	$	1,218

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

ENVIRONMENTAL CLAIMS AND LITIGATION

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

In establishing environmental reserves, the Company evaluates the exposure presented by each policyholder and the anticipated cost of resolution, if any. In the course of its analysis, the Company generally considers the probable liability, available coverage and relevant judicial interpretations. In addition, the Company considers the many variables presented, such as: the nature of the alleged activities of the policyholder at each site; the number of sites; the total number of potentially responsible parties at each site; the nature of the alleged environmental harm and the corresponding remedy at each site; the nature of government enforcement activities at each site; the ownership and general use of each site; the overall nature of the insurance relationship between the Company and the policyholder, including the role of any umbrella or excess insurance the Company has issued to the policyholder; the involvement of other insurers; the potential for other available coverage, including the number of years of coverage; the role, if any, of non-environmental claims or potential non-environmental claims in any resolution process; and the applicable law in each jurisdiction. The evaluation of the exposure presented by a policyholder can

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

change as information concerning that policyholder and the many variables presented is developed. Conventional actuarial methods are not used to estimate these reserves.

Over the past several years, the Company has experienced generally favorable trends in the number of new policyholders tendering environmental claims for the first time and in the number of pending declaratory judgment actions relating to environmental matters. These policyholders continue to present smaller exposures, are involved in fewer hazardous waste sites and are lower tier defendants than policyholders presenting such claims in the past. Further, in many instances, clean-up costs have been reduced because regulatory agencies are willing to accept risk-based site analyses and more efficient clean-up technologies. However, the degree to which those favorable trends have continued has been less than anticipated. In addition, reserve development on existing environmental claims as well as the costs associated with coverage litigation on environmental matters has been greater than anticipated, driven by claims and legal developments in a limited number of jurisdictions. As a result of these factors, the Company increased its net environmental reserves by $8 million and $37 million in the second quarter and first six months of 2024, respectively, and by $17 million and $48 million in the second quarter and first six months of 2023, respectively. Net environmental paid loss and loss expenses in the first six months of 2024 and 2023 were $32 million and $46 million, respectively. Net environmental reserves were $386 million and $374 million at June 30, 2024 and 2023, respectively.

UNCERTAINTY REGARDING ADEQUACY OF ASBESTOS AND ENVIRONMENTAL RESERVES

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

the risks and lack of predictability inherent in complex litigation;
a further increase in the cost to resolve, and/or the number of, asbestos and environmental claims beyond that which is anticipated;
the emergence of a greater number of asbestos claims than anticipated as a result of extended life expectancies resulting from medical advances and lifestyle improvements;
the role of any umbrella or excess policies we have issued;
the resolution or adjudication of disputes concerning coverage for asbestos and environmental claims in a manner inconsistent with our previous assessment of these disputes;
the number and outcome of direct actions against us;
future developments pertaining to our ability to recover reinsurance for asbestos and environmental claims;
any impact on asbestos defendants we insure due to the bankruptcy of other asbestos defendants;
the unavailability of other insurance sources potentially available to policyholders, whether through exhaustion of policy limits or through the insolvency of other participating insurers; and
uncertainties arising from the insolvency or bankruptcy of policyholders.

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

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

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

INVESTMENT PORTFOLIO

The Company’s invested assets at June 30, 2024 were $89.51 billion, of which 93% was invested in fixed maturity and short-term investments, 1% in equity securities, 1% in real estate investments and 5% in other investments. Because the primary purpose of the investment portfolio is to fund future claims payments, the Company employs a thoughtful investment philosophy that focuses on appropriate risk-adjusted returns. A significant majority of funds available for investment are deployed in a widely diversified portfolio of high quality, liquid, taxable U.S. government, tax-exempt and taxable U.S. municipal and taxable corporate and U.S. agency mortgage-backed bonds.

The carrying value of the Company’s fixed maturity portfolio at June 30, 2024 was $79.19 billion. The Company closely monitors the duration of its fixed maturity investments, and investment purchases and sales are executed with the objective of having adequate funds available to satisfy the Company’s insurance and debt obligations. The weighted average credit quality of the Company’s fixed maturity portfolio, both including and excluding U.S. Treasury securities, was “Aa2” at both June 30, 2024 and December 31, 2023. Below investment grade securities represented 1.2% and 1.3% of the total fixed maturity investment portfolio at June 30, 2024 and December 31, 2023, respectively. The weighted average effective duration of fixed maturities and short-term securities was 4.2 (4.4 excluding short-term securities) at June 30, 2024 and 4.1 (4.4 excluding short-term securities) at December 31, 2023.

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

The Company’s fixed maturity investment portfolio at June 30, 2024 and December 31, 2023 included $27.26 billion and $28.51 billion, respectively, of securities which are obligations of U.S. states, municipalities and political subdivisions (collectively referred to as the municipal bond portfolio). The municipal bond portfolio is diversified across the United States, the District of Columbia and Puerto Rico and includes general obligation and revenue bonds issued by states, cities, counties, school districts and similar issuers. Included in the municipal bond portfolio at June 30, 2024 and December 31, 2023 were $975 million and $966 million, respectively, of pre-refunded bonds, which are bonds for which U.S. states or municipalities have established irrevocable trusts, almost exclusively comprised of U.S. Treasury securities and obligations of U.S. government and government agencies and authorities. These trusts were created to fund the payment of principal and interest due under the bonds. The irrevocable trusts are verified as to their sufficiency by an independent verification agent of the underwriter, issuer or trustee. All of the Company’s holdings of securities issued by Puerto Rico and related entities have either been pre-refunded and therefore are defeased by U.S. Treasury securities or have FHA guarantees subject to federal appropriation.

The Company bases its investment decision on the underlying credit characteristics of the municipal security. The weighted average credit rating of the municipal bond portfolio was “Aaa/Aa1” at both June 30, 2024 and December 31, 2023.

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

The Company’s fixed maturity investment portfolio at June 30, 2024 and December 31, 2023 included $10.20 billion and $7.82 billion, respectively, of residential mortgage-backed securities, including pass-through securities and collateralized mortgage obligations (CMOs), all of which are subject to prepayment risk (either shortening or lengthening of duration). While prepayment risk for securities and its effect on income cannot be fully controlled, particularly when interest rates move dramatically, the Company’s investment strategy generally favors securities that reduce this risk within expected interest rate ranges. Included in the totals at June 30, 2024 and December 31, 2023 were $7.81 billion and $6.23 billion, 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 $2.39 billion and $1.59 billion at June 30, 2024 and December 31, 2023, respectively. Approximately 40% and 33% of the Company’s CMO holdings at June 30, 2024 and December 31, 2023, respectively, were guaranteed by or fully collateralized by securities issued by GNMA, FNMA or FHLMC. The weighted average credit rating of the $1.44 billion and $1.07 billion of non-guaranteed CMO holdings was “Aaa” at both June 30, 2024 and December 31, 2023. The weighted average credit rating of all of the above securities was “Aaa/Aa1” at both June 30, 2024 and December 31, 2023. For further discussion regarding the Company’s investments in residential CMOs, see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investment Portfolio” in the Company’s 2023 Annual Report.

Equity Securities, Real Estate and Short-Term Investments

See note 1 of the notes to the consolidated financial statements in the Company’s 2023 Annual Report for further information about these invested asset classes.

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Other Investments

The Company also invests in private equity, hedge fund and real estate partnerships, and joint ventures. These asset classes have historically provided a higher return than investments in fixed maturities but are subject to more volatility. At June 30, 2024 and December 31, 2023, the carrying value of the Company’s other investments was $4.37 billion and $4.30 billion, respectively.

Investments in private equity, hedge fund and real estate partnerships 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.

CATASTROPHE REINSURANCE COVERAGE

The Company’s catastrophe reinsurance coverage is discussed in the “Reinsurance—Catastrophe Reinsurance” section of “Part I—Item 1—Business” in the Company’s 2023 Annual Report. Except as discussed below, there have been no material changes to the Company’s catastrophe reinsurance coverage from that reported in the Company’s 2023 Annual Report.

Catastrophe Bonds. Consistent with the Company’s indemnity reinsurance agreement with Long Point Re IV Ltd., the attachment point and maximum limit were reset during the second quarter of 2024 to adjust the expected loss of the layer within a predetermined range. For the period from May 25, 2024 through and including May 24, 2025, this treaty provides up to $575 million of coverage, subject to a $2.79 billion retention.

See the “Reinsurance—Catastrophe Reinsurance” section of “Part I—Item 1—Business” in the Company’s 2023 Annual Report for more details, including a discussion of the structure of and accounting for Long Point Re IV.

Other Catastrophe Reinsurance Treaties. Catastrophe reinsurance treaties that renewed on July 1, 2024 were as follows:

Northeast Property Catastrophe Excess-of-Loss Reinsurance Treaty. This treaty provides up to $1.00 billion of coverage, subject to a $2.75 billion retention, for losses arising from a single occurrence and allows for one reinstatement. Coverage is provided on an all perils basis, including but not limited to hurricanes, tornadoes, hail storms, earthquakes, winter storms and/or freeze losses (coverage is included for terrorism events in limited circumstances). Coverage for cyber events applies only in limited circumstances, and coverage for communicable disease and nuclear, biological and radiological terrorism attacks is excluded from this treaty. The treaty covers territory from Virginia to Maine for the period from July 1, 2024 through and including June 30, 2025. Losses from a covered event anywhere in North America and waters contiguous thereto may be used to satisfy the retention. Recoveries under the catastrophe bonds (if any) would be first applied to reduce losses subject to this treaty.
Personal Insurance Hurricane Catastrophe Excess-of-Loss Reinsurance Treaty. This treaty provides up to $500 million part of $1.00 billion of coverage for a single event, subject to a $2.00 billion retention (i.e., for every dollar of loss between $2.00 billion and $3.00 billion this treaty provides 50 cents of coverage), for homeowners property losses arising from a hurricane or tropical storm for the period from July 1, 2024 through and including June 30, 2025. The treaty covers the United States coastal states from Texas to Maine, excluding Florida.
Middle Market Earthquake Catastrophe Excess-of-Loss Reinsurance Treaty. This treaty provides up to $293 million part of $325 million of coverage, subject to a $135 million retention (i.e., for every dollar of loss between $135 million and $460 million this treaty provides 90 cents of coverage), for losses arising from an earthquake, including other ensuing causes of loss such as fire following and sprinkler leakage, incurred under policies written by Technology, Public Sector Services and Commercial Accounts in Business Insurance for the period from July 1, 2024 through and including June 30, 2025. The treaty covers the United States and Canada, their territories, possessions and waters contiguous thereto.
Canadian Property Catastrophe Excess-of-Loss Reinsurance Treaty. This treaty provides coverage for 50% of losses in excess of C$100 million (US$73 million at June 30, 2024), up to C$200 million (US$146 million at June 30, 2024) and for 100% of losses in excess of C$200 million (US$146 million at June 30, 2024), up to C$500 million (US$366 million at June 30, 2024), in each case with respect to the accumulation of net property losses arising out of one occurrence on business written by the Company’s Canadian businesses for the period from July 1, 2024 through and

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

including June 30, 2025. The treaty covers all property written by the Company’s Canadian businesses, including, but not limited to, habitational property, commercial property, inland marine, ocean marine and auto physical damages exposures. Coverage for cyber events applies only in limited circumstances and coverage for communicable disease and nuclear, biological and radiological terrorism attacks is excluded from this treaty.

The Company regularly reviews its catastrophe reinsurance coverage and may adjust such coverage in the future.

REINSURANCE RECOVERABLES

The Company reinsures a portion of the risks it underwrites in order to control its exposure to losses. For a description of the Company’s reinsurance recoverables, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reinsurance Recoverables” in the Company’s 2023 Annual Report.

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


(in millions)	June 30, 2024		December 31, 2023
Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses	$	3,952	$	3,895
Gross structured settlements	2,661		2,707
Mandatory pools and associations	1,636		1,659
Gross reinsurance recoverables	8,249		8,261
Allowance for estimated uncollectible reinsurance	(117)		(118)
Net reinsurance recoverables	$	8,132	$	8,143

Net reinsurance recoverables at June 30, 2024 decreased by $11 million from December 31, 2023.

OUTLOOK

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

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

Overall, the Company expects that retention levels (the amount of expiring premium that renews, before the impact of renewal premium changes) will remain strong by historical standards during the remainder of 2024.

Property and casualty insurance market conditions are expected to remain competitive during the remainder of 2024 for new business. In each of the Company’s business segments, new business generally has less of an impact on underwriting profitability than renewal business, given the volume of new business relative to renewal business. However, in periods of meaningful increases in new business, despite its positive impact on underwriting gains over time, the impact of higher new business levels may negatively impact the combined ratio for a period of time. In periods of meaningful decreases in new business, despite its negative impact on underwriting gains over time, the impact of lower new business levels may positively impact the combined ratio for a period of time.

Effective January 1, 2024, the Company renewed a quota share reinsurance agreement with subsidiaries of Fidelis Insurance Holdings Limited (Fidelis) pursuant to which the Company assumes 20% of the gross written premiums of Fidelis during 2024, subject to a loss ratio cap. The Company’s portion of premiums from Fidelis is reported as part of the International results of Business Insurance. The Company also has a minority investment in Fidelis.

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

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

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

On average for the ten-year period ended December 31, 2023, the Company experienced approximately 40% of its annual catastrophe losses during the second quarter, primarily arising out of severe wind and hail storms, including tornadoes. Hurricanes, wildfires and winter storms tend to happen at other times of the year and can also have a material impact on the Company’s results of operations. Catastrophe losses incurred in a particular quarter in any given year may differ materially from historical experience. In addition, most of the Company’s reinsurance programs renew on January 1 or July 1 of each year, and, therefore, any changes to the availability, cost or coverage terms of such programs will be effective after such dates.

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

It is possible that changes in economic conditions, the supply chain, the labor market and geopolitical tensions, as well as steps taken by federal, state and/or local governments and the Federal Reserve could lead to higher or lower inflation than the Company anticipated, which could in turn lead to an increase or decrease in the Company’s loss costs and the need to strengthen or reduce claims and claim adjustment expense reserves. These impacts of inflation on loss costs and claims and claim adjustment expense reserves could be more pronounced for those lines of business that require a relatively longer period of time to finalize and settle claims for a given accident year and, accordingly, are relatively more inflation sensitive. For a further discussion, see “Part I—Item 1A—Risk Factors—If actual claims exceed our claims and claim adjustment expense reserves, or if changes in the estimated level of claims and claim adjustment expense reserves are necessary, including as a result of, among other things, changes in the legal/tort, regulatory and economic environments in which the Company operates, our financial results could be materially and adversely affected” in the Company’s 2023 Annual Report.

The Company’s results of operations may be impacted by a number of other factors, including an economic slowdown, a recession, financial market volatility, disruption in the banking sector, supply chain disruptions, monetary and fiscal policy measures, heightened geopolitical tensions, fluctuations in interest rates and foreign currency exchange rates, the political and regulatory environment, changes to the U.S. Federal budget and potential changes in tax laws.

Investment Portfolio. The Company expects to continue to focus its investment strategy on maintaining a high-quality investment portfolio and a relatively short average effective duration. The weighted average effective duration of fixed maturities and short-term securities was 4.2 (4.4 excluding short-term securities) at June 30, 2024. From time to time, the Company enters into short positions in U.S. Treasury futures contracts to manage the duration of its fixed maturity portfolio. At June 30, 2024, the Company had no open U.S. Treasury futures contracts. The Company regularly evaluates its investment alternatives and mix. Currently, the majority of the Company’s investments are comprised of a widely diversified portfolio of high-quality, liquid, taxable U.S. government, tax-exempt and taxable U.S. municipal, taxable corporate and U.S. agency mortgage-backed bonds.

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

Approximately 31% of the fixed maturity portfolio is expected to mature over the next three years (including the early redemption of bonds, assuming interest rates (including credit spreads) do not rise significantly by applicable call dates). As a

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

result, the overall yield on and composition of its portfolio could be meaningfully impacted by the types of investments available for reinvestment with the proceeds of maturing bonds.

Net investment income is a material contributor to the Company’s results of operations. Based on our current expectations for the impact of expected higher reinvestment yields on fixed income investments and higher levels of fixed income investments, the Company expects that after-tax net investment income from that portfolio will be approximately $675 million in the third quarter of 2024 and $695 million in the fourth quarter of 2024. This expectation could be impacted by the direction of interest rates and disruptions in global financial markets. Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income or loss from these other investments is generally reflected in the Company’s financial statements on a quarter lag basis. The Company’s net investment income in future periods from its non-fixed income investment portfolio will be impacted, positively or negatively, by the performance of global financial markets.

The Company had net pre-tax realized investment losses of $30 million in the first six months of 2024. Changes in global financial markets could result in net realized investment gains or losses in the Company’s investment portfolio.

The Company had a net pre-tax unrealized investment loss of $5.04 billion ($3.98 billion after-tax) in its fixed maturity investment portfolio at June 30, 2024, compared to $3.97 billion ($3.13 billion after-tax) at December 31, 2023. The net unrealized investment loss is primarily due to the impact of movements in interest rates. The increase in the net unrealized investment loss in the first six months of 2024 was due to increases in interest rates. While the Company does not attempt to predict future interest rate movements, a rising interest rate environment reduces the market value of fixed maturity investments and, therefore, reduces shareholders’ equity, and a declining interest rate environment has the opposite effects. The net unrealized loss discussed above is considered temporary in nature as it is not due to credit impairments, there is no impact on expected contractual cash flows from fixed maturities, and the Company generally holds its fixed maturity investments to maturity. In addition, given the temporary nature of net unrealized losses combined with the Company’s strong operating cash flows (which include income received on investments) and the proceeds received upon maturity of the investments, the net unrealized investment loss is not expected to meaningfully impact the Company’s assessment of capital adequacy or liquidity. Equity securities, which include common and non-redeemable preferred stocks, are reported at fair value with changes in fair value recognized in net income.

Additionally, disruptions in global financial markets could also impact the market value of the Company’s investment portfolio. The Company’s investment portfolio has benefited from certain tax exemptions (primarily those related to interest from municipal bonds) and certain other tax laws, including, but not limited to, those governing dividends-received deductions and tax credits (such as foreign tax credits). Changes in these laws could adversely impact the value of the Company’s investment portfolio. See “Our businesses are heavily regulated by the states and countries in which we conduct business, including licensing, market conduct and financial supervision, and changes in regulation, including changes in tax regulation, may reduce our profitability and limit our growth” included in “Part I—Item 1A—Risk Factors” in the Company’s 2023 Annual Report.

For further discussion of the Company’s investment portfolio, see “Investment Portfolio.” For a discussion of the risks to the Company’s business during or following a financial market disruption and risks to the Company’s investment portfolio, see the risk factors entitled “During or following a period of financial market disruption or an economic downturn, our business could be materially and adversely affected” and “Our investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses” included in “Part I—Item 1A—Risk Factors” in the Company’s 2023 Annual Report. For a discussion of the risks to the Company’s investments from foreign currency exchange rate fluctuations, see the risk factor entitled “We are subject to additional risks associated with our business outside the United States” included in “Part I—Item 1A—Risk Factors” in the Company’s 2023 Annual Report and see “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk-Foreign Currency Exchange Rate Risk” in the Company’s 2023 Annual Report.

Capital Position. The Company believes it has a strong capital position and, as part of its ongoing efforts to create shareholder value, expects to continue to return capital not needed to support its business operations to its shareholders, subject to the considerations described below. The Company expects that, generally over time, the combination of dividends to common shareholders and common share repurchases will likely not exceed net income. The Company also expects that to the extent that it continues to grow premium volumes, the level of capital to support the Company’s financial strength ratings will also increase, and accordingly, the amount of capital returned to shareholders relative to earnings would be somewhat less than it otherwise would have been absent the growth in premium volumes. The timing and actual number of shares to be repurchased in the future will depend on a variety of additional factors, including the Company’s financial position, earnings, share price,

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

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 of 2022) and other factors. For information regarding the Company’s common share repurchases in 2024, see “Liquidity and Capital Resources” herein.

As a result of the Company’s business outside of the United States, primarily in Canada, the United Kingdom (including Lloyd’s), the Republic of Ireland and in Brazil through a joint venture, the Company’s capital is also subject to the effects of changes in foreign currency exchange rates. Strengthening of the U.S. dollar in comparison to other currencies could result in a reduction in shareholders’ equity, while a weakening of the U.S. dollar in comparison to other currencies could result in an increase in shareholders’ equity. For additional discussion of the Company’s foreign exchange market risk exposure, see “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in the Company’s 2023 Annual Report.

Many of the statements in this “Outlook” section and in “Liquidity and Capital Resources” are forward-looking statements, which are subject to risks and uncertainties that are often difficult to predict and beyond the Company’s control. Actual results could differ materially from those expressed or implied by such forward-looking statements. Further, such forward-looking statements speak only as of the date of this report and the Company undertakes no obligation to update them. See “Part II—Item 7—Forward-Looking Statements.” For a discussion of potential risks and uncertainties that could impact the Company’s results of operations or financial position, see “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein and “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2023 Annual Report, in each case as updated by the Company’s periodic filings with the SEC.

LIQUIDITY AND CAPITAL RESOURCES

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

Operating Company Liquidity. The liquidity requirements of the Company’s insurance subsidiaries are met primarily by funds generated from premiums, fees, income received on investments and investment maturities. The Company believes that cash flows from operating activities are sufficient to meet the future liquidity requirements of its insurance subsidiaries. Additionally, investment maturities provide a significant level of available liquidity without requiring the sale of investment securities. For further discussion of operating company liquidity, see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in the Company’s 2023 Annual Report.

Holding Company Liquidity. TRV’s liquidity requirements primarily include shareholder dividends, debt servicing, common share repurchases and, from time to time, contributions to its qualified domestic pension plan. At June 30, 2024, TRV held total cash and short-term invested assets in the United States aggregating $1.73 billion and having a weighted average maturity of 43 days. TRV has established a holding company liquidity target equal to its estimated annual pre-tax interest expense and common shareholder dividends (currently approximately $1.34 billion). TRV’s holding company liquidity of $1.73 billion at June 30, 2024 exceeded this target, and it is the opinion of the Company’s management that these assets are sufficient to meet TRV’s current liquidity requirements.

TRV is not dependent on dividends or other forms of repatriation from its foreign operations to support its liquidity needs. The undistributed earnings of the Company’s foreign operations are intended to be permanently reinvested in those operations, and such earnings were not material to the Company’s financial position or liquidity at June 30, 2024.

TRV has a shelf registration statement filed with the Securities and Exchange Commission (SEC) that expires on June 8, 2025 which permits it to issue securities from time to time. TRV also has a $1.0 billion credit facility with a syndicate of financial institutions that expires on June 15, 2027. At June 30, 2024, the Company had $100 million of commercial paper outstanding. TRV is not reliant on its commercial paper program to meet its operating cash flow needs. The Company has no senior notes or junior subordinated debentures maturing until April 2026, at which time $200 million of senior notes will mature.

The Company utilized uncollateralized letters of credit issued by major banks with an aggregate limit of $260 million to provide a portion of the capital needed to support its obligations at Lloyd’s at June 30, 2024. If uncollateralized letters of credit are not available at a reasonable price or at all in the future, the Company can collateralize these letters of credit or may have to seek alternative means of supporting its obligations at Lloyd’s, which could include utilizing holding company funds on hand.

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Operating Activities

Net cash provided by operating activities in the first six months of 2024 and 2023 was $3.14 billion and $2.56 billion, respectively. The increase in cash flows in the first six months of 2024 primarily reflected the impacts of higher levels of cash received for premiums, partially offset by higher levels of payments for income taxes, commissions and general and administrative expenses.

Investing Activities

Net cash used in investing activities in the first six months of 2024 and 2023 was $2.18 billion and $2.31 billion, respectively. The Company’s consolidated total investments at June 30, 2024 increased by $701 million, or 1%, over year-end 2023, primarily reflecting the impacts of (i) net cash flows provided by operating activities, partially offset by (ii) net cash used in financing activities, (iii) higher net unrealized investment losses due to the impact of higher interest rates during the first six months of 2024 and (iv) the cost of acquiring Corvus.

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

Financing Activities

Net cash used in financing activities in the first six months of 2024 and 2023 was $871 million and $455 million, respectively. The totals in both 2024 and 2023 reflected common share repurchases and dividends paid to shareholders, partially offset by the net proceeds from employee stock option exercises. Common share repurchases in the first six months of 2024 and 2023 were $610 million and $856 million, respectively.

Dividends. Dividends paid to shareholders were $473 million and $447 million in the first six months of 2024 and 2023, respectively. The declaration and payment of future dividends to holders of the Company’s common stock will be at the discretion of the Company’s Board of Directors and will depend upon many factors, including the Company’s financial position, earnings, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints and other factors as the Board of Directors deems relevant. Dividends will be paid by the Company only if declared by its Board of Directors out of funds legally available, subject to any other restrictions that may be applicable to the Company. On July 19, 2024, the Company announced that it declared a regular quarterly dividend of $1.05 per share, payable September 30, 2024 to shareholders of record on September 10, 2024.

Share Repurchases. The Company’s Board of Directors has approved common share repurchase authorizations under which repurchases may be made from time to time in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, in private transactions or otherwise. The authorizations do not have a stated expiration date. The Company expects that, generally over time, the combination of dividends to common shareholders and common share repurchases will likely not exceed net income. The Company also expects that to the extent that it continues to grow premium volumes, the amount of capital returned to shareholders relative to earnings would be somewhat less than it otherwise would have been absent the growth in premium volumes. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, changes in levels of written premiums, funding of the Company’s qualified pension plan, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions, changes in tax laws (including the Inflation Reduction Act of 2022) and other factors. During the three and six months ended June 30, 2024, the Company repurchased 1.1 million and 2.3 million common shares, respectively, under its share repurchase authorizations for a total cost of $250 million and $500 million, respectively. The average cost per share repurchased was $211.22 and $214.22, respectively. On April 19, 2023, the Board of Directors approved a share repurchase authorization that added $5.0 billion of repurchase capacity to the $1.60 billion of capacity remaining at that date. At June 30, 2024, the Company had $5.54 billion of capacity remaining under its share repurchase authorizations. Included in the cost of treasury stock acquired pursuant to common share repurchases is the 1% excise tax imposed as part of the Inflation Reduction Act of 2022.

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Capital Resources. Capital resources reflect the overall financial strength of the Company and its ability to borrow funds at competitive rates and raise new capital to meet its needs. The following table summarizes the components of the Company’s capital structure at June 30, 2024 and December 31, 2023.


(in millions)	June 30, 2024		December 31, 2023
Debt:
Short-term	$	100	$	100
Long-term	8,004		8,004
Net unamortized fair value adjustments and debt issuance costs	(72)		(73)
Total debt	8,032		8,031
Shareholders’ equity:
Common stock and retained earnings, less treasury stock	30,272		29,392
Accumulated other comprehensive loss	(5,410)		(4,471)
Total shareholders’ equity	24,862		24,921
Total capitalization	$	32,894	$	32,952

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


(dollars in millions)	June 30, 2024			December 31, 2023
Total capitalization	$	32,894		$	32,952
Less: net unrealized losses on investments, net of taxes, included in shareholders’ equity	(3,976)			(3,129)
Total capitalization excluding net unrealized losses on investments, net of taxes, included in shareholders’ equity	$	36,870		$	36,081
Debt-to-total capital ratio	24.4		%	24.4		%
Debt-to-total capital ratio excluding net unrealized losses on investments, net of taxes, included in shareholders’ equity	21.8		%	22.3		%

The debt-to-total capital ratio excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders’ equity, is calculated by dividing (a) debt by (b) total capitalization excluding net unrealized gains and losses on investments, net of taxes, included in shareholders’ equity. Net unrealized gains and losses on investments can be significantly impacted by both interest rate movements and other economic factors. Accordingly, in the opinion of the Company’s management, the debt-to-total capital ratio calculated on this basis provides another useful metric for investors to understand the Company’s financial leverage position. The Company’s ratio of debt-to-total capital excluding after-tax net unrealized investment losses included in shareholders’ equity of 21.8% at June 30, 2024 was within the Company’s target range of 15% to 25%.

RATINGS

Ratings are an important factor in assessing the Company’s competitive position in the insurance industry. The Company receives ratings from the following major rating agencies: A.M. Best Company (A.M. Best), Fitch Ratings (Fitch), Moody’s Investors Service (Moody’s) and S&P Global Ratings (S&P). The following rating agency actions were taken with respect to the Company since April 17, 2024, the date on which the Company’s Form 10-Q for the quarter ended March 31, 2024 was filed with the SEC. For additional discussion of ratings, see “Part I—Item 1—Business—Ratings” in the Company’s 2023 Annual Report.

*•*On April 22, 2024, Moody’s affirmed all ratings of the Company. The outlook for all ratings is stable.

*•*On June 18, 2024, S&P affirmed all ratings of the Company. The outlook for all ratings is stable.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

CRITICAL ACCOUNTING ESTIMATES

For a description of the Company’s critical accounting estimates, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in the Company’s 2023 Annual Report. The Company considers its most significant accounting estimates to be those applied to claims and claim adjustment expense reserves and related reinsurance recoverables, and impairments of investments, goodwill and other intangible assets. Except as shown in the table below, there have been no material changes to the Company’s critical accounting estimates since December 31, 2023.

Claims and Claim Adjustment Expense Reserves

The table below displays the Company’s gross claims and claim adjustment expense reserves by product line. Because establishment of claims and claim adjustment expense reserves is an inherently uncertain process involving estimates and the application of judgment, currently established claims and claim adjustment expense reserves may change. The Company reflects adjustments to the reserves in the results of operations in the period the estimates are changed. These changes in estimates could result in income statement charges that could be material to the Company’s operating results in future periods. In particular, a portion of the Company’s gross claims and claim adjustment expense reserves (totaling $2.03 billion at June 30, 2024) are for asbestos and environmental claims and related litigation. Asbestos and environmental reserves are included in the General liability, Commercial multi-peril and International and other lines in the summary table below. While the ongoing review of asbestos and environmental claims and associated liabilities considers the inconsistencies of court decisions as to coverage, plaintiffs’ expanded theories of liability and the risks inherent in complex litigation and other uncertainties, in the opinion of the Company’s management, it is possible that the outcome of the continued uncertainties regarding these claims could result in liability in future periods that differs from current insurance reserves by an amount that could be material to the Company’s future operating results. Asbestos and environmental reserves are discussed separately; see “Asbestos Claims and Litigation”, “Environmental Claims and Litigation” and “Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves” in this report.

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


	June 30, 2024						December 31, 2023
(in millions)	Case		IBNR		Total		Case		IBNR		Total
General liability	$	5,657	$	10,909	$	16,566	$	5,658	$	10,214	$	15,872
Commercial property	1,370		432		1,802		1,447		281		1,728
Commercial multi-peril	2,852		3,346		6,198		2,869		2,905		5,774
Commercial automobile	2,720		2,997		5,717		2,661		2,773		5,434
Workers’ compensation	9,977		9,067		19,044		10,004		9,203		19,207
Fidelity and surety	243		512		755		265		466		731
Personal automobile	2,295		2,528		4,823		2,245		2,460		4,705
Personal homeowners and other	1,234		2,580		3,814		1,217		2,004		3,221
International and other	2,576		2,557		5,133		2,620		2,329		4,949
Property-casualty	28,924		34,928		63,852		28,986		32,635		61,621
Accident and health	5		—		5		6		—		6
Claims and claim adjustment expense reserves	$	28,929	$	34,928	$	63,857	$	28,992	$	32,635	$	61,627

The $2.23 billion increase in gross claims and claim adjustment expense reserves since December 31, 2023 primarily reflected the impacts of (i) catastrophe losses in the first six 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 six months of 2024 and (v) net favorable prior year reserve development.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

See note 1 of the notes to the unaudited consolidated financial statements contained in this quarterly report and in the Company’s 2023 Annual Report for a discussion of recently issued accounting pronouncements.

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

FORWARD-LOOKING STATEMENTS

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

the Company’s outlook, the impact of trends on its business and its future results of operations and financial condition (including, among other things, anticipated premium volume, premium rates, renewal premium changes, underwriting margins and underlying underwriting margins, net and core income, investment income and performance, loss costs, return on equity, core return on equity and expected current returns, and combined ratios and underlying combined ratios);
the impact of legislative or regulatory actions or court decisions;
share repurchase plans;
future pension plan contributions;
the sufficiency of the Company’s reserves, including asbestos;
the impact of emerging claims issues as well as other insurance and non-insurance litigation;
the cost and availability of reinsurance coverage;
catastrophe losses and modeling, including statements about probabilities or likelihood of exceedance;
the impact of investment (including changes in interest rates), economic (including inflation, changes in tax laws, changes in commodity prices and fluctuations in foreign currency exchange rates) and underwriting market conditions;
the Company’s approach to managing its investment portfolio;
the impact of changing climate conditions;
strategic and operational initiatives to improve profitability and competitiveness;

*•*the Company’s competitive advantages and innovation agenda, including executing on that agenda with respect to artificial intelligence;

*•*the Company’s cybersecurity policies and practices;

new product offerings;
the impact of developments in the tort environment, such as increased attorney involvement in insurance claims;
the impact of developments in the geopolitical environment; and

*•*the impact of the Company’s acquisition of Corvus Insurance Holdings, Inc.

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

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

Insurance-Related Risks

high levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas and changing climate conditions, could materially and adversely affect the Company’s results of operations, its financial position and/or liquidity, and could adversely impact the Company’s ratings, the Company’s ability to raise capital and the availability and cost of reinsurance;
if actual claims exceed the Company’s claims and claim adjustment expense reserves, or if changes in the estimated level of claims and claim adjustment expense reserves are necessary, including as a result of, among other things, changes in the legal/tort, regulatory and economic environments in which the Company operates, including increased inflation, the Company’s financial results could be materially and adversely affected;
the Company’s business could be harmed because of its potential exposure to asbestos and environmental claims and related litigation;
the Company is exposed to, and may face adverse developments involving, mass tort claims such as those relating to exposure to potentially harmful products or substances; and

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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

FORWARD-LOOKING STATEMENTS, Continued

Financial, Economic and Credit Risks

during or following a period of financial market disruption or an economic downturn, the Company’s business could be materially and adversely affected;
the Company’s investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses;
the Company may not be able to collect all amounts due to it from reinsurers, reinsurance coverage may not be available to the Company in the future at commercially reasonable rates or at all and the Company is exposed to credit risk related to its structured settlements;
the Company is exposed to credit risk in certain of its insurance operations and with respect to certain guarantee or indemnification arrangements that it has with third parties;
a downgrade in the Company’s claims-paying and financial strength ratings could adversely impact the Company’s business volumes, adversely impact the Company’s ability to access the capital markets and increase the Company’s borrowing costs; and
the inability of the Company’s insurance subsidiaries to pay dividends to the Company’s holding company in sufficient amounts would harm the Company’s ability to meet its obligations, pay future shareholder dividends and/or make future share repurchases.

Business and Operational Risks

the intense competition that the Company faces, including with respect to attracting and retaining employees, and the impact of innovation, technological change and changing customer preferences on the insurance industry and the markets in which it operates, could harm its ability to maintain or increase its business volumes and its profitability;
disruptions to the Company’s relationships with its independent agents and brokers or the Company’s inability to manage effectively a changing distribution landscape could adversely affect the Company;
the Company’s efforts to develop new products or services, expand in targeted markets, improve business processes and workflows or make acquisitions may not be successful and may create enhanced risks;
the Company may be adversely affected if its pricing and capital models provide materially different indications than actual results;
loss of or significant restrictions on the use of particular types of underwriting criteria, such as credit scoring, or other data or methodologies, in the pricing and underwriting of the Company’s products could reduce the Company’s future profitability;
the Company is subject to additional risks associated with its business outside the United States; and

*•*future pandemics (including new variants of COVID-19) could materially affect the Company’s results of operations, financial position and/or liquidity.

Technology and Intellectual Property Risks

if, as a result of cyber attacks (the risk of which could be exacerbated by geopolitical tensions) or otherwise, the Company experiences difficulties with technology, data and network security, outsourcing relationships or cloud-based technology, the Company’s ability to conduct its business could be negatively impacted;
the Company’s business success and profitability depend, in part, on effective information technology systems and on continuing to develop and implement improvements in technology, including with respect to artificial intelligence, particularly as its business processes become more digital; and
intellectual property is important to the Company’s business, and the Company may be unable to protect and enforce its own intellectual property or the Company may be subject to claims for infringing the intellectual property of others.

Regulatory and Compliance Risks

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

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

In addition, the Company’s share repurchase plans depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, changes in levels of written premiums, funding of the Company’s qualified pension plan, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

FORWARD-LOOKING STATEMENTS, Continued

acquisitions and related financings), market conditions, changes in tax laws (including the Inflation Reduction Act of 2022) and other factors.

The Company’s forward-looking statements speak only as of the date of this report or as of the date they are made, and the Company undertakes no obligation to update forward-looking statements. For a more detailed discussion of these factors, see the information under the captions “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein and “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2023 Annual Report, in each case as updated by the Company’s periodic filings with the SEC.

WEBSITE AND SOCIAL MEDIA DISCLOSURE

The Company may use its website and/or social media outlets, such as Facebook and X, as distribution channels of material company information. Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s website at investor.travelers.com, its Facebook page at facebook.com/travelers and its X account (@Travelers) at twitter.com/Travelers. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Notifications” section under the “Investor Toolkit” section at investor.travelers.com.

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