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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________
FORM 10-Q
_________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
___________________________________________________________________
 
Commission file number: 001-10898
___________________________________________________________________
The Travelers Companies, Inc.
(Exact name of registrant as specified in its charter)
 ____________________________________________________________________
Minnesota 41-0518860
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
485 Lexington Avenue
New York, NY 10017
(Address of principal executive offices) (Zip Code)
 (917) 778-6000
(Registrant’s telephone number, including area code)
_________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, without par value TRV New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        Yes ý    No o 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).         
Yes ý    No o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerýAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes    No ý 
The number of shares of the Registrant’s Common Stock, without par value, outstanding at April 14, 2023 was 230,976,565.




The Travelers Companies, Inc.
 
Quarterly Report on Form 10-Q
 
For Quarterly Period Ended March 31, 2023
_________________________________________________________
 
TABLE OF CONTENTS
 
  Page
  
   
Item 1. 
   
 
Consolidated Statement of Income (Unaudited) — Three Months Ended March 31, 2023 and 2022
   
 
Consolidated Statement of Comprehensive Income (Loss) (Unaudited) — Three Months Ended March 31, 2023 and 2022
   
 
Consolidated Balance Sheet — March 31, 2023 (Unaudited) and December 31, 2022
   
 
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) — Three Months Ended March 31, 2023 and 2022
   
 
Consolidated Statement of Cash Flows (Unaudited) — Three Months Ended March 31, 2023 and 2022
   
 
   
Item 2.
   
Item 3.
   
Item 4.
   
  
   
Item 1.
   
Item 1A.
   
Item 2.
   
Item 5.
   
Item 6.
   
 
   

2


PART 1 — FINANCIAL INFORMATION
 
Item 1.  FINANCIAL STATEMENTS
 
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(in millions, except per share amounts)
 
Three Months Ended
March 31,
20232022
Revenues
Premiums$8,854 $8,014 
Net investment income663 637 
Fee income106 103 
Net realized investment gains (losses)6 (23)
Other revenues75 78 
Total revenues9,704 8,809 
Claims and expenses
Claims and claim adjustment expenses5,959 5,039 
Amortization of deferred acquisition costs1,462 1,310 
General and administrative expenses1,267 1,191 
Interest expense88 87 
Total claims and expenses8,776 7,627 
Income before income taxes928 1,182 
Income tax expense (benefit)(47)164 
Net income$975 $1,018 
Net income per share
Basic$4.18 $4.20 
Diluted$4.13 $4.15 
Weighted average number of common shares outstanding
Basic231.7 240.9 
Diluted234.4 243.7 
Cash dividends declared per common share$0.93 $0.88 

 









The accompanying notes are an integral part of the consolidated financial statements.
3


THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(in millions)
 
Three Months Ended
March 31,
20232022
Net income$975 $1,018 
Other comprehensive income (loss):
Changes in net unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income1,308 (4,829)
Having credit losses recognized in the consolidated statement of income (1)
Net changes in benefit plan assets and obligations(3)11 
Net changes in unrealized foreign currency translation37 
Other comprehensive income (loss) before income taxes1,342 (4,817)
Income tax expense (benefit)283 (1,022)
Other comprehensive income (loss), net of taxes1,059 (3,795)
Comprehensive income (loss)$2,034 $(2,777)
 


































The accompanying notes are an integral part of the consolidated financial statements.
4


THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
 
March 31,
2023
December 31,
2022
(Unaudited)
Assets
Fixed maturities, available for sale, at fair value (amortized cost $77,827 and $77,380; allowance for expected credit losses of $4 and $3)
$72,914 $71,160 
Equity securities, at fair value (cost $592 and $747)
649 807 
Real estate investments953 952 
Short-term securities3,243 3,470 
Other investments4,276 4,065 
Total investments82,035 80,454 
Cash767 799 
Investment income accrued594 650 
Premiums receivable (net of allowance for expected credit
    losses of $77 and $77)
9,483 8,922 
Reinsurance recoverables (net of allowance for estimated uncollectible
  reinsurance of $131 and $132)
8,091 8,063 
Ceded unearned premiums1,360 1,024 
Deferred acquisition costs3,005 2,836 
Deferred taxes1,568 1,877 
Contractholder receivables (net of allowance for expected credit
   losses of $19 and $17)
3,598 3,579 
Goodwill3,959 3,952 
Other intangible assets285 287 
Other assets3,607 3,274 
Total assets$118,352 $115,717 
Liabilities  
Claims and claim adjustment expense reserves$59,064 $58,649 
Unearned premium reserves19,143 18,240 
Contractholder payables3,617 3,596 
Payables for reinsurance premiums761 419 
Debt7,292 7,292 
Other liabilities5,423 5,961 
Total liabilities95,300 94,157 
Shareholders’ equity  
Common stock (1,750.0 shares authorized; 231.0 and 232.1 shares issued and outstanding)
24,703 24,565 
Retained earnings44,273 43,516 
Accumulated other comprehensive loss(5,386)(6,445)
Treasury stock, at cost (556.0 and 553.5 shares)
(40,538)(40,076)
Total shareholders’ equity23,052 21,560 
Total liabilities and shareholders’ equity$118,352 $115,717 





The accompanying notes are an integral part of the consolidated financial statements.
5


THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(in millions)
 
Three Months Ended
March 31,
20232022
Common stock  
Balance, beginning of period$24,565 $24,154 
Employee share-based compensation68 135 
Compensation amortization under share-based plans and other changes
70 59 
Balance, end of period24,703 24,348 
Retained earnings  
Balance, beginning of period43,516 41,555 
Net income975 1,018 
Dividends(218)(214)
Balance, end of period44,273 42,359 
Accumulated other comprehensive income (loss), net of tax  
Balance, beginning of period(6,445)1,193 
Other comprehensive income (loss)1,059 (3,795)
Balance, end of period(5,386)(2,602)
Treasury stock, at cost  
Balance, beginning of period(40,076)(38,015)
Treasury stock acquired — share repurchase authorizations(400)(500)
Net shares acquired related to employee share-based compensation plans
(62)(59)
Balance, end of period(40,538)(38,574)
Total shareholders’ equity$23,052 $25,531 
Common shares outstanding  
Balance, beginning of period232.1 241.2 
Treasury stock acquired — share repurchase authorizations(2.2)(2.9)
Net shares issued under employee share-based compensation plans
1.1 1.7 
Balance, end of period231.0 240.0 
 











The accompanying notes are an integral part of the consolidated financial statements.
6


THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(in millions)
Three Months Ended March 31,
20232022
Cash flows from operating activities  
Net income$975 $1,018 
Adjustments to reconcile net income to net cash provided by operating activities:  
Net realized investment (gains) losses(6)23 
Depreciation and amortization204 234 
Deferred federal income tax expense32 40 
Amortization of deferred acquisition costs1,462 1,310 
Equity in income from other investments(30)(118)
Premiums receivable(557)(509)
Reinsurance recoverables(24)(282)
Deferred acquisition costs(1,629)(1,413)
Claims and claim adjustment expense reserves381 679 
Unearned premium reserves893 727 
Other(689)(443)
Net cash provided by operating activities1,012 1,266 
Cash flows from investing activities  
Proceeds from maturities of fixed maturities1,538 1,879 
Proceeds from sales of investments:  
Fixed maturities2,364 1,044 
Equity securities28 63 
Other investments64 81 
Purchases of investments:  
Fixed maturities(4,335)(4,409)
Equity securities(34)(63)
Real estate investments(14)(9)
Other investments(139)(135)
Net sales of short-term securities228 367 
Securities transactions in the course of settlement(35)613 
Acquisition, net of cash acquired (4)
Other(120)(84)
Net cash used in investing activities(455)(657)
Cash flows from financing activities  
Treasury stock acquired — share repurchase authorizations(398)(500)
Treasury stock acquired — net employee share-based compensation(62)(59)
Dividends paid to shareholders(215)(213)
Issuance of common stock — employee share options82 159 
Net cash used in financing activities(593)(613)
Effect of exchange rate changes on cash4 (5)
Net decrease in cash(32)(9)
Cash at beginning of year799 761 
Cash at end of period$767 $752 
Supplemental disclosure of cash flow information  
Income taxes paid (received)$(16)$10 
Interest paid$60 $59 

The accompanying notes are an integral part of the consolidated financial statements.
7

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.     BASIS OF PRESENTATION AND ACCOUNTING POLICIES
 
Basis of Presentation
 
The interim consolidated financial statements include the accounts of The Travelers Companies, Inc. (together with its subsidiaries, the Company). These financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP) and are unaudited.  In the opinion of the Company’s management, all adjustments necessary for a fair presentation have been reflected.  Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted.  All material intercompany transactions and balances have been eliminated.  The accompanying interim consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the Company’s 2022 Annual Report).
 
The preparation of the interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period.  Actual results could differ from those estimates.

Adoption of Accounting Standards

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

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

2.    SEGMENT INFORMATION

Nature of Operations
 
The Company’s results are reported in the following three business segments — Business Insurance, Bond & Specialty Insurance and Personal Insurance. These segments reflect the manner in which the Company’s businesses are currently managed and represent an aggregation of products and services based on the type of customer, how the business is marketed and the manner in which risks are underwritten. For more information regarding the Company’s nature of operations, see the “Nature of Operations section of note 1 of the notes to the consolidated financial statements in the Company’s 2022 Annual Report.
8

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2.    SEGMENT INFORMATION, Continued
The following tables summarize the components of the Company’s revenues, income and total assets by reportable business segments:
(For the three months ended March 31, in millions) Business
Insurance
Bond & Specialty
Insurance
Personal
Insurance
Total
Reportable
Segments
2023    
Premiums$4,477 $875 $3,502 $8,854 
Net investment income473 73 117 663 
Fee income99  7 106 
Other revenues47 5 23 75 
Total segment revenues (1)
$5,096 $953 $3,649 $9,698 
Segment income (1)
$756 $207 $83 $1,046 
2022    
Premiums$4,071 $820 $3,123 $8,014 
Net investment income468 59 110 637 
Fee income96 — 103 
Other revenues53 21 78 
Total segment revenues (1)
$4,688 $883 $3,261 $8,832 
Segment income (1)
$669 $217 $225 $1,111 
________________________________________________________
(1)Segment revenues for reportable business segments exclude net realized investment gains (losses) and revenues included in “interest expense and other.” Segment income for reportable business segments excludes the after-tax impact of net realized investment gains (losses) and income (loss) from “interest expense and other.”


9

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2.    SEGMENT INFORMATION, Continued
Business Segment Reconciliations
 Three Months Ended
March 31,
(in millions)20232022
Revenue reconciliation  
Earned premiums  
Business Insurance:  
Domestic:  
Workers’ compensation$850 $830 
Commercial automobile761 713 
Commercial property709 608 
General liability760 688 
Commercial multi-peril1,100 967 
Other18 17 
Total Domestic4,198 3,823 
International279 248 
Total Business Insurance4,477 4,071 
Bond & Specialty Insurance:  
Domestic:  
Fidelity and surety306 274 
General liability398 373 
Other54 55 
Total Domestic758 702 
International117 118 
Total Bond & Specialty Insurance875 820 
Personal Insurance:  
Domestic:  
Automobile1,624 1,458 
Homeowners and Other1,724 1,496 
Total Domestic3,348 2,954 
International154 169 
Total Personal Insurance3,502 3,123 
Total earned premiums8,854 8,014 
Net investment income663 637 
Fee income106 103 
Other revenues75 78 
Total segment revenues9,698 8,832 
Net realized investment gains (losses)6 (23)
Total revenues$9,704 $8,809 
Income reconciliation, net of tax  
Total segment income$1,046 $1,111 
Interest Expense and Other (1)
(76)(74)
Core income970 1,037 
Net realized investment gains (losses)5 (19)
Net income$975 $1,018 
_________________________________________________________
(1)The primary component of Interest Expense and Other was after-tax interest expense of $70 million and $69 million for the three months ended March 31, 2023 and 2022, respectively.
10

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2.    SEGMENT INFORMATION, Continued
(in millions)March 31,
2023
December 31,
2022
Asset reconciliation  
Business Insurance$88,468 $86,522 
Bond & Specialty Insurance10,539 10,119 
Personal Insurance18,514 18,275 
Total assets by reportable segment117,521 114,916 
Other assets (1)
831 801 
Total consolidated assets$118,352 $115,717 
 _________________________________________________________
(1)The primary components of other assets at both March 31, 2023 and December 31, 2022 were the over-funded benefit plan assets related to the Company’s qualified domestic pension plan and other intangible assets.

3.      INVESTMENTS
 
Fixed Maturities
 
The amortized cost and fair value of investments in fixed maturities classified as available for sale were as follows:
 Amortized CostAllowance for Expected Credit LossesGross UnrealizedFair Value
(at March 31, 2023, in millions)GainsLosses
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$6,617 $ $18 $283 $6,352 
Obligations of U.S. states, municipalities and political subdivisions:
Local general obligation18,866  74 1,430 17,510 
Revenue10,321  51 709 9,663 
State general obligation1,198  5 68 1,135 
Pre-refunded1,710  15  1,725 
Total obligations of U.S. states, municipalities and political subdivisions32,095  145 2,207 30,033 
Debt securities issued by foreign governments1,051   41 1,010 
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
3,024  20 180 2,864 
Corporate and all other bonds35,040 4 71 2,452 32,655 
Total$77,827 $4 $254 $5,163 $72,914 

11

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3.    INVESTMENTS, Continued
 Amortized CostAllowance for Expected Credit LossesGross UnrealizedFair Value
(at December 31, 2022, in millions)GainsLosses
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$5,798 $— $$363 $5,438 
Obligations of U.S. states, municipalities and political subdivisions: 
Local general obligation19,615 — 33 1,825 17,823 
Revenue11,076 — 29 907 10,198 
State general obligation1,104 — 88 1,019 
Pre-refunded2,323 — 17 2,339 
Total obligations of U.S. states, municipalities and political subdivisions34,118 — 82 2,821 31,379 
Debt securities issued by foreign governments1,049 — — 55 994 
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
2,178 — 13 200 1,991 
Corporate and all other bonds34,237 37 2,913 31,358 
Total$77,380 $$135 $6,352 $71,160 
 
Pre-refunded bonds of $1.73 billion and $2.34 billion at March 31, 2023 and December 31, 2022, respectively, were bonds for which U.S. states or municipalities have established irrevocable trusts that are almost exclusively comprised of U.S. Treasury securities and obligations of U.S. government and government agencies and authorities.  These trusts were created to fund the payment of principal and interest due under the bonds.
 
Proceeds from the sales of fixed maturities classified as available for sale were $2.36 billion and $1.04 billion during the three months ended March 31, 2023 and 2022, respectively. Gross gains of $17 million and $5 million and gross losses of $27 million and $2 million were realized on those sales during the three months ended March 31, 2023 and 2022, respectively.
 
Equity Securities
 
The cost and fair value of investments in equity securities were as follows:
  
(at March 31, 2023, in millions)CostGross GainsGross LossesFair Value
Common stock$549 $79 $25 $603 
Non-redeemable preferred stock43 3  46 
Total$592 $82 $25 $649 

 
(at December 31, 2022, in millions)CostGross GainsGross LossesFair Value
Common stock$706 $89 $32 $763 
Non-redeemable preferred stock41 — 44 
Total$747 $92 $32 $807 
 
For the three months ended March 31, 2023 and 2022, the Company recognized $17 million and $(14) million of net gains (losses) on equity securities still held as of March 31, 2023 and 2022, respectively.

12

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3.    INVESTMENTS, Continued
Unrealized Investment Losses
 
The following tables summarize, for all fixed maturities classified as available for sale in an unrealized loss position at March 31, 2023 and December 31, 2022, the aggregate fair value and gross unrealized loss by the length of time those securities have been continuously in an unrealized loss position.  The fair value amounts reported in the tables are estimates that are prepared using the process described in note 4 herein and in note 4 of the notes to the consolidated financial statements in the Company’s 2022 Annual Report.  The Company also relies upon estimates of several factors in its review and evaluation of individual investments, using the process described in note 1 of the notes to the consolidated financial statements in the Company’s 2022 Annual Report to determine whether a credit loss impairment exists.

 Less than 12 months12 months or longerTotal
(at March 31, 2023, in millions)Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fixed maturities      
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$2,056 $29 $1,969 $254 $4,025 $283 
Obligations of U.S. states, municipalities and political subdivisions7,701 182 10,534 2,025 18,235 2,207 
Debt securities issued by foreign governments
284 3 668 38 952 41 
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
875 27 1,081 153 1,956 180 
Corporate and all other bonds14,709 441 15,098 2,011 29,807 2,452 
Total $25,625 $682 $29,350 $4,481 $54,975 $5,163 
 
 Less than 12 months12 months or longerTotal
(at December 31, 2022, in millions)Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fixed maturities  
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$2,835 $100 $1,679  $263 $4,514 $363 
Obligations of U.S. states, municipalities and political subdivisions19,251 1,975 3,134  846 22,385 2,821 
Debt securities issued by foreign governments
604 22 367  33 971 55 
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
1,414 128 316  72 1,730 200 
Corporate and all other bonds24,080 1,635 6,096  1,278 30,176 2,913 
Total $48,184 $3,860 $11,592  $2,492 $59,776 $6,352 
 
13

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3.    INVESTMENTS, Continued
The following tables summarize, for all fixed maturities reported at fair value for which fair value was less than 80% of amortized cost at March 31, 2023 and December 31, 2022, the gross unrealized investment loss by length of time those securities have continuously been in an unrealized loss position of greater than 20% of amortized cost:

 Period For Which Fair Value is Less Than 80% of Amortized Cost
(at March 31, 2023, in millions)3 months or lessGreater than 3 months, 6 months or lessGreater than 6 months, 12 months or lessGreater than 12 monthsTotal
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ $ $ $ $ 
Obligations of U.S. states, municipalities and political subdivisions115 1 617 185 918 
Debt securities issued by foreign governments
     
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
35    35 
Corporate and all other bonds103 1 84  188 
Total$253 $2 $701 $185 $1,141 


 Period For Which Fair Value is Less Than 80% of Amortized Cost
(at December 31, 2022, in millions)3 months or lessGreater than 3 months, 6 months or lessGreater than 6 months, 12 months or lessGreater than 12 monthsTotal
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$— $— $— $— $— 
Obligations of U.S. states, municipalities and political subdivisions81 776 643 — 1,500 
Debt securities issued by foreign governments
— — — 
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
48 — — 52 
Corporate and all other bonds89 526  623 
Total$175 $1,350 $651 $— $2,176 

Recent increases in interest rates resulted in the gross unrealized investment losses disclosed in the table above; however, the net unrealized loss is considered temporary in nature as the decrease in value is not due to credit impairments and there is no impact on expected contractual cash flows from fixed maturities.
 
14

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3.    INVESTMENTS, Continued
Impairment Charges
 
The following table presents changes in the allowance for expected credit losses on fixed maturities classified as available for sale for the category of Corporate and All Other Bonds (no other categories of fixed maturities currently have an allowance for expected credit losses):
Fixed Maturities
Corporate and All Other Bonds
At and For the Three Months Ended
(in millions)March 31, 2023 March 31, 2022
Balance, beginning of period$3 $
Additions for expected credit losses on securities where no credit losses were previously recognized
 — 
Additions for expected credit losses on securities where credit losses were previously recognized1 
Reductions due to sales/defaults of credit-impaired securities
 — 
Reductions for impairments of securities which the Company intends to sell or more likely than not will be required to sell — 
Balance, end of period$4 $

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

Other Investments

Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income from these other investments is generally reflected in the Company’s financial statements on a quarter lag basis.
 
4.    FAIR VALUE MEASUREMENTS
 
The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in the fair value accounting guidance.  The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available.  The disclosure of fair value estimates in the fair value accounting guidance hierarchy is based on whether the significant inputs into the valuation are observable.  In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions.  The level in the fair value hierarchy within which the fair value measurement is reported is based on the lowest level input that is significant to the measurement in its entirety.  The three levels of the hierarchy are as follows:
 
Level 1 - Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.
Level 3 - Valuations based on models where significant inputs are not observable.  The unobservable inputs reflect the Company’s own assumptions about the inputs that market participants would use.
 
15

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
4.    FAIR VALUE MEASUREMENTS, Continued
Valuation of Investments Reported at Fair Value in Financial Statements
 
The Company utilized a pricing service to estimate fair value measurements for approximately 99% of its fixed maturities at both March 31, 2023 and December 31, 2022.
 
While the vast majority of the Company’s fixed maturities are included in Level 2, the Company holds a number of corporate bonds which are not valued by the pricing service and estimates the fair value of these bonds using either another internal pricing matrix, a present value income approach, or a broker quote (collectively, the other methodologies). The other methodologies include some unobservable inputs that are significant to the valuation.  Due to the limited amount of observable market information available in the estimation of fair value, the Company includes the fair value estimates for bonds that are valued using the other methodologies in Level 3. 

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

For more information regarding the valuation of the Company’s fixed maturities, equity securities and other investments, see note 4 of the notes to the consolidated financial statements in the Company’s 2022 Annual Report.
 
Fair Value Hierarchy
 
The following tables present the level within the fair value hierarchy at which the Company’s financial assets and financial liabilities are measured on a recurring basis.
 
(at March 31, 2023, in millions)TotalLevel 1Level 2Level 3
Invested assets:    
Fixed maturities    
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$6,352 $6,352 $ $ 
Obligations of U.S. states, municipalities and political subdivisions30,033  30,033  
Debt securities issued by foreign governments1,010  1,010  
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
2,864  2,864  
Corporate and all other bonds32,655 9 32,371 275 
Total fixed maturities72,914 6,361 66,278 275 
Equity securities    
Common stock603 438  165 
Non-redeemable preferred stock46 15 3 28 
Total equity securities649 453 3 193 
Other investments16 15  1 
Total$73,579 $6,829 $66,281 $469 

16

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
4.    FAIR VALUE MEASUREMENTS, Continued
(at December 31, 2022, in millions)TotalLevel 1Level 2Level 3
Invested assets:    
Fixed maturities    
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$5,438 $5,438 $— $— 
Obligations of U.S. states, municipalities and political subdivisions31,379 — 31,379 — 
Debt securities issued by foreign governments994 — 994 — 
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
1,991 — 1,991 — 
Corporate and all other bonds31,358 — 31,055 303 
Total fixed maturities71,160 5,438 65,419 303 
Equity securities    
Common stock763 418 — 345 
Non-redeemable preferred stock44 15 26 
Total equity securities807 433 371 
Other investments16 15 — 
Total$71,983 $5,886 $65,422 $675 
Other liabilities$$— $— $
 
There was no significant activity in Level 3 of the hierarchy during the three months ended March 31, 2023.

Financial Instruments Disclosed, But Not Carried, At Fair Value
 
The following tables present the carrying value and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value, and the level within the fair value hierarchy at which such assets and liabilities are categorized.
(at March 31, 2023, in millions)Carrying
Value
Fair
Value
Level 1Level 2Level 3
Financial assets     
Short-term securities$3,243 $3,243 $409 $2,782 $52 
Financial liabilities     
Debt$7,192 $6,787 $ $6,787 $ 
Commercial paper100 100  100  
 
(at December 31, 2022, in millions)Carrying
Value
Fair
Value
Level 1Level 2Level 3
Financial assets     
Short-term securities$3,470 $3,470 $871 $2,546 $53 
Financial liabilities     
Debt$7,192 $6,509 $— $6,509 $— 
Commercial paper100 100 — 100 — 

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


17

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

5.    ALLOWANCE FOR EXPECTED CREDIT LOSSES

Premiums Receivable

The following table presents the balances of premiums receivable, net of the allowance for expected credit losses, at March 31, 2023 and 2022, and the changes in the allowance for expected credit losses for the three months ended March 31, 2023 and 2022.
At and For the Three Months Ended March 31, 2023At and For the Three Months Ended March 31, 2022
(in millions)Premiums Receivable, Net of Allowance for Expected Credit LossesAllowance for Expected Credit LossesPremiums Receivable, Net of Allowance for Expected Credit LossesAllowance for Expected Credit Losses
 
Balance, beginning of period$8,922 $77 $8,085 $107 
Current period change for expected credit losses10 18 
Write-offs of uncollectible premiums receivable10 36 
Balance, end of period$9,483 $77 $8,593 $89 

Reinsurance Recoverables

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

At and For the Three Months Ended March 31, 2023At and For the Three Months Ended March 31, 2022
(in millions)Reinsurance Recoverables, Net of Allowance for Estimated Uncollectible ReinsuranceAllowance for Estimated Uncollectible ReinsuranceReinsurance Recoverables, Net of Allowance for Estimated Uncollectible ReinsuranceAllowance for Estimated Uncollectible Reinsurance
 
Balance, beginning of period$8,063 $132 $8,452 $141 
Current period change for estimated uncollectible reinsurance(1)(6)
Write-offs of uncollectible reinsurance recoverables — 
Balance, end of period$8,091 $131 $8,734 $135 

Of the total reinsurance recoverables at March 31, 2023, $5.69 billion, or 87%, were rated by A.M. Best Company, after deducting mandatory pools and associations and before allowances for estimated uncollectible reinsurance.  The Company utilizes updated A.M. Best credit ratings on a quarterly basis when determining the allowance. Of the total rated by A.M. Best Company, 94% were rated A- or better. The remaining 13% of reinsurance recoverables comprised the following: 6% related to captive insurance companies, 1% related to the Company’s participation in voluntary pools and 6% were balances from other companies not rated by A.M. Best Company.  Certain of the Company’s reinsurance recoverables are collateralized by letters of credit, funds held or trust agreements.

18

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
5.    ALLOWANCE FOR EXPECTED CREDIT LOSSES, Continued
Contractholder Receivables

The following table presents the balances of contractholder receivables, net of the allowance for expected credit losses, at March 31, 2023 and 2022, and the changes in the allowance for expected credit losses for the three months ended March 31, 2023 and 2022.
At and For the Three Months Ended March 31, 2023At and For the Three Months Ended March 31, 2022
(in millions)Contractholder Receivables, Net of Allowance for Expected Credit LossesAllowance for Expected Credit LossesContractholder Receivables, Net of Allowance for Expected Credit LossesAllowance for Expected Credit Losses
 
Balance, beginning of period$3,579 $17 $3,890 $21 
Current period change for expected credit losses2 (2)
Write-offs of uncollectible contractholder receivables — 
Balance, end of period$3,598 $19 $3,901 $19 

6.          GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill
 
The following table presents the carrying amount of the Company’s goodwill by segment.  Each reportable segment includes goodwill associated with the Company’s international business which is subject to the impact of changes in foreign currency exchange rates.
(in millions)March 31,
2023
December 31,
2022
Business Insurance$2,572 $2,565 
Bond & Specialty Insurance550 550 
Personal Insurance811 811 
Other26 26 
Total$3,959 $3,952 
Other Intangible Assets
 
The following tables present a summary of the Company’s other intangible assets by major asset class.
(at March 31, 2023, in millions)Gross
Carrying
Amount
Accumulated
Amortization
Net
Subject to amortization
Customer-related$97 $50 $47 
Contract-based (1)
204 192 12 
Total subject to amortization301 242 59 
Not subject to amortization226  226 
Total$527 $242 $285 
19

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

6.    GOODWILL AND OTHER INTANGIBLE ASSETS, Continued
 
(at December 31, 2022, in millions)Gross
Carrying
Amount
Accumulated
Amortization
Net
Subject to amortization
Customer-related$96 $48 $48 
Contract-based (1)
204 191 13 
Total subject to amortization300 239 61 
Not subject to amortization226 — 226 
Total$526 $239 $287 
 _________________________________________________________
(1)Contract-based intangible assets subject to amortization are comprised of fair value adjustments on claims and claim adjustment expense reserves, reinsurance recoverables and other contract-related intangible assets. Fair value adjustments recorded in connection with insurance acquisitions were based on management’s estimate of nominal claims and claim adjustment expense reserves and reinsurance recoverables. The method used calculated a risk adjustment to a risk-free discounted reserve that would, if reserves ran off as expected, produce results that yielded the assumed cost-of-capital on the capital supporting the loss reserves.  The fair value adjustments are reported as other intangible assets on the consolidated balance sheet, and the amounts measured in accordance with the acquirer’s accounting policies for insurance contracts have been reported as part of the claims and claim adjustment expense reserves and reinsurance recoverables. The intangible assets are being recognized into income over the expected payment pattern. Because the time value of money and the risk adjustment (cost of capital) components of the intangible assets run off at different rates, the amount recognized in income may be a net benefit in some periods and a net expense in other periods.

7.    INSURANCE CLAIM RESERVES

Claims and claim adjustment expense reserves were as follows:
(in millions)March 31,
2023
December 31,
2022
Property-casualty$59,058 $58,643 
Accident and health6 
Total$59,064 $58,649 
 
20

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
7.    INSURANCE CLAIM RESERVES, Continued
The following table presents a reconciliation of beginning and ending property casualty reserve balances for claims and claim adjustment expenses:
Three Months Ended March 31,
(in millions)20232022
Claims and claim adjustment expense reserves at beginning of year$58,643 $56,897 
Less reinsurance recoverables on unpaid losses7,790 8,209 
Net reserves at beginning of year50,853 48,688 
Estimated claims and claim adjustment expenses for claims arising in the current year6,025 5,133 
Estimated decrease in claims and claim adjustment expenses for
 claims arising in prior years
(90)(114)
Total increases5,935 5,019 
Claims and claim adjustment expense payments for claims arising in:  
Current year1,177 1,074 
Prior years4,382 3,498 
Total payments5,559 4,572 
Unrealized foreign exchange (gain) loss28 (13)
Net reserves at end of period51,257 49,122 
Plus reinsurance recoverables on unpaid losses7,801 8,441 
Claims and claim adjustment expense reserves at end of period$59,058 $57,563 
 
Gross claims and claim adjustment expense reserves at March 31, 2023 increased by $415 million from December 31, 2022, primarily reflecting the impacts of (i) higher volumes of insured exposures, (ii) loss cost trends for the current accident year and (iii) catastrophe losses in the first three months of 2023, partially offset by (iv) claim payments made during the first three months of 2023 and (v) net favorable prior year reserve development.
 
Reinsurance recoverables on unpaid losses at March 31, 2023 increased by $11 million from December 31, 2022.

Prior Year Reserve Development
 
The following disclosures regarding reserve development are on a “net of reinsurance” basis.
 
For the three months ended March 31, 2023 and 2022, estimated claims and claim adjustment expenses incurred included $90 million and $114 million, respectively, of net favorable development for claims arising in prior years, including $105 million and $153 million, respectively, of net favorable prior year reserve development, and $11 million and $12 million, respectively, of accretion of discount that impacted the Company’s results of operations.

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

Bond & Specialty Insurance.  Net favorable prior year reserve development in the first quarter of 2023 totaled $58 million, primarily driven by better than expected loss experience in the domestic operations’ fidelity and surety product lines and in the general liability product line for management liability coverages for recent accident years. Net favorable prior year reserve development in the first quarter of 2022 totaled $35 million, primarily driven by better than expected loss experience in the domestic operations’ fidelity and surety product lines for recent accident years, partially offset by higher than expected loss experience in the domestic operations’ general liability product line for management liability coverages for multiple accident years.

21

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
7.    INSURANCE CLAIM RESERVES, Continued
Personal Insurance.  Net favorable prior year reserve development in the first quarter of 2023 totaled $28 million, primarily driven by better than expected loss experience in the domestic operations’ homeowners and other product line for recent accident years. Net favorable prior year reserve development in the first quarter of 2022 totaled $5 million.

8.    OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
 
The following table presents the changes in the Company’s accumulated other comprehensive income (loss) (AOCI) for the three months ended March 31, 2023.
Changes in Net Unrealized Gains (Losses) on Investment Securities
(in millions)Having No Credit Losses Recognized in the Consolidated Statement of IncomeHaving Credit 
Losses Recognized 
in the Consolidated
Statement of 
Income
Net Benefit Plan Assets and Obligations Recognized in Shareholders’ EquityNet Unrealized Foreign Currency TranslationTotal Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2022$(5,077)$179 $(542)$(1,005)$(6,445)
Other comprehensive income (loss) (OCI) before reclassifications, net of tax1,021 1 31 1,053 
Amounts reclassified from AOCI, net of tax9  (3) 6 
Net OCI, current period1,030  (2)31 1,059 
Balance, March 31, 2023$(4,047)$179 $(544)$(974)$(5,386)
22

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
8.    OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), Continued

The following table presents the pre-tax components of the Company’s other comprehensive income (loss) and the related income tax expense (benefit).
 Three Months Ended
March 31,
(in millions)20232022
Changes in net unrealized gains (losses) on investment securities:  
Having no credit losses recognized in the consolidated statement of income$1,308 $(4,829)
Income tax expense (benefit)278 (1,024)
Net of taxes1,030 (3,805)
Having credit losses recognized in the consolidated statement of income (1)
Income tax benefit — 
Net of taxes (1)
Net changes in benefit plan assets and obligations(3)11 
Income tax expense (benefit)(1)
Net of taxes(2)
Net changes in unrealized foreign currency translation37 
Income tax expense6 — 
Net of taxes31 
Total other comprehensive income (loss)1,342 (4,817)
Total income tax expense (benefit)283 (1,022)
Total other comprehensive income (loss), net of taxes$1,059 $(3,795)
23

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
8.    OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), Continued

The following table presents the pre-tax and related income tax (expense) benefit components of the amounts reclassified from the Company’s AOCI to the Company’s consolidated statement of income.
Three Months Ended
March 31,
(in millions)20232022
Reclassification adjustments related to unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income (1)
$11 $(2)
Income tax (expense) benefit (2)
2 (1)
Net of taxes9 (1)
Having credit losses recognized in the consolidated statement of income (1)
 — 
Income tax benefit (2)
 — 
Net of taxes — 
Reclassification adjustment related to benefit plan assets and obligations:
  
Claims and claim adjustment expenses (benefit) (3)
(1)
General and administrative expenses (benefit) (3)
(2)
Total(3)10 
Income tax benefit (2)
 
Net of taxes(3)
Reclassification adjustment related to foreign currency translation (1)
 — 
Income tax benefit (2)
 — 
Net of taxes — 
Total reclassifications8 
Total income tax benefit2 
Total reclassifications, net of taxes$6 $
_________________________________________________________
(1)(Increases) decreases net realized investment gains (losses) on the consolidated statement of income.
(2)(Increases) decreases income tax expense (benefit) on the consolidated statement of income.
(3)Increases (decreases) expenses on the consolidated statement of income.

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



24


THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
10.     EARNINGS PER SHARE
 
The following is a reconciliation of the income and share data used in the basic and diluted earnings per share computations for the periods presented:
 Three Months Ended
March 31,
(in millions, except per share amounts)20232022
Basic and Diluted
Net income, as reported$975 $1,018 
Participating share-based awards — allocated income(7)(7)
Net income available to common shareholders — basic and diluted$968 $1,011 
Common Shares
Basic
Weighted average shares outstanding231.7 240.9 
Diluted
Weighted average shares outstanding231.7 240.9 
Weighted average effects of dilutive securities — stock options and performance shares
2.7 2.8 
Total234.4 243.7 
Net Income per Common Share
Basic$4.18 $4.20 
Diluted$4.13 $4.15 

11.      SHARE-BASED INCENTIVE COMPENSATION

The following information relates to fully vested stock option awards at March 31, 2023:
                                           Stock OptionsNumberWeighted
Average
Exercise
Price
Weighted
Average
Contractual
Life
Remaining
Aggregate
Intrinsic
Value
($ in millions)
Vested at end of period (1)
7,603,711 $137.41 6.2 years$269 
Exercisable at end of period5,519,783 $127.94 5.3 years$240 
_________________________________________________________
(1)Represents awards for which the requisite service has been rendered, including those that are retirement eligible.

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

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

25


THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

12.    PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS
 
The following table summarizes the components of net periodic benefit cost (benefit) for the Company’s pension and postretirement benefit plans recognized in the consolidated statement of income for the three months ended March 31, 2023 and 2022.
 Pension PlansPostretirement Benefit Plans
(for the three months ended March 31, in millions)2023202220232022
Net Periodic Benefit Cost (Benefit):    
Service cost$27 $36 $ $—