Travelers : 2023 Annual Report

In 2023, Travelers debuted a new brand manifesto and ad campaign around a simple yet powerful idea: "Remarkable things happen when people care." You can find the manifesto at the QR code above.

Through our work, Travelers demonstrates the power of common cause to unite people across distance and differences. The manifesto reflects Travelers employees' extraordinary dedication to the people we are privileged to serve.

These values are the cornerstone of our brand manifesto - and they are at the heart of everything we do.

Days after a hurricane, two Travelers employees faced miles of debris to help turn one small store into a beacon of hope for the community.

Given the competitive advantages that will come from deploying AI across the insurance value chain, and the expertise, resources and data required to get there, scale will increasingly be a differentiator in our industry, as will the ability to execute complex initiatives effectively and efficiently. Expertise, resources, data, scale and execution excellence all favor Travelers.

Alan D. Schnitzer

Chairman and Chief Executive Officer

To My Fellow Shareholders

In 2023, we were very pleased to deliver strong bottom- line results and excellent top-line production. We generated $3.1 billion* of core income and 11.5% core return on equity, despite a year of elevated industrywide catastrophe losses and significant marketwide headwinds impacting our Personal Insurance business. In terms of the top line, our best-in-class marketplace execution and leading field organization enabled us to generate record net written premiums of more than $40 billion for the year, positioning us well for 2024.

We again benefited meaningfully from having a diversified set of businesses. Our Business Insurance and our Bond & Specialty Insurance segments posted excellent results this past year, while our Personal Insurance segment continued to operate in a challenging environment.

Our underwriting and investment results, together with our strong balance sheet, enabled us to return nearly $2.0 billion of excess capital to shareholders.

At the same time, we meaningfully grew both book value and adjusted book value per share and made important investments in our business.

We also continued to successfully execute on our ambitious innovation agenda - motivated by the idea that tomorrow's success is built today. In a world of unprecedented change, we have been hard at work for several years ensuring that our competitive advantages remain relevant and differentiating into the future. With this in mind, in this year's letter I will also discuss an important area for us, artificial intelligence (AI), and how we are leveraging the power of AI across our three innovation priorities: extending our lead in risk expertise; providing great experiences for our customers, agents, brokers and employees; and optimizing productivity and efficiency.

First, however, let me turn to a more detailed discussion of our 2023 performance and how we are positioning Travelers for continued success.

* See "Additional information" for a discussion and calculation of non-GAAP financial measures.

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Financial Highlights

$3.1 Billion	$40.2 Billion
Core Income	Record Net Written Premiums

11.5%	$1.9 Billion
Core Return on Equity	Capital Returned to Shareholders

At and for the year ended December 31. Dollar amounts in millions, except per share amounts.
2023	2022	2021	2020	2019

Earned Premiums	$	37,761	$	33,763	$	30,855	$	29,044	$	28,272
Total Revenues	$	41,364	$	36,884	$	34,816	$	31,981	$	31,581
Core Income	$	3,072	$	2,998	$	3,522	$	2,686	$	2,537
Net Income	$	2,991	$	2,842	$	3,662	$	2,697	$	2,622
Net Income per Diluted Share	$	12.79	$	11.77	$	14.49	$	10.52	$	9.92
Total Investments	$	88,810	$	80,454	$	87,375	$	84,423	$	77,884
Total Assets	$	125,978	$	115,717	$	120,466	$	116,764	$	110,122
Shareholders' Equity	$	24,921	$	21,560	$	28,887	$	29,201	$	25,943
Return on Equity		13.6%		12.2%		12.7%		10.0%		10.5%
Core Return on Equity		11.5%		11.3%		13.7%		11.3%		10.9%
Book Value per Share	$	109.19	$	92.90	$	119.77	$	115.68	$	101.55
Dividends per Share	$	3.93	$	3.67	$	3.49	$	3.37	$	3.23

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The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of property casualty insurance for auto, home and business.

A component of the Dow Jones Industrial Average, Travelers has more than 30,000 employees and generated revenues of more than $41 billion in 2023. For more information, visit Travelers.com.

Our 2023 Results - Excellence in Execution

Travelers delivered core income of $3.1 billion, or $13.13 of core income per diluted share, generating a core return on equity of 11.5%, a meaningful spread above both the 10-year Treasury and our cost of equity. We produced these very strong results notwithstanding elevated industrywide catastrophe losses and a personal lines operating environment that, while improving, was difficult during the year.

We delivered a record $3.2 billion of after-tax underlying underwriting income, an increase of more than 55% compared to the prior year, and an underlying combined ratio that improved 250 basis points to an excellent 89.5%. This year's outstanding underlying underwriting results are even more impressive when considered in their historical context. As illustrated by the following chart, over the past four years, we have taken our underlying underwriting income to an entirely new level and sustained it there.

Turning to the top line, today's production generates tomorrow's earned premiums. In 2023, we delivered record net written premiums of $40.2 billion, up 14% compared to the prior year. This represents the 14th consecutive year of net written premium growth. All three of our business segments contributed to this strong top-line performance, with Business Insurance up 16%, Bond & Specialty Insurance up 3% and Personal Insurance up 13%. We remain very well positioned to continue to profitably grow our business. Importantly, our growth has not come from competing margin away. As demonstrated by our continued strong margins, we have grown by successfully investing in the franchise value - products, services and experiences - that our customers want to purchase and our distribution partners want to sell, and, of course, through excellent execution by our field organization.

				Underlying Underwriting Income1
					(in billions, after-tax)
$3.5													$3.2
$3.0											Average $2.1
$2.5											$2.3
										$2.0		$2.1
$2.0				Average $1.4
$1.4	$1.4	$1.5	$1.4
$1.5	$1.3
			$1.3
					$1.2
					$1.2
$1.0
$0.5
$0.0
2014	2015	2016	2017	2018	2019			2020	2021	2022	2023

• Excludes the impact of net prior year reserve development and catastrophe losses.

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Our Investment Expertise

We strive to be thoughtful underwriters on both sides of our balance sheet, and we have always managed our investment portfolio to support our insurance operations, not the reverse. Accordingly, our investment portfolio is positioned to meet our obligations to policyholders under almost every foreseeable circumstance - anything from a global pandemic to a significant natural disaster to a financial crisis.

With this in mind, we are focused on risk-adjusted returns and credit quality rather than reaching for yield that is not commensurate with the underlying risk. Our well-defined and consistent investment portfolio has been a meaningful and reliable contributor to our results, year in and year out.

This is exactly what we saw in 2023. Net investment income increased by more than 12% to a very strong $2.4 billion after-tax. From a fixed income perspective, we benefited throughout 2023 from very strong cash flow and the trend of higher interest rates, which began in 2022. For 2024, we expect to earn approximately $2.6 billion after-tax on our fixed income portfolio, our highest level ever.

Our Data-Driven Underwriting Culture and Expertise Set Us Apart

Underwriting excellence is of course key to our success, and there is nothing more critical to underwriting excellence than a culture that values strong performance over time and understands how to balance the art and science of decision making based on data and analytics. In other words, evaluating risk and reward is at the heart of what we do.

Our culture alone is a significant competitive advantage, and one that we believe is very hard to replicate. A critical component of this culture is our granular approach to underwriting. In our commercial businesses, that means execution on an account-by-account or class-by-class basis. In personal lines, it means a very high degree of segmentation by risk profile, product and geography. With that and our advanced data and analytics, we thoughtfully select the risks we write and price our products deliberately with our target return in mind.

Like every aspect of our business, our focus on performance over time is core to how we manage our catastrophe exposure. Although we are unable to predict what the next event will be or where it will occur, we are taking steps every day to ensure that our portfolio of risk properly contemplates the potential for loss and that we maintain the right balance of risk and reward. While the impact of the risk-based decisions we are making today is not always immediately evident, they will continue to drive our performance over time.

As a result of our thoughtful risk and reward approach to catastrophe management, our share of catastrophe losses over time has been significantly below our market share. This outperformance is the result of our prudent and integrated approach to managing our catastrophe exposures through portfolio, underwriting and pricing actions.

We continue to make significant investments in advanced capabilities to ensure that our underwriters have the tools and insights necessary to develop a comprehensive view of catastrophe risk. As just a few examples, in 2023, we:

• Introduced new, internally developed storm surge underwriting capabilities, providing a granular view of storm surge risk to inform underwriting decisions at the point of sale;
• Invested in new climate research to deepen our understanding of changing climate conditions related to peak catastrophe perils; and
• Enhanced our view of the risks related to tornado/hail to align with the latest science and implemented a new tornado/hail catastrophe model that includes new variables to improve risk segmentation and better reflect current weather trends.

While weather and catastrophe losses continue to be a major challenge for the industry, we are confident that we are making the necessary investments to maintain our underwriting excellence and achieve target returns over time.

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Deliberate and Disciplined Execution Over Time

Roughly seven years ago, just after I began my tenure as CEO, we laid out a focused innovation strategy and shared that if we were successful in its execution, we would expect to grow our business at attractive returns - a reflection of our belief that any strategy to achieve industry-leading returns over time requires a strategy to grow over time. The graphs below demonstrate our successful execution of this strategy.

Accelerating Net Written Premium Growth			Consistently Strong Underlying Profitability3
											$40.2B	93.0%				AVG=91.4%			89.5%
									2
								CAGR
								.0%
$22.4B						7
		1
	2.7%	CAGR
2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023		2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023

Improving Expense Ratio

AVG=31.7%

Improved 3.
6	pts

28.1%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Higher Underlying Underwriting Income4

(after-tax)

$3.2B

+146%

$1.3B

Avg.

2017

2018

2019

2020

2021

2022

2023

2012-2016

Higher Cash Flows from Operations	Growing Invested Assets5
$7.7B	$92.8B
+108%	+33%
$3.7B	$69.7B

Avg.	2017	2018	2019	2020	2021	2022	2023		Avg.	2017	2018	2019	2020	2021	2022	2023
2012-2016									2012-2016

• Represents growth from 2012 through 2016.
  2 Represents growth from 2016 through 2023.
  3 Underlying underwriting combined ratio, which excludes the impact of net prior year reserve development and catastrophe losses. 4 Underlying underwriting income, which excludes the impact of net prior year reserve development and catastrophe losses.

• Invested assets excludes net unrealized investment gains (losses).

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Accelerating Net Written Premium Growth

Starting with the top line, we have grown net written premiums at a compound annual growth rate of 7% over the past seven years. That is 2 1/2 times our rate of growth from 2012 to 2016. The growth rate in each of the past two years was double digits, the result of a deliberate and tailored strategy: We achieved unit growth where we liked the opportunity and stronger pricing where we needed it.

The growth rate in each of the past two years was double digits, the result of a deliberate and tailored strategy: We achieved unit growth where we liked the opportunity and stronger pricing where we needed it.

In Business Insurance, we have added more than $4 billion to our top line over the past two years. The investments we have made in capabilities to enhance the franchise value that we offer to our customers and distribution partners have contributed to strong retention and growth in new business.

In Bond & Specialty Insurance, we have increased net written premiums by about a half a billion dollars, or 14%, over the past two years. More than half of that growth has come from our very profitable Surety business, where our market-leading position has enabled us to benefit from increased demand for bonds with higher contract values and projects resulting from the Infrastructure Investment and Jobs Act and other federal programs.

Across both of our commercial segments, since 2021, we have about doubled our excess and surplus (E&S) writings to around $2.5 billion. That includes organic growth from the E&S business we write in National Property, our Northfield business and our Lloyd's business, among others, as well as the impact of more recent strategic efforts, which include our relationships with Fidelis Insurance Holdings Limited and Corvus Insurance Holdings, Inc. (Corvus), an industry-leading cyber insurance managing general underwriter. The margins in our E&S business have been quite attractive.

In Personal Insurance, where margins have not been at target levels in recent periods, net written premium growth of $3.4 billion over the past two years has been almost entirely a result of price increases. The Personal Insurance team has done an excellent job of maintaining

our strong and loyal customer base while achieving meaningful pricing gains.

At the same time, they have also done a great job with product management. Our advanced peril-by-peril Quantum Home 2.0® offering now represents more than 60% of the total property portfolio, and the adoption of our telematics product, IntelliDrive®, among new customers has been strong. With pricing gains and enhanced product sophistication, the book should contribute to our earnings power going forward as we move toward target returns.

Also important, across all three segments, our growth is concentrated in products, classes of business and geographies, and through distribution partners, that we know well. That gives us a lot of confidence in the quality of the business we are adding to the books.

Consistently Strong Underlying Profitability

At the same time as we have meaningfully increased our rate of growth, we have also maintained very strong and consistent underlying profitability. This demonstrates that we are not growing by underpricing the business or compromising our underwriting discipline. We have grown by investing in the products, services and experiences that our customers want to buy and our distribution partners want to sell. We have also grown through excellent execution and hard work on the part of our outstanding field organization.

Improving Expense Ratio

One of the clear strategic objectives of our innovation strategy has been to optimize productivity and efficiency. As you can see in the chart on the previous page, over the last seven years, we have reduced our expense ratio by

3.6 points to just over 28% for 2023, which is more than a 10% improvement relative to the average of our expense ratio from 2012 through 2016 of around 32%. Enhanced operating leverage gives us the flexibility to let the benefit fall to the bottom line and/or invest further in our strategic priorities.

Case in point, since 2017, we have nearly doubled our investment in strategic technology initiatives. Over that same period, we have carefully managed growth in routine but necessary technology expenditures. In other words, over a seven-year period, we have simultaneously and meaningfully increased our technology spend, improved the strategic mix of that spend and lowered our expense ratio.

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The upshot of higher growth at strong underlying margins is record levels of underlying underwriting income, cash flows from operations and invested assets.

Technology Investments

2017 2018 2019 2020 2021 2022 2023

Strategic Investments

Routine but Necessary Expenditures

Higher Underlying Underwriting Income

From 2012 through 2019, underlying underwriting income averaged $1.3 billion after-tax. 2023 marks the fourth consecutive year that the underlying underwriting income exceeded $2.0 billion and the first time that we have exceeded $3.0 billion. We have taken our underlying underwriting income to a meaningfully higher level and sustained it there.

Higher Cash Flows from Operations

Our cash flows from operations increased to more than $7.5 billion in 2023, the fourth consecutive year that this has been more than $6 billion and more than double our average cash flow from operations in the earlier part of the last decade. Cash flow is not a metric that we or our industry talk a lot about, but it is important. It is what gives us the ability to make important investments in our business, return excess capital to shareholders and grow the investment portfolio.

Growing Invested Assets

We meaningfully grew our investment portfolio to nearly $93 billion, excluding unrealized investment gains (losses). As we continue to reinvest at higher rates, our fixed income portfolio will continue to be a highly reliable source of earnings and value creation.

Tomorrow's Success Is Built Today:

Artificial Intelligence

For a number of years now, our employees have rallied around our Perform and Transform call to action. Perform is about delivering on our objective of industry- leading returns over time, and Transform is about innovating to ensure that our competitive advantages are as relevant and differentiating tomorrow as they are today.

With this in mind, we have been hard at work positioning Travelers as a leader in the property casualty industry as it relates to leveraging the power of AI. We subscribe to the view that over time, the impact of AI across the economy will be profound. So is the opportunity for Travelers. With our Perform and Transform mindset and our disciplined framework for assessing our investment priorities, we have been focused for years on responsibly developing differentiating AI capabilities across our three innovation priorities: extending our lead in risk expertise; providing great experiences for our customers, agents, brokers and employees; and optimizing productivity and efficiency.

Top Talent, Sound Investment, Robust Data

Powering all of our AI efforts are industry-leading experts, meaningful strategic investments and a significant, hard-to-replicate data advantage.

Between our colleagues who are dedicated to AI specifically and others in enabling disciplines, we have a very significant number of our employees engaged in the objective of making sure that we are leading when it comes to AI.

These efforts are supported by significant and strategic investments. As discussed above, for some time, we have been steadily increasing, and improving the strategic mix of, our technology spend. That includes a meaningful increase in investments to develop or acquire cutting- edge AI capabilities built on modern cloud technology.

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$3.9B

Management Liability

Surety

International

$20.4B

Commercial Multi-Peril

Workers Compensation

Commercial Property

Commercial Auto

General Liability

International

The Power of Our Diversified Businesses

Our results this year and over time demonstrate the benefits of the diversification of our business across core commercial, specialty and personal lines coverages. We engage broadly across nine major lines of insurance through our three business segments. Our portfolio is balanced across these lines of business and further diversified by geography and customer size and type. The depth and breadth of our business is a significant competitive advantage and one that would be very difficult to replicate.

Our commercial business segments demonstrated exceptional performance in 2023, delivering excellent bottom- line results and strong top-line production, which positions us well for 2024. In the Personal Insurance segment, we have made substantial strides toward achieving our target returns. Notably, in 2023, we reached our target returns on a written basis in the Automobile business across states that account for the majority of our premium.

Business Insurance generated segment income of $2.6 billion, driven by record net earned premium and its best ever underlying combined ratio of 88.9%. In terms of the top line, Business Insurance grew net written premiums by 15.8% to $20.4 billion. Renewal premium change of 11.9%, retention of 87% and new business of nearly $2.7 billion were all record results.

Bond & Specialty Insurance generated record segment income of $942 million, driven by strong earned premium and an outstanding combined ratio of 76.9%. In terms of the top line, Bond & Specialty Insurance grew net written premiums to a record $3.9 billion. In our profitable domestic management liability business, retention improved nearly 2 points to just over 90%, renewal premium change remained positive at 3.7%, and new business improved by 20% to $285 million. In our highly profitable and market-leading domestic surety business, net written premiums grew by 6% to more than $1.1 billion for the year.

Another highlight for Bond & Specialty Insurance this year was its agreement to purchase Corvus, an industry-leading cyber insurance managing general underwriter.

25%

17%

17%

16%

16%

9%

56%

30%

14%

Personal Insurance had a segment loss of $128 million,
reflecting a historically high level of industrywide catastrophe
losses and inflationary pressures. Despite challenging market		50%		Homeowners and Other
dynamics, we were steadfast in our disciplined approach	$15.9B	46%		Automobile
to execution and took significant pricing actions to improve		4%		International
profitability throughout the year. In terms of the top line, these

pricing actions were the primary driver of a record $15.9 billion

in net written premiums, a 13% year-over-year increase. The average renewal premium change for the year was 17.1% in Domestic Automobile and 19.8% in Domestic Homeowners and Other - both at record levels.

In Personal Insurance, we also continued to evolve our segmentation, underwriting and terms and conditions, while managing new business flow to ensure that we deployed capacity thoughtfully in the face of significant market dislocation. These actions allowed us to navigate these challenges and, as the year went on, make progress toward our commitment to improving profitability and managing growth. We are very pleased with our targeted marketplace execution and are confident that we are on a path to generating leading returns in our Personal Insurance business.

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