TRAVELERS COMPANIES, INC. - Annual Report: 2019 (Form 10-K)

---

---

•	ability to profitably price business, retain existing customers and obtain new business;

•	premiums charged, contract terms and conditions, products and services offered (including the ability to design customized programs);

•	agent, broker and policyholder relationships;

•	ability to keep pace relative to competitors with changes in technology and information systems;

•	ability to use data and analytics to make decisions;

•	speed of claims payment;

•	ability to provide a positive customer experience;

•	ability to provide products and services in a cost effective manner;

•	ability to provide new products and services to meet changing customer needs;

•	ability to adapt to changes in business models, technology, customer preferences or regulation impacting the markets in which the Company operates;

•	perceived overall financial strength and corresponding ratings assigned by independent rating agencies;

•	reputation, experience and qualifications of employees;

•	geographic scope of business; and

•	local presence.

---

(1)	No other single state or country accounted for 3.0% or more of the Company’s consolidated direct written premiums written in 2019.

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

---

•

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

•

National Accounts provides large companies with casualty insurance products and services, including workers’ compensation, commercial automobile and general liability, generally utilizing loss-sensitive products, on both a bundled and unbundled basis, as well as risk management, claims handling and other services. National Accounts also includes the Company’s commercial residual market business, which primarily offers workers’ compensation claims, policy management and other administrative services related to the involuntary market.

•

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

•

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

---

•

Select Accounts markets and distributes products and services to small businesses, generally with fewer than 50 employees, through a large network of independent agents and brokers. Products offered by Select Accounts are guaranteed-cost policies, including packaged products covering property and liability exposures.  Each small business risk is independently evaluated via an automated underwriting platform which in turn enables agents to quote, bind and issue a substantial amount of new small business risks in an efficient manner. Risks with more complex characteristics are underwritten with the assistance of Company personnel.

•

Middle Market markets and distributes products and services primarily to mid-sized businesses with 50 to 1,000 employees through a large network of independent agents and brokers. The Company offers a full line of products to its Middle Market customers with an emphasis on guaranteed-cost programs. Each account is underwritten based on the unique risk characteristics, loss history and coverage needs of the account. The ability to underwrite at this detailed level allows Middle Market to have a broad risk appetite and a diversified customer base. Within Middle Market, products and services are tailored to certain targeted industry segments of significant size and complexity that require unique underwriting, claims handling services, risk management or other insurance-related products and services.

---

•

National Accounts markets and distributes products and services to large companies through a network of national and regional brokers. Products offered by National Accounts are primarily casualty programs that utilize loss-sensitive products, such as large deductible, and to a lesser extent, retrospectively rated insurance and self-insured retention plans. National Accounts also offers insurance-related services, such as claims administration, risk management, loss control and risk management information services through Constitution State Services LLC, a wholly-owned subsidiary of the Company. The commercial residual market business of National Accounts services approximately 38% of the total workers’ compensation assigned risk market, making the Company one of the largest servicing carriers in the industry.

•

National Property and Other markets and distributes products and services to a wide customer base, providing traditional and customized insurance programs to a broad range of customer sizes through a large network of agents and brokers. National Property and Other also markets and distributes its products through brokers, wholesale agents, program managers and specialized retail agents who operate in certain markets that are not typically served by the Company’s appointed retail agents, or who maintain certain affinity arrangements in specialized market segments. The wholesale excess and surplus lines market, which is characterized by the absence of rate and form regulation, allows for more pricing and coverage flexibility to write certain classes of business. In working with agents or program managers on a brokerage basis, National Property and Other underwrites the business internally and sets the premium level. In working with agents or program managers with delegated underwriting authority, the agents produce and underwrite business subject to pricing and underwriting guidelines that have been specifically designed for each facility or program.

•

Workers’ Compensation. Provides coverage for employers for specified benefits payable under state or federal law for workplace injuries to employees. There are typically four types of benefits payable under workers’ compensation policies: medical benefits, disability benefits, death benefits and vocational rehabilitation benefits. The Company emphasizes managed care cost containment strategies, which involve employers, employees and care providers in a collaborative effort that focuses on the injured employee’s early return to work and cost-effective quality care. The Company offers the following types of workers’ compensation products:

---

•	guaranteed-cost insurance products, where the premiums charged are not adjusted for actual loss experience during the covered period;

•	loss-sensitive insurance products, including large deductible and retrospectively rated policies, where fees or premiums are adjusted based on actual loss experience of the insured during the policy period; and

•	service programs, which are generally sold to the Company’s National Accounts customers, where the Company receives fees rather than premiums for providing loss prevention, risk management, and claim and benefit administration services.

•	Commercial Automobile. Provides coverage for businesses against losses incurred from personal bodily injury, bodily injury to third parties, property damage to an insured’s vehicle and property damage to other vehicles and other property resulting from the ownership, maintenance or use of automobiles and trucks in a business.

•

Commercial Property. Provides coverage for loss of or damage to buildings, inventory and equipment resulting from a variety of events, including, among others, hurricanes and other windstorms, tornadoes, earthquakes, hail, wildfires, severe winter weather, floods, volcanic eruptions, tsunamis, theft, vandalism, fires, explosions, terrorism and financial loss due to business interruption resulting from covered property damage. Commercial property also includes specialized equipment insurance, which provides coverage for loss or damage resulting from the mechanical breakdown of boilers and machinery, and ocean and inland marine insurance, which provides coverage for goods in transit and unique, one-of-a-kind exposures.

•

General Liability. Provides coverages for businesses against third-party claims arising from accidents occurring on their premises or arising out of their operations, including as a result of injuries sustained from products sold. Coverages may also include directors’ and officers’ liability arising in their official capacities, employment practices liability insurance, fiduciary liability for trustees and sponsors of pension, health and welfare, and other employee benefit plans, errors and omissions insurance for employees, agents, professionals and others arising from acts or failures to act under specified circumstances, cyber liability, as well as umbrella and excess insurance.

•	Commercial Multi-Peril.  Provides a combination of the property and liability coverages described in the foregoing product line descriptions.

•

Provides coverage for employers’ liability (similar to workers’ compensation coverage in the United States), public and product liability (the equivalent of general liability), professional indemnity (similar to professional liability coverage), commercial property, commercial automobile, marine, aviation, onshore and offshore energy, construction, terrorism, personal accident and kidnap & ransom. Marine provides coverage for ship hulls, cargoes carried, private yachts, marine-related liability, ports and terminals, and fine art. Aviation provides coverage for worldwide aviation risks including physical damage and liabilities for airline, aerospace, general aviation, aviation war and space risks. Personal accident provides financial protection in the event of death or disablement due to accidental bodily injury, while kidnap & ransom provides financial protection against kidnap, hijack, illegal detention and extortion. While the covered hazards may be similar to those in the U.S. market, the different legal environments can make the product risks and coverage terms very different from those the Company faces in the United States.

---

(1)	No other single state or country accounted for 3.0% or more of Business Insurance’s direct written premiums in 2019.

---

---

•

Fidelity and Surety. Provides fidelity insurance coverage, which protects an insured for loss due to embezzlement or misappropriation of funds by an employee, and surety, which is a three-party agreement whereby the surety company agrees to pay a third party or complete an obligation in response to the default, acts or omissions of a bonded party. Surety bonds are generally provided for construction performance, legal matters such as appeals, trustees in bankruptcy and probate and other performance obligations.

•	General Liability. Provides coverage for specialized liability exposures as described above in more detail in the “Business Insurance” section of this report.

•	Other. Coverages include Commercial Property, Workers’ Compensation, Commercial Automobile and Commercial Multi-Peril, which are described above in more detail in the “Business Insurance” section of this report.

•	Fidelity and Surety and certain General Liability products, as well as cyber risk coverages, are provided internationally to various customer groups.

---

(1)	No other single state or country accounted for 3.0% or more of Bond & Specialty Insurance’s direct written premiums in 2019.

---

---

---

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

•

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

•	International provides automobile and homeowners and other coverages in Canada (similar to coverages in the United States).  Personal Insurance had approximately 536,000 active policies in Canada at December 31, 2019.

(1)	The percentage for Texas includes business written by the Company through a fronting agreement with another insurer.

(2)	No other single state accounted for 3.0% or more of Personal Insurance’s direct written premiums in 2019.

---

---

---

---

---

---

(a)

The Travelers Reinsurance Pool consists of:  The Travelers Indemnity Company, The Charter Oak Fire Insurance Company, The Phoenix Insurance Company, The Travelers Indemnity Company of Connecticut, The Travelers Indemnity Company of America, Travelers Property Casualty Company of America, Travelers Commercial Casualty Company, TravCo Insurance Company, The Travelers Home and Marine Insurance Company, Travelers Casualty and Surety Company, Northland Insurance Company, Northfield Insurance Company, Northland Casualty Company, American Equity Specialty Insurance Company, The Standard Fire Insurance Company, The Automobile Insurance Company of Hartford, Connecticut, Travelers Casualty Insurance Company of America, Farmington Casualty Company, Travelers Commercial Insurance Company, Travelers Casualty Company of Connecticut, Travelers Property Casualty Insurance Company, Travelers Personal Security Insurance Company, Travelers Personal Insurance Company, Travelers Excess

---

(b)	The following affiliated companies are 100% reinsured by one of the pool participants noted in (a) above: Fidelity and Guaranty Insurance Company, Gulf Underwriters Insurance Company, American Equity Insurance Company, Select Insurance Company, The Travelers Lloyds Insurance Company and Travelers Lloyds of Texas Insurance Company.

•	On February 28, 2019, A.M. Best assigned a financial strength rating of "A++" to the Company's newly established insurance subsidiary in the Republic of Ireland, Travelers Insurance Designated Activity Company. The outlook for this rating is stable.

•	On May 20, 2019, Fitch affirmed all ratings of the Company. The outlook for all ratings is stable.

•	On June 26, 2019, S&P assigned a financial strength rating of "A+" to the Company's newly established insurance subsidiary in the Republic of Ireland, Travelers Insurance Designated Activity Company. The outlook for this rating is stable.

•	On July 29, 2019, S&P affirmed all ratings of the Company. The outlook for all ratings is stable.

•	On November 1, 2019, Moody's affirmed all ratings of the Company. The outlook for all ratings is stable.

•	On November 5, 2019, A.M. Best affirmed all ratings of the Company. The outlook for all ratings is stable.

•	On November 19, 2019, S&P upgraded the financial strength rating of Travelers Insurance Designated Activity Company to "AA-" from "A+." The outlook for this rating is stable.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

•	In recent years, many state and local governments have been operating under deficits or projected deficits. The severity and duration of these deficits could have an adverse impact on the collectability and valuation of our municipal bond portfolio. These deficits may be exacerbated by the impact of unfunded pension plan obligations and other

---

•

Some municipal bond issuers may be unwilling to increase tax rates, or to reduce spending, to fund interest or principal payments on their municipal bonds, or may be unable to access the municipal bond market to fund such payments. The risk of widespread defaults may increase if some issuers voluntarily choose to default, instead of implementing difficult fiscal measures, and the actual or perceived consequences (such as reduced access to capital markets) are less severe than expected.

•

The risk of widespread defaults may also increase if there are changes in legislation that permit states, municipalities and political subdivisions to file for bankruptcy protection where they were not permitted before. In addition, the collectability and valuation of municipal bonds may be adversely affected if there are judicial interpretations in a bankruptcy or other proceeding that lessen the value of structural protections. For example, debtors may challenge the effectiveness of structural protections thought to be provided by municipal securities backed by a dedicated source of revenue. The collectability and valuation may also be adversely affected if there are judicial interpretations in a bankruptcy or other proceeding that question the payment priority of municipal bonds.

---

---

•	ability to profitably price our business, retain existing customers and obtain new business;

•	premiums charged, contract terms and conditions, products and services offered (including the ability to design customized programs);

•	agent, broker and policyholder relationships;

•	ability to keep pace relative to our competitors with changes in technology, information systems, data and analytics;

•	effectiveness of our claims process, including the speed of payment;

•	ability to avoid and mitigate fraudulent claims;

•	ability to provide our products and services in a cost effective manner;

•	ability to provide new products and services to meet changing customer needs;

•	ability to adapt to changes in business models, technology, customer preferences or regulation impacting the markets in which we operate;

•	ability to provide access to the distribution channels preferred by customers and prospective customers;

•	perceived overall financial strength and corresponding ratings assigned by independent rating agencies;

•	reputation, experience and qualifications of employees;

•	geographic scope of business; and

•	local presence.

---

•	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.

---

---

•	plaintiffs targeting property and casualty insurers, including us, in purported class action litigation relating to claims handling and other practices;

•	claims relating to construction defects, which often present complex coverage and damage valuation questions;

•	claims under directors’ & officers’ and/or errors and omissions insurance policies relating to losses from involvement in financial market activities; failed financial institutions; fraud; improper sales practices; anti-trust allegations; possible accounting irregularities; and corporate governance issues;

•	claims related to data and network security breaches, information system failures or cyber events, including cases where coverage was not intended to be provided;

•

the assertion of “public nuisance” or similar theories of liability, pursuant to which plaintiffs, including governmental entities, seek to recover monies spent to administer public health care programs, abate hazards to public health and safety and/or recover damages purportedly attributable to a “public nuisance,” such as litigation against lead paint manufacturers or manufacturers or distributors of opioids;

•	claims related to liability or workers’ compensation arising out of the spread of infectious disease or pandemic;

•	claims relating to abuse by an employee or a volunteer of an insured;

•	claims that link health issues to particular causes (for example, cumulative traumatic head injury from sports or other causes), resulting in liability or workers’ compensation claims;

•	claims alleging that one or more of our underwriting criteria have a disparate impact on persons belonging to a protected class in violation of the law, including the Fair Housing Act;

•	claims arising out of modern techniques and practices used in connection with the extraction of natural resources, such as hydraulic fracturing or wastewater injection;

•	claims arising out of the use of personal cars, homes or other property in commercial transactions, such as ride or home sharing;

•	claims relating to unanticipated consequences of current or new technologies or business models or processes, including as a result of related behavioral changes; and

•	claims relating to changing climate conditions, including claims alleging that our policyholders cause or contribute to changing climate conditions.

---

---

---

•	Improve business processes and workflow to increase efficiencies and productivity and to enhance the experience of our customers and distributors;

•	Change our underwriting processes;

•	Develop products that insure risks we have not previously insured, contain new coverages or change coverage terms;

•	Expand distribution channels;

---

•	Change commission terms; and

•	Enter geographic markets within or outside of the United States where we have had relatively little or no market share.

•	Changes to our business processes or workflow, including the use of new technologies, may give rise to execution risk;

•	Models underlying automated underwriting and pricing decisions may not be effective;

•	Demand for new products or expansion into new markets may not meet our expectations;

•	New products and expansion into new markets may change our risk exposures, and the data and models we use to manage such exposures may not be as effective as those we use in existing markets or with existing products;

•	Efforts to develop new products or markets and to change commission terms may create or increase distribution channel conflict, such as described above under “—Disruptions to our relationships with our independent agents and brokers could adversely affect us;” and

•	In connection with the conversion of existing policyholders to a new product, some policyholders’ pricing may increase while the pricing for other policyholders may decrease, the net impact of which could negatively impact retention and profit margins.

---

---

---

---

•	the potential disruption of our ongoing business;

•	the ineffective integration of, or other difficulties with, underwriting, risk management, claims handling, information technology and actuarial practices;

•	uncertainties related to an acquiree’s reserve estimates and its design and operation of internal controls over financial reporting;

•	the diversion of management time and resources to acquisition integration challenges;

•	the loss of key employees;

•	unforeseen liabilities;

•	difficulties in achieving the strategic objectives of an acquisition, including the business, financial, technological or distribution objectives;

•	the cultural challenges associated with integrating employees; and

•	the impact on our financial position and/or credit ratings.

---

---

---

(1)

The cumulative total return to shareholders is a concept used to compare the performance of a company's stock over time. Cumulative total return to shareholders is calculated as the net stock price change for the specified time period plus the cumulative amount of dividends (assuming dividend reinvestment on the respective dividend payment dates) divided by the stock price at the beginning of the time period.

(2)	Assumes $100 invested in common shares of The Travelers Companies, Inc. on December 31, 2014.

(3)

Companies in the S&P 500 Property & Casualty Insurance Index as of December 31, 2019 were the following: The Travelers Companies, Inc., Chubb Limited, Cincinnati Financial Corporation, The Progressive Corporation, The Allstate Corporation, Loews Corporation (CNA) and WR Berkley Corporation. Returns of each of the companies included in this index have been weighted according to their respective market capitalizations.

---

---

---

•	Net income of $2.62 billion, or $10.01 per share basic and $9.92 per share diluted

•	Net earned premiums of $28.27 billion

•	Catastrophe losses of $886 million ($699 million after-tax)

•	Net unfavorable prior year reserve development of $60 million ($47 million after-tax)

•	Combined ratio of 96.5%

•	Net investment income of $2.47 billion ($2.10 billion after-tax)

•	Total investments of $77.88 billion; fixed maturities and short-term securities comprise 94% of total investments

•	Total assets of $110.12 billion

•	Total debt of $6.56 billion, resulting in a debt-to-total capital ratio of 20.2% (21.7% excluding net unrealized investment gains, net of tax, included in shareholders' equity)

•	Repurchased 11.2 million common shares for total cost of $1.55 billion and paid $844 million of dividends to shareholders

•	Shareholders’ equity of $25.94 billion

•	Net unrealized investment gains of $2.85 billion ($2.25 billion after-tax)

•	Book value per common share of $101.55

•	Holding company liquidity of $1.43 billion

---

(1)

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act of 2017 (TCJA) which, among other changes, reduced the U.S. Federal tax rate from 35% to 21% beginning on January 1, 2018 and imposed a tax on undistributed and previously untaxed post-1986 foreign earnings and profits (accumulated foreign earnings). Total income tax expense for 2017 included a net charge of $129 million to reflect the estimated impact of the changes in tax law and tax rates included in TCJA at the date of enactment, primarily reflecting the revaluation of the Company’s deferred tax assets and liabilities at the new statutory federal tax rate of 21%, and the recognition of tax imposed on the accumulated foreign earnings.

---

(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.

---

•	that is designated a catastrophe by internationally recognized organizations that track and report on insured losses resulting from catastrophic events, such as Property Claim Services (PCS) for events in the United States and Canada; and

•	for which the Company’s estimates of its ultimate losses before reinsurance and taxes exceed a pre-established dollar threshold.

---

---

---

(1)	On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act of 2017 (TCJA) which, among other changes, reduced the U.S. Federal tax rate from 35% to 21% beginning on January 1, 2018 and imposed a tax on undistributed and previously untaxed post-1986 foreign earnings and profits (accumulated foreign earnings).

---

---

---

(1)	On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act of 2017 (TCJA) which, among other changes, reduced the U.S. Federal tax rate from 35% to 21% beginning on January 1, 2018 and imposed a tax on undistributed and previously untaxed post-1986 foreign earnings and profits (accumulated foreign earnings).

---

---

(1)	On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act of 2017 (TCJA) which, among other changes, reduced the U.S. Federal tax rate from 35% to 21% beginning on January 1, 2018 and imposed a tax on undistributed and previously untaxed post-1986 foreign earnings and profits (accumulated foreign earnings).

---

---

---

---

•	a high level of litigation activity in certain jurisdictions involving individuals alleging serious asbestos-related illness, primarily involving mesothelioma claims;

•	while overall payment patterns have been generally stable, there has been an increase in severity for certain policyholders due to the high level of litigation activity; and

•	a moderate level of asbestos-related bankruptcy activity.

---

---

---

---

(1)	Rated using external rating agencies or by the Company when a public rating does not exist.

---

(2)	Sovereign corporate securities include corporate securities that are backed by a government and include sovereign banks and securities issued under the Federal Ship Financing Programs.

(3)	Included in commercial mortgage-backed securities and project loans at December 31, 2019 and 2018 were $557 million and $456 million of securities guaranteed by the U.S. government, respectively, and $2 million of securities guaranteed by government-sponsored enterprises at both December 31, 2019 and 2018.

---

(1)	Rated using external rating agencies or by the Company when a public rating does not exist.  Ratings shown are the higher of the rating of the underlying issuer or the insurer in the case of securities enhanced by third-party insurance for the payment of principal and interest in the event of issuer default.

(2)	No other single state accounted for 2.5% or more of the total non-pre-refunded municipal bonds.

---

(1)	Rated using external rating agencies or by the Company when a public rating does not exist. Ratings shown are the higher of the rating of the underlying issuer or the insurer in the case of securities enhanced by third-party insurance for the payment of principal and interest in the event of issuer default.

(1)	Rated using external rating agencies or by the Company when a public rating does not exist.

---

(1)	Rated using external rating agencies or by the Company when a public rating does not exist.  The table includes $619 million of short-term securities which have high ratings issued by external rating agencies for short-term issuances.  For purposes of this table, the short-term securities, which are rated “A-1+” and/or “P-1,” are included as “Aaa” rated securities.

---

---

---

(1)

An event that has, for example, a 2% likelihood of exceedance is sometimes described as a “1-in-50 year event.” As noted above, however, the probabilities in the table represent the likelihood of losses from a single event equaling or exceeding the indicated threshold loss amount in a one-year timeframe, not over a multi-year timeframe. Also, because the probabilities relate to a single event, the probabilities do not address the likelihood of more than one event occurring in a particular period, and, therefore, the amounts do not address potential aggregate catastrophe losses occurring in a one-year timeframe.

(2)

The percentage of common equity is calculated by dividing (a) indicated loss amounts in dollars by (b) total common equity excluding net unrealized investment gains and losses, net of taxes, included in shareholders’ equity. Net unrealized investment gains and losses can be significantly impacted by both discretionary and other economic factors and are not necessarily indicative of operating trends. Accordingly, the Company’s management uses the percentage of common equity calculated on this basis as a metric to evaluate the potential impact of a single hurricane or single earthquake on the Company’s financial position for purposes of making underwriting and reinsurance decisions.

---

•

Increasingly unpredictable and severe weather conditions could result in increased frequency and severity of claims under policies issued by the Company. See “Item 1A—Risk Factors—High levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas, could materially and adversely affect our results of operations, our financial position and/or liquidity, and could adversely impact our ratings, our ability to raise capital and the availability and cost of reinsurance” and “-Outlook-Underwriting Gain/Loss.”

•

Changing climate conditions could also impact the creditworthiness of issuers of securities in which the Company invests. For example, water supply adequacy could impact the creditworthiness of bond issuers with significant assets or business activities in the Southwestern United States, and more frequent and/or severe hurricanes could impact the creditworthiness of issuers with significant assets or business activities in the Southeastern United States, among other areas. See “Item 1A—Risk Factors—Our investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses.”

•

Increased regulation adopted in response to potential changes in climate conditions may impact the Company and its customers, including state insurance regulations that could impact the Company’s ability to manage property exposures in areas vulnerable to significant climate driven losses. For example, a state recently passed legislation that restricts a carrier's ability to cancel or non-renew policies within or adjacent to declared state emergency zip codes. If the Company is unable to implement risk-based pricing, modify policy terms or reduce exposures to the extent necessary to address rising losses related to catastrophes and smaller scale weather events (should those increased losses occur), its business may be adversely affected. See “Item 1A—Risk Factors—High levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas, could materially and adversely affect our results of operations, our financial position and/or liquidity, and could adversely impact our ratings, our ability to raise capital and the availability and cost of reinsurance.” In addition, climate change regulation could increase the Company’s customers’ costs of doing business. For example, insureds faced with carbon management regulatory requirements may have less available capital for investment in loss prevention and safety features which may, over time, increase loss exposures. Increased regulation may also result in reduced economic activity, which would decrease the amount of insurable assets and businesses.

•

The full range of potential liability exposures related to changing climate conditions continues to evolve. For example, from time to time third parties sue our policyholders alleging that they caused or contributed to changing climate conditions. Through the Company’s Emerging Issues Committee and its Committee on Climate, Energy and the Environment, the Company works with its business units and corporate groups, as appropriate, to identify and try to assess climate change-related liability issues, which are continually evolving and often hard to fully evaluate. The Company regularly reviews

---

---

(2)

On October 23, 2016, Genworth Financial (Genworth) announced that they entered into a definitive agreement under which China Oceanwide Holdings Group Co., Ltd. (China Oceanwide) agreed to acquire all of the outstanding shares of Genworth. China Oceanwide is a privately held, family-owned international financial holding group headquartered in Beijing, China. On March 7, 2017, Genworth stockholders adopted the merger agreement, and the acquisition is pending the receipt of required regulatory approvals. On December 23, 2019, the parties agreed to extend the closing deadline for the transaction until March 31, 2020.

---

---

---

---

---

---

---

(1)	See note 8 of notes to the consolidated financial statements for a further discussion of outstanding indebtedness. Because the amounts reported in the foregoing table include principal and interest, the total long-term debt obligations will not agree with the amounts reported in note 8.

(2)	Represents agreements entered into in the ordinary course of business to lease office space, equipment and furniture.

(3)	Includes agreements with vendors to purchase system software administration and maintenance services.

---

(4)	Includes commitments to vendors entered into in the ordinary course of business for goods and services including property, plant and equipment, office supplies, archival services, etc.

(5)	Represents estimated timing for fulfilling unfunded commitments for private equity limited partnerships and real estate partnerships, as well as a put/call option entered into by the Company in connection with a business acquisition.

(6)	The amounts in “Claims and claim adjustment expenses” in the table above represent the estimated timing of future payments for both reported and unreported claims incurred and related claim adjustment expenses, gross of reinsurance recoverables, excluding structured settlements expected to be paid by annuity companies.

(7)

Workers’ compensation large deductible policies provide third-party coverage in which the Company typically is responsible for paying the entire loss under such policies and then seeks reimbursement from the insured for the deductible amount. “Claims from large deductible policies” represent the estimated future payment for claims and claim related expenses below the deductible amount, net of the estimated recovery of the deductible. The liability and the related deductible receivable for unpaid claims are presented in the consolidated balance sheet as “contractholder payables” and “contractholder receivables,” respectively. Most deductibles for such policies are paid directly from the policyholder’s escrow, which is periodically replenished by the policyholder. The payment of the loss amounts above the deductible are reported within “Claims and claim adjustment expenses” in the above table. Because the timing of the collection of the deductible (contractholder receivables) occurs shortly after the payment of the deductible to a claimant (contractholder payables), these cash flows offset each other in the table.

---

(8)

The amounts in “Loss-based assessments” relate to estimated future payments of second-injury fund assessments which would result from payment of current claim liabilities. Second injury funds cover the cost of any additional benefits for aggravation of a pre-existing condition. For loss-based assessments, the cost is shared by the insurance industry and self-insureds, funded through assessments to insurance companies and self-insureds based on losses. Amounts relating to second-injury fund assessments are included in “other liabilities” in the consolidated balance sheet.

(9)	The amounts in “Reinsurance contracts accounted for as deposits” represent estimated future nominal payments for reinsurance agreements that are accounted for as deposits. Amounts payable under deposit agreements are included in “other liabilities” in the consolidated balance sheet.

(10)	The amounts in “Payout from ceded funds withheld” represent estimated payments for losses and return of funds held related to certain reinsurance arrangements whereby the Company holds a portion of the premium due to the reinsurer and is allowed to pay claims from the amounts held.

(11)	The Company's current liabilities related to unrecognized tax benefits from uncertain tax positions are $50 million. Offsetting these liabilities are deferred tax assets of $5 million associated with the temporary differences that would exist if these positions become realized.

---

---

---

---

---

•	Estimating the number of large claims and their average values based on historical trends from prior accident periods, adjusted for the current environment and supplemented with actual data for the accident year analyzed to the extent available.

•	Utilizing individual claim adjuster estimates of the large claims, combined with continual monitoring of the aggregate accuracy of such claim adjuster estimates. (This monitoring may lead to supplemental adjustments to the aggregate of such claim estimates).

•	Utilizing historic longer-term average ratios of large claims to small claims, and applying such ratios to the estimated ultimate small claims from conventional analysis.

•	Ground-up analysis of the underlying exposure (typically used for asbestos and environmental).

---

---

---

•	Changes in claim handling philosophies

•	Changes in policy provisions or court interpretation of such provisions

•	New or expanded theories of liability

•	Trends in jury awards

•	Changes in the propensity to sue, in general with specificity to particular issues

•	Changes in the propensity to litigate rather than settle a claim

•	Increases in attorney involvement in, or impact on, claims

•	Changes in statutes of limitations

•	Changes in the underlying court system

•	Distortions from losses resulting from large single accounts or single issues

•	Changes in tort law

•	Shifts in lawsuit mix between federal and state courts

•	Changes in claim adjuster processes or reporting which may cause distortions in the data being analyzed

•	The potential impact of inflation on loss costs

•	Changes in settlement patterns

•	Changes in policy provisions (e.g., deductibles, policy limits, endorsements)

•	Changes in underwriting standards

•	Product mix (e.g., size of account, industries insured, jurisdiction mix)

---

•	Physical concentration of policyholders

•	Availability and cost of local contractors

•	For the more severe catastrophic events, “demand surge” inflation, which refers to significant short-term increases in building material and labor costs due to a sharp increase in demand for those materials and services

•	Local building codes

•	Amount of time to return property to full usage (for business interruption claims)

•	Frequency of claim re-openings on claims previously closed

•	Court interpretation of policy provisions (such as occurrence definition, or wind versus flooding)

•	Lags in reporting claims (e.g., winter damage to summer homes, hidden damage after an earthquake, hail damage to roofs and/or equipment on roofs)

•	Court or legislative changes to the statute of limitations

•	Policy provisions mix (e.g., deductibles, policy limits, endorsements)

•	Changes in underwriting standards

---

•	Trends in jury awards

•	Changes in the underlying court system

•	Changes in case law

•	Litigation trends

•	Increases in attorney involvement in, or impact on, claims

•	Frequency of claims with payment capped by policy limits

•	Change in average severity of accidents, or proportion of severe accidents

•	Changes in auto safety technology

•	Subrogation opportunities

•	Changes in claim handling philosophies

•	Frequency of visits to health providers

•	Number of medical procedures given during visits to health providers

•	Types of health providers used

---

•	Types of medical treatments received

•	Changes in cost of medical treatments

•	Degree of patient responsiveness to treatment

•	Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.)

•	Changes in mix of insured vehicles (e.g., long haul trucks versus local and smaller vehicles, fleet risks versus non-fleets)

•	Changes in underwriting standards

•	Time required to recover from the injury

•	Degree of available transitional jobs

•	Degree of legal involvement

•	Changes in the interpretations and processes of the administrative bodies that oversee workers’ compensation claims

•	Future wage inflation for states that index benefits

•	Changes in the administrative policies of second injury funds

•	Changes in the cost of medical treatments (including prescription drugs) and underlying fee schedules (“inflation”)

•	Frequency of visits to health providers

•	Number of medical procedures given during visits to health providers

•	Types of health providers used

•	Type of medical treatments received

•	Use of preferred provider networks and other medical cost containment practices

---

•	Availability of new medical processes and equipment

•	Changes in the use of pharmaceutical drugs, including drugs for pain management

•	Degree of patient responsiveness to treatment

•	Frequency of reopening claims previously closed

•	Mortality trends of injured workers with lifetime benefits and medical treatment

•	Changes in statutory benefits

•	The impact, if any, of potential future changes to government health insurance legislation

•	Product mix

•	Injury type mix

•	Changes in underwriting standards

•	Type of business of insured

---

•	Policy limit and attachment points

•	Third-party claims

•	Coverage litigation

•	Complexity of claims

•	Growth in insureds’ operations

•	Economic trends, including the general level of construction activity

•	Concentration of reserves in a relatively few large claims

•	Type of business bonded

•	Type of obligation bonded

•	Cumulative limits of liability for the bonded party

•	Assets available to mitigate loss

•	Defective workmanship/latent defects

•	Financial strategy of the bonded party

•	Changes in statutory obligations

•	Geographic spread of business

•	Changes in policy provisions (e.g., deductibles, limits, endorsements)

•	Changes in underwriting standards

•	Trends in jury awards

•	Changes in the underlying court system and its philosophy

---

•	Changes in case law

•	Litigation trends

•	Increases in attorney involvement in, or impact on, claims

•	Frequency of claims with payment capped by policy limits

•	Change in average severity of accidents, or proportion of severe accidents

•	Changes in auto safety technology

•	Frequency and severity of claims involving distracted drivers and pedestrians

•	Subrogation opportunities

•	Frequency of visits to health providers

•	Number of medical procedures given during visits to health providers

•	Types of health providers used

•	Types of medical treatments received

•	Changes in cost of medical treatments

•	Effectiveness of no-fault laws

•	Degree of patient responsiveness to treatment

•	Changes in claim handling philosophies

•	Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.)

•	Changes in underwriting standards

•	Changes in the use of permissible data for rating and underwriting

•	Salvage opportunities

•	Amount of time to return property to residential use

•	Changes in weather patterns

---

•	Local building codes

•	Construction and building material costs

•	Litigation trends

•	Trends in jury awards

•	Court interpretation of policy provisions (such as occurrence definition, or wind versus flooding)

•	Lags in reporting claims (e.g., winter damage to summer homes, hidden damage after an earthquake, hail damage to roofs and/or equipment on roofs)

•	Court or legislative changes to the statute of limitations

•	Physical concentration of policyholders

•	Availability and cost of local contractors

•	Local building codes

•	Quality of construction of damaged homes

•	Amount of time to return property to residential use

•	For the more severe catastrophic events, “demand surge” inflation, which refers to significant short-term increases in building material and labor costs due to a sharp increase in demand for those materials and services

•	Policy provisions mix (e.g., deductibles, policy limits, endorsements, etc.)

•	Degree of concentration of policyholders

•	Changes in underwriting standards

•	Changes in the use of permissible data for rating and underwriting

---

•	Changes in claim handling procedures, including those of the primary carriers

•	Changes in policy provisions or court interpretation of such provision

•	Economic trends

•	New theories of liability

•	Trends in jury awards

•	Changes in the propensity to sue

•	Changes in statutes of limitations

•	Changes in the underlying court system

•	Distortions from losses resulting from large single accounts or single issues

•	Changes in tort law

•	Changes in claim adjuster office structure (causing distortions in the data)

•	Changes in foreign currency exchange rates

•	Changes in policy provisions (e.g., deductibles, policy limits, endorsements, “claims-made” language)

•	Changes in underwriting standards

•	Product mix (e.g., size of account, industries insured, jurisdiction mix)

---

---

•

the Company’s outlook 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);

•	share repurchase plans;

•	future pension plan contributions;

•	the sufficiency of the Company’s asbestos and other reserves;

•	the impact of emerging claims issues as well as other insurance and non-insurance litigation;

•	the potential benefit associated with the Company's ability to recover on its subrogation claims;

•	the cost and availability of reinsurance coverage;

•	catastrophe losses;

•	the impact of investment (including changes in interest rates), economic (including inflation, changes in tax law, changes in commodity prices and fluctuations in foreign currency exchange rates) and underwriting market conditions;

•	strategic and operational initiatives to improve profitability and competitiveness;

•	the Company's competitive advantages;

•	new product offerings;

•	the impact of new or potential regulations imposed or to be imposed by the United States or other nations, including tariffs or other barriers to international trade; and

•	the impact of developments in the tort environment, such as increased attorney involvement in insurance claims and legislation allowing victims of sexual abuse to file or proceed with claims that otherwise would have been time-barred.

---

---

---

---

•	Changes in claims handling procedures;

•	Economic inflation and changes in the tort environment; and

•	Legislative changes, among others.

---

•	Assessing the assumptions and methodologies underlying the Company’s reserve estimate by participating in quarterly discussions with the Company’s actuaries;

•	Evaluating the Company’s estimates by performing independent analyses of net and gross claims and claim adjustment expense reserves for certain lines of business;

•	Assessing the Company's internally prepared actuarial analyses in comparison to the Company's internal experience and related industry trends for selected other lines of business; and

•	Developing an overall range of reserve estimates and assessing the position of the Company’s recorded reserve relative to the range.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

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

•

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

•

National Accounts provides large companies with casualty insurance products and services, including workers’ compensation, commercial automobile and general liability, generally utilizing loss-sensitive products, on both a bundled and unbundled basis, as well as risk management, claims handling and other services. National Accounts also includes the Company’s commercial residual market business, which primarily offers workers’ compensation claims, policy management and other administrative services related to the involuntary market.

•

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

---

•

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

---

---

(1)	Segment revenues for reportable business segments exclude net realized investment gains. Segment income for reportable business segments equals net income excluding the after-tax impact of net realized investment gains and, in 2017, the impact of the Tax Cuts and Jobs Act of 2017 at enactment.

---

---

(1)	The primary component of Interest Expense and Other was after-tax interest expense of $272 million, $278 million and $240 million in 2019, 2018 and 2017, respectively.

---

(1)	The primary components of other assets at both December 31, 2019 and 2018, were accrued over-funded benefit plan assets related to the Company's qualified domestic pension plan and other intangible assets.

---

---

---

---

---

---

---

---

•	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.

---

---

---

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

---

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

---

---

---

---

(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.

---

---

•	General liability (excluding asbestos and environmental) - higher than expected loss experience in the segment's domestic operations for primary and excess coverages for multiple accident years, including the impact for accident years 2009 and prior related to the enactment of legislation by a number of states that extended the statute of limitations for childhood sexual molestation claims;

•	Commercial automobile - higher than expected loss experience in the segment's domestic operations for recent accident years;

•	Asbestos reserves - an increase of $220 million, primarily in the segment's domestic general liability product line;

•	Commercial multi-peril - higher than expected loss experience in the segment's domestic operations for recent accident years; and

•	Environmental reserves - an increase of $76 million, primarily in the segment's domestic general liability product line,

•	Workers' compensation - better than expected loss experience in the segment's domestic operations for multiple accident years; and

•	Commercial property - better than expected loss experience in the segment's domestic operations for recent accident years.

---

•	Workers' compensation - better than expected loss experience in the segment’s domestic operations for multiple accident years; and

•	Commercial property - better than expected loss experience in the segment’s domestic operations for recent accident years,

•	Commercial automobile - higher than expected loss experience for recent accident years;

•	Asbestos reserves - an increase of $225 million, primarily in the segment's domestic general liability product line;

•	General liability (excluding asbestos and environmental) - higher than expected loss experience in the segment's domestic operations for both primary and excess coverages for multiple accident years; and

•	Environmental reserves - an increase of $55 million, primarily in the segment's domestic general liability product line.

•	Workers' compensation - better than expected loss experience in the segment's domestic operations for multiple accident years;

•	General liability (excluding an increase to asbestos and environmental reserves) - better than expected loss experience in the segment's domestic operations for both primary and excess coverages for multiple accident years; and

•	Commercial multi-peril - better than expected loss experience for liability coverages for multiple accident years,

•	Asbestos reserves - an increase of $225 million, primarily in the segment's domestic general liability product line;

•	Commercial automobile - higher than expected loss experience for recent accident years;

---

•	Environmental reserves - an increase of $65 million, primarily in the segment's domestic general liability product line; and

•	International and other - higher than expected loss experience in Europe primarily due to the U.K. Ministry of Justice’s “Ogden” discount rate adjustment applied to lump sum bodily injury payouts.

---

(1)	Net discount amount includes discount of $67 million on reinsurance recoverables for long-term disability and annuity claim payments.

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

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

(4)	Total reinsurance recoverables (on paid and unpaid losses) at December 31, 2019 were $8.24 billion.

---

---

---

---

---

---

---

---

---

---

---

•	The paid loss development method assumes that the future change (positive or negative) in cumulative paid losses for a given cohort of claims will occur in a stable, predictable pattern from year-to-year, consistent with the pattern observed in past cohorts.

•	The case incurred development method is the same as the paid loss development method but is based on cumulative case-incurred losses rather than paid losses.

•

The Bornhuetter-Ferguson method uses an initial estimate of ultimate losses for a given product line reserve component, typically expressed as a ratio to earned premium.  The method assumes that the ratio of additional claim activity to earned premium for that component is relatively stable and predictable over time and that actual claim activity to date is not a credible predictor of further activity for that component.  The method is used most often for more recent accident years where claim data is sparse and/or volatile, with a transition to other methods as the underlying claim data becomes more voluminous and therefore more credible.

•

The average value analysis combined with the reported claim development method assumes that average claim values are stable and predictable over time for a particular cohort of claims.  It is typically limited to analysis at more granular levels, such as coverage or hazard/peril, where a more homogeneous subset of claims produce a more stable and fairly predictable average value.  The reported claim development method is the same as the paid loss development method but uses changes in cumulative claim counts to produce estimates of ultimate claim counts rather than ultimate dollars.  The resulting estimate of ultimate claim counts by cohort is multiplied by an average value per claim from an average value analysis to obtain estimated ultimate claims and claim adjustment expenses.

---

---

•	a high level of litigation activity in certain jurisdictions involving individuals alleging serious asbestos-related illness, primarily involving mesothelioma claims;

•	while overall payment patterns have been generally stable, there has been an increase in severity for certain policyholders due to the high level of litigation activity; and

•	a moderate level of asbestos-related bankruptcy activity.

---

---

---

---

---

---

---

---

---

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

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

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

---

---

---

---

---

---

---

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

---

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

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

(3)	Represents the current year change in estimated performance shares to reflect the attainment of performance goals for the awards that were granted in each of the years 2017 through 2019.

(4)	95,953 shares of restricted common stock were also issued outside of the 2014 Incentive Plan in 2017 in connection with the acquisition of Simply Business, of which 41,997 shares remain unvested and are not included in this table. See note 9.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

(1)	Total other-than-temporary impairments (OTTI) for the year ended December 31, 2019, and the amounts comprising total OTTI that were recognized in net realized investment gains and in other comprehensive income (OCI), were as follows:

---

(1)	Total other-than-temporary impairments (OTTI) for the year ended December 31, 2018, and the amounts comprising total OTTI that were recognized in net realized investment gains (losses) and in other comprehensive income (OCI), were as follows:

---

(1)	Total other-than-temporary impairments (OTTI) for the year ended December 31, 2017, and the amounts comprising total OTTI that were recognized in net realized investment gains and in other comprehensive income (OCI), were as follows:

---

---

---

---

---

---

---

---

---

(1)	Due to the use of an average number of shares for each quarter, the sum of the quarterly earnings per share may not equal the total earnings per share for the full year.

---

---

•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and

•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

---

---

---

---

(1)

In addition to the 2014 Incentive Plan, also included are The Travelers Companies, Inc. Amended and Restated 2004 Stock Incentive Plan, as amended (the 2004 Incentive Plan), which was replaced by the 2014 Incentive Plan, and certain plans for employees in the United Kingdom and the Republic of Ireland and The Travelers Deferred Compensation Plan for Non-Employee Directors. Shares delivered under these plans are issued pursuant to the 2004 Incentive Plan and the 2014 Incentive Plan.

(2)

Total includes (i) 9,143,777 stock options, (ii) 1,034,334 performance shares and dividend equivalents accrued thereon (assuming issuance of 100% of performance shares granted), (iii) 1,572,135 restricted stock units, (iv) 235,477 director deferred stock awards and dividend equivalents accrued thereon and (v) 22,156 common stock units credited to the deferred compensation accounts of certain non-employee directors in lieu of cash compensation, at the election of such directors.

(3)

The weighted average exercise prices for both the 2004 Incentive Plan and the 2014 Incentive Plan relate only to stock options. The calculation of the weighted average exercise price does not include outstanding equity awards that are received or exercised for no consideration and also does not include common stock units credited to the deferred compensation accounts of certain non-employee directors at fair market value in lieu of cash compensation at the election of such directors.

(4)

These shares are available for grant as of December 31, 2019 under the 2014 Incentive Plan pursuant to which the Compensation Committee of the Board of Directors may make various stock-based awards including nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock, deferred stock units, performance awards and other stock-based or stock-denominated awards with respect to the Company’s common stock. This includes 10 million shares initially authorized for issuance under the 2014 Incentive Plan and an additional 3.1 million shares, 2.5 million shares and 4.4 million shares authorized by shareholders in May 2019, May 2017 and May 2016, respectively, and shares subject to awards under the 2004 Incentive

---

(1)	Financial Statements and Schedules. See Index to Consolidated Financial Statements and Schedules on page 120 hereof.

---

---

†	Filed herewith.

---

---

---

---

---

---

1.	GUARANTEES

---

(1)	See note 2 of notes to the consolidated financial statements for discussion of the method used to allocate net investment income and invested assets to the identified segments.

(2)	Expense allocations are determined in accordance with prescribed statutory accounting practices. These practices make a reasonable allocation of all expenses to those product lines with which they are associated.

---

(1)	Credited to the related asset account.

---

(1)	Excludes accident and health insurance business.

(2)	Consolidated property-casualty insurance operations.

(3)	For a discussion of types of reserves discounted and discount rates used, see note 7 of notes to the consolidated financial statements.