TRV 10-Q Quarterly Report June 30, 2022 | Alphaminr
TRAVELERS COMPANIES, INC.
ALPHAMINR

TRV 10-Q Quarter ended June 30, 2022

Balance Sheet
Cash Flow
Income Statement
Debt
TRAVELERS COMPANIES, INC.
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________
FORM 10-Q
_________________________________________________________
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
___________________________________________________________________
Commission file number: 001-10898
___________________________________________________________________
The Travelers Companies, Inc.
(Exact name of registrant as specified in its charter)
____________________________________________________________________
Minnesota 41-0518860
(State or other jurisdiction of
incorporation or organization) 		(I.R.S. Employer
Identification No.)
485 Lexington Avenue
New York , NY 10017
(Address of principal executive offices) (Zip Code)
( 917 ) 778-6000
(Registrant’s telephone number, including area code)
_________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, without par value TRV New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ý
The number of shares of the Registrant’s Common Stock, without par value, outstanding at July 18, 2022 was 237,313,119 .



The Travelers Companies, Inc.
Quarterly Report on Form 10-Q
For Quarterly Period Ended June 30, 2022
_________________________________________________________
TABLE OF CONTENTS
Page
Item 1.
Consolidated Statement of Income (Unaudited) — Three Months and Six Months Ended June 30, 2022 and 2021
Consolidated Statement of Comprehensive Income (Loss) (Unaudited) — Three Months and Six Months Ended June 30, 2022 and 2021
Consolidated Balance Sheet — June 30, 2022 (Unaudited) and December 31, 2021
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) — Three Months and Six Months Ended June 30, 2022 and 2021
Consolidated Statement of Cash Flows (Unaudited) — Six Months Ended June 30, 2022 and 2021
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.

2

PART 1 — FINANCIAL INFORMATION
Item 1.  FINANCIAL STATEMENTS
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(in millions, except per share amounts)
Three Months Ended
June 30, 		Six Months Ended
June 30,
2022 2021 2022 2021
Revenues
Premiums $ 8,317 $ 7,616 $ 16,331 $ 15,002
Net investment income 707 818 1,344 1,519
Fee income 100 104 203 205
Net realized investment gains (losses) ( 95 ) 61 ( 118 ) 105
Other revenues 107 88 185 169
Total revenues 9,136 8,687 17,945 17,000
Claims and expenses
Claims and claim adjustment expenses 5,803 5,045 10,842 10,015
Amortization of deferred acquisition costs 1,365 1,254 2,675 2,461
General and administrative expenses 1,223 1,174 2,414 2,337
Interest expense 88 83 175 165
Total claims and expenses 8,479 7,556 16,106 14,978
Income before income taxes 657 1,131 1,839 2,022
Income tax expense 106 197 270 355
Net income $ 551 $ 934 $ 1,569 $ 1,667
Net income per share
Basic $ 2.29 $ 3.70 $ 6.50 $ 6.58
Diluted $ 2.27 $ 3.66 $ 6.43 $ 6.53
Weighted average number of common shares outstanding
Basic 238.4 250.7 239.7 251.4
Diluted 241.1 253.1 242.4 253.6
Cash dividends declared per common share $ 0.93 $ 0.88 $ 1.81 $ 1.73










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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(in millions)
Three Months Ended
June 30, 		Six Months Ended
June 30,
2022 2021 2022 2021
Net income $ 551 $ 934 $ 1,569 $ 1,667
Other comprehensive income (loss)
Changes in net unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income ( 3,045 ) 533 ( 7,874 ) ( 1,063 )
Having credit losses recognized in the consolidated statement of income ( 2 ) — ( 3 ) —
Net changes in benefit plan assets and obligations 11 26 22 51
Net changes in unrealized foreign currency translation ( 174 ) 40 ( 172 ) 66
Other comprehensive income (loss) before income taxes ( 3,210 ) 599 ( 8,027 ) ( 946 )
Income tax expense (benefit) ( 657 ) 121 ( 1,679 ) ( 213 )
Other comprehensive income (loss), net of taxes ( 2,553 ) 478 ( 6,348 ) ( 733 )
Comprehensive income (loss) $ ( 2,002 ) $ 1,412 $ ( 4,779 ) $ 934


































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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
June 30,
2022 		December 31,
2021
(Unaudited)
Assets
Fixed maturities, available for sale, at fair value (amortized cost $ 75,917 and $ 74,751 ; allowance for expected credit losses of $ 4 and $ 3 )
$ 71,099 $ 77,810
Equity securities, at fair value (cost $ 755 and $ 749 )
800 893
Real estate investments 970 979
Short-term securities 3,569 3,836
Other investments 4,021 3,857
Total investments 80,459 87,375
Cash 710 761
Investment income accrued 612 615
Premiums receivable (net of allowance for expected credit
losses of $ 89 and $ 107 )
9,132 8,085
Reinsurance recoverables (net of allowance for estimated uncollectible
reinsurance of $ 132 and $ 141 )
8,509 8,452
Ceded unearned premiums 1,196 902
Deferred acquisition costs 2,776 2,542
Deferred taxes 1,374 —
Contractholder receivables (net of allowance for expected credit
losses of $ 18 and $ 21 )
3,735 3,890
Goodwill 3,967 4,008
Other intangible assets 294 306
Other assets 3,823 3,530
Total assets $ 116,587 $ 120,466
Liabilities
Claims and claim adjustment expense reserves $ 57,983 $ 56,907
Unearned premium reserves 17,811 16,469
Contractholder payables 3,753 3,911
Payables for reinsurance premiums 620 384
Deferred taxes — 289
Debt 7,291 7,290
Other liabilities 6,255 6,329
Total liabilities 93,713 91,579
Shareholders’ equity
Common stock ( 1,750.0 shares authorized; 237.3 and 241.2 shares issued and outstanding)
24,419 24,154
Retained earnings 42,684 41,555
Accumulated other comprehensive income (loss) ( 5,155 ) 1,193
Treasury stock, at cost ( 547.7 and 541.5 shares)
( 39,074 ) ( 38,015 )
Total shareholders’ equity 22,874 28,887
Total liabilities and shareholders’ equity $ 116,587 $ 120,466





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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(in millions)
Three Months Ended
June 30, 		Six Months Ended
June 30,
2022 2021 2022 2021
Common stock
Balance, beginning of period $ 24,348 $ 23,905 $ 24,154 $ 23,743
Employee share-based compensation 30 61 165 169
Compensation amortization under share-based plans and other changes
41 36 100 90
Balance, end of period 24,419 24,002 24,419 24,002
Retained earnings
Balance, beginning of period 42,359 39,285 41,555 38,771
Net income 551 934 1,569 1,667
Dividends ( 225 ) ( 224 ) ( 439 ) ( 440 )
Other ( 1 ) 3 ( 1 ) —
Balance, end of period 42,684 39,998 42,684 39,998
Accumulated other comprehensive income (loss), net of tax
Balance, beginning of period ( 2,602 ) 1,291 1,193 2,502
Other comprehensive income (loss) ( 2,553 ) 478 ( 6,348 ) ( 733 )
Balance, end of period ( 5,155 ) 1,769 ( 5,155 ) 1,769
Treasury stock, at cost
Balance, beginning of period ( 38,574 ) ( 36,212 ) ( 38,015 ) ( 35,815 )
Treasury stock acquired — share repurchase authorizations ( 500 ) ( 400 ) ( 1,000 ) ( 756 )
Net shares acquired related to employee share-based compensation plans
— ( 1 ) ( 59 ) ( 42 )
Balance, end of period ( 39,074 ) ( 36,613 ) ( 39,074 ) ( 36,613 )
Total shareholders’ equity $ 22,874 $ 29,156 $ 22,874 $ 29,156
Common shares outstanding
Balance, beginning of period 240.0 251.5 241.2 252.4
Treasury stock acquired — share repurchase authorizations ( 2.9 ) ( 2.6 ) ( 5.8 ) ( 5.0 )
Net shares issued under employee share-based compensation plans
0.2 0.6 1.9 2.1
Balance, end of period 237.3 249.5 237.3 249.5











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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(in millions)
Six Months Ended June 30,
2022 2021
Cash flows from operating activities
Net income $ 1,569 $ 1,667
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment (gains) losses 118 ( 105 )
Depreciation and amortization 444 450
Deferred federal income tax expense (benefit) ( 28 ) 57
Amortization of deferred acquisition costs 2,675 2,461
Equity in income from other investments ( 295 ) ( 513 )
Premiums receivable ( 1,071 ) ( 718 )
Reinsurance recoverables ( 84 ) 154
Deferred acquisition costs ( 2,917 ) ( 2,601 )
Claims and claim adjustment expense reserves 1,272 1,313
Unearned premium reserves 1,398 968
Other ( 440 ) ( 94 )
Net cash provided by operating activities 2,641 3,039
Cash flows from investing activities
Proceeds from maturities of fixed maturities 3,697 4,347
Proceeds from sales of investments:
Fixed maturities 2,701 2,482
Equity securities 84 45
Other investments 173 195
Purchases of investments:
Fixed maturities ( 7,998 ) ( 9,462 )
Equity securities ( 86 ) ( 41 )
Real estate investments ( 16 ) ( 14 )
Other investments ( 252 ) ( 221 )
Net sales (purchases) of short-term securities 257 ( 194 )
Securities transactions in the course of settlement 236 229
Acquisitions, net of cash acquired ( 4 ) ( 38 )
Other ( 159 ) ( 113 )
Net cash used in investing activities ( 1,367 ) ( 2,785 )
Cash flows from financing activities
Treasury stock acquired — share repurchase authorizations ( 1,000 ) ( 756 )
Treasury stock acquired — net employee share-based compensation ( 59 ) ( 42 )
Dividends paid to shareholders ( 436 ) ( 436 )
Issuance of debt — 739
Issuance of common stock — employee share options 194 206
Net cash used in financing activities ( 1,301 ) ( 289 )
Effect of exchange rate changes on cash ( 24 ) 3
Net decrease in cash ( 51 ) ( 32 )
Cash at beginning of year 761 721
Cash at end of period $ 710 $ 689
Supplemental disclosure of cash flow information
Income taxes paid $ 552 $ 342
Interest paid $ 174 $ 163

The accompanying notes are an integral part of the consolidated financial statements.
7
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Basis of Presentation
The interim consolidated financial statements include the accounts of The Travelers Companies, Inc. (together with its subsidiaries, the Company). These financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP) and are unaudited.  In the opinion of the Company’s management, all adjustments necessary for a fair presentation have been reflected.  Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted.  All material intercompany transactions and balances have been eliminated.  The accompanying interim consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the Company’s 2021 Annual Report).
The preparation of the interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period.  Actual results could differ from those estimates. Certain reclassifications have been made to the prior period to conform to the 2022 presentation.

Adoption of Accounting Standards

For information regarding accounting standards that the Company adopted during the periods presented, see note 1 of the notes to the consolidated financial statements in the Company’s 2021 Annual Report.


2. SEGMENT INFORMATION

Nature of Operations
The Company’s results are reported in the following three business segments — Business Insurance, Bond & Specialty Insurance and Personal Insurance. These segments reflect the manner in which the Company’s businesses are currently managed and represent an aggregation of products and services based on the type of customer, how the business is marketed and the manner in which risks are underwritten. For more information regarding the Company’s nature of operations, see the “Nature of Operations ” section of note 1 of the notes to the consolidated financial statements in the Company’s 2021 Annual Report.
8
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2.    SEGMENT INFORMATION, Continued
The following tables summarize the components of the Company’s revenues, income (loss) and total assets by reportable business segments:
(For the three months ended June 30, in millions) Business
Insurance 		Bond & Specialty
Insurance 		Personal
Insurance 		Total
Reportable
Segments
2022
Premiums $ 4,218 $ 851 $ 3,248 $ 8,317
Net investment income 521 64 122 707
Fee income 93 — 7 100
Other revenues 85 4 18 107
Total segment revenues (1)
$ 4,917 $ 919 $ 3,395 $ 9,231
Segment income (loss) (1)
$ 666 $ 228 $ ( 193 ) $ 701
2021
Premiums $ 3,880 $ 776 $ 2,960 $ 7,616
Net investment income 615 64 139 818
Fee income 97 — 7 104
Other revenues 57 7 24 88
Total segment revenues (1)
$ 4,649 $ 847 $ 3,130 $ 8,626
Segment income (1)
$ 643 $ 187 $ 121 $ 951
________________________________________________________
(1) Segment revenues for reportable business segments exclude net realized investment gains (losses) and revenues included in "interest expense and other." Segment income (loss) for reportable business segments excludes the after-tax impact of net realized investment gains (losses) and income (loss) from "interest expense and other."
(For the six months ended June 30, in millions) Business
Insurance 		Bond & Specialty
Insurance 		Personal
Insurance 		Total
Reportable
Segments
2022
Premiums $ 8,289 $ 1,671 $ 6,371 $ 16,331
Net investment income 989 123 232 1,344
Fee income 189 — 14 203
Other revenues 138 8 39 185
Total segment revenues (1)
$ 9,605 $ 1,802 $ 6,656 $ 18,063
Segment income (1)
$ 1,335 $ 445 $ 32 $ 1,812
2021
Premiums $ 7,679 $ 1,519 $ 5,804 $ 15,002
Net investment income 1,138 123 258 1,519
Fee income 192 — 13 205
Other revenues 110 12 47 169
Total segment revenues (1)
$ 9,119 $ 1,654 $ 6,122 $ 16,895
Segment income (1)
$ 960 $ 324 $ 435 $ 1,719
_________________________________________________________
(1) Segment revenues for reportable business segments exclude net realized investment gains (losses) and revenues included in "interest expense and other." Segment income for reportable business segments excludes the after-tax impact of net realized investment gains (losses) and income (loss) from "interest expense and other."
9
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2.    SEGMENT INFORMATION, Continued
Business Segment Reconciliations
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Revenue reconciliation
Earned premiums
Business Insurance:
Domestic:
Workers’ compensation $ 864 $ 810 $ 1,694 $ 1,621
Commercial automobile 735 709 1,448 1,404
Commercial property 638 556 1,246 1,087
General liability 700 618 1,388 1,225
Commercial multi-peril 1,010 899 1,977 1,769
Other 16 14 33 28
Total Domestic 3,963 3,606 7,786 7,134
International 255 274 503 545
Total Business Insurance 4,218 3,880 8,289 7,679
Bond & Specialty Insurance:
Domestic:
Fidelity and surety 295 276 569 542
General liability 385 347 758 678
Other 54 55 109 111
Total Domestic 734 678 1,436 1,331
International 117 98 235 188
Total Bond & Specialty Insurance 851 776 1,671 1,519
Personal Insurance:
Domestic:
Automobile 1,511 1,405 2,969 2,775
Homeowners and Other 1,570 1,377 3,066 2,685
Total Domestic 3,081 2,782 6,035 5,460
International 167 178 336 344
Total Personal Insurance 3,248 2,960 6,371 5,804
Total earned premiums 8,317 7,616 16,331 15,002
Net investment income 707 818 1,344 1,519
Fee income 100 104 203 205
Other revenues 107 88 185 169
Total segment revenues 9,231 8,626 18,063 16,895
Net realized investment gains (losses) ( 95 ) 61 ( 118 ) 105
Total revenues $ 9,136 $ 8,687 $ 17,945 $ 17,000
Income reconciliation, net of tax
Total segment income $ 701 $ 951 $ 1,812 $ 1,719
Interest Expense and Other (1)
( 76 ) ( 72 ) ( 150 ) ( 141 )
Core income 625 879 1,662 1,578
Net realized investment gains (losses) ( 74 ) 47 ( 93 ) 81
Impact of changes in tax laws and/or tax rates (2)
— 8 — 8
Net income $ 551 $ 934 $ 1,569 $ 1,667
_________________________________________________________
(1) The primary component of Interest Expense and Other was after-tax interest expense of $ 69 million and $ 65 million for the three months ended June 30, 2022 and 2021, respectively, and $ 138 million and $ 130 million for the six months ended June 30, 2022 and 2021, respectively.
(2) Impact is recognized in the accounting period in which the change is enacted.

10
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2.    SEGMENT INFORMATION, Continued
(in millions) June 30,
2022 		December 31,
2021
Asset reconciliation
Business Insurance $ 87,092 $ 90,353
Bond & Specialty Insurance 10,167 10,146
Personal Insurance 18,366 18,983
Total assets by reportable segment 115,625 119,482
Other assets (1)
962 984
Total consolidated assets $ 116,587 $ 120,466
_________________________________________________________
(1) The primary components of other assets at both June 30, 2022 and December 31, 2021 were the over-funded benefit plan assets related to the Company’s qualified domestic pension plan and other intangible assets.

3. INVESTMENTS
Fixed Maturities
The amortized cost and fair value of investments in fixed maturities classified as available for sale were as follows:
Amortized Cost Allowance for Expected Credit Losses Gross Unrealized Fair Value
(at June 30, 2022, in millions) Gains Losses
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ 3,845 $ — $ 7 $ 264 $ 3,588
Obligations of U.S. states, municipalities and political subdivisions:
Local general obligation 19,959 — 55 1,593 18,421
Revenue 11,174 — 38 763 10,449
State general obligation 1,169 — 6 75 1,100
Pre-refunded 3,566 — 72 — 3,638
Total obligations of U.S. states, municipalities and political subdivisions 35,868 — 171 2,431 33,608
Debt securities issued by foreign governments 1,048 — 1 47 1,002
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
1,795 — 15 120 1,690
Corporate and all other bonds 33,361 4 32 2,178 31,211
Total $ 75,917 $ 4 $ 226 $ 5,040 $ 71,099

11
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3.    INVESTMENTS, Continued
Amortized Cost Allowance for Expected Credit Losses Gross Unrealized Fair Value
(at December 31, 2021, in millions) Gains Losses
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ 3,574 $ — $ 20 $ 32 $ 3,562
Obligations of U.S. states, municipalities and political subdivisions:
Local general obligation 18,668 — 1,045 46 19,667
Revenue 11,274 — 693 27 11,940
State general obligation 1,158 — 67 2 1,223
Pre-refunded 3,825 — 207 — 4,032
Total obligations of U.S. states, municipalities and political subdivisions 34,925 — 2,012 75 36,862
Debt securities issued by foreign governments 1,041 — 7 7 1,041
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
1,754 — 68 5 1,817
Corporate and all other bonds 33,457 3 1,249 175 34,528
Total $ 74,751 $ 3 $ 3,356 $ 294 $ 77,810
Pre-refunded bonds of $ 3.64 billion and $ 4.03 billion at June 30, 2022 and December 31, 2021, respectively, were bonds for which U.S. states or municipalities have established irrevocable trusts that are almost exclusively comprised of U.S. Treasury securities and obligations of U.S. government and government agencies and authorities.  These trusts were created to fund the payment of principal and interest due under the bonds.
Proceeds from the sales of fixed maturities classified as available for sale were $ 2.70 billion and $ 2.48 billion during the six months ended June 30, 2022 and 2021, respectively. Gross gains of $ 10 million and $ 43 million and gross losses of $ 8 million and $ 5 million were realized on those sales during the six months ended June 30, 2022 and 2021, respectively.
Equity Securities
The cost and fair value of investments in equity securities were as follows:
Fair
(at June 30, 2022, in millions) Cost Gross Gains Gross Losses Value
Common stock $ 706 $ 66 $ 27 $ 745
Non-redeemable preferred stock 49 8 2 55
Total $ 755 $ 74 $ 29 $ 800
Fair
(at December 31, 2021, in millions) Cost Gross Gains Gross Losses Value
Common stock $ 694 $ 137 $ 4 $ 827
Non-redeemable preferred stock 55 11 — 66
Total $ 749 $ 148 $ 4 $ 893
For the six months ended June 30, 2022 and 2021, the Company recognized $( 85 ) million and $ 51 million of net gains (losses) on equity securities still held as of June 30, 2022 and 2021, respectively.

12
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3.    INVESTMENTS, Continued
Unrealized Investment Losses
The following tables summarize, for all fixed maturities classified as available for sale in an unrealized loss position at June 30, 2022 and December 31, 2021, the aggregate fair value and gross unrealized loss by the length of time those securities have been continuously in an unrealized loss position.  The fair value amounts reported in the tables are estimates that are prepared using the process described in note 4 herein and in note 4 of the notes to the consolidated financial statements in the Company’s 2021 Annual Report.  The Company also relies upon estimates of several factors in its review and evaluation of individual investments, using the process described in note 1 of the notes to the consolidated financial statements in the Company’s 2021 Annual Report to determine whether a credit loss impairment exists.

Less than 12 months 12 months or longer Total
(at June 30, 2022, in millions) Fair
Value 		Gross
Unrealized
Losses 		Fair
Value 		Gross
Unrealized
Losses 		Fair
Value 		Gross
Unrealized
Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ 2,506 $ 235 $ 221 $ 29 $ 2,727 $ 264
Obligations of U.S. states, municipalities and political subdivisions 19,690 2,201 1,117 230 20,807 2,431
Debt securities issued by foreign governments
805 34 136 13 941 47
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
1,476 118 21 2 1,497 120
Corporate and all other bonds 25,489 1,818 1,917 360 27,406 2,178
Total $ 49,966 $ 4,406 $ 3,412 $ 634 $ 53,378 $ 5,040
Less than 12 months 12 months or longer Total
(at December 31, 2021, in millions) Fair
Value 		Gross
Unrealized
Losses 		Fair
Value 		Gross
Unrealized
Losses 		Fair
Value 		Gross
Unrealized
Losses
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ 2,438 $ 32 $ 5 $ — $ 2,443 $ 32
Obligations of U.S. states, municipalities and political subdivisions 3,873 69 153 6 4,026 75
Debt securities issued by foreign governments
452 7 7 — 459 7
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
426 5 1 — 427 5
Corporate and all other bonds 7,306 153 436 22 7,742 175
Total $ 14,495 $ 266 $ 602 $ 28 $ 15,097 $ 294
13
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3.    INVESTMENTS, Continued
The following table summarizes, for all fixed maturities reported at fair value for which fair value is less than 80% of amortized cost at June 30, 2022, the gross unrealized investment loss by length of time those securities have continuously been in an unrealized loss position of greater than 20% of amortized cost:

Period For Which Fair Value is Less Than 80% of Amortized Cost
(at June 30, 2022, in millions) 3 months or less Greater than 3 months, 6 months or less Greater than 6 months, 12 months or less Greater than 12 months Total
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ — $ — $ — $ — $ —
Obligations of U.S. states, municipalities and political subdivisions 807 195 — — 1,002
Debt securities issued by foreign governments
— — — — —
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
— — — — —
Corporate and all other bonds 116 — — — 116
Total $ 923 $ 195 $ — $ — $ 1,118

At December 31, 2021, the Company had no fixed maturity investments reported at fair value for which fair value was less than 80% of amortized cost. The increase in fixed maturities in an unrealized loss position from December 31, 2021 through June 30, 2022 was primarily due to higher interest rates. These unrealized losses at June 30, 2022 represented less than 2 % of the fixed maturity portfolio on a pre-tax basis and approximately 5 % of shareholders' equity on an after-tax basis.
Credit Impairment Charges
The following tables present changes in the allowance for expected credit losses on fixed maturities classified as available for sale for the category of Corporate and All Other Bonds (no other categories of fixed maturities currently have an allowance for expected credit losses):
Fixed Maturities
Corporate and All Other Bonds
(in millions) At and For the Three Months Ended June 30, 2022 At and For the Three Months Ended June 30, 2021
Balance, beginning of period $ 4 $ 2
Additions for expected credit losses on securities where no credit losses were previously recognized
— 1
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized
— ( 1 )
Reductions due to sales/defaults of credit-impaired securities
— —
Reductions for impairments of securities which the Company intends to sell or more likely than not will be required to sell — —
Balance, end of period $ 4 $ 2

14
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3.    INVESTMENTS, Continued
Fixed Maturities
Corporate and All Other Bonds
(in millions) At and For the Six Months Ended June 30, 2022 At and For the Six Months Ended June 30, 2021
Balance, beginning of period $ 3 $ 2
Additions for expected credit losses on securities where no credit losses were previously recognized — 1
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized 1 ( 1 )
Reductions due to sales/defaults of credit-impaired securities — —
Reductions for impairments of securities which the Company intends to sell or more likely than not will be required to sell
— —
Balance, end of period $ 4 $ 2

Total net impairment charges, including credit impairments, reported in net realized investment gains (losses) in the consolidated statement of income, were $ 20 million and $ 0 million for the three months ended June 30, 2022 and 2021, respectively, and $ 21 million and $ 0 million for the six months ended June 30, 2022 and 2021, respectively. Credit losses related to the fixed maturity portfolio for both the three months and six months ended June 30, 2022 and 2021 represented less than 1 % of the fixed maturity portfolio on a pre-tax basis and less than 1 % of shareholders’ equity on an after-tax basis.

Other Investments

Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income from these other investments is generally reflected in the Company's financial statements on a quarter lag basis.
4. FAIR VALUE MEASUREMENTS
The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in the fair value accounting guidance.  The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available.  The disclosure of fair value estimates in the fair value accounting guidance hierarchy is based on whether the significant inputs into the valuation are observable.  In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions.  The level in the fair value hierarchy within which the fair value measurement is reported is based on the lowest level input that is significant to the measurement in its entirety.  The three levels of the hierarchy are as follows:
• Level 1 - Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.
• Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.
• Level 3 - Valuations based on models where significant inputs are not observable.  The unobservable inputs reflect the Company’s own assumptions about the inputs that market participants would use.
15
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
4.    FAIR VALUE MEASUREMENTS, Continued
Valuation of Investments Reported at Fair Value in Financial Statements
The Company utilized a pricing service to estimate fair value measurements for approximately 99 % of its fixed maturities at both June 30, 2022 and December 31, 2021.
While the vast majority of the Company’s fixed maturities are included in Level 2, the Company holds a number of municipal bonds and corporate bonds which are not valued by the pricing service and estimates the fair value of these bonds using either another internal pricing matrix, a present value income approach, or a broker quote (collectively, the other methodologies). The other methodologies include some unobservable inputs that are significant to the valuation.  Due to the limited amount of observable market information available in the estimation of fair value, the Company includes the fair value estimates for bonds that are valued using the other methodologies in Level 3.

For certain investments in non-public common and preferred equity securities, the fair value estimate is determined either internally or by an external fund manager based on the impact of recent observable transactions on the investment, recent filings, operating results, balance sheet stability, growth and other business and market sector fundamentals. Due to the significant unobservable inputs in these valuations, the Company included the fair value estimate of $ 338 million and $ 343 million for these investments at June 30, 2022 and December 31, 2021, respectively, in the amounts disclosed in Level 3.

For more information regarding the valuation of the Company’s fixed maturities, equity securities and other investments, see note 4 of the notes to the consolidated financial statements in the Company’s 2021 Annual Report.
Fair Value Hierarchy
The following tables present the level within the fair value hierarchy at which the Company’s financial assets and financial liabilities are measured on a recurring basis.
(at June 30, 2022, in millions) Total Level 1 Level 2 Level 3
Invested assets:
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ 3,588 $ 3,588 $ — $ —
Obligations of U.S. states, municipalities and political subdivisions 33,608 — 33,608 —
Debt securities issued by foreign governments 1,002 — 1,002 —
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
1,690 — 1,690 —
Corporate and all other bonds 31,211 — 30,986 225
Total fixed maturities 71,099 3,588 67,286 225
Equity securities
Common stock 745 426 — 319
Non-redeemable preferred stock 55 16 20 19
Total equity securities 800 442 20 338
Other investments 16 15 — 1
Total $ 71,915 $ 4,045 $ 67,306 $ 564
Other liabilities $ 3 $ — $ — $ 3

16
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
4.    FAIR VALUE MEASUREMENTS, Continued
(at December 31, 2021, in millions) Total Level 1 Level 2 Level 3
Invested assets:
Fixed maturities
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ 3,562 $ 3,562 $ — $ —
Obligations of U.S. states, municipalities and political subdivisions 36,862 — 36,858 4
Debt securities issued by foreign governments 1,041 — 1,041 —
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
1,817 — 1,762 55
Corporate and all other bonds 34,528 — 34,339 189
Total fixed maturities 77,810 3,562 74,000 248
Equity securities
Common stock 827 509 — 318
Non-redeemable preferred stock 66 21 20 25
Total equity securities 893 530 20 343
Other investments 23 18 — 5
Total $ 78,726 $ 4,110 $ 74,020 $ 596
Other liabilities $ 3 $ — $ — $ 3
There was no significant activity in Level 3 of the hierarchy during the six months ended June 30, 2022.

Financial Instruments Disclosed, But Not Carried, At Fair Value
The following tables present the carrying value and fair value of the Company’s financial assets and financial liabilities disclosed, but not carried, at fair value, and the level within the fair value hierarchy at which such assets and liabilities are categorized.
(at June 30, 2022, in millions) Carrying
Value 		Fair
Value 		Level 1 Level 2 Level 3
Financial assets
Short-term securities $ 3,569 $ 3,569 $ 421 $ 3,092 $ 56
Financial liabilities
Debt $ 7,191 $ 7,081 $ — $ 7,081 $ —
Commercial paper 100 100 — 100 —
(at December 31, 2021, in millions) Carrying
Value 		Fair
Value 		Level 1 Level 2 Level 3
Financial assets
Short-term securities $ 3,836 $ 3,836 $ 1,163 $ 2,615 $ 58
Financial liabilities
Debt $ 7,190 $ 9,085 $ — $ 9,085 $ —
Commercial paper 100 100 — 100 —

The Company had no material assets or liabilities that were measured at fair value on a non-recurring basis during the six months ended June 30, 2022 or the year ended December 31, 2021.


17
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

5. ALLOWANCE FOR EXPECTED CREDIT LOSSES

Premiums Receivable

The following tables present the balances of premiums receivable, net of the allowance for expected credit losses, at June 30, 2022 and 2021, and the changes in the allowance for expected credit losses for the three and six months ended June 30, 2022 and 2021.
At and For the Three Months Ended June 30, 2022 At and For the Three Months Ended June 30, 2021
(in millions) Premiums Receivable, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses Premiums Receivable, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses
Balance, beginning of period $ 8,593 $ 89 $ 8,167 $ 110
Current period change for expected credit losses 17 14
Write-offs of uncollectible premiums receivable 17 19
Balance, end of period $ 9,132 $ 89 $ 8,555 $ 105

At and For the Six Months Ended June 30, 2022 At and For the Six Months Ended June 30, 2021
(in millions) Premiums Receivable, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses Premiums Receivable, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses
Balance, beginning of period $ 8,085 $ 107 $ 7,829 $ 105
Current period change for expected credit losses 35 30
Write-offs of uncollectible premiums receivable 53 30
Balance, end of period $ 9,132 $ 89 $ 8,555 $ 105

Reinsurance Recoverables

The following tables present the balances of reinsurance recoverables, net of the allowance for estimated uncollectible reinsurance, at June 30, 2022 and 2021, and the changes in the allowance for estimated uncollectible reinsurance for the three and six months ended June 30, 2022 and 2021.

18
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
5.    ALLOWANCE FOR EXPECTED CREDIT LOSSES, Continued
At and For the Three Months Ended June 30, 2022 At and For the Three Months Ended June 30, 2021
(in millions) Reinsurance Recoverables, Net of Allowance for Estimated Uncollectible Reinsurance Allowance for Estimated Uncollectible Reinsurance Reinsurance Recoverables, Net of Allowance for Estimated Uncollectible Reinsurance Allowance for Estimated Uncollectible Reinsurance
Balance, beginning of period $ 8,734 $ 135 $ 8,345 $ 142
Current period change for estimated uncollectible reinsurance ( 3 ) ( 7 )
Write-offs of uncollectible reinsurance recoverables — —
Balance, end of period $ 8,509 $ 132 $ 8,209 $ 135

At and For the Six Months Ended June 30, 2022 At and For the Six Months Ended June 30, 2021
(in millions) Reinsurance Recoverables, Net of Allowance for Estimated Uncollectible Reinsurance Allowance for Estimated Uncollectible Reinsurance Reinsurance Recoverables, Net of Allowance for Estimated Uncollectible Reinsurance Allowance for Estimated Uncollectible Reinsurance
Balance, beginning of period $ 8,452 $ 141 $ 8,350 $ 146
Current period change for estimated uncollectible reinsurance ( 9 ) ( 11 )
Write-offs of uncollectible reinsurance recoverables — —
Balance, end of period $ 8,509 $ 132 $ 8,209 $ 135

Of the total reinsurance recoverables at June 30, 2022, $ 5.95 billion, or 86 %, were rated by A.M. Best Company, after deducting mandatory pools and associations and before allowances for estimated uncollectible reinsurance.  The Company utilizes updated A.M. Best credit ratings on a quarterly basis when determining the allowance. Of the total rated by A.M. Best Company, 94 % were rated A- or better. The remaining 14 % of reinsurance recoverables were comprised of the following: 6 % related to captive insurance companies, 1 % related to the Company’s participation in voluntary pools and 7 % were balances from other companies not rated by A.M. Best Company.  Certain of the Company's reinsurance recoverables are collateralized by letters of credit, funds held or trust agreements.

19
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
5.    ALLOWANCE FOR EXPECTED CREDIT LOSSES, Continued
Contractholder Receivables

The following tables present the balances of contractholder receivables, net of the allowance for expected credit losses, at June 30, 2022 and 2021, and the changes in the allowance for expected credit losses for the three and six months ended June 30, 2022 and 2021.
At and For the Three Months Ended June 30, 2022 At and For the Three Months Ended June 30, 2021
(in millions) Contractholder Receivables, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses Contractholder Receivables, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses
Balance, beginning of period $ 3,901 $ 19 $ 4,271 $ 19
Current period change for expected credit losses — —
Write-offs of uncollectible contractholder receivables 1 —
Balance, end of period $ 3,735 $ 18 $ 4,016 $ 19

At and For the Six Months Ended June 30, 2022 At and For the Six Months Ended June 30, 2021
(in millions) Contractholder Receivables, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses Contractholder Receivables, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses
Balance, beginning of period $ 3,890 $ 21 $ 4,242 $ 19
Current period change for expected credit losses ( 2 ) —
Write-offs of uncollectible contractholder receivables 1 —
Balance, end of period $ 3,735 $ 18 $ 4,016 $ 19

20

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

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill
The following table presents the carrying amount of the Company’s goodwill by segment.  Each reportable segment includes goodwill associated with the Company’s international business which is subject to the impact of changes in foreign currency exchange rates.
(in millions) June 30,
2022 		December 31,
2021
Business Insurance $ 2,571 $ 2,610
Bond & Specialty Insurance 550 550
Personal Insurance 820 822
Other 26 26
Total $ 3,967 $ 4,008
Other Intangible Assets
The following tables present a summary of the Company’s other intangible assets by major asset class.
(at June 30, 2022, in millions) Gross
Carrying
Amount 		Accumulated
Amortization 		Net
Subject to amortization
Customer-related $ 96 $ 43 $ 53
Contract-based (1)
205 190 15
Total subject to amortization 301 233 68
Not subject to amortization 226 — 226
Total $ 527 $ 233 $ 294
(at December 31, 2021, in millions) Gross
Carrying
Amount 		Accumulated
Amortization 		Net
Subject to amortization
Customer-related $ 104 $ 41 $ 63
Contract-based (1)
205 188 17
Total subject to amortization 309 229 80
Not subject to amortization 226 — 226
Total $ 535 $ 229 $ 306
_________________________________________________________
(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.

21
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

7.    INSURANCE CLAIM RESERVES

Claims and claim adjustment expense reserves were as follows:
(in millions) June 30,
2022 		December 31,
2021
Property-casualty $ 57,976 $ 56,897
Accident and health 7 10
Total $ 57,983 $ 56,907
The following table presents a reconciliation of beginning and ending property casualty reserve balances for claims and claim adjustment expenses:
Six Months Ended June 30,
(in millions) 2022 2021
Claims and claim adjustment expense reserves at beginning of year $ 56,897 $ 54,510
Less reinsurance recoverables on unpaid losses 8,209 8,153
Net reserves at beginning of year 48,688 46,357
Estimated claims and claim adjustment expenses for claims arising in the current year 11,194 10,430
Estimated decrease in claims and claim adjustment expenses for
claims arising in prior years
( 387 ) ( 459 )
Total increases 10,807 9,971
Claims and claim adjustment expense payments for claims arising in:
Current year 3,357 3,113
Prior years 6,205 5,274
Total payments 9,562 8,387
Unrealized foreign exchange (gain) loss ( 164 ) 53
Net reserves at end of period 49,769 47,994
Plus reinsurance recoverables on unpaid losses 8,207 7,901
Claims and claim adjustment expense reserves at end of period $ 57,976 $ 55,895
Gross claims and claim adjustment expense reserves at June 30, 2022 increased by $ 1.08 billion from December 31, 2021, primarily reflecting the impacts of (i) higher volumes of insured exposures, (ii) loss cost trends for the current accident year and (iii) catastrophe losses in the first six months of 2022, partially offset by (iv) net favorable prior year reserve development.
Reinsurance recoverables on unpaid losses at June 30, 2022 decreased by $ 2 million from December 31, 2021.

Prior Year Reserve Development
The following disclosures regarding reserve development are on a “net of reinsurance” basis.
For the six months ended June 30, 2022 and 2021, estimated claims and claim adjustment expenses incurred included $ 387 million and $ 459 million, respectively, of net favorable development for claims arising in prior years, including $ 444 million and $ 499 million, respectively, of net favorable prior year reserve development, and $ 23 million and $ 24 million, respectively, of accretion of discount that impacted the Company's results of operations.

22
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
7.    INSURANCE CLAIM RESERVES, Continued
Business Insurance. Net favorable prior year reserve development in the second quarter of 2022 totaled $ 202 million, primarily driven by better than expected loss experience in the domestic operations' workers' compensation product line for multiple accident years and in the commercial multi-peril product line for recent accident years, partially offset by an increase in reserves in the domestic operations' general liability product line including for run-off operations. Net favorable prior year reserve development in the second quarter of 2021 totaled $ 73 million, primarily driven by better than expected loss experience in the domestic operations' workers' compensation product line for multiple accident years, partially offset by an increase in reserves related to run-off operations.

Net favorable prior year reserve development in the first six months of 2022 totaled $ 315 million, primarily driven by better than expected loss experience in the domestic operations' workers' compensation product line for multiple accident years and in the commercial multi-peril product line for recent accident years, partially offset by an increase in reserves in the domestic operations' general liability product line including for run-off operations. Net favorable prior year reserve development in the first six months of 2021 totaled $ 207 million, primarily driven by better than expected loss experience in the domestic operations' workers' compensation product line for multiple accident years and in the commercial property and commercial automobile product lines for recent accident years, partially offset by an increase in reserves related to run-off operations. The first six months of 2022 and 2021 also included an increase to environmental reserves.

Bond & Specialty Insurance. Net favorable prior year reserve development in the second quarter and first six months of 2022 totaled $ 73 million and $ 108 million, respectively, primarily driven by better than expected loss experience in the domestic operations' fidelity and surety product lines for recent accident years. Net favorable prior year reserve development in the second quarter and first six months of 2021 totaled $ 44 million and $ 59 million, respectively, primarily driven by better than expected loss experience in the domestic operations' fidelity and surety product lines for recent accident years.

Personal Insurance. Net favorable prior year reserve development in the second quarter and first six months of 2022 totaled $ 16 million and $ 21 million, respectively. Net favorable prior year reserve development in the second quarter and first six months of 2021 totaled $ 65 million and $ 233 million, respectively, primarily driven by better than expected loss experience in the domestic operations in both the automobile and homeowners and other product lines for recent accident years.


23

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

8. OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables present the changes in the Company’s accumulated other comprehensive income (loss) (AOCI) for the three months and six months ended June 30, 2022.
Changes in Net Unrealized Gains (Losses) on Investment Securities
(in millions) Having No Credit Losses Recognized in the Consolidated Statement of Income Having Credit
Losses Recognized
in the Consolidated
Statement of
Income 		Net Benefit Plan Assets and Obligations Recognized in Shareholders’ Equity Net Unrealized Foreign Currency Translation Total Accumulated Other Comprehensive Income (Loss)
Balance, March 31, 2022 $ ( 1,572 ) $ 181 $ ( 464 ) $ ( 747 ) $ ( 2,602 )
Other comprehensive income (loss) (OCI) before reclassifications, net of tax ( 2,415 ) ( 2 ) 1 ( 161 ) ( 2,577 )
Amounts reclassified from AOCI, net of tax 16 — 8 — 24
Net OCI, current period ( 2,399 ) ( 2 ) 9 ( 161 ) ( 2,553 )
Balance, June 30, 2022 $ ( 3,971 ) $ 179 $ ( 455 ) $ ( 908 ) $ ( 5,155 )

Changes in Net Unrealized Gains (Losses) on Investment Securities
(in millions) Having No Credit
Losses Recognized in
the Consolidated
Statement of Income 		Having Credit
Losses Recognized
in the Consolidated
Statement of
Income 		Net Benefit Plan Assets and
Obligations
Recognized in
Shareholders’
Equity 		Net Unrealized
Foreign Currency
Translation 		Total Accumulated
Other
Comprehensive
Income (Loss)
Balance, December 31, 2021 $ 2,233 $ 182 $ ( 473 ) $ ( 749 ) $ 1,193
Other comprehensive income (loss) (OCI) before reclassifications, net of tax ( 6,219 ) ( 3 ) 2 ( 159 ) ( 6,379 )
Amounts reclassified from AOCI, net of tax
15 — 16 — 31
Net OCI, current period ( 6,204 ) ( 3 ) 18 ( 159 ) ( 6,348 )
Balance, June 30, 2022 $ ( 3,971 ) $ 179 $ ( 455 ) $ ( 908 ) $ ( 5,155 )

24
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
8.    OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), Continued

The following table presents the pre-tax components of the Company’s other comprehensive income (loss) and the related income tax expense (benefit).
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Changes in net unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income $ ( 3,045 ) $ 533 $ ( 7,874 ) $ ( 1,063 )
Income tax expense (benefit) ( 646 ) 111 ( 1,670 ) ( 228 )
Net of taxes ( 2,399 ) 422 ( 6,204 ) ( 835 )
Having credit losses recognized in the consolidated statement of income ( 2 ) — ( 3 ) —
Income tax benefit — — — —
Net of taxes ( 2 ) — ( 3 ) —
Net changes in benefit plan assets and obligations 11 26 22 51
Income tax expense 2 6 4 11
Net of taxes 9 20 18 40
Net changes in unrealized foreign currency translation ( 174 ) 40 ( 172 ) 66
Income tax expense (benefit) ( 13 ) 4 ( 13 ) 4
Net of taxes ( 161 ) 36 ( 159 ) 62
Total other comprehensive income (loss) ( 3,210 ) 599 ( 8,027 ) ( 946 )
Total income tax expense (benefit) ( 657 ) 121 ( 1,679 ) ( 213 )
Total other comprehensive income (loss), net of taxes $ ( 2,553 ) $ 478 $ ( 6,348 ) $ ( 733 )
25
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
8.    OTHER COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), Continued

The following table presents the pre-tax and related income tax (expense) benefit components of the amounts reclassified from the Company’s AOCI to the Company’s consolidated statement of income.
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Reclassification adjustments related to unrealized gains (losses) on investment securities:
Having no credit losses recognized in the consolidated statement of income (1)
$ 21 $ ( 24 ) $ 19 $ ( 38 )
Income tax (expense) benefit (2)
5 ( 5 ) 4 ( 8 )
Net of taxes 16 ( 19 ) 15 ( 30 )
Having credit losses recognized in the consolidated statement of income (1)
— — — —
Income tax benefit (2)
— — — —
Net of taxes — — — —
Reclassification adjustment related to benefit plan assets and obligations:
Claims and claim adjustment expenses (3)
4 11 8 21
General and administrative expenses (3)
7 15 13 30
Total 11 26 21 51
Income tax benefit (2)
3 6 5 11
Net of taxes 8 20 16 40
Reclassification adjustment related to foreign currency translation (1)
— — — —
Income tax benefit (2)
— — — —
Net of taxes — — — —
Total reclassifications 32 2 40 13
Total income tax benefit 8 1 9 3
Total reclassifications, net of taxes $ 24 $ 1 $ 31 $ 10
_________________________________________________________
(1) (Increases) decreases net realized investment gains (losses) 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.

9. DEBT
Credit Agreement . On June 15, 2022, the Company entered into a five-year $ 1.0 billion revolving credit agreement with a syndicate of financial institutions, replacing its five-year $ 1.0 billion credit agreement that was due to expire on June 4, 2023. Pursuant to the credit agreement covenants, the Company must maintain a minimum consolidated net worth, defined as shareholders’ equity determined in accordance with GAAP (excluding accumulated other comprehensive income (loss)) plus (a) trust preferred securities (not to exceed 15 % of total capital) and (b) mandatorily convertible securities (combined with trust preferred securities, not to exceed 25 % of total capital), less goodwill and other intangible assets. That threshold is fixed during the term of the credit agreement at an amount equal to $ 13.9 billion ( 57.5 % of the Company's net worth as defined above at March 31, 2022). In addition, the credit agreement contains other customary restrictive covenants as well as certain customary events of default, including with respect to a change in control, which would occur upon the acquisition of 35 % or more of the Company’s voting stock or certain changes in the composition of the Company’s board of directors. At June 30, 2022, the
26
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
9. DEBT, Continued
Company was in compliance with these covenants. Generally, the cost of borrowing under this agreement will range from the Secured Overnight Financing Rate (SOFR) plus 85 basis points (including a credit spread adjustment) to SOFR plus 147.5 basis points (including a credit spread adjustment), depending on the Company’s credit ratings. At June 30, 2022, that cost would have been SOFR plus 110 basis points (including a credit spread adjustment), had there been any amounts outstanding under the credit agreement.
10. COMMON SHARE REPURCHASES
During the three and six months ended June 30, 2022, the Company repurchased 2.9 million and 5.8 million common shares, respectively, under its share repurchase authorizations for total cost of $ 500 million and $ 1.00 billion, respectively. The average cost per share repurchased was $ 172.56 and $ 172.33 , respectively.  In addition, the Company acquired 2,394 shares and 0.4 million common shares for a total cost of approximately $ 414,000 and $ 59 million during the three and six months ended June 30, 2022, respectively, that were not part of its publicly announced share repurchase authorizations.  These shares consisted of shares retained to cover payroll withholding taxes in connection with the vesting of restricted stock unit awards and performance share awards, and shares used by employees to cover the price of certain stock options that were exercised. At June 30, 2022, the Company had $ 3.01 billion of capacity remaining under its share repurchase authorizations.

11. EARNINGS PER SHARE
The following is a reconciliation of the income and share data used in the basic and diluted earnings per share computations for the periods presented:
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions, except per share amounts) 2022 2021 2022 2021
Basic and Diluted
Net income, as reported $ 551 $ 934 $ 1,569 $ 1,667
Participating share-based awards — allocated income ( 4 ) ( 7 ) ( 11 ) ( 12 )
Net income available to common shareholders — basic and diluted $ 547 $ 927 $ 1,558 $ 1,655
Common Shares
Basic
Weighted average shares outstanding 238.4 250.7 239.7 251.4
Diluted
Weighted average shares outstanding 238.4 250.7 239.7 251.4
Weighted average effects of dilutive securities — stock options and performance shares
2.7 2.4 2.7 2.2
Total 241.1 253.1 242.4 253.6
Net Income per Common Share
Basic $ 2.29 $ 3.70 $ 6.50 $ 6.58
Diluted $ 2.27 $ 3.66 $ 6.43 $ 6.53

27
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
12. SHARE-BASED INCENTIVE COMPENSATION

The following information relates to fully vested stock option awards at June 30, 2022:
Stock Options Number Weighted
Average
Exercise
Price 		Weighted
Average
Contractual
Life
Remaining 		Aggregate
Intrinsic
Value
($ in millions)
Vested at end of period (1)
7,211,916 $ 130.88 6.3 years $ 278
Exercisable at end of period 4,433,140 $ 122.89 5.0 years $ 205
_________________________________________________________
(1) Represents awards for which the requisite service has been rendered, including those that are retirement eligible.

The total compensation cost for all share-based incentive compensation awards recognized in earnings was $ 41 million and $ 36 million for the three months ended June 30, 2022 and 2021, respectively, and $ 100 million and $ 89 million for the six months ended June 30, 2022 and 2021, respectively. The related tax benefits recognized in earnings were $ 7 million and $ 6 million for the three months ended June 30, 2022 and 2021, respectively, and $ 17 million and $ 15 million for the six months ended June 30, 2022 and 2021, respectively.

The total unrecognized compensation cost related to all nonvested share-based incentive compensation awards at June 30, 2022 was $ 245 million, which is expected to be recognized over a weighted-average period of 2.0 years.

13. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS
The following table summarizes the components of net periodic benefit cost (benefit) for the Company’s pension and postretirement benefit plans recognized in the consolidated statement of income for the three months ended June 30, 2022 and 2021.
Pension Plans Postretirement Benefit Plans
(for the three months ended June 30, in millions) 2022 2021 2022 2021
Net Periodic Benefit Cost (Benefit):
Service cost $ 37 $ 36 $ — $ —
Non-service cost (benefit):
Interest cost on benefit obligation $ 26 $ 20 $ 1 $ —
Expected return on plan assets ( 74 ) ( 68 ) — —
Amortization of unrecognized:
Prior service benefit — — ( 1 ) ( 1 )
Net actuarial (gain) loss 13 27 ( 1 ) —
Total non-service cost (benefit) ( 35 ) ( 21 ) ( 1 ) ( 1 )
Net periodic benefit cost (benefit) $ 2 $ 15 $ ( 1 ) $ ( 1 )
28
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
13. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS, Continued
The following table indicates the line items in which the respective service cost and non-service cost (benefit) are presented in the consolidated statement of income for the three months ended June 30, 2022 and 2021.
Pension Plans Postretirement Benefit Plans
(for the three months ended June 30, in millions) 2022 2021 2022 2021
Service Cost:
Claims and claim adjustment expenses $ 15 $ 15 $ — $ —
General and administrative expenses 22 21 — —
Total service cost 37 36 — —
Non-Service Cost (Benefit):
Claims and claim adjustment expenses ( 14 ) ( 8 ) ( 1 ) ( 1 )
General and administrative expenses ( 21 ) ( 13 ) — —
Total non-service cost (benefit) ( 35 ) ( 21 ) ( 1 ) ( 1 )
Net periodic benefit cost (benefit) $ 2 $ 15 $ ( 1 ) $ ( 1 )

The following table summarizes the components of net periodic benefit cost (benefit) for the Company’s pension and postretirement benefit plans recognized in the consolidated statement of income for the six months ended June 30, 2022 and 2021.
Pension Plans Postretirement Benefit Plans
(for the six months ended June 30, in millions) 2022 2021 2022 2021
Net Periodic Benefit Cost (Benefit):
Service cost $ 73 $ 71 $ — $ —
Non-service cost (benefit):
Interest cost on benefit obligation 51 41 2 1
Expected return on plan assets ( 148 ) ( 137 ) — —
Amortization of unrecognized:
Prior service benefit — — ( 2 ) ( 2 )
Net actuarial (gain) loss 25 54 ( 2 ) ( 1 )
Total non-service cost (benefit) ( 72 ) ( 42 ) ( 2 ) ( 2 )
Net periodic benefit cost (benefit) $ 1 $ 29 $ ( 2 ) $ ( 2 )
The following table indicates the line items in which the respective service cost and non-service cost (benefit) are presented in the consolidated statement of income for the six months ended June 30, 2022 and 2021.
Pension Plans Postretirement Benefit Plans
(for the six months ended June 30, in millions) 2022 2021 2022 2021
Service Cost:
Claims and claim adjustment expenses $ 30 $ 29 $ — $ —
General and administrative expenses 43 42 — —
Total service cost 73 71 — —
Non-Service Cost (Benefit):
Claims and claim adjustment expenses ( 29 ) ( 17 ) ( 1 ) ( 1 )
General and administrative expenses ( 43 ) ( 25 ) ( 1 ) ( 1 )
Total non-service cost (benefit) ( 72 ) ( 42 ) ( 2 ) ( 2 )
Net periodic benefit cost (benefit) $ 1 $ 29 $ ( 2 ) $ ( 2 )

29
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
14. LEASES
The Company enters into lease agreements for real estate that is primarily used for office space in the ordinary course of business. These leases are accounted for as operating leases, whereby lease expense is recognized on a straight-line basis over the term of the lease, and a right-of-use asset and lease liability is recognized as part of other assets and other liabilities, respectively, in the consolidated balance sheet.

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

Lease expense is included in general and administrative expenses in the consolidated statement of income. Additional information regarding the Company’s real estate operating leases is as follows:
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Lease cost
Operating leases $ 21 $ 22 $ 42 $ 45
Short-term leases (1)
1 1 1 1
Lease expense 22 23 43 46
Less: sublease income (2)
— — — —
Net lease cost $ 22 $ 23 $ 43 $ 46
Other information on operating leases
Cash payments to settle a lease liability reported in cash flows
$ 24 $ 27 $ 48 $ 53
Right-of-use assets obtained in exchange for new lease liabilities $ 5 $ 7 $ 7 $ 19
Weighted average discount rate 2.27 % 2.41 % 2.27 % 2.41 %
Weighted average remaining lease term 4.6 years 4.8 years 4.6 years 4.8 years
_________________________________________________________
(1) Leases with a term of twelve months or less are not recorded on the consolidated balance sheet.
(2) Sublease income consists of rent from third parties of office space and is recognized as part of other revenues in the consolidated statement of income.


15. CONTINGENCIES, COMMITMENTS AND GUARANTEES
Contingencies
The major pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or to which any of the Company’s properties is subject are described below.
30
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
15.    CONTINGENCIES, COMMITMENTS AND GUARANTEES, Continued
Asbestos and Environmental Claims and Litigation
In the ordinary course of its insurance business, the Company has received and continues to receive claims for insurance arising under policies issued by the Company asserting alleged injuries and damages from asbestos- and environmental-related exposures that are the subject of related coverage litigation. The Company is defending asbestos- and environmental-related litigation vigorously and believes that it has meritorious defenses; however, the outcomes of these disputes are uncertain. In this regard, the Company employs dedicated specialists and comprehensive resolution strategies to manage asbestos and environmental loss exposure, including settling litigation under appropriate circumstances. Currently, it is not possible to predict legal outcomes and their impact on future loss development for claims and litigation relating to asbestos and environmental claims. Any such development could be affected by future court decisions and interpretations, as well as future changes, if any, in applicable legislation. Because of these uncertainties, additional liabilities may arise for amounts in excess of the Company’s current insurance reserves. In addition, the Company’s estimate of ultimate claims and claim adjustment expenses may change. These additional liabilities or changes in estimates, or a range of either, cannot now be reasonably estimated and could result in income statement charges that could be material to the Company’s results of operations in future periods.
Other Proceedings Not Arising Under Insurance Contracts or Reinsurance Agreements
The Company is involved in other lawsuits, including lawsuits alleging extra-contractual damages relating to insurance contracts or reinsurance agreements, that do not arise under insurance contracts or reinsurance agreements. The legal costs associated with such lawsuits are expensed in the period in which the costs are incurred. Based upon currently available information, the Company does not believe it is reasonably possible that any such lawsuit or related lawsuits would be material to the Company’s results of operations or would have a material adverse effect on the Company’s financial position or liquidity.

Other Commitments and Guarantees
Commitments
Investment Commitments — The Company has unfunded commitments to private equity limited partnerships, real estate partnerships and others.  These commitments totaled $ 1.83 billion and $ 1.70 billion at June 30, 2022 and December 31, 2021, respectively.
Guarantees
The maximum amount of the Company’s contingent obligation for indemnifications related to the sale of businesses that are quantifiable was $ 351 million at June 30, 2022.
The maximum amount of the Company’s obligation related to the guarantee of certain insurance policy obligations of a former insurance subsidiary was $ 480 million at June 30, 2022, all of which is indemnified by a third party.  For more information regarding Company guarantees, see note 17 of the notes to the consolidated financial statements in the Company’s 2021 Annual Report.

31

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of the Company’s financial condition and results of operations.
FINANCIAL HIGHLIGHTS
2022 Second Quarter Consolidated Results of Operations
• Net income of $551 million, or $2.29 per share basic and $2.27 per share diluted
• Net earned premiums of $8.32 billion
• Catastrophe losses of $746 million ($587 million after-tax)
• Net favorable prior year reserve development of $291 million ($229 million after-tax)
• Combined ratio of 98.3%
• Net investment income of $707 million ($595 million after-tax)
• Net realized investment losses of $95 million ($74 million after-tax)
• Operating cash flows of $1.38 billion
2022 Second Quarter Consolidated Financial Condition
• Total investments of $80.46 billion; fixed maturities and short-term securities comprised 93% of total investments
• Total assets of $116.59 billion
• Total debt of $7.29 billion, resulting in a debt-to-total capital ratio of 24.2% (21.5% excluding net unrealized investment gains, net of tax)
• Total capital returned to shareholders of $725 million, comprising $500 million of share repurchases and $225 million of dividends
• Shareholders’ equity of $22.87 billion
• Net unrealized investment losses of $4.82 billion ($3.79 billion after-tax)
• Book value per common share of $96.39
• Holding company liquidity of $1.56 billion

32

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

CONSOLIDATED OVERVIEW
Consolidated Results of Operations
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions, except ratio and per share amounts) 2022 2021 2022 2021
Revenues
Premiums $ 8,317 $ 7,616 $ 16,331 $ 15,002
Net investment income 707 818 1,344 1,519
Fee income 100 104 203 205
Net realized investment gains (losses) (95) 61 (118) 105
Other revenues 107 88 185 169
Total revenues 9,136 8,687 17,945 17,000
Claims and expenses
Claims and claim adjustment expenses 5,803 5,045 10,842 10,015
Amortization of deferred acquisition costs 1,365 1,254 2,675 2,461
General and administrative expenses 1,223 1,174 2,414 2,337
Interest expense 88 83 175 165
Total claims and expenses 8,479 7,556 16,106 14,978
Income before income taxes 657 1,131 1,839 2,022
Income tax expense 106 197 270 355
Net income $ 551 $ 934 $ 1,569 $ 1,667
Net income per share
Basic $ 2.29 $ 3.70 $ 6.50 $ 6.58
Diluted $ 2.27 $ 3.66 $ 6.43 $ 6.53
Combined ratio
Loss and loss adjustment expense ratio 69.3 % 65.6 % 65.8 % 66.1 %
Underwriting expense ratio 29.0 29.7 29.0 29.8
Combined ratio 98.3 % 95.3 % 94.8 % 95.9 %
The following discussions of the Company’s net income and segment income (loss) are presented on an after-tax basis.  Discussions of the components of net income and segment income (loss) are presented on a pre-tax basis, unless otherwise noted.  Discussions of net income per common share are presented on a diluted basis.
Overview
Diluted net income per share of $2.27 in the second quarter of 2022 decreased by 38% from diluted net income per share of $3.66 in the same period of 2021.  Net income of $551 million in the second quarter of 2022 decreased by 41% from net income of $934 million in the same period of 2021.  The lower rate of decrease in diluted net income per share reflected the impact of share repurchases in recent periods. The decrease in income before income taxes in the second quarter of 2022 primarily reflected the pre-tax impacts of (i) higher catastrophe losses, (ii) net realized investment losses compared to net realized investment gains in the same period of 2021, (iii) lower net investment income and (iv) lower underwriting margins excluding catastrophe losses and prior year reserve development ("underlying underwriting margins"), partially offset by (v) higher net favorable prior year reserve development. Catastrophe losses in the second quarters of 2022 and 2021 were $746 million and $475 million, respectively. Net favorable prior year reserve development in the second quarters of 2022 and 2021 was $291 million and $182 million, respectively. The lower underlying underwriting margins in the second quarter of 2022 were driven by Personal Insurance, partially offset by Business Insurance and Bond & Specialty Insurance. Underlying underwriting margins in the second quarter of 2021 included a net favorable impact from COVID-19 and related economic conditions. Income tax expense in the second quarter of 2022 was lower than in the same period of 2021, primarily reflecting the impact of the decrease in income before income taxes.
33

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Diluted net income per share of $6.43 in the first six months of 2022 decreased by 2% from diluted net income per share of $6.53 in the same period of 2021.  Net income of $1.57 billion in the first six months of 2022 decreased by 6% from net income of $1.67 billion in the same period of 2021.  The lower rate of decrease in diluted net income per share reflected the impact of share repurchases in recent periods. The decrease in income before income taxes primarily reflected the pre-tax impacts of (i) net realized investment losses compared to net realized investment gains in the same period of 2021, (ii) lower net investment income, (iii) lower underlying underwriting margins and (iv) lower net favorable prior year reserve development, partially offset by (v) lower catastrophe losses. Net favorable prior year reserve development in the first six months of 2022 and 2021 was $444 million and $499 million, respectively. Catastrophe losses in the first six months of 2022 and 2021 were $906 million and $1.31 billion, respectively. The lower underlying underwriting margins in the first six months of 2022 were driven by Personal Insurance, partially offset by Business Insurance and Bond & Specialty Insurance. Underlying underwriting margins in the first six months of 2021 reflected a net favorable impact from COVID-19 and related economic conditions. Income tax expense in the first six months of 2022 was lower than in the same period of 2021, primarily reflecting a $47 million reduction in income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters and the impact of the decrease in income before income taxes.

The Company has insurance operations in Canada, the United Kingdom, the Republic of Ireland and throughout other parts of the world as a corporate member of Lloyd’s, as well as in Brazil and Colombia through joint ventures.  Because these operations are conducted in local currencies other than the U.S. dollar, the Company is subject to changes in foreign currency exchange rates. For the three and six months ended June 30, 2022 and 2021, changes in foreign currency exchange rates impacted reported line items in the statement of income by insignificant amounts.  The impact of these changes was not material to the Company’s net income or segment income (loss) for the periods reported.
Revenues
Earned Premiums
Earned premiums in the second quarter of 2022 were $8.32 billion, $701 million or 9% higher than in the same period of 2021.  Earned premiums in the first six months of 2022 were $16.33 billion, $1.33 billion or 9% higher than in the same period of 2021. In Business Insurance, earned premiums in the second quarter and first six months of 2022 increased by 9% and 8%, respectively, over the same periods of 2021.  Earned premiums in Business Insurance in both periods of 2021 were negatively impacted by lower net written premiums in the preceding twelve months due to a modest reduction in exposures and a decrease in new business volume, in each case impacted by COVID-19 and related economic conditions. In Bond & Specialty Insurance, earned premiums in the second quarter and first six months of 2022 both increased by 10% over the same periods of 2021.  In Personal Insurance, earned premiums in the second quarter and first six months of 2022 both increased by 10% over the same periods of 2021.  Earned premiums in Bond & Specialty Insurance and Personal Insurance in both the second quarter and first six months of 2021 were not materially impacted by COVID-19 and related economic conditions. Factors contributing to the changes in earned premiums in each segment are discussed in more detail in the segment discussions that follow.
Net Investment Income
The following table sets forth information regarding the Company’s investments.
Three Months Ended
June 30, 		Six Months Ended
June 30,
(dollars in millions) 2022 2021 2022 2021
Average investments (1)
$ 86,660 $ 82,594 $ 86,519 $ 81,954
Pre-tax net investment income 707 818 1,344 1,519
After-tax net investment income 595 682 1,134 1,272
Average pre-tax yield (2)
3.3 % 4.0 % 3.1 % 3.7 %
Average after-tax yield (2)
2.7 % 3.3 % 2.6 % 3.1 %
_________________________________________________________
(1) Excludes net unrealized investment gains and losses and reflects cash, receivables for investment sales, payables on investment purchases and accrued investment income.
(2) Excludes net realized and net unrealized investment gains and losses.
Net investment income in the second quarter of 2022 was $707 million, $111 million or 14% lower than in the same period of 2021.  Net investment income in the first six months of 2022 was $1.34 billion, $175 million or 12% lower than in the same period of 2021. Net investment income from fixed maturity investments in the second quarter and first six months of 2022 was $512 million and $1.02 billion, respectively, $19 million and $33 million higher, respectively, than in the same periods of 2021.
34

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

The increases primarily resulted from a higher average level of fixed maturity investments, partially offset by lower long-term average yields. Net investment income from short-term securities in the second quarter and first six months of 2022 was $9 million and $11 million, respectively, $8 million and $7 million higher, respectively, than in the same periods of 2021. The increases in both periods of 2022 primarily resulted from higher short-term average yields, partially offset by a lower level of short-term investments. The Company's remaining investment portfolios had net investment income of $197 million and $339 million in the second quarter and first six months of 2022, respectively, $138 million and $214 million lower, respectively, than in the same periods of 2021. The decline in net investment income from these portfolios in the second quarter and first six months of 2022 compared with the same periods of 2021 primarily reflected the impact of lower returns from private equity partnerships as compared to strong returns in the same periods of 2021. Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income from these other investments is generally reflected in the Company's financial statements on a quarter lag basis.

Fee Income
Fee income in the second quarter of 2022 was $100 million, $4 million lower than in the same period of 2021. Fee income in the first six months of 2022 was $203 million, $2 million lower than in the same period of 2021. The National Accounts market in Business Insurance is the primary source of the Company’s fee-based business and is discussed in the Business Insurance segment discussion that follows.
Net Realized Investment Gains (Losses)
The following table sets forth information regarding the Company’s net realized investment gains (losses).
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Impairment gains (losses):
Fixed maturities $ (20) $ — $ (21) $ —
Net realized investment gains (losses) on equity securities still held
(71) 28 (85) 51
Other net realized investment gains (losses), including from sales (4) 33 (12) 54
Total $ (95) $ 61 $ (118) $ 105

Net realized investment losses on equity securities still held of $71 million and $85 million in the second quarter and first six months of 2022, respectively, were driven by the impact of changes in fair value attributable to unfavorable equity markets. Net realized investment gains on equity securities still held of $28 million and $51 million in the second quarter and first six months of 2021, respectively, were driven by the impact of changes in fair value attributable to favorable equity markets.

Other Revenues
Other revenues in the second quarter of 2022 were $107 million, $19 million higher than in the same period of 2021. Other revenues in the first six months of 2022 were $185 million, $16 million higher than in the same period of 2021. The increases in both periods primarily reflected the receipt of a surplus distribution from a state workers’ compensation reinsurance fund. Other revenues also included revenues from Simply Business, installment premium charges and other policyholder service charges.

Claims and Expenses

Claims and Claim Adjustment Expenses
Claims and claim adjustment expenses in the second quarter of 2022 were $5.80 billion, $758 million or 15% higher than in the same period of 2021, primarily reflecting the impacts of (i) higher business volumes, (ii) higher catastrophe losses, (iii) loss cost trends, including elevated severity in the current quarter in both the automobile and homeowners and other product lines in Personal Insurance, (iv) higher non-catastrophe property losses in Business Insurance and (v) a comparison to a low level of loss activity in the prior year quarter in the automobile product line in Personal Insurance, partially offset by (vi) higher net favorable prior year reserve development. Catastrophe losses in the second quarter of 2022 primarily resulted from severe wind and hail storms in several regions of the United States. Catastrophe losses in the second quarter of 2021 primarily resulted from severe storms in several regions of the United States. The impacts of COVID-19 and related economic conditions on claims and claim adjustment expenses in the second quarter of 2021 are discussed in more detail in the segment discussions that follow.
35

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued


Claims and claim adjustment expenses in the first six months of 2022 were $10.84 billion, $827 million or 8% higher than in the same period of 2021, primarily reflecting the impacts of (i) higher business volumes, (ii) loss cost trends, including elevated severity in the current year in both the automobile and homeowners and other product lines in Personal Insurance, (iii) a comparison to a low level of loss activity in the prior year period in the automobile product line in Personal Insurance, (iv) higher non-catastrophe property losses in Business Insurance and (v) lower net favorable prior year reserve development, partially offset by (vi) lower catastrophe losses. Catastrophe losses in the first six months of 2022 included the second quarter events described above, as well as wind storms in multiple states in the first quarter of 2022. Catastrophe losses in the first six months of 2021 included the second quarter events described above, as well as winter storms and wind storms in several regions of the United States in the first quarter of 2021. The impacts of COVID-19 and related economic conditions on claims and claim adjustment expenses in the first six months of 2021 are discussed in more detail in the segment discussions that follow.

Factors contributing to net favorable prior year reserve development during the second quarters and first six months of 2022 and 2021 are discussed in more detail in note 7 of the notes to the unaudited consolidated financial statements.

Significant Catastrophe Losses
The following table presents the amount of losses recorded by the Company for significant catastrophes that occurred in the three months and six months ended June 30, 2022 and 2021, the amount of net unfavorable (favorable) prior year reserve development recognized in the three months and six months ended June 30, 2022 and 2021 for significant catastrophes that occurred in 2021 and 2020, and the estimate of ultimate losses for those catastrophes at June 30, 2022 and December 31, 2021. For purposes of the table, a significant catastrophe is an event for which the Company estimates its ultimate losses will be $100 million or more after reinsurance and before taxes. The Company's threshold for disclosing catastrophes is primarily determined at the reportable segment level and for 2022 ranged from $20 million to $30 million of losses before reinsurance and taxes. For the Company’s definition of a catastrophe, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations— Consolidated Overview” in the Company’s 2021 Annual Report.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Losses Incurred/Unfavorable (Favorable)
Prior Year Reserve Development
Three Months Ended
June 30, 		Six Months Ended
June 30,
Estimated Ultimate Losses
(in millions, pre-tax and net of reinsurance) (1)
2022 2021 2022 2021 June 30,
2022 		December 31, 2021
'
2020
PCS Serial Number:
16 — Tennessee tornado activity
— (2) 3 (3) 145 142
19 — Severe storms
(1) (6) (4) (11) 121 125
20 — Severe storms
(3) (9) 2 (14) 142 140
33 — Civil unrest
(1) (2) (5) (2) 88 93
44 — Tropical Storm Isaias
(3) (13) — (14) 118 118
46 — Midwest derecho (1) (5) (3) (10) 199 202
68 — California wildfire - Glass fire — (1) — (8) 136 136
2021
PCS Serial Number:
15 — Winter storms (2) (10) (5) 213 223 228
17 — Winter storms (5) 15 (5) 495 503 508
29 — Severe wind storms (5) 151 (6) 151 99 105
60 — Hurricane Ida (22) n/a (42) n/a 375 417
76 — Tornado outbreak (14) n/a (12) n/a 119 131
2022
PCS Serial Number:
33 — Severe wind and hail storms 108 n/a 108 n/a 108 n/a
35 — Severe wind and hail storms 104 n/a 104 n/a 104 n/a
43 — Severe wind and hail storms 131 n/a 131 n/a 131 n/a
_________________________________________________________
(1) Amounts are reported pre-tax and net of recoveries under all applicable reinsurance treaties, except for the Company's 2021 and 2020 Underlying Property Aggregate Catastrophe Excess-of-Loss Treaties, the terms of which are described in "Part I—Item 1—Business" in the Company's 2021 Annual Report. Those treaties covered the accumulation of certain property losses arising from one or multiple occurrences (both catastrophe and non-catastrophe events) for the period January 1, 2021 through and including December 31, 2021 and the period January 1, 2020 through and including December 31, 2020, respectively. As a result, the benefits from those treaties are not included in the table above as the allocation of the treaty's benefit to each identified catastrophe changes each time there are additional events or changes in estimated losses from any covered event.

n/a: not applicable.

Amortization of Deferred Acquisition Costs
Amortization of deferred acquisition costs in the second quarter of 2022 was $1.37 billion, $111 million or 9% higher than in the same period of 2021.  Amortization of deferred acquisition costs in the first six months of 2022 was $2.68 billion, $214 million or 9% higher than in the same period of 2021. The increases in both periods of 2022 were generally consistent with the increases in earned premiums. Amortization of deferred acquisition costs is discussed in more detail in the segment discussions that follow.
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

General and Administrative Expenses
General and administrative expenses in the second quarter of 2022 were $1.22 billion, $49 million or 4% higher than in the same period of 2021. General and administrative expenses in the first six months of 2022 were $2.41 billion, $77 million or 3% higher than in the same period of 2021. The increases in both periods of 2022 primarily reflected the impact of costs associated with higher business volumes. General and administrative expenses are discussed in more detail in the segment discussions that follow.

Interest Expense
Interest expense in the second quarter and first six months of 2022 was $88 million and $175 million, respectively, compared with $83 million and $165 million, respectively, in the same periods of 2021.
Income Tax Expense
Income tax expense in the second quarter of 2022 was $106 million, $91 million or 46% lower than in the same period of 2021, primarily reflecting the impact of the $474 million decrease in income before income taxes in the second quarter of 2022. Income tax expense in the first six months of 2022 was $270 million, $85 million or 24% lower than in the same period of 2021, primarily reflecting the $47 million reduction in income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters and the impact of the $183 million decrease in income before income taxes in the first six months of 2022.
The Company’s effective tax rate was 16% and 17% in the second quarters of 2022 and 2021, respectively.  The Company's effective tax rate was 15% and 18% in the first six months of 2022 and 2021, respectively. The effective tax rates were lower than the statutory rate of 21% in all periods, primarily due to the impact of tax-exempt investment income on the calculation of the Company’s income tax provision. In addition, the effective tax rate for the first six months of 2022 was reduced by the impact of the resolution of prior year tax matters discussed above.

Combined Ratio

The combined ratio of 98.3% in the second quarter of 2022 was 3.0 points higher than the combined ratio of 95.3% in the same period of 2021.  The loss and loss adjustment expense ratio of 69.3% in the second quarter of 2022 was 3.7 points higher than the loss and loss adjustment expense ratio of 65.6% in the same period of 2021.  The underwriting expense ratio of 29.0% for the second quarter of 2022 was 0.7 points lower than the underwriting expense ratio of 29.7% in the same period of 2021.

Catastrophe losses in the second quarters of 2022 and 2021 accounted for 9.0 points and 6.3 points, respectively, of the combined ratio. Net favorable prior year reserve development in the second quarters of 2022 and 2021 provided 3.5 points and 2.4 points of benefit, respectively, to the combined ratio. The combined ratio excluding prior year reserve development and catastrophe losses (“underlying combined ratio”) in the second quarter of 2022 was 1.4 points higher than the 2021 ratio on the same basis, primarily reflecting the impacts of ( i) elevated severity in the current quarter in both the automobile and homeowners and other product lines in Personal Insurance, (ii) higher property losses in Business Insurance and (iii) a comparison to a low level of loss activity in the prior year quarter in the automobile product line in Personal Insurance, partially offset by (iv) the benefit of earned pricing in Business Insurance and Bond & Specialty Insurance and (v) a lower expense ratio.

The combined ratio of 94.8% in the first six months of 2022 was 1.1 points lower than the combined ratio of 95.9% in the same period of 2021. The loss and loss adjustment expense ratio of 65.8% for the first six months of 2022 was 0.3 points lower than the loss and loss adjustment expense ratio of 66.1% in the same period of 2021.  The underwriting expense ratio of 29.0% for the first six months of 2022 was 0.8 points lower than the underwriting expense ratio of 29.8% in the same period of 2021.

Catastrophe losses in the first six months of 2022 and 2021 accounted for 5.5 points and 8.7 points, respectively, of the combined ratio.  Net favorable prior year reserve development in the first six months of 2022 and 2021 provided 2.7 points and 3.3 points of benefit, respectively, to the combined ratio. The underlying combined ratio in the first six months of 2022 was 1.5 points higher than the 2021 ratio on the same basis, primarily reflecting the impacts of (i) elevated severity in the current year in both the automobile and homeowners and other product lines in Personal Insurance, (ii) a comparison to a low level of loss activity in the prior year period in the automobile product line in Personal Insurance and (iii) higher property losses in Business Insurance, partially offset by (iv) the benefit of earned pricing in Business Insurance and Bond & Specialty Insurance and (v) a lower expense ratio.

The combined ratio continues to be impacted by the tort environment, including more aggressive attorney involvement in insurance claims.
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued


Written Premiums

Consolidated gross and net written premiums were as follows:
Gross Written Premiums
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Business Insurance $ 4,786 $ 4,356 $ 9,934 $ 9,132
Bond & Specialty Insurance 1,036 919 2,045 1,753
Personal Insurance 3,714 3,322 6,840 6,119
Total $ 9,536 $ 8,597 $ 18,819 $ 17,004
Net Written Premiums
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Business Insurance $ 4,373 $ 3,980 $ 8,875 $ 8,105
Bond & Specialty Insurance 962 854 1,844 1,577
Personal Insurance 3,685 3,301 6,668 5,958
Total $ 9,020 $ 8,135 $ 17,387 $ 15,640
Gross and net written premiums in the second quarter of 2022 both increased by 11% over the same period of 2021. Gross and net written premiums in the first six months of 2022 both increased by 11% over the same period of 2021. Factors contributing to the changes in gross and net written premiums in each segment are discussed in more detail in the segment discussions that follow.

RESULTS OF OPERATIONS BY SEGMENT
Business Insurance

Results of Business Insurance were as follows:
Three Months Ended
June 30, 		Six Months Ended
June 30,
(dollars in millions) 2022 2021 2022 2021
Revenues
Earned premiums $ 4,218 $ 3,880 $ 8,289 $ 7,679
Net investment income 521 615 989 1,138
Fee income 93 97 189 192
Other revenues 85 57 138 110
Total revenues 4,917 4,649 9,605 9,119
Total claims and expenses 4,103 3,869 7,982 7,967
Segment income before income taxes 814 780 1,623 1,152
Income tax expense 148 137 288 192
Segment income $ 666 $ 643 $ 1,335 $ 960
Loss and loss adjustment expense ratio 63.0 % 64.3 % 61.9 % 68.2 %
Underwriting expense ratio 30.2 31.0 30.2 31.1
Combined ratio 93.2 % 95.3 % 92.1 % 99.3 %

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Overview
Segment income in the second quarter of 2022 was $666 million, $23 million or 4% higher than segment income of $643 million in the same period of 2021. The increase in segment income before income taxes primarily reflected the pre-tax impacts of (i) higher net favorable prior year reserve development and (ii) higher underlying underwriting margins, partially offset by (iii) lower net investment income and (iv) higher catastrophe losses. Net favorable prior year reserve development in the second quarters of 2022 and 2021 was $202 million and $73 million, respectively. Catastrophe losses in the second quarters of 2022 and 2021 were $234 million and $149 million, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) higher business volumes and (ii) the benefit of earned pricing, partially offset by (iii) higher property losses. Income tax expense in the second quarter of 2022 was higher than in the same period of 2021, primarily reflecting the impact of the increase in segment income before income taxes.

Segment income in the first six months of 2022 was $1.34 billion, $375 million or 39% higher than segment income of $960 million in the same period of 2021. The increase in segment income before income taxes primarily reflected the pre-tax impacts of (i) lower catastrophe losses, (ii) higher underlying underwriting margins and (iii) higher net favorable prior year reserve development, partially offset by (iv) lower net investment income. Catastrophe losses in the first six months of 2022 and 2021 were $313 million and $655 million, respectively. Net favorable prior year reserve development in the first six months of 2022 and 2021 was $315 million and $207 million, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) higher business volumes and (ii) the benefit of earned pricing, partially offset by (iii) higher property losses. Income tax expense in the first six months of 2022 was higher than in the same period of 2021, primarily reflecting the impact of the increase in income before income taxes.

Revenues
Earned Premiums
Earned premiums in the second quarter of 2022 were $4.22 billion, $338 million or 9% higher than in the same period of 2021. Earned premiums in the first six months of 2022 were $8.29 billion, $610 million or 8% higher than in the same period of 2021. The increases in both periods of 2022 primarily reflected the increase in net written premiums over the preceding twelve months. Earned premiums in both periods of 2021 were negatively impacted by lower net written premiums in the preceding twelve months due to a modest reduction in exposures and a decrease in new business volume, in each case driven by the impact of COVID-19 and related economic conditions.

Net Investment Income
Net investment income in the second quarter of 2022 was $521 million, $94 million or 15% lower than in the same period of 2021.  Net investment income in the first six months of 2022 was $989 million, $149 million or 13% lower than in the same period of 2021. Refer to the “Revenues—Net Investment Income” section of the “Consolidated Results of Operations” discussion herein for a description of the factors contributing to the decreases in the Company’s consolidated net investment income in the second quarter and first six months of 2022 compared with the same periods of 2021. In addition, refer to note 2 of the notes to the consolidated financial statements in the Company’s 2021 Annual Report for a discussion of the Company’s net investment income allocation methodology.
Fee Income
National Accounts is the primary source of fee income due to revenue from its large deductible policies and service businesses, which include risk management, claims administration, loss control and risk management information services provided to third parties, as well as policy issuance and claims management services to workers' compensation residual market pools.  Fee income in the second quarter of 2022 was $93 million, $4 million or 4% lower than in the same period of 2021. Fee income in the first six months of 2022 was $189 million, $3 million or 2% lower than in the same period of 2021. The decreases in both periods of 2022 primarily reflected lower claim volume under administration associated with large deductible policies.

Other Revenues
Other revenues in the second quarter of 2022 were $85 million, $28 million higher than in the same period of 2021. Other revenues in the first six months of 2022 were $138 million, $28 million higher than in the same period of 2021. The increases in both periods primarily reflected the receipt of a surplus distribution from a state workers’ compensation reinsurance fund. Other revenues also included revenues from Simply Business, installment premium charges and other policyholder service charges.
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Claims and Expenses
Claims and Claim Adjustment Expenses
Claims and claim adjustment expenses in the second quarter of 2022 were $2.70 billion, $159 million or 6% higher than in the same period of 2021, primarily reflecting the impacts of (i) higher non-catastrophe property losses, (ii) higher catastrophe losses, (iii) higher business volumes and (iv) loss cost trends, partially offset by (v) higher net favorable prior year reserve development.

Claims and claim adjustment expenses in the first six months of 2022 were $5.21 billion, $115 million or 2% lower than in the same period of 2021, primarily reflecting the impacts of (i) lower catastrophe losses and (ii) higher net favorable prior year reserve development, partially offset by (iii) higher non-catastrophe property losses, (iv) loss cost trends and (v) higher business volumes. Claims and claim adjustment expenses in the first six months of 2021 included favorable loss activity related to the impact of COVID-19 and related economic conditions.

Factors contributing to net favorable prior year reserve development during the second quarters and first six months of 2022 and 2021 are discussed in more detail in note 7 of the notes to the unaudited consolidated financial statements.

Amortization of Deferred Acquisition Costs
Amortization of deferred acquisition costs in the second quarter of 2022 was $691 million, $49 million or 8% higher than the same period of 2021. Amortization of deferred acquisition costs in the first six months of 2022 was $1.36 billion, $90 million or 7% higher than the same period of 2021. The increases in both periods of 2022 were generally consistent with the increases in earned premiums.
General and Administrative Expenses
General and administrative expenses in the second quarter of 2022 were $714 million, $26 million or 4% higher than in the same period of 2021. General and administrative expenses in the first six months of 2022 were $1.41 billion, $40 million or 3% higher than in the same period of 2021. The increases in both periods of 2022 were primarily in support of business growth. General and administrative expenses in the second quarter and first six months of 2021 included the benefit of lower travel-related expenses attributable to the impact of COVID-19 and related economic conditions.
Income Tax Expense
Income tax expense in the second quarter of 2022 was $148 million, $11 million higher than the same period of 2021, primarily reflecting the impact of the $34 million increase in income before income taxes. Income tax expense in the first six months of 2022 was $288 million, $96 million higher than in the same period of 2021, primarily reflecting the impact of the $471 million increase in income before income taxes. Income tax expense in the first six months of 2022 was reduced by $3 million as a result of the resolution of prior year tax matters.

Combined Ratio
The combined ratio of 93.2% in the second quarter of 2022 was 2.1 points lower than the combined ratio of 95.3% in the same period of 2021.  The loss and loss adjustment expense ratio of 63.0% in the second quarter of 2022 was 1.3 points lower than the loss and loss adjustment expense ratio of 64.3% in the same period of 2021. The underwriting expense ratio of 30.2% for the second quarter of 2022 was 0.8 points lower than the underwriting expense ratio of 31.0% in the same period of 2021.

Catastrophe losses in the second quarters of 2022 and 2021 accounted for 5.6 points and 3.9 points, respectively, of the combined ratio.  Net favorable prior year reserve development in the second quarters of 2022 and 2021 provided 4.8 points and 1.9 points of benefit, respectively, to the combined ratio. The underlying combined ratio in the second quarter of 2022 was 0.9 points lower than the 2021 ratio on the same basis, primarily reflecting the impacts of (i) the benefit of earned pricing and (ii) a lower expense ratio, as well as (iii) higher property losses.

The combined ratio of 92.1% in the first six months of 2022 was 7.2 points lower than the combined ratio of 99.3% in the same period of 2021. The loss and loss adjustment expense ratio of 61.9% in the first six months of 2022 was 6.3 points lower than the loss and loss adjustment expense ratio of 68.2% in the same period of 2021.  The underwriting expense ratio of 30.2% for the first six months of 2022 was 0.9 points lower than the underwriting expense ratio of 31.1% in the same period of 2021.

Catastrophe losses in the first six months of 2022 and 2021 accounted for 3.8 points and 8.5 points, respectively, of the combined ratio. Net favorable prior year reserve development in the first six months of 2022 and 2021 provided 3.8 points and
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

2.7 points of benefit, respectively, to the combined ratio. The underlying combined ratio in the first six months of 2022 was 1.4 points lower than the 2021 ratio on the same basis, primarily reflecting the impacts of (i) the benefit of earned pricing and (ii) a lower expense ratio, as well as (iii) higher property losses.

Written Premiums

Business Insurance’s gross and net written premiums by market were as follows:
Gross Written Premiums
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Domestic:
Select Accounts $ 810 $ 727 $ 1,647 $ 1,478
Middle Market 2,506 2,243 5,301 4,808
National Accounts 334 314 844 811
National Property and Other 769 713 1,407 1,313
Total Domestic 4,419 3,997 9,199 8,410
International 367 359 735 722
Total Business Insurance $ 4,786 $ 4,356 $ 9,934 $ 9,132
Net Written Premiums
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Domestic:
Select Accounts $ 807 $ 726 $ 1,626 $ 1,455
Middle Market 2,329 2,087 4,945 4,471
National Accounts 240 213 543 503
National Property and Other 690 647 1,187 1,092
Total Domestic 4,066 3,673 8,301 7,521
International 307 307 574 584
Total Business Insurance $ 4,373 $ 3,980 $ 8,875 $ 8,105
Gross and net written premiums in the second quarter of 2022 both increased by 10% over the same period of 2021. Gross and net written premiums in the first six months of 2022 increased by 9% and 10%, respectively, over the same period of 2021.

Select Accounts .  Net written premiums of $807 million and $1.63 billion in the second quarter and first six months of 2022, respectively, increased by 11% and 12%, respectively, over the same periods of 2021. Retention rates remained strong in the second quarter and first six months of 2022 and increased over the same periods of 2021. Renewal premium changes in the second quarter and first six months of 2022 remained positive and were lower than in the same periods of 2021.  New business premiums in the second quarter and first six months of 2022 increased over the same periods of 2021.

Middle Market. Net written premiums of $2.33 billion and $4.95 billion in the second quarter and first six months of 2022, respectively, increased by 12% and 11%, respectively, over the same periods of 2021.  Retention rates remained strong in the second quarter and first six months of 2022 and increased over the same periods of 2021.  Renewal premium changes in the second quarter of 2022 remained positive and were higher than the same period of 2021. Renewal premium changes in the first six months of 2022 remained positive and were comparable with the same period of 2021. New business premiums in the second quarter of 2022 decreased from the same period of 2021. New business premiums in the first six months of 2022 increased over the same period of 2021.

National Accounts. Net written premiums of $240 million and $543 million in the second quarter and first six months of 2022, respectively, increased by 13% and 8%, respectively, over the same periods of 2021. Retention rates remained strong in the second quarter and first six months of 2022 and increased over the same periods of 2021. Renewal premium changes in the
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

second quarter and first six months of 2022 remained positive and were lower than in the same periods of 2021. New business premiums in the second quarter and first six months of 2022 increased over the same periods of 2021.

National Property and Other. Net written premiums of $690 million and $1.19 billion in the second quarter and first six months of 2022, respectively, increased by 7% and 9%, respectively, over the same periods of 2021.  Retention rates remained strong in the second quarter and first six months of 2022 and increased over the same periods of 2021.  Renewal premium changes in the second quarter and first six months of 2022 remained positive and were lower than in the same periods of 2021. New business premiums in the second quarter of 2022 decreased from the same period of 2021. New business premiums in the first six months of 2022 were comparable with the same period of 2021.

International. Net written premiums of $307 million in the second quarter of 2022 were comparable with the same period of 2021. Net written premiums of $574 million in the first six months of 2022 decreased by 2% from the same period of 2021, primarily driven by the impact of changes in foreign currency exchange rates.

Bond & Specialty Insurance
Results of Bond & Specialty Insurance were as follows:
Three Months Ended
June 30, 		Six Months Ended
June 30,
(dollars in millions) 2022 2021 2022 2021
Revenues
Earned premiums $ 851 $ 776 $ 1,671 $ 1,519
Net investment income 64 64 123 123
Other revenues 4 7 8 12
Total revenues 919 847 1,802 1,654
Total claims and expenses 634 612 1,278 1,250
Segment income before income taxes 285 235 524 404
Income tax expense 57 48 79 80
Segment income $ 228 $ 187 $ 445 $ 324
Loss and loss adjustment expense ratio 38.5 % 42.6 % 40.7 % 46.2 %
Underwriting expense ratio 35.5 35.5 35.3 35.4
Combined ratio 74.0 % 78.1 % 76.0 % 81.6 %
Overview
Segment income in the second quarter of 2022 was $228 million, $41 million or 22% higher than segment income of $187 million in the same period of 2021. The increase in segment income before income taxes primarily reflected the pre-tax impacts of (i) higher net favorable prior year reserve development and (ii) higher underlying underwriting margins. Net favorable prior year reserve development in the second quarters of 2022 and 2021 was $73 million and $44 million, respectively. Catastrophe losses in the second quarters of 2022 and 2021 were $4 million and $3 million, respectively. The higher underlying underwriting margins primarily reflected the impacts of (i) higher business volumes and (ii) the benefit of earned pricing, partially offset by (iii) higher general and administrative expenses. Income tax expense in the second quarter of 2022 was higher than in the same period of 2021, primarily reflecting the impact of the increase in segment income before income taxes.

Segment income in the first six months of 2022 was $445 million, $121 million or 37% higher than segment income of $324 million in the same period of 2021. The increase in segment income before income taxes primarily reflected the pre-tax impacts of (i) higher underlying underwriting margins, (ii) higher net favorable prior year reserve development and (iii) lower catastrophe losses. Net favorable prior year reserve development in the first six months of 2022 and 2021 was $108 million and $59 million, respectively. Catastrophe losses in the first six months of 2022 and 2021 were $5 million and $27 million, respectively.  The higher underlying underwriting margins primarily reflected the impacts of (i) higher business volumes and (ii) the benefit of earned pricing, partially offset by (iii) higher general and administrative expenses. Income tax expense in the first six months of 2022 was slightly lower than in the same period of 2021, primarily reflecting a $24 million reduction in
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters, largely offset by the impact of the increase in segment income before income taxes.

Revenues

Earned Premiums
Earned premiums in the second quarter of 2022 were $851 million, $75 million or 10% higher than in the same period of 2021. Earned premiums in the first six months of 2022 were $1.67 billion, $152 million or 10% higher than in the same period of 2021. The increases in both periods of 2022 primarily reflected the increase in net written premiums over the preceding twelve months.

Net Investment Income
Net investment income in the second quarter of 2022 was $64 million, comparable with the same period of 2021. Net investment income in the first six months of 2022 was $123 million, comparable with the same period of 2021. Included in Bond & Specialty Insurance are certain legal entities whose invested assets and related net investment income are reported exclusively in this segment and not allocated among all business segments. Refer to the “Revenues—Net Investment Income” section of “Consolidated Results of Operations” herein for a discussion of the decreases in the Company’s consolidated net investment income in the second quarter and first six months of 2022 compared with the same periods of 2021. In addition, refer to note 2 of the notes to the consolidated financial statements in the Company’s 2021 Annual Report for a discussion of the Company’s net investment income allocation methodology.
Claims and Expenses
Claims and Claim Adjustment Expenses
Claims and claim adjustment expenses in the second quarter of 2022 were $331 million, $4 million or 1% lower than in the same period of 2021, primarily reflecting the impacts of (i) higher net favorable prior year reserve development, partially offset by (ii) higher business volumes.

Claims and claim adjustment expenses in the first six months of 2022 were $685 million, $24 million or 3% lower than in the same period of 2021, primarily reflecting the impact of (i) higher net favorable prior year reserve development and (ii) lower catastrophe losses, partially offset by (iii) higher business volumes.

Factors contributing to net favorable prior year reserve development during the second quarters and first six months of 2022 and 2021 are discussed in more detail in note 7 of the notes to the unaudited consolidated financial statements.

Amortization of Deferred Acquisition Costs
Amortization of deferred acquisition costs in the second quarter of 2022 was $155 million, $13 million or 9% higher than in the same period of 2021.  Amortization of deferred acquisition costs in the first six months of 2022 was $304 million, $28 million or 10% higher than in the same period of 2021. The increases in both periods of 2022 were generally consistent with the increases in earned premiums.

General and Administrative Expenses
General and administrative expenses in the second quarter of 2022 were $148 million, $13 million or 10% higher than in the same period of 2021. General and administrative expenses in the first six months of 2022 were $289 million, $24 million or 9% higher than in the same period of 2021. The increases in both periods of 2022 primarily reflected the impacts of higher business volumes.
Income Tax Expense
Income tax expense in the second quarter of 2022 was $57 million, $9 million or 19% higher than in the same period of 2021, primarily reflecting the impact of the $50 million increase in segment income before income taxes. Income tax expense in the first six months of 2022 was $79 million, $1 million or 1% lower than in the same period of 2021, primarily reflecting the $24 million reduction in income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters, largely offset by the impact of the $120 million increase in segment income before income taxes.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Combined Ratio
The combined ratio of 74.0% in the second quarter of 2022 was 4.1 points lower than the combined ratio of 78.1% in the same period of 2021.  The loss and loss adjustment expense ratio of 38.5% in the second quarter of 2022 was 4.1 points lower than the loss and loss adjustment expense ratio of 42.6% in the same period of 2021. The underwriting expense ratio of 35.5% in the second quarter of 2022 was comparable with the underwriting expense ratio of 35.5% in the same period of 2021.
Net favorable prior year reserve development in the second quarters of 2022 and 2021 provided 8.6 points and 5.7 points of benefit, respectively, to the combined ratio. Catastrophe losses in the second quarters of 2022 and 2021 accounted for 0.4 points of the combined ratio. The underlying combined ratio in the second quarter of 2022 was 1.2 points lower than the 2021 ratio on the same basis, primarily reflecting the benefit of earned pricing.

The combined ratio of 76.0% in the first six months of 2022 was 5.6 points lower than the combined ratio of 81.6% in the same period of 2021. The loss and loss adjustment expense ratio of 40.7% in the first six months of 2022 was 5.5 points lower than the loss and loss adjustment expense ratio of 46.2% in the same period of 2021.  The underwriting expense ratio of 35.3% in the first six months of 2022 was 0.1 points lower than the underwriting expense ratio of 35.4% in the same period of 2021.

Net favorable prior year reserve development in the first six months of 2022 and 2021 provided 6.5 points and 3.9 points of benefit, respectively, to the combined ratio. Catastrophe losses in the first six months of 2022 and 2021 accounted for 0.3 points and 1.7 points, respectively, of the combined ratio.  The underlying combined ratio in the first six months of 2022 was 1.6 points lower than the 2021 ratio on the same basis, primarily reflecting the benefit of earned pricing.

Written Premiums

The Bond & Specialty Insurance segment’s gross and net written premiums were as follows:
Gross Written Premiums
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Domestic:
Management Liability $ 589 $ 553 $ 1,163 $ 1,055
Surety 298 239 594 474
Total Domestic 887 792 1,757 1,529
International 149 127 288 224
Total Bond & Specialty Insurance $ 1,036 $ 919 $ 2,045 $ 1,753

Net Written Premiums
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Domestic:
Management Liability $ 533 $ 497 $ 1,038 $ 941
Surety 287 232 544 432
Total Domestic 820 729 1,582 1,373
International 142 125 262 204
Total Bond & Specialty Insurance $ 962 $ 854 $ 1,844 $ 1,577
Gross and net written premiums in the second quarter of 2022 both increased by 13% over the same period of 2021. Gross and net written premiums in the first six months of 2022 both increased by 17% over the same period of 2021.
Domestic. Net written premiums of $820 million and $1.58 billion in the second quarter and first six months of 2022, respectively, increased by 12% and 15%, respectively, over the same periods of 2021. Excluding the surety line of business, for which the following are not relevant measures, retention rates remained strong in the second quarter of 2022 and increased over
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

the same period of 2021. Retention rates remained strong in the first six months of 2022. Renewal premium changes in the second quarter and first six months of 2022 remained positive and were lower than in the same periods of 2021. New business premiums in the second quarter and first six months of 2022 increased over the same periods of 2021.
International. Net written premiums of $142 million and $262 million in the second quarter and first six months of 2022, respectively, increased by 14% and 28%, respectively, over the same periods of 2021. The increases in both periods of 2022 were primarily driven by increases in the United Kingdom and broader Europe, as well as Canada, partially offset by the impact of changes in foreign currency exchange rates.

Personal Insurance

Results of Personal Insurance were as follows:
Three Months Ended
June 30, 		Six Months Ended
June 30,
(dollars in millions) 2022 2021 2022 2021
Revenues
Earned premiums $ 3,248 $ 2,960 $ 6,371 $ 5,804
Net investment income 122 139 232 258
Fee income 7 7 14 13
Other revenues 18 24 39 47
Total revenues 3,395 3,130 6,656 6,122
Total claims and expenses 3,645 2,984 6,654 5,582
Segment income (loss) before income taxes (250) 146 2 540
Income tax expense (benefit) (57) 25 (30) 105
Segment income (loss) $ (193) $ 121 $ 32 $ 435
Loss and loss adjustment expense ratio 85.4 % 73.3 % 77.6 % 68.6 %
Underwriting expense ratio 25.8 26.4 25.8 26.5
Combined ratio 111.2 % 99.7 % 103.4 % 95.1 %
Overview
Segment loss in the second quarter of 2022 was $193 million, compared with segment income of $121 million in the same period of 2021. Segment loss before income taxes primarily reflected the pre-tax impacts of (i) higher catastrophe losses, (ii) lower underlying underwriting margins and (iii) lower net favorable prior year reserve development. Catastrophe losses in the second quarters of 2022 and 2021 were $508 million and $323 million, respectively. Net favorable prior year reserve development in the second quarters of 2022 and 2021 was $16 million and $65 million, respectively. The lower underlying underwriting margins primarily reflected the impacts of (i) elevated severity in the current quarter in both the automobile and homeowners and other product lines and (ii) a comparison to a low level of loss activity in the prior year quarter in the automobile product line, partially offset by (iii) higher business volumes. The segment recorded an income tax benefit in the second quarter of 2022 compared to income tax expense in the same period of 2021, primarily reflecting the impact of the decrease in income before income taxes.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Segment income in the first six months of 2022 was $32 million, $403 million or 93% lower than segment income of $435 million in the same period of 2021. The decrease in segment income before income taxes primarily reflected the pre-tax impacts of (i) lower underlying underwriting margins and (ii) lower net favorable prior year reserve development, partially offset by (iii) lower catastrophe losses. Net favorable prior year reserve development in the first six months of 2022 and 2021 was $21 million and $233 million, respectively.  Catastrophe losses in the first six months of 2022 and 2021 were $588 million and $628 million, respectively.  The lower underlying underwriting margins primarily reflected the impacts of (i) elevated severity in the current year in both the automobile and homeowners and other product lines and (ii) a comparison to a low level of loss activity in the prior year period in the automobile product line, partially offset by (iii) higher business volumes. The segment recorded an income tax benefit in the first six months of 2022 compared to income tax expense in the same period of 2021, primarily reflecting the impact of the decrease in segment income before income taxes and a $20 million reduction in income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters.

Revenues
Earned Premiums
Earned premiums in the second quarter of 2022 were $3.25 billion, $288 million or 10% higher than in the same period of 2021.  Earned premiums in the first six months of 2022 were $6.37 billion, $567 million or 10% higher than in the same period of 2021. The increases in both periods of 2022 primarily reflected the increase in net written premiums over the preceding twelve months.

Net Investment Income
Net investment income in the second quarter of 2022 was $122 million, $17 million or 12% lower than in the same period of 2021. Net investment income in the first six months of 2022 was $232 million, $26 million or 10% lower than in the same period of 2021. Refer to the “Revenues—Net Investment Income” section of the “Consolidated Results of Operations” discussion herein for a description of the factors contributing to the decreases in the Company’s consolidated net investment income in the second quarter and first six months of 2022 compared with the same periods of 2021. In addition, refer to note 2 of the notes to the consolidated financial statements in the Company’s 2021 Annual Report for a discussion of the Company’s net investment income allocation methodology.
Other Revenues
Other revenues in the second quarters and first six months of 2022 and 2021 primarily consisted of installment premium charges.
Claims and Expenses
Claims and Claim Adjustment Expenses
Claims and claim adjustment expenses in the second quarter of 2022 were $2.77 billion, $603 million or 28% higher than in the same period of 2021, primarily reflecting the impacts of (i) loss cost trends, including elevated severity in the current quarter in both the automobile and homeowners and other product lines, (ii) higher catastrophe losses, (iii) higher business volumes, (iv) a comparison to a low level of loss activity in the prior year quarter in the automobile product line and (v) lower net favorable prior year reserve development.

Claims and claim adjustment expenses in the first six months of 2022 were $4.95 billion, $966 million or 24% higher than in the same period of 2021, primarily reflecting the impacts of (i) loss cost trends, including elevated severity in the current year in both the automobile and homeowners and other product lines, (ii) higher business volumes, (iii) lower net favorable prior year reserve development and (iv) a comparison to a low level of loss activity in the prior year period in the automobile product line, partially offset by (v) lower catastrophe losses.

Net favorable prior year reserve development was not significant in the second quarter and first six months of 2022. Factors contributing to net favorable prior year reserve development during the second quarter and first six months of 2021 are discussed in more detail in note 7 of the notes to the unaudited consolidated financial statements.
Amortization of Deferred Acquisition Costs
Amortization of deferred acquisition costs in the second quarter of 2022 was $519 million, $49 million or 10% higher than in the same period of 2021. Amortization of deferred acquisition costs in the first six months of 2022 was $1.01 billion, $96 million or 10% higher than in the same period of 2021. The increases in both periods of 2022 were generally consistent with the increases in earned premiums.
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

General and Administrative Expenses
General and administrative expenses in the second quarter of 2022 were $352 million, $9 million or 3% higher than in the same period of 2021. General and administrative expenses in the first six months of 2022 were $697 million, $10 million or 1% higher than in the same period of 2021. The increases in both periods of 2022 primarily reflected the impacts of higher business volumes and variability in expenses.

Income Tax Expense (Benefit)
The income tax benefit in the second quarter of 2022 was $57 million, compared with income tax expense of $25 million in same period of 2021, primarily reflecting the impact of the $396 million decrease in segment income before income taxes. The income tax benefit in the first six months of 2022 was $30 million, compared with income tax expense of $105 million in the same period of 2021, primarily reflecting the impact of the $538 million decrease in segment income before income taxes and the $20 million reduction in income tax expense in the first quarter of 2022 as a result of the resolution of prior year tax matters.

Combined Ratio
The combined ratio of 111.2% in the second quarter of 2022 was 11.5 points higher than the combined ratio of 99.7% in the same period of 2021.  The loss and loss adjustment expense ratio of 85.4% in the second quarter of 2022 was 12.1 points higher than the loss and loss adjustment expense ratio of 73.3% in the same period of 2021.  The underwriting expense ratio of 25.8% for the second quarter of 2022 was 0.6 points lower than the underwriting expense ratio of 26.4% in the same period of 2021.
Catastrophe losses in the second quarters of 2022 and 2021 accounted for 15.6 points and 10.9 points, respectively, of the combined ratio. Net favorable prior year reserve development in the second quarters of 2022 and 2021 provided 0.5 points and 2.2 points of benefit, respectively, to the combined ratio. The underlying combined ratio in the second quarter of 2022 was 5.1 points higher than the 2021 ratio on the same basis, primarily reflecting the impacts of (i) elevated severity in the current quarter in both the automobile and homeowners and other product lines and (ii) a comparison to a low level of loss activity in the prior year quarter in the automobile product line, partially offset by (iii) a lower expense ratio.

The combined ratio of 103.4% in the first six months of 2022 was 8.3 points higher than the combined ratio of 95.1% in the same period of 2021. The loss and loss adjustment expense ratio of 77.6% in the first six months of 2022 was 9.0 points higher than the loss and loss adjustment expense ratio of 68.6% in the same period of 2021.  The underwriting expense ratio of 25.8% in the first six months of 2022 was 0.7 points lower than the underwriting expense ratio of 26.5% in the same period of 2021.

Catastrophe losses in the first six months of 2022 and 2021 accounted for 9.2 points and 10.8 points, respectively, of the combined ratio.  Net favorable prior year reserve development in the first six months of 2022 and 2021 provided 0.3 points and 4.0 points, respectively, of benefit to the combined ratio.  The underlying combined ratio in the first six months of 2022 was 6.2 points higher than the 2021 ratio on the same basis, primarily reflecting the impacts of (i) elevated severity in the current year in both the automobile and homeowners and other product lines and (ii) a comparison to a low level of loss activity in the prior year period in the automobile product line, partially offset by (iii) a lower expense ratio.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Written Premiums

Personal Insurance’s gross and net written premiums were as follows:
Gross Written Premiums
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Domestic:
Automobile $ 1,634 $ 1,472 $ 3,141 $ 2,859
Homeowners and Other 1,890 1,648 3,362 2,916
Total Domestic 3,524 3,120 6,503 5,775
International 190 202 337 344
Total Personal Insurance $ 3,714 $ 3,322 $ 6,840 $ 6,119
Net Written Premiums
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Domestic:
Automobile $ 1,629 $ 1,467 $ 3,125 $ 2,842
Homeowners and Other 1,868 1,634 3,212 2,778
Total Domestic 3,497 3,101 6,337 5,620
International 188 200 331 338
Total Personal Insurance $ 3,685 $ 3,301 $ 6,668 $ 5,958
Gross and net written premiums in the second quarter of 2022 both increased by 12% over the same period of 2021. Gross and net written premiums in the first six months of 2022 both increased by 12% over the same period of 2021.

Domestic
Automobile net written premiums of $1.63 billion and $3.13 billion in the second quarter and first six months of 2022, respectively, increased by 11% and 10%, respectively, over the same periods of 2021. Retention rates remained strong in the second quarter and first six months of 2022 but were lower than the same periods of 2021.  Renewal premium changes in the second quarter and first six months of 2022 remained positive and were higher than in the same periods of 2021.  New business premiums in the second quarter and first six months of 2022 increased over the same periods of 2021.

Homeowners and Other net written premiums of $1.87 billion and $3.21 billion in the second quarter and first six months of 2022, respectively, increased by 14% and 16%, respectively, over the same periods of 2021.  Retention rates remained strong in the second quarter and first six months of 2022 but were lower than the same periods of 2021.  Renewal premium changes in the second quarter and first six months of 2022 remained positive and were higher than in the same periods of 2021.  New business premiums in the second quarter and first six months of 2022 decreased from the same periods of 2021.

For its Domestic business, Personal Insurance had approximately 9.1 million and 8.7 million active policies at June 30, 2022 and 2021, respectively.

International
International net written premiums of $188 million and $331 million in the second quarter and first six months of 2022, respectively, decreased by 6% and 2%, respectively, from the same periods of 2021, driven by the impact of changes in foreign currency exchange rates and declines in the automobile product line.

For its International business, Personal Insurance had approximately 465,000 and 486,000 active policies at June 30, 2022 and 2021, respectively.
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Interest Expense and Other
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in millions) 2022 2021 2022 2021
Income (loss) $ (76) $ (72) $ (150) $ (141)
The Income (loss) for Interest Expense and Other in the second quarters of 2022 and 2021 was $(76) million and $(72) million, respectively.  Pre-tax interest expense for the second quarters of 2022 and 2021 was $88 million and $83 million, respectively. After-tax interest expense for the second quarters of 2022 and 2021 was $69 million and $65 million, respectively. The Income (loss) for Interest Expense and Other in the first six months of 2022 and 2021 was $(150) million and $(141) million, respectively. Pre-tax interest expense in the first six months of 2022 and 2021 was $175 million and $165 million, respectively. After-tax interest expense in the first six months of 2022 and 2021 was $138 million and $130 million, respectively.

ASBESTOS CLAIMS AND LITIGATION
The Company believes that the property and casualty insurance industry has suffered from court decisions and other trends that have expanded insurance coverage for asbestos claims far beyond the original intent of insurers and policyholders. The Company has received and continues to receive a significant number of asbestos claims. Factors underlying these claim filings include continued intensive advertising by lawyers seeking asbestos claimants and the focus by plaintiffs on defendants, such as manufacturers of talcum powder, who were not traditionally primary targets of asbestos litigation. The focus on these defendants is primarily the result of the number of traditional asbestos defendants who have sought bankruptcy protection in previous years.  The bankruptcy of many traditional defendants has also caused increased settlement demands against those policyholders who are not in bankruptcy but remain in the tort system. Currently, in many jurisdictions, those who allege very serious injury and who can present credible medical evidence of their injuries are receiving priority trial settings in the courts, while those who have not shown any credible disease manifestation are having their hearing dates delayed or placed on an inactive docket. Prioritizing claims involving credible evidence of injuries, along with the focus on defendants who were not traditionally primary targets of asbestos litigation, contributes to the claims and claim adjustment expense payment patterns experienced by the Company. The Company’s asbestos-related claims and claim adjustment expense experience also has been impacted by the unavailability of other insurance sources potentially available to policyholders, whether through exhaustion of policy limits or through the insolvency of other participating insurers.
The Company continues to be involved in disputes, including litigation, with a number of policyholders, some of whom are in bankruptcy, over coverage for asbestos-related claims. Many coverage disputes with policyholders are only resolved through settlement agreements. Because many policyholders make exaggerated demands, it is difficult to predict the outcome of settlement negotiations. Settlements involving bankrupt policyholders may include extensive releases which are favorable to the Company, but which could result in settlements for larger amounts than originally anticipated. Although the Company has seen a reduction in the overall risk associated with these disputes, it remains difficult to predict the ultimate cost of these claims. As in the past, the Company will continue to pursue settlement opportunities.

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

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

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

The Company’s quarterly asbestos reserve reviews include an analysis of exposure and claim payment patterns by policyholder, as well as recent settlements, policyholder bankruptcies, judicial rulings and legislative actions.  The Company also analyzes developing payment patterns among policyholders and the assumed reinsurance component of reserves, as well as projected reinsurance billings and recoveries. In addition, the Company reviews its historical gross and net loss and expense paid experience, year-by-year, to assess any emerging trends, fluctuations, or characteristics suggested by the aggregate paid activity. Conventional actuarial methods are not utilized to establish asbestos reserves, and the Company’s evaluations have not resulted in a reliable method to determine a meaningful average asbestos defense or indemnity payment. Over the past decade, the property and casualty insurance industry, including the Company, has experienced net unfavorable prior year reserve development with regard to asbestos reserves, but the Company believes that over that period there has been a reduction in the volatility associated with the Company’s overall asbestos exposure as the overall asbestos environment has evolved from one dominated by exposure to significant litigation risks, particularly coverage disputes relating to policyholders in bankruptcy who were asserting that their claims were not subject to the aggregate limits contained in their policies, to an environment primarily driven by a frequency of litigation related to individuals with mesothelioma. The Company’s overall view of the current underlying asbestos environment is essentially unchanged from recent periods, and there remains a high degree of uncertainty with respect to future exposure to asbestos claims.

Net asbestos paid loss and loss expenses in the first six months of 2022 and 2021 were $113 million and $88 million, respectively. Net asbestos reserves were $1.23 billion and $1.25 billion at June 30, 2022 and 2021, respectively.
The following table displays activity for asbestos losses and loss expenses and reserves:
(at and for the six months ended June 30, in millions) 2022 2021
Beginning reserves:
Gross $ 1,687 $ 1,668
Ceded (346) (330)
Net 1,341 1,338
Incurred losses and loss expenses:
Gross — —
Ceded — —
Net — —
Paid loss and loss expenses:
Gross 137 103
Ceded (24) (15)
Net 113 88
Foreign exchange and other:
Gross (3) —
Ceded — —
Net (3) —
Ending reserves:
Gross 1,547 1,565
Ceded (322) (315)
Net $ 1,225 $ 1,250
_________________________________________________________
See “—Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves.”

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

ENVIRONMENTAL CLAIMS AND LITIGATION
The Company has received and continues to receive claims from policyholders who allege that they are liable for injury or damage arising out of the alleged storage, emissions or disposal of toxic substances, frequently under policies issued prior to the mid-1980s. These claims are mainly brought pursuant to various state or federal statutes that require a liable party to undertake or pay for environmental remediation. For example, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) enables private parties as well as federal and state governments to take action with respect to releases and threatened releases of hazardous substances. This federal statute permits the recovery of response costs from some liable parties and may require liable parties to undertake their own remedial action. Liability under these statutes may be joint and several with other responsible parties. The Company has also been, and continues to be, involved in litigation involving insurance coverage issues pertaining to environmental claims. The Company believes that some court decisions pertaining to environmental claims have interpreted the insurance coverage to be broader than the original intent of the insurers and policyholders.
In establishing environmental reserves, the Company evaluates the exposure presented by each policyholder and the anticipated cost of resolution, if any. In the course of its analysis, the Company generally considers the probable liability, available coverage and relevant judicial interpretations. In addition, the Company considers the many variables presented, such as: the nature of the alleged activities of the policyholder at each site; the number of sites; the total number of potentially responsible parties at each site; the nature of the alleged environmental harm and the corresponding remedy at each site; the nature of government enforcement activities at each site; the ownership and general use of each site; the overall nature of the insurance relationship between the Company and the policyholder, including the role of any umbrella or excess insurance the Company has issued to the policyholder; the involvement of other insurers; the potential for other available coverage, including the number of years of coverage; the role, if any, of non-environmental claims or potential non-environmental claims in any resolution process; and the applicable law in each jurisdiction. The evaluation of the exposure presented by a policyholder can change as information concerning that policyholder and the many variables presented is developed. Conventional actuarial methods are not used to estimate these reserves.

Over the past several years, the Company has experienced generally favorable trends in the number of new policyholders tendering environmental claims for the first time and in the number of pending declaratory judgment actions relating to environmental matters. These policyholders continue to present smaller exposures, are involved in fewer hazardous waste sites and are lower tier defendants than policyholders presenting such claims in the past. Further, in many instances, clean-up costs have been reduced because regulatory agencies are willing to accept risk-based site analyses and more efficient clean-up technologies. However, the degree to which those favorable trends have continued has been less than anticipated.  In addition, reserve development on existing environmental claims as well as the costs associated with coverage litigation on environmental matters has been greater than anticipated, driven by claims and legal developments in a limited number of jurisdictions. As a result of these factors, the Company increased its net environmental reserves by $38 million and $83 million in the second quarter and first six months of 2022, respectively, and $19 million and $52 million in the second quarter and first six months of 2021, respectively. Net environmental paid loss and loss expenses in the first six months of 2022 and 2021 were $41 million and $35 million, respectively. Net environmental reserves were $363 million and $323 million at June 30, 2022 and 2021, respectively.
UNCERTAINTY REGARDING ADEQUACY OF ASBESTOS AND ENVIRONMENTAL RESERVES
As a result of the processes and procedures discussed above, management believes that the reserves carried for asbestos and environmental claims are appropriately established based upon known facts, current law and management’s judgment. However, the uncertainties surrounding the final resolution of these claims continue, and it is difficult to determine the ultimate exposure for asbestos and environmental claims and related litigation. As a result, these reserves are subject to revision as new information becomes available and as claims develop. The continuing uncertainties include, without limitation:

• the risks and lack of predictability inherent in complex litigation;
• a further increase in the cost to resolve, and/or the number of, asbestos and environmental claims beyond that which is anticipated;
• the emergence of a greater number of asbestos claims than anticipated as a result of extended life expectancies resulting from medical advances and lifestyle improvements;
• the role of any umbrella or excess policies we have issued;
• the resolution or adjudication of disputes concerning coverage for asbestos and environmental claims in a manner inconsistent with our previous assessment of these disputes;
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

• the number and outcome of direct actions against us;
• future developments pertaining to our ability to recover reinsurance for asbestos and environmental claims;
• any impact on asbestos defendants we insure due to the bankruptcy of other asbestos defendants;
• the unavailability of other insurance sources potentially available to policyholders, whether through exhaustion of policy limits or through the insolvency of other participating insurers; and
• uncertainties arising from the insolvency or bankruptcy of policyholders.

Changes in the legal, regulatory and legislative environment may impact the future resolution of asbestos and environmental claims and result in adverse loss reserve development.  The emergence of a greater number of asbestos or environmental claims beyond that which is anticipated may result in adverse loss reserve development. Changes in applicable legislation and future court and regulatory decisions and interpretations, including the outcome of legal challenges to legislative and/or judicial reforms establishing medical criteria for the pursuit of asbestos claims, could affect the settlement of asbestos and environmental claims.  It is also difficult to predict the ultimate outcome of complex coverage disputes until settlement negotiations near completion and significant legal questions are resolved or, failing settlement, until the dispute is adjudicated. This is particularly the case with policyholders in bankruptcy where negotiations often involve a large number of claimants and other parties and require court approval to be effective. As part of its continuing analysis of asbestos and environmental reserves, the Company continues to study the implications of these and other developments.
Because of the uncertainties set forth above, additional liabilities may arise for amounts in excess of the Company’s current reserves.  In addition, the Company’s estimate of claims and claim adjustment expenses may change.  These additional liabilities or increases in estimates, or a range of either, cannot now be reasonably estimated and could result in income statement charges that could be material to the Company’s operating results in future periods.

INVESTMENT PORTFOLIO
The Company’s invested assets at June 30, 2022 were $80.46 billion, of which 93% was invested in fixed maturity and short-term investments, 1% in equity securities, 1% in real estate investments and 5% in other investments.  Because the primary purpose of the investment portfolio is to fund future claims payments, the Company employs a thoughtful investment philosophy that focuses on appropriate risk-adjusted returns.  A significant majority of funds available for investment are deployed in a widely diversified portfolio of high quality, liquid, taxable U.S. government, tax-exempt and taxable U.S. municipal and taxable corporate and U.S. agency mortgage-backed bonds.
The carrying value of the Company’s fixed maturity portfolio at June 30, 2022 was $71.10 billion.  The Company closely monitors the duration of its fixed maturity investments, and investment purchases and sales are executed with the objective of having adequate funds available to satisfy the Company’s insurance and debt obligations.  The weighted average credit quality of the Company’s fixed maturity portfolio, both including and excluding U.S. Treasury securities, was “Aa2” at both June 30, 2022 and December 31, 2021.  Below investment grade securities represented 1.3% and 1.4% of the total fixed maturity investment portfolio at June 30, 2022 and December 31, 2021, respectively. The weighted average effective duration of fixed maturities and short-term securities was 4.8 (5.1 excluding short-term securities) at June 30, 2022 and 4.2 (4.4 excluding short-term securities) at December 31, 2021.

Obligations of U.S. States, Municipalities and Political Subdivisions
The Company’s fixed maturity investment portfolio at June 30, 2022 and December 31, 2021 included $33.61 billion and $36.86 billion, respectively, of securities which are obligations of U.S. states, municipalities and political subdivisions (collectively referred to as the municipal bond portfolio).  The municipal bond portfolio is diversified across the United States, the District of Columbia and Puerto Rico and includes general obligation and revenue bonds issued by states, cities, counties, school districts and similar issuers.  Included in the municipal bond portfolio at June 30, 2022 and December 31, 2021 were $3.64 billion and $4.03 billion, respectively, of pre-refunded bonds, which are bonds for which U.S. states or municipalities have established irrevocable trusts, almost exclusively comprised of U.S. Treasury securities and obligations of U.S. government and government agencies and authorities.  These trusts were created to fund the payment of principal and interest due under the bonds.  The irrevocable trusts are verified as to their sufficiency by an independent verification agent of the underwriter, issuer or trustee.  All of the Company’s holdings of securities issued by Puerto Rico and related entities have either been pre-refunded and therefore are defeased by U.S. Treasury securities or have FHA guarantees subject to federal appropriation.
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

The Company bases its investment decision on the underlying credit characteristics of the municipal security. The weighted average credit rating of the municipal bond portfolio was "Aaa/Aa1" at both June 30, 2022 and December 31, 2021.
Mortgage-Backed Securities, Collateralized Mortgage Obligations and Pass-Through Securities
The Company’s fixed maturity investment portfolio at June 30, 2022 and December 31, 2021 included $1.69 billion and $1.82 billion, respectively, of residential mortgage-backed securities, including pass-through securities and collateralized mortgage obligations (CMOs), all of which are subject to prepayment risk (either shortening or lengthening of duration).  While prepayment risk for securities and its effect on income cannot be fully controlled, particularly when interest rates move dramatically, the Company’s investment strategy generally favors securities that reduce this risk within expected interest rate ranges.  Included in the totals at June 30, 2022 and December 31, 2021 were $708 million and $846 million, respectively, of GNMA, FNMA, FHLMC (excluding FHA project loans) and Canadian government guaranteed residential mortgage-backed pass-through securities classified as available for sale.  Also included in those totals were residential CMOs classified as available for sale with a fair value of $982 million and $971 million at June 30, 2022 and December 31, 2021, respectively. Approximately 37% and 47% of the Company’s CMO holdings at June 30, 2022 and December 31, 2021, respectively, were guaranteed by or fully collateralized by securities issued by GNMA, FNMA or FHLMC.  The weighted average credit rating of the $618 million and $511 million of non-guaranteed CMO holdings was "Aaa/Aal" at both June 30, 2022 and December 31, 2021. The weighted average credit rating of all of the above securities was "Aaa/Aa1" at both June 30, 2022 and December 31, 2021.  For further discussion regarding the Company’s investments in residential CMOs, see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investment Portfolio” in the Company’s 2021 Annual Report.
Equity Securities, Real Estate and Short-Term Investments
See note 1 of the notes to the consolidated financial statements in the Company’s 2021 Annual Report for further information about these invested asset classes.
Other Investments
The Company also invests in private equity, hedge fund and real estate partnerships, and joint ventures.  These asset classes have historically provided a higher return than investments in fixed maturities but are subject to more volatility.  At June 30, 2022 and December 31, 2021, the carrying value of the Company’s other investments was $4.02 billion and $3.86 billion, respectively.

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

CATASTROPHE REINSURANCE COVERAGE

The Company's catastrophe reinsurance coverage is discussed in the "Reinsurance—Catastrophe Reinsurance" section of "Part I—Item 1—Business" in the Company's 2021 Annual Report. Except as discussed below, there have been no material changes to the Company's catastrophe reinsurance coverage from that reported in the Company's 2021 Annual Report.

Catastrophe Bonds. The Company has catastrophe protection through an indemnity reinsurance agreement with Long Point Re IV Ltd. (Long Point Re IV), an independent Bermuda company registered as a special purpose insurer under the Bermuda Insurance Act of 1978 and related regulations. The reinsurance agreement meets the requirements to be accounted for as reinsurance in accordance with the guidance for reinsurance contracts. In connection with the reinsurance agreement, Long Point Re IV issued notes (generally referred to as “catastrophe bonds”) to investors in amounts equal to the full coverage provided under the reinsurance agreement as described below. The proceeds of the issuance were deposited in a reinsurance trust account. The businesses covered by the reinsurance agreement are subsets of the Company’s overall insurance portfolio, comprising specified property coverages spread across the following geographic locations: Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia and Vermont.

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The reinsurance agreement was entered into in May 2022 in connection with Long Point Re IV’s offering to unrelated investors of $575 million aggregate principal amount of catastrophe bonds. This reinsurance agreement provides coverage to the Company through May 24, 2026 for certain losses from tropical cyclones, earthquakes, severe thunderstorms or winter storms in the locations listed above. The attachment point and maximum limit under this agreement will be reset annually to adjust the expected loss of the layer within a predetermined range. For the period from May 25, 2022 through and including May 24, 2023, this treaty provides up to $575 million part of $700 million coverage, subject to a $2.20 billion retention (i.e., for every dollar of loss between $2.20 billion and $2.90 billion this treaty provides 82 cents of coverage). The coverage under the reinsurance agreement is limited to specified property coverage written in Personal Insurance; Select Accounts, Middle Market (excluding Excess Casualty and Boiler & Machinery) and National Property and Other in Business Insurance; and Bond & Specialty Insurance Other in Bond & Specialty Insurance.

The Company's previous reinsurance agreement with Long Point Re III expired in May 2022 without the Company incurring any losses that resulted in a recovery under the agreement.

See the “Reinsurance—Catastrophe Reinsurance” section of “Part I—Item 1—Business” in the Company’s 2021 Annual Report for more details, including a discussion of the structure of and accounting for Long Point Re III.

Other Catastrophe Reinsurance Treaties . Catastrophe reinsurance treaties that renewed on July 1, 2022 were as follows:

• Northeast Property Catastrophe Excess-of-Loss Reinsurance Treaty. This treaty provides up to $750 million part of $850 million of coverage, subject to a $2.25 billion retention (i.e., for every dollar of loss between $2.25 billion and $3.10 billion this treaty provides 88 cents of coverage), for losses arising from a single occurrence and allows for one reinstatement. Coverage is provided on an all perils basis, including but not limited to hurricanes, tornadoes, hail storms, earthquakes, winter storms and/or freeze losses (coverage is included for terrorism events in limited circumstances). Coverage for cyber events applies only in limited circumstances, and coverage for communicable disease and nuclear, biological and radiological terrorism attacks is excluded from this treaty. The treaty covers territory from Virginia to Maine for the period from July 1, 2022 through and including June 30, 2023. Losses from a covered event anywhere in North America and waters contiguous thereto may be used to satisfy the retention. Recoveries under the catastrophe bonds (if any) would be first applied to reduce losses subject to this treaty.

• Middle Market Earthquake Catastrophe Excess-of-Loss Reinsurance Treaty . This treaty provides for up to $248 million part of $275 million of coverage, subject to a $110 million retention (i.e., for every dollar of loss between $110 million and $385 million this treaty provides 90 cents of coverage), for losses arising from an earthquake, including other ensuing causes of loss such as fire following and sprinkler leakage, incurred under policies written by Technology, Public Sector Services and Commercial Accounts in Business Insurance for the period from July 1, 2022 through and including June 30, 2023. The treaty covers the United States and Canada, their territories, possessions and waters contiguous thereto.

• Canadian Property Catastrophe Excess-of-Loss Reinsurance Treaty. This treaty provides coverage for 50% of losses in excess of C$100 million (US$78 million at June 30, 2022), up to C$200 million (US$155 million at June 30, 2022) and for 100% of losses in excess of C$200 million (US$155 million at June 30, 2022), up to C$500 million (US$389 million at June 30, 2022), in each case with respect to the accumulation of net property losses arising out of one occurrence on business written by the Company’s Canadian businesses for the period from July 1, 2022 through and including June 30, 2023.  The treaty covers all property written by the Company’s Canadian businesses, including, but not limited to, habitational property, commercial property, inland marine, ocean marine and auto physical damages exposures. Coverage for cyber events applies only in limited circumstances and coverage for communicable disease and nuclear, biological and radiological terrorism attacks is excluded from this treaty.

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

REINSURANCE RECOVERABLES
The Company reinsures a portion of the risks it underwrites in order to control its exposure to losses. For a description of the Company’s reinsurance recoverables, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reinsurance Recoverables” in the Company’s 2021 Annual Report.
The following table summarizes the composition of the Company’s reinsurance recoverables:
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(in millions) June 30, 2022 December 31, 2021
Gross reinsurance recoverables on paid and unpaid claims and claim adjustment expenses $ 4,015 $ 3,931
Gross structured settlements 2,866 2,900
Mandatory pools and associations 1,760 1,762
Gross reinsurance recoverables 8,641 8,593
Allowance for estimated uncollectible reinsurance (132) (141)
Net reinsurance recoverables $ 8,509 $ 8,452

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

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

Overall, the Company expects that retention levels (the amount of expiring premium that renews, before the impact of renewal premium changes) will remain strong by historical standards during the remainder of 2022.

Property and casualty insurance market conditions are expected to remain competitive during the remainder of 2022 for new business. In each of the Company’s business segments, new business generally has less of an impact on underwriting profitability than renewal business, given the volume of new business relative to renewal business.  However, in periods of meaningful increases in new business, despite its positive impact on underwriting gains over time, the impact of higher new business levels may negatively impact the combined ratio for a period of time. In periods of meaningful decreases in new business, despite its negative impact on underwriting gains over time, the impact of lower new business levels may positively impact the combined ratio for a period of time.

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

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

On average for the ten-year period ended December 31, 2021, the Company experienced approximately 40% of its annual catastrophe losses during the second quarter, primarily arising out of severe wind and hail storms, including tornadoes. Hurricanes, wildfires and winter storms tend to happen at other times of the year and can also have a material impact on the Company's results of operations. Catastrophe losses incurred in a particular quarter in any given year may differ materially from historical experience. In addition, most of the Company's reinsurance programs renew on January 1 or July 1 of each year, and, therefore, any changes to the cost or coverage terms of such programs will be effective after such dates.

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

It is possible that changes in economic conditions, the supply chain, the labor market and geopolitical tensions, as well as steps taken by federal, state and/or local governments and the Federal Reserve, could lead to higher or lower inflation than the Company anticipated, which could in turn lead to an increase or decrease in the Company’s loss costs and the need to strengthen or reduce claims and claim adjustment expense reserves. These impacts of inflation on loss costs and claims and claim adjustment expense reserves could be more pronounced for those lines of business that require a relatively longer period of time to finalize and settle claims for a given accident year and, accordingly, are relatively more inflation sensitive. Labor shortages, higher costs of used vehicles and parts, and increased demand and decreased supply for raw materials are adversely impacting severity in our auto and property businesses and may continue to do so in future quarters. For a further discussion, see “Part I—Item 1A—Risk Factors—If actual claims exceed our claims and claim adjustment expense reserves, or if changes in the estimated level of claims and claim adjustment expense reserves are necessary, including as a result of, among other things, changes in the legal/tort, regulatory and economic environments in which the Company operates, our financial results could be materially and adversely affected” in the Company's 2021 Annual Report.

Economic conditions and therefore the Company’s results of operations may be impacted by a variety of other factors as well, such as an economic slowdown or recession, financial market volatility, supply chain disruptions, monetary and fiscal policy measures, heightened geopolitical tensions, fluctuations in interest rates and foreign currency exchange rates, the political and regulatory environment, changes to the U.S. Federal budget and potential changes in tax laws.

Investment Portfolio. The Company expects to continue to focus its investment strategy on maintaining a high-quality investment portfolio and a relatively short average effective duration.  The weighted average effective duration of fixed maturities and short-term securities was 4.8 (5.1 excluding short-term securities) at June 30, 2022.  From time to time, the Company enters into short positions in U.S. Treasury futures contracts to manage the duration of its fixed maturity portfolio.  At June 30, 2022, the Company had no open U.S. Treasury futures contracts.  The Company regularly evaluates its investment alternatives and mix.  Currently, the majority of the Company’s investments are comprised of a widely diversified portfolio of high-quality, liquid, taxable U.S. government, tax-exempt and taxable U.S. municipal and taxable corporate and U.S. agency mortgage-backed bonds.

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

Approximately 24% of the fixed maturity portfolio is expected to mature over the next three years (including the early redemption of bonds, assuming interest rates (including credit spreads) do not rise significantly by applicable call dates). As a result, the overall yield on and composition of its portfolio could be meaningfully impacted by the types of investments available for reinvestment with the proceeds of maturing bonds.

Net investment income is a material contributor to the Company’s results of operations. Based on our current expectations for slightly higher levels of fixed income investments and the impact of expected higher reinvestment yields on fixed income investments, the Company expects that after-tax net investment income from that portfolio will be approximately $470 million in the third quarter of 2022 and $495 million in the fourth quarter of 2022. This expectation could be impacted by disruptions in global financial markets. Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income or loss from these other investments is generally reflected in the Company's financial statements on a quarter lag basis. Net investment income from these other investments was particularly strong during 2021 reflecting strong global financial market performance. Given that particularly strong performance, the challenging equity market in the first six months of 2022 and the lag in reporting described above, the Company expects that net investment income from these other investments in the second half of 2022 will be significantly lower than both the second half of 2021 and the first half of 2022. The Company’s net investment income in future periods from its non-fixed income investment portfolio will be impacted, positively or negatively, by the performance of global financial markets.

The Company had net pre-tax realized investment losses of $118 million in the first six months of 2022. Changes in global financial markets could result in net realized investment gains or losses in the Company’s investment portfolio.

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The Company had a net pre-tax unrealized investment loss of $4.81 billion ( $3.79 billion after-tax) in its fixed maturity investment portfolio at June 30, 2022, compared to a net pre-tax unrealized investment gain of $3.06 billion ($2.42 billion after-tax) at December 31, 2021.  While the Company does not attempt to predict future interest rate movements, a rising interest rate environment would reduce the market value of fixed maturity investments and, therefore, reduce shareholders’ equity, and a declining interest rate environment would have the opposite effects. Additionally, disruptions in global financial markets could also impact the market value of the Company’s investment portfolio. The Company's investment portfolio has benefited from certain tax exemptions (primarily those related to interest from municipal bonds) and certain other tax laws, including, but not limited to, those governing dividends-received deductions and tax credits (such as foreign tax credits). Changes in these laws could adversely impact the value of the Company's investment portfolio. See "Our businesses are heavily regulated by the states and countries in which we conduct business, including licensing, market conduct and financial supervision, and changes in regulation, including higher tax rates, may reduce our profitability and limit our growth" included in “Part I—Item 1A—Risk Factors” in the Company’s 2021 Annual Report.

For further discussion of the Company’s investment portfolio, see “Investment Portfolio.” For a discussion of the risks to the Company’s business during or following a financial market disruption and risks to the Company’s investment portfolio, see the risk factors entitled “During or following a period of financial market disruption or an economic downturn, our business could be materially and adversely affected” and “Our investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses” included in “Part I—Item 1A—Risk Factors” in the Company’s 2021 Annual Report.  For a discussion of the risks to the Company’s investments from foreign currency exchange rate fluctuations, see the risk factor entitled “We are subject to additional risks associated with our business outside the United States” included in “Part I—Item 1A—Risk Factors” in the Company’s 2021 Annual Report and see “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk-Foreign Currency Exchange Rate Risk” in the Company’s 2021 Annual Report.

Capital Position . The Company believes it has a strong capital position and, as part of its ongoing efforts to create shareholder value, expects to continue to return capital not needed to support its business operations to its shareholders, subject to the considerations described below.  The Company expects that, generally over time, the combination of dividends to common shareholders and common share repurchases will likely not exceed net income.  The Company also expects that to the extent that it continues to grow premium volumes, the level of capital to support the Company's financial strength ratings will also increase, and accordingly, the amount of capital returned to shareholders relative to earnings would be somewhat less than it otherwise would have been absent the growth in premium volumes. The timing and actual number of shares to be repurchased in the future will depend on a variety of additional factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, changes in levels of written premiums, funding of the Company’s qualified pension plan, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions, changes in tax laws and other factors. For information regarding the Company’s common share repurchases in 2022, see “Liquidity and Capital Resources” herein. S&P has announced that it intends to change its capital adequacy model. While the proposed model has not been finalized, it could increase the level of capital S&P requires for a particular financial strength rating. As part of its capital management strategy, the Company will continue to make its own assessment of the appropriate level of capital to support the Company’s business operations. For a discussion of the risks to the Company's claims-paying and financial strength ratings, see the risk factor entitled “A downgrade in our claims-paying and financial strength ratings could adversely impact our business volumes, adversely impact our ability to access the capital markets and increase our borrowing costs” included in “Part I—Item 1A—Risk Factors" in the Company's 2021 Annual Report.

As a result of the Company’s business outside of the United States, primarily in Canada, the United Kingdom (including Lloyd’s), the Republic of Ireland and in Brazil through a joint venture, the Company’s capital is also subject to the effects of changes in foreign currency exchange rates. Strengthening of the U.S. dollar in comparison to other currencies could result in a reduction in shareholders’ equity, while a weakening of the U.S. dollar in comparison to other currencies could result in an increase in shareholders' equity. For additional discussion of the Company’s foreign exchange market risk exposure, see “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in the Company’s 2021 Annual Report.

Many of the statements in this “Outlook” section and in “Liquidity and Capital Resources” are forward-looking statements, which are subject to risks and uncertainties that are often difficult to predict and beyond the Company’s control.  Actual results could differ materially from those expressed or implied by such forward-looking statements.  Further, such forward-looking statements speak only as of the date of this report and the Company undertakes no obligation to update them.  See “—Forward-Looking Statements.”  For a discussion of potential risks and uncertainties that could impact the Company’s results of operations or financial position, see “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and
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Results of Operations" herein and “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2021 Annual Report, in each case as updated by the Company's periodic filings with the SEC.

LIQUIDITY AND CAPITAL RESOURCES

Consistent with 2021, the Company's liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the first six months of 2022. For further discussion regarding the potential future impacts of COVID-19 and related economic conditions on the Company's liquidity and capital resources, see “The ongoing impact of COVID-19 and related risks could materially affect our results of operations, financial position and/or liquidity” included in “Part I—Item 1A—Risk Factors” in the Company's 2021 Annual Report.
Liquidity is a measure of a company’s ability to generate sufficient cash flows to meet the cash requirements of its business operations and to satisfy general corporate purposes when needed.
Operating Company Liquidity. The liquidity requirements of the Company’s insurance subsidiaries are met primarily by funds generated from premiums, fees, income received on investments and investment maturities.  The Company believes that cash flows from operating activities are sufficient to meet the future liquidity requirements of its insurance subsidiaries. Additionally, investment maturities provide a significant level of available liquidity without requiring the sale of investment securities. For further discussion of operating company liquidity, see “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in the Company’s 2021 Annual Report.

Holding Company Liquidity .  TRV’s liquidity requirements primarily include shareholder dividends, debt servicing, common share repurchases and, from time to time, contributions to its qualified domestic pension plan.  At June 30, 2022, TRV held total cash and short-term invested assets in the United States aggregating $1.56 billion and having a weighted average maturity of 42 days.  TRV has established a holding company liquidity target equal to its estimated annual pre-tax interest expense and common shareholder dividends (currently approximately $1.21 billion).  TRV’s holding company liquidity of $1.56 billion at June 30, 2022 exceeded this target, and it is the opinion of the Company’s management that these assets are sufficient to meet TRV’s current liquidity requirements.

TRV is not dependent on dividends or other forms of repatriation from its foreign operations to support its liquidity needs. The undistributed earnings of the Company’s foreign operations are intended to be permanently reinvested in those operations, and such earnings were not material to the Company’s financial position or liquidity at June 30, 2022.

TRV has a shelf registration statement filed with the Securities and Exchange Commission (SEC) that expires on June 8, 2025 which permits it to issue securities from time to time.  TRV also has a $1.0 billion line of credit facility with a syndicate of financial institutions that expires on June 15, 2027. At June 30, 2022, the Company had $100 million of commercial paper outstanding. TRV is not reliant on its commercial paper program to meet its operating cash flow needs. The Company has no senior notes or junior subordinated debentures maturing until April 2026, at which time $200 million of senior notes will mature.
The Company utilized uncollateralized letters of credit issued by major banks with an aggregate limit of $279 million to provide a portion of the capital needed to support its obligations at Lloyd’s at June 30, 2022. If uncollateralized letters of credit are not available at a reasonable price or at all in the future, the Company can collateralize these letters of credit or may have to seek alternative means of supporting its obligations at Lloyd’s, which could include utilizing holding company funds on hand.
Operating Activities
Net cash provided by operating activities in the first six months of 2022 and 2021 was $2.64 billion and $3.04 billion, respectively. The decrease in cash flows in the first six months of 2022 primarily reflected the impacts of higher levels of payments for claims and claim adjustments expenses, commissions and income taxes, partially offset by higher levels of cash received for premiums. The higher levels of payments for claims and claim adjustment expenses reflected the impact of COVID-19 and related economic conditions, which resulted in lower levels of payments for claims and claim adjustment expenses in the prior year period.

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Investing Activities
Net cash used in investing activities in the first six months of 2022 and 2021 was $1.37 billion and $2.79 billion, respectively.  The Company’s consolidated total investments at June 30, 2022 decreased by $6.92 billion, or 8% from year-end 2021, primarily reflecting the impacts of (i) net unrealized investment losses on investments at June 30, 2022 as compared with net unrealized investment gains at December 31, 2021, due to the impact of higher interest rates during the first six months of 2022 and (ii) net cash used in financing activities, partially offset by (iii) net cash flows provided by operating activities.

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

Financing Activities
Net cash used in financing activities in the first six months of 2022 and 2021 was $1.30 billion and $289 million, respectively.  The totals in both 2022 and 2021 reflected common share repurchases and dividends paid to shareholders, partially offset by the net proceeds from employee stock option exercises. Common share repurchases in the first six months of 2022 and 2021 were $1.06 billion and $798 million, respectively. Net cash used in financing activities in the first six months of 2021 also included net proceeds from the issuance of debt.
Dividends .  Dividends paid to shareholders were $436 million in the first six months of both 2022 and 2021. The declaration and payment of future dividends to holders of the Company’s common stock will be at the discretion of the Company’s Board of Directors and will depend upon many factors, including the Company’s financial position, earnings, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints and other factors as the Board of Directors deems relevant.  Dividends will be paid by the Company only if declared by its Board of Directors out of funds legally available, subject to any other restrictions that may be applicable to the Company.  On July 21, 2022, the Company announced that it declared a regular quarterly dividend of $0.93 per share, payable September 30, 2022 to shareholders of record on September 9, 2022.
Share Repurchases .  The Company’s Board of Directors has approved common share repurchase authorizations under which repurchases may be made from time to time in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, in private transactions or otherwise.  The authorizations do not have a stated expiration date.  The Company expects that, generally over time, the combination of dividends to common shareholders and common share repurchases will likely not exceed net income. The Company also expects that to the extent that it continues to grow premium volumes, the amount of capital returned to shareholders relative to earnings would be somewhat less than it otherwise would have been absent the growth in premium volumes. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, changes in levels of written premiums, funding of the Company’s qualified pension plan, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions and other factors.  During the three and six months ended June 30, 2022, the Company repurchased 2.9 million and 5.8 million common shares under its share repurchase authorizations for a total cost of $500 million and $1.00 billion, respectively. The average cost per share repurchased was $172.56 and $172.33, respectively. On April 20, 2021, the Board of Directors approved a share repurchase authorization that added an additional $5.0 billion of repurchase capacity to the $805 million of capacity remaining at that date. At June 30, 2022, the Company had $3.01 billion of capacity remaining under its share repurchase authorizations.

Capital Resources .  Capital resources reflect the overall financial strength of the Company and its ability to borrow funds at competitive rates and raise new capital to meet its needs. The following table summarizes the components of the Company’s capital structure at June 30, 2022 and December 31, 2021.
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(in millions) June 30,
2022 		December 31,
2021
Debt:
Short-term $ 100 $ 100
Long-term 7,254 7,254
Net unamortized fair value adjustments and debt issuance costs (63) (64)
Total debt 7,291 7,290
Shareholders’ equity:
Common stock and retained earnings, less treasury stock 28,029 27,694
Accumulated other comprehensive income (loss) (5,155) 1,193
Total shareholders’ equity 22,874 28,887
Total capitalization $ 30,165 $ 36,177
The following table provides a reconciliation of total capitalization presented in the foregoing table to total capitalization excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders' equity.
(dollars in millions) June 30,
2022 		December 31,
2021
Total capitalization $ 30,165 $ 36,177
Less: net unrealized gains (losses) on investments, net of taxes, included in shareholders' equity (3,792) 2,415
Total capitalization excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders' equity $ 33,957 $ 33,762
Debt-to-total capital ratio 24.2 % 20.2 %
Debt-to-total capital ratio excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders' equity 21.5 % 21.6 %

The debt-to-total capital ratio excluding net unrealized gains (losses) on investments, net of taxes, included in shareholders’ equity, is calculated by dividing (a) debt by (b) total capitalization excluding net unrealized gains and losses on investments, net of taxes, included in shareholders’ equity. Net unrealized gains and losses on investments can be significantly impacted by both interest rate movements and other economic factors. Accordingly, in the opinion of the Company’s management, the debt-to-total capital ratio calculated on this basis provides another useful metric for investors to understand the Company’s financial leverage position. The Company’s ratio of debt-to-total capital excluding after-tax net unrealized investment gains (losses) included in shareholders’ equity of 21.5% at June 30, 2022 was within the Company’s target range of 15% to 25%.

RATINGS

Ratings are an important factor in assessing the Company’s competitive position in the insurance industry. The Company receives ratings from the following major rating agencies: A.M. Best Company (A.M. Best), Fitch Ratings (Fitch), Moody’s Investors Service (Moody’s) and S&P Global Ratings (S&P). The following rating agency actions were taken with respect to the Company since April 19, 2022, the date on which the Company's Form 10-Q for the quarter ended March 31, 2022 was filed with the SEC. For additional discussion of ratings, see “Part I—Item 1—Business—Ratings” in the Company’s 2021 Annual Report.

• On April 29, 2022, Fitch affirmed all ratings of the Company. The outlook for all ratings is stable.

• On April 29, 2022, Moody's affirmed all ratings of the Company. The outlook for all ratings is stable.

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MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

CRITICAL ACCOUNTING ESTIMATES
For a description of the Company’s critical accounting estimates, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in the Company’s 2021 Annual Report.  The Company considers its most significant accounting estimates to be those applied to claims and claim adjustment expense reserves and related reinsurance recoverables, and impairments of investments, goodwill and other intangible assets. Except as shown in the table below, there have been no material changes to the Company’s critical accounting estimates since December 31, 2021.
Claims and Claim Adjustment Expense Reserves
The table below displays the Company’s gross claims and claim adjustment expense reserves by product line.  Because establishment of claims and claim adjustment expense reserves is an inherently uncertain process involving estimates and the application of judgment, currently established claims and claim adjustment expense reserves may change.  The Company reflects adjustments to the reserves in the results of operations in the period the estimates are changed.  These changes in estimates could result in income statement charges that could be material to the Company’s operating results in future periods.  In particular, a portion of the Company’s gross claims and claim adjustment expense reserves (totaling $1.95 billion at June 30, 2022) are for asbestos and environmental claims and related litigation.  Asbestos and environmental reserves are included in the General liability, Commercial multi-peril and International and other lines in the summary table below.  While the ongoing review of asbestos and environmental claims and associated liabilities considers the inconsistencies of court decisions as to coverage, plaintiffs’ expanded theories of liability and the risks inherent in complex litigation and other uncertainties, in the opinion of the Company’s management, it is possible that the outcome of the continued uncertainties regarding these claims could result in liability in future periods that differs from current insurance reserves by an amount that could be material to the Company’s future operating results. Asbestos and environmental reserves are discussed separately; see “Asbestos Claims and Litigation”, “Environmental Claims and Litigation” and “Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves” in this report.
Gross claims and claim adjustment expense reserves by product line were as follows:
June 30, 2022 December 31, 2021
(in millions) Case IBNR Total Case IBNR Total
General liability $ 5,557 $ 8,945 $ 14,502 $ 5,351 $ 8,863 $ 14,214
Commercial property 1,344 318 1,662 1,220 392 1,612
Commercial multi-peril 2,627 2,639 5,266 2,404 2,573 4,977
Commercial automobile 2,629 2,375 5,004 2,594 2,335 4,929
Workers’ compensation 10,089 9,572 19,661 10,152 9,551 19,703
Fidelity and surety 173 448 621 188 436 624
Personal automobile 2,100 1,847 3,947 2,062 1,765 3,827
Personal homeowners and other 1,075 1,671 2,746 1,021 1,395 2,416
International and other 2,496 2,071 4,567 2,525 2,070 4,595
Property-casualty 28,090 29,886 57,976 27,517 29,380 56,897
Accident and health 7 — 7 10 — 10
Claims and claim adjustment expense reserves
$ 28,097 $ 29,886 $ 57,983 $ 27,527 $ 29,380 $ 56,907
The $1.08 billion increase in gross claims and claim adjustment expense reserves since December 31, 2021 primarily reflected the impacts of (i) higher volumes of insured exposures, (ii) loss cost trends for the current accident year and (iii) catastrophe losses in the first six months of 2022, partially offset by (iv) net favorable prior year reserve development.

FUTURE APPLICATION OF ACCOUNTING STANDARDS
See note 1 of the notes to the unaudited consolidated financial statements contained in this quarterly report and in the Company’s 2021 Annual Report for a discussion of recently issued accounting pronouncements.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

FORWARD-LOOKING STATEMENTS
This report contains, and management may make, certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements, other than statements of historical facts, may be forward-looking statements.  Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “views,” “estimates” and similar expressions are used to identify these forward-looking statements.  These statements include, among other things, the Company’s statements about:
• the Company’s outlook and its future results of operations and financial condition (including, among other things, anticipated premium volume, premium rates, renewal premium changes, underwriting margins and underlying underwriting margins, net and core income, investment income and performance, loss costs, return on equity, core return on equity and expected current returns, and combined ratios and underlying combined ratios);
• the impact of COVID-19 and related economic conditions, including the potential impact on the Company's investments;
• the impact of legislative or regulatory actions or court decisions taken in response to COVID-19 or otherwise;
• 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 cost and availability of reinsurance coverage;
• catastrophe losses and modeling, including statements about probabilities or likelihood of exceedance;
• the impact of investment (including changes in interest rates), economic (including inflation, changes in tax law, changes in commodity prices and fluctuations in foreign currency exchange rates) and underwriting market conditions;
• the impact of changing climate conditions;
• strategic and operational initiatives to improve profitability and competitiveness;
• the Company's competitive advantages and innovation agenda;
• new product offerings;
• the impact of developments in the tort environment, such as increased attorney involvement in insurance claims; and
• the impact of developments in the geopolitical environment.
The Company cautions investors that such statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond the Company’s control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Some of the factors that could cause actual results to differ include, but are not limited to, the following:
Insurance-Related Risks

• high levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas, could materially and adversely affect the Company’s results of operations, its financial position and/or liquidity, and could adversely impact the Company’s ratings, the Company’s ability to raise capital and the availability and cost of reinsurance;
• if actual claims exceed the Company’s claims and claim adjustment expense reserves, or if changes in the estimated level of claims and claim adjustment expense reserves are necessary, including as a result of, among other things, changes in the legal/tort, regulatory and economic environments in which the Company operates, including increased inflation, the Company’s financial results could be materially and adversely affected;
• the Company’s business could be harmed because of its potential exposure to asbestos and environmental claims and related litigation;
• the Company is exposed to, and may face adverse developments involving, mass tort claims such as those relating to exposure to potentially harmful products or substances; and
• the effects of emerging claim and coverage issues on the Company’s business are uncertain, and court decisions or legislative changes that take place after the Company issues its policies can result in an unexpected increase in the number of claims and have a material adverse impact on the Company's results of operations.

Financial, Economic and Credit Risks

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

Business and Operational Risks

• the ongoing impact of COVID-19 and related risks could materially affect the Company's results of operations, financial position and/or liquidity, including with respect to revenues, claims and claim adjustment expenses, general and administrative expenses, investments, inflation, adverse legislative and/or regulatory action, operational disruptions and heightened cyber security risks;
• the intense competition that the Company faces, including with respect to attracting and retaining employees, and the impact of innovation, technological change and changing customer preferences on the insurance industry and the markets in which it operates, could harm its ability to maintain or increase its business volumes and its profitability;
• disruptions to the Company’s relationships with its independent agents and brokers or the Company’s inability to manage effectively a changing distribution landscape could adversely affect the Company;
• the Company’s efforts to develop new products or services, expand in targeted markets, improve business processes and workflows or make acquisitions may not be successful and may create enhanced risks;
• the Company may be adversely affected if its pricing and capital models provide materially different indications than actual results;
• loss of or significant restrictions on the use of particular types of underwriting criteria, such as credit scoring, or other data or methodologies, in the pricing and underwriting of the Company’s products could reduce the Company’s future profitability; and
• the Company is subject to additional risks associated with its business outside the United States.

Technology and Intellectual Property Risks

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

Regulatory and Compliance Risks

• the Company's businesses are heavily regulated by the states and countries in which it conducts business, including licensing, market conduct and financial supervision, and changes in regulation, including higher tax rates, may reduce the Company's profitability and limit its growth; and
• the Company could be adversely affected if its controls designed to ensure compliance with guidelines, policies and legal and regulatory standards are not effective.

In addition, the Company’s share repurchase plans depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, changes in levels of written premiums, funding of the Company’s qualified pension plan, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions, changes in tax laws and other factors.
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
FORWARD-LOOKING STATEMENTS, Continued

The Company’s forward-looking statements speak only as of the date of this report or as of the date they are made, and the Company undertakes no obligation to update forward-looking statements.  For a more detailed discussion of these factors, see the information under the captions “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations" herein and “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2021 Annual Report, in each case as updated by the Company's periodic filings with the SEC.

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

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the Company’s disclosures about market risk, please see “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in the Company’s 2021 Annual Report filed with the SEC.  There have been no material changes to the Company’s disclosures about market risk in Part II—Item 7A of the Company’s 2021 Annual Report.

Item 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2022.  Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2022, the design and operation of the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

In addition, there was no change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

The Company regularly seeks to identify, develop and implement improvements to its technology systems and business processes, some of which may affect its internal control over financial reporting. These changes may include such activities as implementing new, more efficient systems, updating existing systems or platforms, automating manual processes or utilizing technology developed by third parties.  These systems changes are often phased in over multiple periods in order to limit the implementation risk in any one period, and as each change is implemented the Company monitors its effectiveness as part of its internal control over financial reporting.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
The information required with respect to this item can be found under “Contingencies” in note 15 of the notes to the unaudited consolidated financial statements contained in this quarterly report and is incorporated by reference into this Item 1.

Item 1A.  RISK FACTORS
For a discussion of the Company’s potential risks or uncertainties, please see “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2021 Annual Report and "Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein, in each case as updated by the Company's periodic filings with the SEC. There have been no material changes to the risk factors disclosed in Part I—Item 1A of the Company’s 2021 Annual Report.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below sets forth information regarding repurchases by the Company of its common stock during the periods indicated.

ISSUER PURCHASES OF EQUITY SECURITIES
Period Beginning Period Ending Total number of
shares
purchased 		Average price paid
per share 		Total number of
shares purchased
as part of
publicly announced
plans or programs 		Approximate
dollar value of
shares that may
yet be purchased
under the
plans or programs
(in millions)
April 1, 2022 April 30, 2022 496,462 $ 174.19 496,000 $ 3,419
May 1, 2022 May 31, 2022 1,454,997 $ 172.80 1,454,200 $ 3,167
June 1, 2022 June 30, 2022 948,541 $ 171.35 947,406 $ 3,005
Total 2,900,000 $ 172.57 2,897,606 $ 3,005
The Company’s Board of Directors has approved common share repurchase authorizations under which repurchases may be made from time to time in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, in private transactions or otherwise. The most recent authorization was approved by the Board of Directors on April 20, 2021 and added $5.0 billion of repurchase capacity to the $805 million capacity remaining at that date. The authorizations do not have a stated expiration date. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company’s financial position, earnings, share price, catastrophe losses, maintaining capital levels appropriate for the Company’s business operations, changes in levels of written premiums, funding of the Company’s qualified pension plan, capital requirements of the Company’s operating subsidiaries, legal requirements, regulatory constraints, other investment opportunities (including mergers and acquisitions and related financings), market conditions and other factors.
The Company acquired 2,394 shares for a total cost of approximately $414,000 during the three months ended June 30, 2022 that were not part of the publicly announced share repurchase authorizations.  These shares consisted of shares retained to cover payroll withholding taxes in connection with the vesting of restricted stock unit awards and performance share awards, and shares used by employees to cover the price of certain stock options that were exercised.

For additional information regarding the Company’s share repurchases, see “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Item 5. OTHER INFORMATION
Executive Ownership and Sales . All of the Company’s executive officers are subject to the Company’s executive stock ownership policy. For a summary of this policy as currently in effect, see “Compensation Discussion and Analysis—Additional
Compensation Information—Stock Ownership Guidelines, Anti-Hedging and Pledging Policies, and Other Trading Restrictions” in the Company’s proxy statement filed with the SEC on April 8, 2022. From time to time, some of the Company’s executives may determine that it is advisable to diversify their investments for personal financial planning reasons,
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

Item 5. OTHER INFORMATION, Continued
or may seek liquidity for other reasons, and may, in compliance with the stock ownership policy, sell shares of common stock of the Company on the open market, in private transactions or to the Company. To effect such sales, from time to time, some of the Company’s executives may enter into trading plans designed to comply with the Company’s Securities Trading Policy and the provisions of Rule 10b5-1 under the Securities Exchange Act of 1934. The trading plans will not reduce any of the executives’ ownership of the Company’s shares below the applicable executive stock ownership guidelines. The Company does not undertake any obligation to report Rule 10b5-1 plans that may be adopted by any employee or director of the Company in the future, or to report any modifications or termination of any publicly announced plan. As of the date of this report, none of the Company's "named executive officers" (i.e. an executive officer included in the compensation disclosures in the Company's most recent proxy statement) has entered into a Rule 10b5-1 trading plan that remains in effect.


Item 6. EXHIBITS
Exhibit Number Description of Exhibit
3.1
3.2
10.1
31.1†
31.2†
32.1†
32.2†
101.1†
The following information from The Travelers Companies, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 formatted in Inline XBRL: (i) Consolidated Statement of Income for the three months and six months ended June 30, 2022 and 2021; (ii) Consolidated Statement of Comprehensive Income (Loss) for the three months and six months ended June 30, 2022 and 2021; (iii) Consolidated Balance Sheet at June 30, 2022 and December 31, 2021; (iv) Consolidated Statement of Changes in Shareholders’ Equity for the three months and six months ended June 30, 2022 and 2021; (v) Consolidated Statement of Cash Flows for the six months ended June 30, 2022 and 2021; (vi) Notes to Consolidated Financial Statements; and (vii) the cover page.
104.1 Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101.1).
________________________________________________________
†                          Filed herewith .
The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of the Company does not exceed 10% of the total assets of the Company and its consolidated subsidiaries.  Therefore, the Company is not filing any instruments evidencing long-term debt.  However, the Company will furnish copies of any such instrument to the Securities and Exchange Commission upon request.
Copies of any of the exhibits referred to above will be furnished to security holders who make written request therefor to The Travelers Companies, Inc., 385 Washington Street, Saint Paul, MN 55102, Attention: Corporate Secretary.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure except for the terms of the agreements or other documents themselves, and you should not rely on them for other than that purpose.  In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and do not apply in any other context or at any time other than the date they were made.
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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, The Travelers Companies, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE TRAVELERS COMPANIES, INC.
(Registrant)
Date: July 21, 2022 By /S/   WENDY C. SKJERVEN
Wendy C. Skjerven
Vice President, Corporate Secretary and Group General Counsel
(Authorized Signatory)
Date: July 21, 2022 By /S/    DOUGLAS K. RUSSELL
Douglas K. Russell
Senior Vice President and Corporate Controller (Principal Accounting Officer)

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TABLE OF CONTENTS
Part 1 Financial InformationprintItem 1. Financial StatementsprintItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 5. Other InformationprintItem 5. Other Information, Continuedprint

Exhibits

3.1 Amended and Restated Articles of Incorporation of The Travelers Companies,Inc., as amended and restated May23, 2013, were filed as Exhibit3.1 to the Companys current report on Form8-K filed on May24, 2013, and are incorporated herein by reference. 3.2 Bylaws of The Travelers Companies,Inc. as Amended and Restated October 22, 2019 were filed as Exhibit 3.2 to the Company's quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2019, and are incorporated herein by reference. 10.1 Revolving Credit Agreement, dated June 15, 2022, between the Company and a syndicate of financial institutions, was filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on June 17, 2022, and is incorporated herein by reference. 31.1 Certification of Alan D. Schnitzer, Chairman and Chief Executive Officer of the Company, as required by Section302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Daniel S. Frey, Executive Vice President and Chief Financial Officer of the Company, as required by Section302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Alan D. Schnitzer, Chairman and Chief Executive Officer of the Company, as required by Section906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Daniel S. Frey, Executive Vice President and Chief Financial Officer of the Company, as required by Section906 of the Sarbanes-Oxley Act of 2002.