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What changed in Travelers Companies (The)'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Travelers Companies (The)'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+609 added−614 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)

Top changes in Travelers Companies (The)'s 2023 10-K

609 paragraphs added · 614 removed · 559 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

142 edited+14 added−14 removed349 unchanged
Biggest changeA supervisory college is a forum of the regulators having jurisdictional authority over a holding company’s various insurance subsidiaries, including foreign insurance subsidiaries, convened to meet with the insurer’s executive management, to evaluate the insurer's business strategies, approach to enterprise risk management and corporate governance from both a groupwide and legal-entity perspective. 23 While insurance in the United States is regulated on a legal-entity basis, the NAIC has adopted changes to its Model Holding Company Act that some states, including the State of Connecticut, have enacted to allow the insurance commissioner to be designated as the groupwide supervisor (i.e., lead regulator) for the insurance holding company system based upon certain criteria, including the jurisdiction of domicile of the insurance subsidiaries holding the majority of the insurance group’s premiums, assets, or liabilities.
Biggest changeWhile insurance in the United States is regulated on a legal-entity basis, the NAIC has adopted changes to its Model Holding Company Act that some states, including the State of Connecticut, have enacted to allow the insurance commissioner to be 23 designated as the groupwide supervisor (i.e., lead regulator) for the insurance holding company system based upon certain criteria, including the jurisdiction of domicile of the insurance subsidiaries holding the majority of the insurance group’s premiums, assets, or liabilities.
Competitors in this market are 9 primarily national property and casualty insurance companies (including international companies doing business in the U.S.) that write most classes of business using traditional products and pricing, and regional insurance companies. Companies compete based on product offerings, service levels, price, claim and loss prevention services and ease and speed of doing business.
Competitors in this market are primarily national property and casualty insurance companies (including international companies doing business in the U.S.) that write most classes of business using traditional products and pricing, and regional insurance companies. Companies compete based on product offerings, service levels, price, claim and loss prevention services and ease and speed of doing 9 business.
Reinsurance treaties often have 11 aggregate limits or caps which may result in larger net per risk retentions if the aggregate limits or caps are reached. Bond & Specialty Insurance utilizes facultative reinsurance to provide additional limits capacity or to reduce retentions on an individual risk basis.
Reinsurance treaties often have aggregate limits or caps which may result in larger net per risk retentions if the aggregate limits or caps are reached. Bond & Specialty Insurance utilizes facultative reinsurance to provide additional limits capacity or to reduce retentions on an individual 11 risk basis.
The Company regularly monitors its investment in claim resources to maintain an effective focus on claim outcomes and a 16 disciplined approach to continual improvement. The Company operates a state-of-the-art claims-training facility which offers hands-on experiential learning to help ensure that its claim professionals are properly trained.
The Company regularly monitors its investment in claim resources to maintain an effective focus on claim outcomes and a disciplined approach to continual improvement. The Company operates a state-of-the-art claims-training facility which offers 16 hands-on experiential learning to help ensure that its claim professionals are properly trained.
Regulatory and Legislative Responses to Catastrophes. States have from time to time passed legislation, and regulators have taken action, that have the effect of limiting the ability of insurers to manage catastrophe risk, such as legislation restricting insurers from reducing exposures or withdrawing from catastrophe-prone areas or mandating that insurers participate in residual markets involving catastrophe-prone areas.
Regulatory and Legislative Responses to Catastrophes. States from time to time have passed legislation, and regulators have taken action, that have the effect of limiting the ability of insurers to manage catastrophe risk, such as legislation restricting insurers from reducing exposures or withdrawing from catastrophe-prone areas or mandating that insurers participate in residual markets involving catastrophe-prone areas.
Certain operations are conducted in the U.K. through a U.K. branch of the Irish subsidiary, which is supervised by the PRA and FCA as well as the 26 Central Bank of Ireland. Since January 1, 2019, the Company has used a Lloyd's insurance subsidiary in Brussels, Belgium (Lloyd's Brussels) to cover its Lloyd's customers' risks in the EU.
Certain operations 26 are conducted in the U.K. through a U.K. branch of the Irish subsidiary, which is supervised by the PRA and FCA as well as the Central Bank of Ireland. Since January 1, 2019, the Company has used a Lloyd’s insurance subsidiary in Brussels, Belgium (Lloyd’s Brussels) to cover its Lloyd’s customers’ risks in the EU.
For additional information regarding catastrophes, see “Item 1A—Risk Factors—High levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas and changing climate conditions, could materially and adversely affect our results of operations, our financial position and/or liquidity, and could adversely impact our ratings, our ability to raise capital and the availability and cost of reinsurance." The Company generally seeks to manage its exposure to catastrophes through individual risk selection and the purchase of catastrophe reinsurance.
For additional information regarding catastrophes, see “Item 1A—Risk Factors—High levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas and changing climate conditions, could materially and adversely affect our results of operations, our financial position and/or liquidity, and could adversely impact our ratings, our ability to raise capital and the availability and cost of reinsurance.” The Company generally seeks to manage its exposure to catastrophes through individual risk selection and the purchase of catastrophe reinsurance.
Amounts related to assessments from arrangements that are not reinsurance are reported as part of “General and Administrative Expenses,” such as the Florida Special Disability Trust. For additional information concerning assessments for guaranty funds and second-injury funds and other mandatory assigned risk and reinsurance agreements including state-funding mechanisms, see “Item 1A—Risk Factors.” Insurance Regulatory Information System (IRIS).
Amounts related to assessments from arrangements that are not reinsurance are reported as part of “General and Administrative Expenses,” such as the Florida Special Disability Trust. For additional information concerning assessments for guaranty funds and second-injury funds as well as other mandatory assigned risk and reinsurance agreements including state-funding mechanisms, see “Item 1A—Risk Factors.” Insurance Regulatory Information System (IRIS).
The Company’s competitive position in the marketplace is based on many factors, including the following: • ability to profitably price business, retain existing customers and obtain new business; • premiums charged, contract terms and conditions, products and services offered (including the ability to design customized programs); • agent, broker and policyholder relationships; • ability to keep pace relative to competitors with changes in technology and information systems; • ability to use data and analytics to make decisions; • speed of claims payment; • ability to provide a positive customer experience; • ability to provide products and services in a cost effective manner; • ability to provide new products and services to meet changing customer needs; • ability to adapt to changes in business models, technology, customer preferences or regulation impacting the markets in which the Company operates; • perceived overall financial strength and corresponding ratings assigned by independent rating agencies; • ability to recruit and retain qualified employees; • geographic scope of business; and • local presence.
The Company’s competitive position in the marketplace is based on many factors, including the following: • ability to profitably price business, retain existing customers and obtain new business; • premiums charged, contract terms and conditions, products and services offered (including the ability to design customized programs); • agent, broker and policyholder relationships; • ability to keep pace relative to competitors with changes in technology and information systems, including artificial intelligence; • ability to use data and analytics to make decisions; • speed of claims payment; • ability to provide a positive customer experience; • ability to provide products and services in a cost effective manner; • ability to provide new products and services to meet changing customer needs; • ability to adapt to changes in business models, technology, customer preferences or regulation impacting the markets in which the Company operates; • perceived overall financial strength and corresponding ratings assigned by independent rating agencies; • ability to recruit and retain qualified employees; • geographic scope of business; and • local presence.
In addition, many states require policies to provide first-party personal injury protection, frequently referred to as no-fault coverage. • Homeowners and Other provides protection against losses to dwellings and contents from a variety of perils (excluding flooding) as well as coverage for personal liability. The Company writes homeowners insurance for dwellings, 14 condominiums and tenants, and rental properties.
In addition, many states require policies to provide first-party personal injury protection, frequently referred to as no-fault coverage. • Homeowners and Other provides protection against losses to dwellings and contents from a variety of perils (excluding flooding) as well as coverage for personal liability. The Company writes homeowners insurance for dwellings, condominiums and tenants, and rental properties.
Insurers having premium volume above certain thresholds, including the Company, are also required to perform at least annually a self-assessment of their current and future risks, including their likely future solvency position (known as an own risk and solvency assessment or ORSA) and file a confidential report with the insurer’s lead insurance regulator.
Insurers having premium volume above certain thresholds, including the Company, are also required to perform at least annually a self-assessment of their current and future 28 risks, including their likely future solvency position (known as an own risk and solvency assessment, or ORSA) and file a confidential report with the insurer’s lead insurance regulator.
Voluntary market The market in which a person seeking insurance obtains coverage without the assistance of residual market mechanisms. Wholesale broker An independent or exclusive agent that represents both admitted and non-admitted insurers in market areas, which include standard, non-standard, specialty and excess and surplus lines of insurance. The wholesaler does not deal directly with the insurance consumer.
Voluntary market The market in which a person seeking insurance obtains coverage without the assistance of residual market mechanisms. 42 Wholesale broker An independent or exclusive agent that represents both admitted and non-admitted insurers in market areas, which include standard, non-standard, specialty and excess and surplus lines of insurance. The wholesaler does not deal directly with the insurance consumer.
For a further description of the program, including the Company’s estimated deductible under the program in 2023, see note 6 of the notes to the consolidated financial statements and “Item 1A—Risk Factors—High levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas and changing climate conditions, could materially and adversely affect our results of operations, our financial position and/or liquidity, and could adversely impact our ratings, our ability to raise capital and the availability and cost of reinsurance.” 19 CLAIMS AND CLAIM ADJUSTMENT EXPENSE RESERVES Claims and claim adjustment expense reserves represent management’s estimate of the ultimate liability for unpaid losses and loss adjustment expenses for claims that have been reported and claims that have been incurred but not yet reported as of the balance sheet date.
For a further description of the program, including the Company’s estimated deductible under the program in 2024, see note 6 of the notes to the consolidated financial statements and “Item 1A—Risk Factors—High levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas and changing climate conditions, could materially and adversely affect our results of operations, our financial position and/or liquidity, and could adversely impact our ratings, our ability to raise capital and the availability and cost of reinsurance.” 19 CLAIMS AND CLAIM ADJUSTMENT EXPENSE RESERVES Claims and claim adjustment expense reserves represent management’s estimate of the ultimate liability for unpaid losses and loss adjustment expenses for claims that have been reported and claims that have been incurred but not yet reported as of the balance sheet date.
The Company provides employees with multiple channels to raise concerns, including the Human Resources, Employee Relations and Compliance functions, as well as the Travelers Ethics Helpline. The Company’s independently administered Ethics Helpline is available to employees and others 24 hours a day, seven days a week to report issues or seek guidance confidentially and anonymously.
The Company provides employees with multiple channels to raise concerns, including the Human Resources, Employee Relations and Compliance functions, as well as the Travelers Ethics Helpline. The Company’s independently administered 30 Ethics Helpline is available to employees and others 24 hours a day, seven days a week to report issues or seek guidance confidentially and anonymously.
Further, the design of any risk management or control system must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. As a result, the possibility of material financial loss remains in spite of the Company’s significant and comprehensive ERM efforts.
Further, the design of any risk management or control system must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. As a result, the possibility of material financial loss remains in spite of the 29 Company’s significant and comprehensive ERM efforts.
Business Insurance generally retains its workers' compensation exposures. Reinsurance treaties often have aggregate limits or caps which may result in larger net per-risk retentions if the aggregate limits or caps are reached. Business Insurance utilizes facultative reinsurance to provide additional limits capacity or to reduce retentions on an individual risk basis.
Business Insurance generally retains its workers’ compensation exposures. Reinsurance treaties often have aggregate limits or caps which may result in larger net per-risk retentions if the aggregate limits or caps are reached. Business Insurance utilizes facultative reinsurance to provide additional limits capacity or to reduce retentions on an individual 8 risk basis.
Furthermore, reduction or elimination of the National Flood Insurance Program could result in an increase in the Company's exposure to flood risk if insurers become required to cover flood risk under certain types of policies. Assessments for Guaranty Funds and Second-Injury Funds and Other Mandatory Assigned Risk and Reinsurance Arrangements.
Furthermore, the reduction or elimination of the National Flood Insurance Program could result in an increase in the Company’s exposure to flood risk if insurers become required to cover flood risk under certain types of policies. 24 Assessments for Guaranty Funds and Second-Injury Funds and Other Mandatory Assigned Risk and Reinsurance Arrangements.
Amounts payable or paid as a result of arrangements that are in substance reinsurance, including certain involuntary pools where insurers are required to assume premiums and losses from those pools, are accounted for as reinsurance (e.g., National Workers’ Compensation Reinsurance Pool, North Carolina Beach Plan).
Amounts payable or paid as a result of arrangements that are in substance reinsurance, including certain involuntary pools where insurers are required to assume premiums and losses from those pools, are accounted for as reinsurance (e.g., the National Workers’ Compensation Reinsurance Pool, North Carolina Beach Plan).
See “Item 1A—Risk Factors—Intellectual property is important to our business, and we may be unable to protect and enforce our own intellectual property or we may be subject to claims for infringing the intellectual property of others.” Company Website, Social Media and Availability of SEC Filings The Company’s internet website is www.travelers.com .
See “Item 1A—Risk Factors—Intellectual property is important to our business, and we may be unable to protect and enforce our own intellectual property or we may be subject to claims for infringing the intellectual property of others.” Company Website, Social Media and Availability of SEC Filings The Company’s internet website is travelers.com .
The Company's ability or its willingness to manage its catastrophe exposure by raising prices, modifying policy terms or reducing exposure to certain geographies may be limited due to considerations of public policy, an evolving political environment and/or changes in general economic 24 conditions.
The Company’s ability or its willingness to manage its catastrophe exposure by raising prices, modifying policy terms, or reducing exposure to certain geographies may be limited due to considerations of public policy, an evolving political environment, and/or changes in general economic conditions.
The wholesaler deals with the retail agent or broker. 42 Workers’ compensation A system (established under state and federal laws) under which employers provide insurance for benefit payments to their employees for work-related injuries, deaths and diseases, regardless of fault.
The wholesaler deals with the retail agent or broker. Workers’ compensation A system (established under state and federal laws) under which employers provide insurance for benefit payments to their employees for work-related injuries, deaths and diseases, regardless of fault.
The requirement for an insurer to conduct an ORSA is intended to foster an effective level of ERM for all insurers within a holding company system, and to provide a group-wide perspective 28 on risks and capital as a supplement to the legal entity view.
The requirement for an insurer to conduct an ORSA is intended to foster an effective level of ERM for all insurers within a holding company system, and to provide a group-wide perspective on risks and capital as a supplement to the legal entity view.
Provides coverage for employers for specified benefits payable under state or federal law for workplace injuries to employees. There are typically four types of benefits payable under workers’ compensation policies: 7 medical benefits, disability benefits, death benefits and vocational rehabilitation benefits.
Provides coverage for employers for specified benefits payable under state or federal law for workplace injuries to employees. There are typically four types of benefits payable under workers’ compensation policies: medical benefits, disability benefits, death benefits and vocational rehabilitation benefits.
The Company emphasizes managed care cost containment strategies, which involve employers, employees and care providers in a collaborative effort that focuses on the injured employee’s early return to work and cost-effective quality care. • Commercial Automobile.
The Company emphasizes 7 managed care cost containment strategies, which involve employers, employees and care providers in a collaborative effort that focuses on the injured employee’s early return to work and cost-effective quality care. • Commercial Automobile.
These Canadian subsidiaries and the Canadian branch are also subject to Canadian provincial and territorial insurance legislation and regulation, governing market conduct, including pricing, underwriting, coverage and claim conduct, in varying degrees by province/territory and by product line.
These Canadian subsidiaries and the Canadian branch are also subject to Canadian provincial and territorial insurance legislation and regulation, primarily governing market conduct, including pricing, underwriting, coverage, and claim conduct, in varying degrees by province/territory and by product line.
As a result of the foregoing, the Dodd-Frank Act, including any changes thereto, or other additional federal regulation that is adopted in the future, could impose additional burdens on the Company, including impacting the ways in which the Company conducts its business, increasing compliance costs and duplicating state regulation, and could result in a competitive disadvantage, particularly relative to other competitors that may not be subject to the same level of regulation.
As a result of the foregoing, the Dodd-Frank Act, including any changes thereto or additional related regulations, or other additional federal regulation that is adopted in the future, could impose additional burdens on the Company, including impacting the ways in which the Company conducts its business, increasing compliance costs and duplicating state regulation, and could result in a competitive disadvantage, particularly relative to other competitors that may not be subject to the same level of regulation.
The Company continues to make 31 progress in promoting women and people of color. In each of the last 10 years, the Company has increased the percentage of women and people of color in U.S. management-level positions.
The Company continues to make progress in promoting women and people of color. In each of the last 10 years, the Company has increased the percentage of women and people of color in U.S. management-level positions.
As calculated and reported in the Company’s most recent Proxy Statement filed in April 2022, excluding the Company's Chairman and Chief Executive Officer, (i) the median of the annual total compensation of all the Company’s employees was nearly $110,000, and (ii) the median of the annual total compensation of the Company’s full-time U.S. employees who worked for the Company for the entire year, who comprised over 90% of its U.S. workforce, was more than $115,000.
As calculated and reported in the Company’s most recent Proxy Statement filed in April 2023, excluding the Company’s Chairman and Chief Executive Officer, (i) the median of the annual total compensation of all the Company’s employees was nearly $110,000, and (ii) the median of the annual total compensation of the Company’s full-time U.S. employees who worked for the Company for the entire year, who comprised over 90% of its U.S. workforce, was more than $115,000.
The Company takes a holistic approach with respect to the physical, emotional, mental and financial well-being of its employees. The Company offers comprehensive, flexible benefit options for its employees.
The Company takes a holistic approach with respect to the physical, mental and financial well-being of its employees. The Company offers comprehensive, flexible benefit options for its employees.
The commercial residual market business of National Accounts services approximately 38% of the total workers’ compensation assigned risk market, making the Company one of the largest servicing carriers in the industry. • National Property and Other markets and distributes products and services to a wide customer base, providing traditional and customized insurance programs to a broad range of customer sizes through a large network of agents and brokers.
The commercial residual market business of National Accounts services approximately 35% of the total workers’ compensation assigned risk market, making the Company one of the largest servicing carriers in the industry. • National Property and Other markets and distributes products and services to a wide customer base, providing traditional and customized insurance programs to a broad range of customer sizes through a large network of agents and brokers.
While the covered hazards may be similar to those in the U.S. market, the different legal environments can make the product risks and coverage terms very different from those the Company faces in the United States. Net Retention Policy Per Risk The following discussion reflects the Company’s retention policy with respect to Business Insurance as of January 1, 2023.
While the covered hazards may be similar to those in the U.S. market, the different legal environments can make the product risks and coverage terms very different from those the Company faces in the United States. Net Retention Policy Per Risk The following discussion reflects the Company’s retention policy with respect to Business Insurance as of January 1, 2024.
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.
The treaty covers territory from Virginia to Maine for the period from July 1, 2023 through and including June 30, 2024. 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.
This treaty provides for up to $160 million part of $200 million of coverage, subject to a $170 million retention, for losses occurring from an earthquake, including fire following and sprinkler leakage, incurred by Personal Insurance from January 1, 2023 through and including December 31, 2023. The treaty covers the United States, its territories, possessions and waters contiguous thereto.
This treaty provides up to $160 million part of $200 million of coverage, subject to a $170 million retention, for losses occurring from an earthquake, including fire following and sprinkler leakage, incurred by Personal Insurance from January 1, 2024 through and including December 31, 2024. The treaty covers the United States, its territories, possessions and waters contiguous thereto.
Based on preliminary 2022 IRIS ratios calculated by the Company for its lead domestic insurance subsidiaries, The Travelers Indemnity Company had results outside the normal range for one IRIS ratio due to the size of its investments in certain non-fixed maturity securities, while Travelers Casualty and Surety Company had results outside the normal range for one IRIS ratio due to the amount of dividends received from its subsidiaries.
Based on preliminary 2023 IRIS ratios calculated by the Company for its lead domestic insurance subsidiaries, in both 2023 and 2022, The Travelers Indemnity Company had results outside the normal range for one IRIS ratio due to the size of its investments in certain non-fixed maturity securities, while Travelers Casualty and Surety Company had results outside the normal range for one IRIS ratio due to the amount of dividends received from its subsidiaries.
In general, these laws and regulations permit investments in federal, state and municipal obligations, corporate bonds, preferred and common equity securities, mortgage loans, real estate and certain other investments, subject to specified limits and certain other qualifications, depending on the type of investment. At December 31, 2022 and 2021, the Company was in compliance with these laws and regulations.
In general, these laws and regulations permit investments in federal, state and municipal obligations, corporate bonds, preferred and common equity securities, mortgage loans, real estate, and certain other investments, subject to specified limits and certain other qualifications, depending on the type of investment. At December 31, 2023 and 2022, the Company was in compliance with these laws and regulations.
According to A.M. Best, there are approximately 1,100 property and casualty groups in the United States, comprising approximately 2,600 property and casualty companies. Of those groups, the top 150 accounted for approximately 94% of the consolidated industry’s total net written premiums in 2021. The Company competes with both foreign and domestic insurers.
According to A.M. Best, there are approximately 1,100 property and casualty groups in the United States, comprising approximately 2,600 property and casualty companies. Of those groups, the top 150 accounted for approximately 94% of the consolidated industry’s total net written premiums in 2022. The Company competes with both foreign and domestic insurers.
(2) No other single state accounted for 3.0% or more of Personal Insurance’s direct written premiums in 2022. 15 Competition Domestic Although national companies (including international companies doing business in the U.S.) write the majority of this business, Personal Insurance also faces competition from many regional and local companies.
(2) No other single state accounted for 3.0% or more of Personal Insurance’s direct written premiums in 2023. 15 Competition Domestic Although national companies (including international companies doing business in the U.S.) write the majority of this business, Personal Insurance also faces competition from many regional and local companies.
Additionally, an aggregate threshold is applied for International business across all reportable segments. For 2022, the threshold ranged from approximately $20 million to $30 million of losses before reinsurance and taxes. Catastrophe loss Loss and directly identified loss adjustment expenses from catastrophes, as well as related reinsurance reinstatement premiums and assessments from various pools.
Additionally, an aggregate threshold is applied for International business across all reportable segments. For 2023, the threshold ranged from approximately $20 million to $30 million of losses before reinsurance and taxes. Catastrophe loss Loss and directly identified loss adjustment expenses from catastrophes, as well as related reinsurance reinstatement premiums and assessments from various pools.
Additionally, the NAIC has recently adopted changes to its Model Holding Company Act to require certain insurance groups to file a Group Capital Calculation to allow the groupwide supervisor (lead state) to evaluate the risks and available capital on a groupwide basis in addition to the risk-based capital requirements currently imposed on a legal-entity basis.
Additionally, the NAIC adopted changes to its Model Holding Company Act to require certain insurance groups to file a Group Capital Calculation to allow the groupwide supervisor (lead state) to evaluate the risks and available capital on a groupwide basis in addition to the risk-based capital requirements currently imposed on a legal-entity basis.
In each of the last 10 years, the Company has increased the percentage of people of color (as defined by the U.S. Equal Employment Opportunity Commission's EEO-1 race and ethnicity categories for the U.S.) in its U.S. workforce. As of December 31, 2022, women and people of color represented approximately 54% and 27% of its U.S. workforce, respectively.
In each of the last 10 years, the Company has increased the percentage of people of color (as defined by the U.S. Equal Employment Opportunity Commission’s EEO-1 race and ethnicity categories for the U.S.) in its U.S. workforce. As of December 31, 2023, women and 31 people of color represented approximately 54% and 27% of its U.S. workforce, respectively.
Agencies and brokers are serviced by 86 field offices and supported by customer service centers where the Company performs services for agents for a fee and centralized business centers where the Company processes new and renewal business that meet certain underwriting criteria. Business Insurance builds relationships with well-established, independent insurance agencies and brokers.
Agencies and brokers are serviced by 87 field offices and supported by customer service centers where the Company performs services for agents for a fee and centralized business centers where the Company processes new and renewal business that meet certain underwriting criteria. Business Insurance builds relationships with well-established, independent insurance agencies and brokers.
Net Retention Policy Per Risk The following discussion reflects the Company’s retention policy with respect to Personal Insurance as of January 1, 2023. Personal Insurance generally retains its primary personal auto exposures in their entirety. For personal property insurance, there is an $8.0 million maximum retention per risk, net of reinsurance.
Net Retention Policy Per Risk The following discussion reflects the Company’s retention policy with respect to Personal Insurance as of January 1, 2024. Personal Insurance generally retains its primary personal auto exposures in their entirety. For personal property insurance, there is an $8.0 million maximum retention per risk, net of reinsurance.
In recent years, the Company has invested significant additional resources in many of its claims handling operations, including digital, analytics, artificial intelligence and automation capabilities, and regularly monitors the effect of those investments to ensure a consistent optimization among outcomes, cost and service.
In recent years, the Company has invested significant additional resources in many of its claims handling operations, including digital, analytics, artificial intelligence and automation capabilities. The Company regularly monitors the effect of these investments to ensure a consistent optimization among outcomes, cost and service.
The Company, based upon the FSOC’s rules and interpretive guidance, has not been designated as a SIFI and is not subject to regulation by the Federal Reserve. Nonetheless, it is possible that FSOC may change its rules or interpretations in the future and conclude that the Company is a SIFI.
The Company, based upon the FSOC’s rules and interpretive guidance, has not been designated as a SIFI and is not subject to regulation by the Federal Reserve. Nonetheless, it is possible that FSOC may change its rules, interpretations, or application thereof in the future and conclude that the Company is a SIFI.
Lloyd’s Brussels is regulated by the National Bank of Belgium. During 2022, the Company's operations in the Republic of Ireland were also subject to regulation by the European Union (EU). Generally, EU requirements are adopted by the EU and then implemented by enabling legislation in the member countries.
Lloyd’s Brussels is regulated by the National Bank of Belgium. During 2023, the Company’s operations in the Republic of Ireland were also subject to regulation by the European Union (EU). Generally, EU requirements are adopted by the EU and then implemented by enabling legislation in the member countries.
To access these filings, go to the Company’s website and under the “Investors” heading, click on “Financial Information” then “SEC Filings.” The Company may use its website and/or social media outlets, such as Facebook and Twitter, as distribution channels of material company information.
To access these filings, go to the Company’s website and under the “Investors” heading, click on “Financial Information” then “SEC Filings.” The Company may use its website and/or social media outlets, such as Facebook and X, as distribution channels of material company information.
(2) No other single state accounted for 3.0% or more of the Company’s consolidated direct written premiums written in 2022. Catastrophe Exposure The Company’s property and casualty insurance operations expose it to claims arising out of catastrophes.
(2) No other single state accounted for 3.0% or more of the Company’s consolidated direct written premiums written in 2023. Catastrophe Exposure The Company’s property and casualty insurance operations expose it to claims arising out of catastrophes.
Middle Market generally provides these products to mid-sized businesses through Commercial Accounts, as well as to targeted industries through Construction , Technology , Public Sector Services and Oil & Gas , and additionally, provides mono-line umbrella and excess coverage insurance through Excess Casualty.
Middle Market generally provides these products to mid-sized businesses through Commercial Accounts, as well as to targeted industries through Construction , Technology & Life Sciences , Public Sector Services and Oil & Gas, and additionally, provides mono-line umbrella and excess coverage insurance through Excess Casualty.
International Regulation The Company's insurance subsidiaries based in Canada, and the Canadian branch of one of the Company’s U.S. insurance subsidiaries, are regulated for solvency purposes by the Office of the Superintendent of Financial Institutions (OSFI) under the provisions of the Insurance Companies Act (Canada).
International Regulation The Company’s insurance subsidiaries based in Canada, and the Canadian branch of one of the Company’s U.S. insurance subsidiaries, are regulated for solvency and risk management purposes by the Office of the Superintendent of Financial Institutions (OSFI) under the provisions of the Insurance Companies Act (Canada).
Savings and Retirement • A 401(k) Savings Plan, through which the Company matches employee contributions dollar-for-dollar up to 5% of eligible pay, with a maximum annual Company match of $7,000 for 2022 and $7,500 for 2023; • The Paying It Forward Savings Program, through which the Company supports employees with student loans by making an annual contribution in the employee’s 401(k) account equal to the annual student loan payments.
Savings and Retirement • A 401(k) Savings Plan, through which the Company matches employee contributions dollar-for-dollar up to 5% of eligible pay, with a maximum annual Company match of $7,500; • The Paying It Forward Savings Program, through which the Company supports employees with student loans by making an annual contribution in the employee’s 401(k) account equal to the annual student loan payments.
The Company’s home office operations provide additional support in the form of workflow design, quality management, information technology, advanced management information and data analysis, training, financial reporting and control, and human resources strategy.
The Company’s home office operations provide additional support in the form of workflow design, quality management, information technology, advanced management information and data analysis, training, financial reporting and controls, and human resources strategy.
National Property and Other also includes commercial property and general liability policies for small, difficult-to-place specialty classes of commercial business, primarily on an excess and surplus lines basis through Northfield , and also offers tailored property and casualty insurance programs on an admitted basis for customers with common risk characteristics or coverage requirements through National Programs .
National Property and Other also includes commercial property and general liability policies for small, difficult to place commercial business primarily on an excess and surplus lines basis through Northfield, and also offers tailored property and casualty insurance programs on an admitted basis for customers with common risk characteristics or coverage requirements through National Programs .
In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting “Email Notifications” under the "Investor Toolkit" section at http://investor.travelers.com . 33 Glossary of Selected Insurance Terms Accident year The annual calendar accounting period in which loss events occurred, regardless of when the losses are actually reported, booked or paid.
In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting “Email Notifications” under the “Investor Toolkit” section at investor.travelers.com . 33 Glossary of Selected Insurance Terms Accident year The annual calendar accounting period in which loss events occurred, regardless of when the losses are actually reported, booked or paid.
Reserves on Statutory Accounting Basis At December 31, 2022, 2021 and 2020, claims and claim adjustment expense reserves (net of reinsurance) prepared in accordance with U.S. generally accepted accounting principles (GAAP reserves) were $91 million higher, $99 million higher and $110 million higher, respectively, than those reported in the Company’s respective annual financial reports filed with insurance regulators, which are prepared in accordance with statutory accounting practices (statutory reserves).
Reserves on Statutory Accounting Basis At December 31, 2023, 2022 and 2021, claims and claim adjustment expense reserves (net of reinsurance) prepared in accordance with U.S. generally accepted accounting principles (GAAP reserves) were $87 million higher, $91 million higher and $99 million higher, respectively, than those reported in the Company’s respective annual financial reports filed with insurance regulators, which are prepared in accordance with statutory accounting practices (statutory reserves).
The Company’s ability or willingness to change prices, modify underwriting terms or reduce exposure to certain geographies may be limited due to a number of factors, including public policy, the competitive environment, the evolving political and legislative environment and/or changes in the general economic climate.
The Company’s ability or willingness to change prices, modify underwriting terms or shift exposure to, or from, certain geographies may be limited due to a number of factors, including public policy, the competitive environment, the evolving political and legislative environment and/or changes in the general economic climate.
It is possible that individual members of the EU could differ in how they adopt or implement the Covered Agreement, resulting in greater regulation and higher capital standards as well as inconsistent regulatory requirements among the jurisdictions in which the Company does business.
It is possible that individual members of the EU could differ in how they adopt or apply the terms of the Covered Agreement, resulting in greater regulation and higher capital standards as well as inconsistent regulatory requirements among the jurisdictions in which the Company does business.
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, 21 adversely impact our ability to access the capital markets and increase our borrowing costs” included in “Part I—Item 1A—Risk Factors." Claims — Paying Ratings The following table summarizes the current claims-paying (or financial strength) ratings for each of the Company’s rated entities as of February 16, 2023, including the position of each rating in the applicable agency’s rating scale.
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.” 21 Claims — Paying Ratings The following table summarizes the current claims-paying (or financial strength) ratings for each of the Company’s rated entities as of February 15, 2024, including the position of each rating in the applicable agency’s rating scale.
The Connecticut insurance holding company laws require notice to, and approval by, the state insurance commissioner for the declaration or payment of any dividend from an insurance subsidiary that, together with other distributions made within the preceding twelve months, exceeds the greater of 10% of the insurance subsidiary’s statutory capital and surplus as of the preceding December 31, or the insurance subsidiary’s net income for the twelve-month period ending the preceding December 31, in each case determined in accordance with statutory accounting practices and by state regulation.
The Connecticut insurance holding company laws require notice to, and approval by, the state insurance commissioner for the declaration or payment of any dividend from an insurance subsidiary that, together with other distributions made within the preceding twelve months, exceeds the greater of 10% of the insurance subsidiary’s statutory capital and surplus as of the preceding December 31 st , or the insurance subsidiary’s net income for the twelve-month period ending the preceding December 31 st , in each case determined in accordance with the statutory accounting practices prescribed or permitted by the State of Connecticut Insurance Department.
Personal Insurance handles the sales and service for these programs either through a sponsoring independent agent or through the Company’s contact center locations. Personal Insurance also markets and distributes its products on other distribution platforms, including carrier partnerships.
Personal Insurance handles the sales and service for these programs either through a sponsoring independent agent, through the Company’s contact center locations or through its wholly owned independent agency. Personal Insurance also markets and distributes its products on other distribution platforms, including carrier partnerships.
With approximately 13,000 employees, Claims Services employs a group of professionals with diverse skills, including claim adjusters, appraisers, attorneys, investigators, engineers, accountants, nurses, data and analytics professionals, system specialists and training, management and support personnel. Approved external service providers, such as investigators, attorneys and, when necessary, independent adjusters and appraisers, are available for use as appropriate.
With approximately 12,500 employees, Claims Services employs a group of professionals with diverse skills, including claim adjusters, appraisers, attorneys, investigators, engineers, accountants, nurses, data and analytics professionals, system specialists and training, management and support personnel. Approved external service providers, such as investigators, attorneys and, when necessary, independent adjusters and appraisers, are available for use as appropriate.
In addition, these groups are a resource for the Company’s business leaders, providing them with important insights and perspectives. More than 12,000 employees – nearly 40% of the Company's employee population – are members of one or more of the Company's Diversity Networks. The Company also continues to improve its diverse talent pipeline.
In addition, these groups are a resource for the Company’s business leaders, providing them with important insights and perspectives. More than 13,000 employees – nearly 40% of the Company’s employee population – are members of one or more of the Company’s Diversity Networks. The Company also continues to enhance its diverse talent pipeline.
Net Retention Policy Per Risk The following discussion reflects the Company’s retention policy with respect to Bond & Specialty Insurance as of January 1, 2023.
Net Retention Policy Per Risk The following discussion reflects the Company’s retention policy with respect to Bond & Specialty Insurance as of January 1, 2024.
Geographic Distribution The following table shows the geographic distribution of the Company’s consolidated direct written premiums for the year ended December 31, 2022: Location % of Total Domestic: California 10.4 % Texas (1) 8.6 New York 8.5 Florida 4.2 Pennsylvania 4.1 Illinois 3.8 Georgia 3.8 New Jersey 3.8 Massachusetts 3.0 All other domestic (2) 43.9 Total Domestic 94.1 International: Canada 3.3 All other international 2.6 Total International 5.9 Consolidated total 100.0 % ___________________________________________ (1) The percentage for Texas includes business written by the Company through a fronting agreement with another insurer.
Geographic Distribution The following table shows the geographic distribution of the Company’s consolidated direct written premiums for the year ended December 31, 2023: Location % of Total Domestic: California 10.4 % Texas (1) 9.1 New York 8.4 Florida 4.2 Pennsylvania 4.1 Illinois 3.8 Georgia 3.8 New Jersey 3.7 Massachusetts 3.1 All other domestic (2) 44.1 Total Domestic 94.7 International: Canada 3.0 All other international 2.3 Total International 5.3 Consolidated total 100.0 % ___________________________________________ (1) The percentage for Texas includes business written by the Company through a fronting agreement with another insurer.
The differences between the amount of reserves reported for GAAP and statutory reporting are primarily due to the differences in accounting for: (i) fee reimbursements associated with large deductible business, (ii) the impact of updated accounting guidance for credit losses adopted January 1, 2020 applicable to structured settlements and (iii) the accounting for reinsurance.
The differences between the amount of reserves reported for GAAP and statutory reporting are primarily due to the differences in accounting for: (i) fee reimbursements associated with large deductible business, (ii) the impact of updated guidance for credit losses applicable to structured settlements and (iii) the accounting for reinsurance.
For additional information on asbestos and environmental claims, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Asbestos Claims and Litigation” and “—Environmental Claims and Litigation.” INTERCOMPANY REINSURANCE POOLING ARRANGEMENTS Most of the Company’s domestic insurance subsidiaries are members of an intercompany property and casualty reinsurance pooling arrangement.
For additional information on asbestos and environmental claims, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Asbestos Claims and Litigation” and “—Environmental Claims and Litigation.” INTERCOMPANY REINSURANCE POOLING ARRANGEMENTS Most of the Company’s domestic insurance subsidiaries participate in an intercompany property and casualty reinsurance pooling arrangement.
For third-party liability, Business Insurance generally limits its net retention, through the use of reinsurance, to a maximum of $14.0 million per insured, per occurrence, subject further to a significant aggregate annual deductible. For property exposures, Business Insurance generally limits its net retention, through the use of reinsurance, to a maximum amount per risk of $21.0 8 million per occurrence.
For third-party liability, Business Insurance generally limits its net retention, through the use of reinsurance, to a maximum of $21.2 million per insured, per occurrence, subject further to a significant aggregate annual deductible. For property exposures, Business Insurance generally limits its net retention, through the use of reinsurance, to a maximum amount per risk of $20.0 million per occurrence.
The Company also writes coverage for boats and yachts, valuable personal items such as jewelry, umbrella liability, and weddings and special events. International • International provides automobile and homeowners and other coverages in Canada (similar to coverages in the United States). Personal Insurance had approximately 449,000 active policies in Canada at December 31, 2022.
The Company also writes coverage for boats and yachts, valuable personal items such as jewelry, umbrella liability, and weddings and special events. 14 International • International provides automobile and homeowners and other coverages in Canada (similar to coverages in the United States). Personal Insurance had approximately 450,000 active policies in Canada at December 31, 2023.
Insurers in the United Kingdom and the Republic of Ireland are subject to change of control restrictions, including approval of the PRA and FCA and of the Central Bank of Ireland, respectively. TRV’s insurance subsidiaries domiciled in, or authorized to conduct insurance business in, Canada are also subject to regulatory change of control restrictions, including approval of OSFI.
Insurers in the U.K. and the Republic of Ireland are subject to change of control restrictions, including approval of the PRA and FCA and of the Central Bank of Ireland, respectively. TRV’s insurance subsidiaries domiciled in, or authorized to conduct insurance business in, Canada are also subject to regulatory change of control restrictions, including approval of OSFI.
Product Lines Domestic The primary coverages in Personal Insurance are personal automobile and homeowners and other insurance sold to individuals. Personal Insurance had approximately 9.2 million active policies (i.e., policies-in-force) in the United States at December 31, 2022.
Product Lines Domestic The primary coverages in Personal Insurance are personal automobile and homeowners and other insurance sold to individuals. Personal Insurance had approximately 9.1 million active policies (i.e., policies-in-force) in the United States at December 31, 2023.
Debt Ratings The following table summarizes the current debt, trust preferred securities and commercial paper ratings of the Company and its subsidiaries as of February 16, 2023. The table also presents the position of each rating in the applicable agency’s rating scale. A.M.
Debt Ratings The following table summarizes the current debt, trust preferred securities and commercial paper ratings of the Company and its subsidiaries as of February 15, 2024. The table also presents the position of each rating in the applicable agency’s rating scale. A.M.
Although the retrospectively rated feature of the policy substantially reduces insurance risk for the Company, it introduces additional credit risk to the Company. Premiums receivable from holders of retrospectively rated policies totaled approximately $70 million at December 31, 2022.
Although the retrospectively rated feature of the policy substantially reduces insurance risk for the Company, it introduces additional credit risk to the Company. Premiums receivable from holders of retrospectively rated policies totaled approximately $48 million at December 31, 2023.
The following table shows the geographic distribution of the Company’s employees as of December 31, 2022: Location % of Total Domestic: Connecticut 21.9 % New York 6.9 Minnesota 6.7 Texas 6.7 California 5.3 Florida 4.1 Massachusetts 4.1 Georgia 3.6 All other domestic (1) 31.1 Total Domestic 90.4 International: Canada 5.1 United Kingdom 4.3 All other international 0.2 Total International 9.6 Consolidated total 100.0 % ___________________________________________ (1) No other single state accounted for 3.0% or more of the Company’s employees as of December 31, 2022.
The following table shows the geographic distribution of the Company’s employees as of December 31, 2023: Location % of Total Domestic: Connecticut 22.1 % New York 6.8 Minnesota 6.7 Texas 6.6 California 5.2 Florida 4.1 Massachusetts 3.5 Georgia 3.4 Illinois 3.0 All other domestic (1) 28.7 Total Domestic 90.1 International: Canada 5.3 United Kingdom 4.4 All other international 0.2 Total International 9.9 Consolidated total 100.0 % ___________________________________________ (1) No other single state accounted for 3.0% or more of the Company’s employees as of December 31, 2023.
Geographic Distribution The following table shows the geographic distribution of Personal Insurance’s direct written premiums for the year ended December 31, 2022: Location % of Total Domestic: Texas (1) 11.1 % New York 8.8 California 7.1 Georgia 5.4 Pennsylvania 4.7 New Jersey 4.2 Florida 4.1 Virginia 3.6 Maryland 3.3 Colorado 3.3 Massachusetts 3.1 South Carolina 3.1 Illinois 3.0 All other domestic (2) 30.7 Total Domestic 95.5 International: Canada 4.5 Total International 4.5 Total Personal Insurance 100.0 % ___________________________________________ (1) The percentage for Texas includes business written by the Company through a fronting agreement with another insurer.
Geographic Distribution The following table shows the geographic distribution of Personal Insurance’s direct written premiums for the year ended December 31, 2023: Location % of Total Domestic: Texas (1) 11.7 % New York 8.7 California 6.9 Georgia 5.2 Pennsylvania 4.6 Florida 4.2 New Jersey 4.1 Virginia 3.7 Maryland 3.5 Colorado 3.4 Massachusetts 3.3 Illinois 3.0 All other domestic (2) 33.7 Total Domestic 96.0 International: Canada 4.0 Total International 4.0 Total Personal Insurance 100.0 % ___________________________________________ (1) The percentage for Texas includes business written by the Company through a fronting agreement with another insurer.
At December 31, 2022, contractholder payables on unpaid losses within the deductible layer of large deductible policies were approximately $3.60 billion, and the associated receivables (net of allowance for expected credit losses) were approximately $3.58 billion. Business Insurance also utilizes retrospectively rated policies for a portion of its business, primarily for workers’ compensation coverage.
At December 31, 2023, contractholder payables on unpaid losses within the deductible layer of large deductible policies were approximately $3.27 billion, and the associated receivables (net of allowance for expected credit losses) were approximately $3.25 billion. Business Insurance also utilizes retrospectively rated policies for a portion of its business, primarily for workers’ compensation coverage.
The Company has not incurred any losses that have resulted or are expected to result in a recovery under the Long Point Re IV agreement since its inception. Northeast Property Catastrophe Excess-of-Loss Reinsurance Treaty.
The Company has not incurred any losses that have resulted or are expected to result in a recovery under the Long Point Re IV agreement since its inception. Personal Insurance Hurricane Catastrophe Excess-of-Loss Reinsurance Treaty.
This treaty provides coverage for 50% of losses in excess of C$100 million (US$74 million at December 31, 2022) up to C$200 million (US$148 million at December 31, 2022) and for 100% of losses in excess of C$200 million (US$148 million at December 31, 2022) up to C$500 million (US$369 million at December 31, 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.
This treaty provides coverage for 50% of losses in excess of C$100 million (US$76 million at December 31, 2023) up to C$200 million (US$151 million at December 31, 2023) and for 100% of losses in excess of C$200 million (US$151 million at December 31, 2023) up to C$500 million (US$378 million at December 31, 2023), 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, 2023 through and including June 30, 2024.
The average employee tenure at the Company is 11 years, and over 20 years for the Company’s approximately 700 most senior leaders. The Company’s average global voluntary turnover rate over the past three years was approximately 9%.
The average employee tenure at the Company is 12 years, and over 20 years for the Company’s approximately 700 most senior leaders. The Company’s average global voluntary turnover rate over the past three years was approximately 10%.
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://www.twitter.com/Travelers .
Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s website at investor.travelers.com , its Facebook page at facebook.com/travelers and its X account (@Travelers) at twitter.com/travelers .
Geographic Distribution The following table shows the geographic distribution of Bond & Specialty Insurance’s direct written premiums for the year ended December 31, 2022: Location % of Total Domestic: California 10.2 % Texas 6.4 New York 6.3 Florida 4.9 Illinois 3.6 Pennsylvania 3.5 All other domestic (1) 50.5 Total Domestic 85.4 International: United Kingdom 7.8 Canada 4.4 All other international 2.4 Total International 14.6 Total Bond & Specialty Insurance 100.0 % ___________________________________________ (1) No other single state accounted for 3.0% or more of Bond & Specialty Insurance’s direct written premiums in 2022.
Geographic Distribution The following table shows the geographic distribution of Bond & Specialty Insurance’s direct written premiums for the year ended December 31, 2023: Location % of Total Domestic: California 10.2 % Texas 6.6 New York 5.7 Florida 4.8 Illinois 3.6 Pennsylvania 3.4 All other domestic (1) 52.2 Total Domestic 86.5 International: United Kingdom 6.4 Canada 4.3 All other international 2.8 Total International 13.5 Total Bond & Specialty Insurance 100.0 % ___________________________________________ (1) No other single state accounted for 3.0% or more of Bond & Specialty Insurance’s direct written premiums in 2023.
The Company also has eight Diversity Networks – voluntary groups led by employees, dedicated to fostering a diverse and inclusive work environment. The networks help foster the retention, development and success of the Company’s employees through networking, mentorship and community volunteer opportunities.
The Company also has 10 Diversity Networks – voluntary groups led by employees, dedicated to fostering a diverse and inclusive work environment. The networks, which are open to all employees, help foster the retention, development and success of the Company’s employees through networking, mentorship and community volunteer opportunities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile the Company believes that many of the risks related to COVID-19 have moderated, some significant risks remain, such as inflation; supply chain disruption; labor shortages; backlogs in the court system (which increase the time and costs to resolve claims); regulators rejecting rate increases in the face of claim frequency rates returning to pre-pandemic levels and increased severity due to inflation; behavioral changes that began to manifest during the pandemic and have continued, such as driving at faster speeds, which have resulted in the increased frequency and severity of claims; “long-COVID” and other claims in our workers compensation line; and litigation seeking business interruption coverage.
Biggest changeCOVID-19 presented, and any future pandemics (including new variants of COVID-19) could present, the following risks, among others: inflation; supply chain disruption; labor shortages; backlogs in the court system (which increase the time and costs to resolve claims); legal and regulatory demands for rate refunds; behavioral changes can result in the increased frequency and severity of claims, such as driving at faster speeds; medical conditions such as “long-COVID” and other claims in our workers compensation line; litigation seeking business interruption coverage; reduced earned premiums; higher claim and claim adjustment expenses in certain lines of business; adverse legislative or regulatory actions; operational disruptions; increased general and administrative expenses; financial market disruption; and an economic downturn.
These additional liabilities or increases in estimates, or a range of either, could vary significantly from period to period and could materially and adversely affect our results of operations and/or our financial position.
These additional liabilities or increases in estimates, or a range of either, could vary significantly from period to period and could materially and adversely affect our results of operations and/or our financial position.
If we fail to appropriately price the risks we insure or fail to change our pricing models to appropriately reflect our experience, or if our claims experience is more frequent or severe than our underlying risk assumptions, for example due to inflation, 52 changing climate conditions, legislative or regulatory changes, changes in behavior such as distracted or faster driving or a more aggressive tort environment, our profit margins may be negatively affected.
If we fail to appropriately price the risks we insure or fail to change our pricing models to appropriately reflect our experience, or if our claims experience is more frequent or severe than our underlying risk assumptions, for example due to inflation, changing climate conditions, legislative or regulatory changes, changes in behavior such as distracted or faster driving or a more aggressive tort environment, our profit margins may be negatively affected.
Because of the risks set forth above, we may not be able to collect all amounts due to us from reinsurers, and reinsurance coverage may not be available to us in the future at commercially reasonable rates or at all, and/or life insurance companies may fail to make required annuity payments, and thus our results of operations could be materially and adversely affected.
Because of the risks set forth above, we may not be able to collect all amounts due to us from reinsurers, and reinsurance coverage may not be available to us in the future at commercially reasonable rates or terms, or at all, and/or life insurance companies may fail to make required annuity payments, and thus our results of operations could be materially and adversely affected.
If we do not effectively develop, implement and monitor our vendor relationships, if third party providers do not perform as anticipated, if we experience technological or other problems with a transition, or if vendor relationships relevant to our business process functions are terminated, we may not realize expected productivity improvements or cost efficiencies and may 54 experience operational difficulties, increased costs and a loss of business .
If we do not effectively develop, implement and monitor our vendor relationships, if third party providers do not perform as anticipated or experience financial difficulties, if we experience technological or other problems with a transition, or if vendor relationships relevant to our business process functions are terminated, we may not realize expected productivity improvements 54 or cost efficiencies and may experience operational difficulties, increased costs and a loss of business .
The impact of inflation on loss costs could be more pronounced for those lines of 44 business that are considered “long tail,” such as general liability and workers' compensation, as they require a relatively long period of time to finalize and settle claims for a given accident year or require payouts over a long period of time.
The impact of inflation on loss costs could be more pronounced for those lines of business that are considered “long tail,” such as general liability and workers’ compensation, as they require a relatively long period of time to finalize and settle claims for a given accident year or require payouts over a long period of time.
Although the reinsurer is liable to us to the extent of the reinsurance, we remain liable as the direct insurer on all risks reinsured. As a result, reinsurance arrangements do not eliminate our obligation to pay claims. Accordingly, we are subject to credit risk with respect to our ability to recover amounts due from reinsurers.
Although the reinsurer is liable to us to the extent of the reinsurance, we remain liable as the direct insurer on all risks reinsured. As a result, reinsurance arrangements do not eliminate our obligation to pay claims. Accordingly, we are subject 48 to credit risk with respect to our ability to recover amounts due from reinsurers.
The compromise of personal, confidential or proprietary information could also subject us to legal liability or regulatory action under evolving cyber-security, data protection and privacy laws and regulations enacted by the U.S. federal and state governments, Canada, the European Union or other jurisdictions or by various regulatory organizations or exchanges.
The compromise of personal, confidential or proprietary information could also subject us to significant legal liability or regulatory action under evolving cyber-security, data protection and privacy laws and regulations enacted by the U.S. federal and state governments, Canada, the European Union or other jurisdictions or by various regulatory organizations or exchanges.
Residual markets have resulted in, and may in the future 43 result in, significant losses or assessments to insurers, including us. In addition, legislative, regulatory and legal actions have sought to expand insurance coverage for catastrophe claims beyond the original intent of the policies, prevent the application of deductibles or limit other rights of insurers.
Residual markets have resulted in, and may in the future result in, significant losses or assessments to insurers, including us. In addition, legislative, regulatory and legal actions have sought to expand insurance coverage for catastrophe claims beyond the original intent of the policies, prevent the application of deductibles or limit other rights of insurers.
In particular: 47 • Many state and local governments have from time to time operated under deficits or projected deficits, particularly during and after a financial market disruption or economic downturn. The severity and duration of these deficits could have an adverse impact on the collectability and valuation of our municipal bond portfolio.
In particular: • Many state and local governments have from time to time operated under deficits or projected deficits, particularly during and after a financial market disruption or economic downturn. The severity and duration of these deficits could have an adverse impact on the collectability and valuation of our municipal bond portfolio.
In addition, the potential repeal of the McCarran-Ferguson Act (which exempts insurance from most federal regulation) or a change to the federal health care system that eliminates or reduces the need for the medical coverage 55 component of workers' compensation insurance , could also significantly harm the insurance industry, including us.
In addition, the potential repeal of the McCarran-Ferguson Act (which exempts insurance from most federal regulation) or a change to the federal health care system that eliminates or reduces the need for the medical coverage component of workers’ compensation insurance , could also significantly harm the insurance industry, including us.
The Company has been, and continues to be, involved in litigation involving insurance coverage issues pertaining to asbestos and environmental claims. The Company believes that some court decisions have interpreted the insurance coverage to be broader than the original intent of the insurers and policyholders. These decisions continue to be inconsistent and vary from jurisdiction to jurisdiction.
The Company has been, and continues to be, involved in litigation involving insurance coverage issues pertaining to asbestos and environmental claims. The Company believes that some court decisions have interpreted the insurance coverage to be 45 broader than the original intent of the insurers and policyholders. These decisions continue to be inconsistent and vary from jurisdiction to jurisdiction.
Consequently, we assume a degree of credit risk associated with amounts due from independent agents and brokers. We are also exposed to credit risk related to certain guarantee or indemnification arrangements that we have with third parties. See note 17 of the notes to the consolidated financial statements.
Consequently, we assume a degree of credit risk associated with amounts due from independent agents and brokers. 49 We are also exposed to credit risk related to certain guarantee or indemnification arrangements that we have with third parties. See note 17 of the notes to the consolidated financial statements.
Our exposure to the above credit risks could materially and adversely affect our results of operations. 49 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. Claims-paying and financial strength ratings are important to an insurer’s competitive position.
Our exposure to the above credit risks could materially and adversely affect our results of operations. 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. Claims-paying and financial strength ratings are important to an insurer’s competitive position.
Our business activities outside the United States may also subject us to currency risk and, in some markets, it may be difficult to effectively hedge that risk, or we may choose not to hedge that risk. In addition, in some markets, we invest as part of a joint venture with a local counterparty.
Our business activities outside the United States may also subject us to currency risk and, in some markets, it may be difficult to 52 effectively hedge that risk, or we may choose not to hedge that risk. In addition, in some markets, we invest as part of a joint venture with a local counterparty.
This environment could be affected by changes in applicable legislation and future court and regulatory decisions and interpretations, 45 including the outcome of legal challenges to legislative and/or judicial reforms establishing medical criteria for the pursuit of asbestos claims.
This environment could be affected by 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.
For example, changes to state law regarding workers' compensation insurance could impact the demand for our products, and the legalization of cannabis in certain states has, according to some studies, resulted in more automobile accidents.
For example, changes to state law regarding workers’ compensation insurance could impact the demand for our products, and the legalization of cannabis in certain states has, 55 according to some studies, resulted in more automobile accidents.
Well-capitalized new entrants to the property and 50 casualty insurance and reinsurance industries and existing competitors that receive substantial infusions of capital may conduct business in ways that adversely impact our business volumes and profitability.
Well-capitalized new entrants to the property and casualty insurance and reinsurance industries and existing competitors that receive substantial infusions of capital may conduct business in ways that adversely impact our business volumes and profitability.
In addition, increases in the value and geographic concentration of insured property, the number of policyholders exposed to certain events and the effects of inflation could increase the severity of claims resulting from a catastrophe.
In addition, increases in the value and geographic concentration of insured property, the number of policyholders exposed to certain events and the effects of inflation could increase the severity of claims resulting 43 from a catastrophe.
We face potential exposure to mass tort claims, including claims related to exposure to potentially harmful products or substances, such as lead paint, perfluoroalkyl and polyfluoroalkyl substances (PFAS), talc and opioids.
We face potential exposure to mass tort claims, including claims related to exposure to potentially harmful products or substances, such as perfluoroalkyl and polyfluoroalkyl substances (PFAS), talc, opioids and lead.
Because of the uncertainties set forth above, additional liabilities may arise for amounts in excess of the current loss reserves. In addition, our estimate of loss reserves may change.
Because of the uncertainties set forth above, additional liabilities may arise for amounts significantly in excess of the current loss reserves. In addition, our estimate of loss reserves may change.
Claims and claim adjustment expense reserves (“loss reserves”) represent management estimates of what the ultimate settlement and administration of claims will cost, generally utilizing actuarial expertise and projection techniques, at a given accounting date. The process of estimating loss reserves involves a high degree of judgment and is subject to a number of variables.
Claims and claim adjustment expense reserves (“loss reserves”) represent management estimates of what the ultimate settlement and administration of claims will cost, generally utilizing actuarial expertise and projection techniques, at a given accounting date. The process of estimating loss reserves involves a high degree of judgment and is subject to a number of variables and significant uncertainty.
As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claim and coverage may emerge. These issues may adversely affect our business, including by extending coverage beyond our underwriting intent, by increasing the number, size or types of claims or by mandating changes to our underwriting practices.
As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claim and coverage are likely to emerge. These issues may adversely affect our business, including by extending coverage beyond our underwriting intent, by increasing the number, size or types of claims or by mandating changes to our underwriting practices.
In addition, the passage of new legislation designed to expand the right to sue, to remove limitations on recovery, to deem by statute the existence of a covered occurrence, to extend or eliminate the statutes of limitations or otherwise to repeal or weaken tort reforms could have a material and adverse effect on our results of operations.
In addition, the passage of new legislation designed to expand the right to sue, to remove limitations on recovery, to deem by statute the existence of a covered occurrence, to extend or eliminate the statutes of limitations or otherwise to repeal or weaken tort reforms could have a material and adverse effect on our results of operations and/or our financial position.
The effects of emerging claim and coverage issues on our business are uncertain, and court decisions or legislative changes that take place after we issue our policies can result in an unexpected increase in the number of claims and have a material adverse impact on our results of operations.
The effects of emerging claim and coverage issues on our business are uncertain, and court decisions or legislative changes that take place after we issue our policies can result in an unexpected increase in the number of claims and have a material adverse impact on our results of operations and/or our financial position.
Due to the inherent uncertainty underlying loss reserve estimates, the final resolution of the estimated liability for claims and claim adjustment expenses will likely be higher or lower than the related loss reserves at the reporting date. In addition, our estimate of claims and claim adjustment expenses may change.
Due to the inherent uncertainty underlying loss reserve estimates, the final resolution of the estimated liability for claims and claim adjustment expenses will likely be higher or lower than the related loss reserves at the reporting date. In addition, our estimate of claims and claim adjustment expenses is likely to change.
Examples of such claims and coverage issues include, but are not limited to: • judicial expansion of policy coverage and the impact of new or expanded theories of liability; • plaintiffs targeting insurers in purported class action litigation relating to claims handling and other practices; • claims relating to construction defects, which often present complex coverage and damage valuation questions; • claims related to data and network security breaches, information system failures or cyber events, including cases where coverage was not intended to be provided; • the assertion of “public nuisance” or similar theories of liability, pursuant to which plaintiffs, including governmental entities, seek to recover monies spent to respond to harm caused to members of the public, abate hazards to public health and safety and/or recover expenditures purportedly attributable to a “public nuisance,” such as litigation against manufacturers or distributors of lead paint, opioids, perfluoroalkyl and polyfluoroalkyl substances (PFAS) and other allegedly harmful products, and entities that caused or contributed to harm to the environment; • claims related to liability, business interruption or workers’ compensation arising out of infectious disease or pandemic; • claims related to vaccine mandates, testing protocols or other matters related to employees returning to the workplace; • claims relating to abuse by an employee or a volunteer of an insured; • claims that link health issues to particular causes (for example, cumulative traumatic head injury from sports or other causes), resulting in liability or workers’ compensation claims; • claims alleging that one or more of our underwriting criteria have a disparate impact on persons belonging to a protected class in violation of the law, including the Fair Housing Act; • claims arising out of modern techniques and practices used in connection with the extraction of natural resources, such as hydraulic fracturing or wastewater injection; • claims arising out of the use of personal property in commercial transactions, such as ride or home sharing; • claims against fiduciaries of retirement plans, including allegations regarding excessive fees; • claims under laws protecting biometric data; 46 • claims relating to unanticipated consequences of current or new technologies or business models or processes, including as a result of related behavioral changes; and • claims relating to changing climate conditions, including claims alleging that our policyholders cause or contribute to changing climate conditions.
Examples of such claims and coverage issues include, but are not limited to: • judicial expansion of policy coverage and the impact of new or expanded theories of liability; • plaintiffs targeting insurers in purported class action litigation relating to claims handling and other practices; • claims relating to construction defects, which often present complex coverage and damage valuation questions; • claims related to data and network security breaches, information system failures or cyber events, including cases where coverage was not intended to be provided; • the assertion of “public nuisance” or similar theories of liability, pursuant to which plaintiffs, including governmental entities, seek to recover monies spent to respond to harm caused to members of the public, abate hazards to public health and safety and/or recover expenditures purportedly attributable to a “public nuisance,” such as litigation against manufacturers or distributors of lead paint, opioids, perfluoroalkyl and polyfluoroalkyl substances (PFAS) and other allegedly harmful products, and entities that caused or contributed to harm to the environment; • claims related to liability, business interruption or workers’ compensation arising out of infectious disease or pandemic; • claims related to vaccine mandates; • claims relating to abuse by an employee or a volunteer of an insured; • claims that link health issues to particular causes (for example, cumulative traumatic head injury from sports or other causes), resulting in liability or workers’ compensation claims; • claims alleging that one or more of our underwriting criteria have a disparate impact on persons belonging to a protected class in violation of the law, including the Fair Housing Act; 46 • claims arising out of modern techniques and practices used in connection with the extraction of natural resources, such as hydraulic fracturing or wastewater injection; • claims arising out of the use of personal property in commercial transactions, such as ride or home sharing; • claims against fiduciaries of retirement plans, including allegations regarding excessive fees; • claims under laws protecting biometric data; • claims relating to unanticipated consequences of current or new technologies or business models or processes, including as a result of related behavioral changes; • claims relating to changing climate conditions, including claims alleging that our policyholders cause or contribute to changing climate conditions; and • bankruptcies of policyholders, which can lead to inflated numbers and values of claims.
RISK FACTORS You should carefully consider the following risks and all of the other information set forth in this report, including without limitation our consolidated financial statements and the notes thereto and "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates." The following risk factors have been organized by category for ease of use; however, many of the risks may have impacts in more than one category.
RISK FACTORS You should carefully consider the following risks and all of the other information set forth in this report, including without limitation our consolidated financial statements and the notes thereto and “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates.” The following risk factors have been organized by category for ease of use; however, many of the risks may have impacts in more than one category.
These variables can be affected by both internal and external events, such as: changes in claims handling procedures, including automation; adverse changes in loss cost trends, including inflationary pressures, technology or other changes that may impact medical, auto and home repair costs (e.g., more costly technology in vehicles, labor shortages, higher costs of used vehicles and parts, and increased demand and decreased supply for raw materials, all of which results in increased severity of claims); economic conditions, including general and wage inflation; legal trends, including adverse changes in the tort environment that have continued to persist at elevated levels for a number of years (e.g., increased and more aggressive attorney involvement in insurance claims, increased litigation, expanded theories of liability, higher jury awards, lawsuit abuse and third-party litigation finance, among others); labor shortages, which can result in companies hiring less experienced workers; and legislative changes, among others.
These variables can be affected by both internal and external events, such as: changes in claims handling procedures, including automation; adverse changes in loss cost trends, including inflationary pressures, technology or other changes that may impact medical, auto and home repair costs (e.g., more costly technology in vehicles, labor shortages, supply chain disruptions, higher costs of used vehicles and parts, and increased demand and decreased supply for raw materials, all of which results in increased severity of claims); economic conditions, including general and wage inflation; legal trends, including adverse changes in the tort environment that have continued to persist at elevated levels for a number of years (e.g., increased and more aggressive attorney involvement in insurance claims, increased litigation, expanded theories of liability, higher jury awards, lawsuit abuse and third-party litigation finance, among others); labor shortages, which can result in companies hiring less experienced workers; higher interest rates, which can result in higher post-judgment interest costs; and legislative changes, among others.
Investment returns are an important part of our overall profitability. Fixed maturity and short-term investments comprised approximately 93% of the carrying value of our investment portfolio as of December 31, 2022. Changes in interest rates affect the carrying value of our fixed maturity investments and returns on our fixed maturity and short-term investments.
Investment returns are an important part of our overall profitability. Fixed maturity and short-term investments comprised approximately 93% of the carrying value of our investment portfolio as of December 31, 2023. Changes in interest rates affect the carrying value of our fixed maturity investments and returns on our fixed maturity and short-term investments.
Regulatory and Compliance Risks 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.
Regulatory and Compliance Risks Our businesses are heavily regulated by the states and countries in which we conduct business, including licensing, market conduct and financial supervision, and changes in regulation, including changes in tax regulation, may reduce our profitability and limit our growth.
For a discussion of loss reserves by product line, including examples of common factors that can affect reserves, see "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates—Claims and Claim Adjustment Expense Reserves." Our business could be harmed because of our potential exposure to asbestos and environmental claims and related litigation.
For a discussion of loss reserves by product line, including examples of common factors that can affect reserves, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates—Claims and Claim Adjustment Expense Reserves.” Our business could be harmed because of our potential exposure to asbestos and environmental claims and related litigation.
Climate studies by government agencies, academic institutions, catastrophe modeling organizations and other groups indicate that an increase in the frequency and/or intensity of hurricanes, heavy precipitation events, flash flooding, sea level rise, droughts, heat waves and wildfires has occurred, and can be expected into the future.
Climate studies by government agencies, academic institutions, catastrophe modeling organizations and other groups indicate that an increase in the frequency and/or intensity of hurricanes, heavy precipitation events and associated river, urban and flash flooding, sea level rise, droughts, heat waves and wildfires has occurred, and can be expected into the future.
For example, our competitive position could be impacted if we are unable to deploy, in a cost effective and competitive manner, technology such as artificial intelligence and machine learning that collects and analyzes a wide variety of data points (so-called “big data” analysis) to make underwriting or other decisions, or if our competitors collect and use data which we do not have the ability to access or use.
For example, our competitive position could be impacted if we are unable to deploy, in a cost effective and competitive manner, technology such as artificial intelligence and machine learning 50 that collects and analyzes a wide variety of data points (so-called “big data” analysis) to make underwriting or other decisions, or if our competitors collect and use data which we do not have the ability to access or use or deploy artificial intelligence to create efficiencies in ways that we do not.
Recent changes in the macroeconomic environment have impacted medical labor and materials costs, the potential persistency of which could result in future loss costs which are higher than our current expectations.
Recent changes in the inflationary environment have impacted medical labor and materials costs, the potential persistency of which could result in future loss costs which are higher than our current expectations.
The sophistication of these threats continues to increase, and the preventative actions we take to reduce the risk of cyber incidents and protect our systems and information may be insufficient. In addition, new technology that could result in greater operational efficiency may further expose our computer systems to the risk of cyber-attacks.
The sophistication of these threats continues to increase, and the preventative actions we take to reduce the risk of cyber incidents and protect our systems and information may be insufficient. In addition, new technology that could result in greater operational efficiency, including artificial intelligence, may further expose our computer systems to the risk of cyber-attacks.
The availability and cost of reinsurance could affect our business volume and profitability.
The availability, cost and terms of reinsurance could affect our business volume and profitability.
For a discussion of our catastrophe reinsurance coverage, see "Item 1—Business—Reinsurance—Catastrophe Reinsurance." Catastrophic events could also adversely impact the credit of the issuers of securities held in our investment portfolio, such as states or municipalities. In addition, coverage in our reinsurance program for terrorism is limited.
For a discussion of our catastrophe reinsurance coverage, see “Item 1—Business—Reinsurance—Catastrophe Reinsurance.” Catastrophic events could also adversely impact the credit of the issuers of securities held in our investment portfolio, such as states or municipalities. In addition, coverage in our reinsurance program for terrorism is limited.
We may not be able to adjust terms or adequately raise prices to offset the costs of catastrophes. See "Item 1—Business—U.S.
We may not be able to adjust terms or adequately raise prices to offset the costs of catastrophes. See “Item 1—Business—U.S.
A decline in interest rates reduces the returns available on short-term investments and new fixed maturity investments (including those purchased to re-invest maturities from the existing portfolio), thereby negatively impacting our net investment income on a going-forward basis, while rising interest rates reduce the market value of existing fixed maturity investments, thereby negatively impacting our book value, as we experienced in 2022.
A decline in interest rates reduces the returns available on short-term investments and new fixed maturity investments (including those purchased to re-invest maturities from the existing portfolio), thereby negatively impacting our net investment income on a going-forward basis, while rising interest rates reduce the market value of existing fixed maturity investments, thereby negatively impacting our book value.
Our success depends in part upon our ability to protect our proprietary trademarks, technology and other intellectual property. See "Item 1—Business—Other Information—Intellectual Property." We may not, however, be able to protect our intellectual property from unauthorized use and disclosure by others.
Our success depends in part upon our ability to protect our proprietary trademarks, technology and other intellectual property. See “Item 1—Business—Other Information—Intellectual Property.” We may not, however, be able to protect our intellectual property from unauthorized use and disclosure by others.
See also "Item 1—Business—Ratings." The inability of our insurance subsidiaries to pay dividends to our holding company in sufficient amounts would harm our ability to meet our obligations, pay future shareholder dividends and/or make future share repurchases.
See also “Item 1—Business—Ratings.” The inability of our insurance subsidiaries to pay dividends to our holding company in sufficient amounts would harm our ability to meet our obligations, pay future shareholder dividends and/or make future share repurchases.
Our estimated deductible under the program is $3.15 billion for 2023. For a further description of the Terrorism Risk Insurance Program, see note 6 of the notes to the consolidated financial statements. Because of the risks set forth above, catastrophes could materially and adversely affect our results of operations, financial position and/or liquidity.
Our estimated deductible under the program is $3.48 billion for 2024. For a further description of the Terrorism Risk Insurance Program, see note 6 of the notes to the consolidated financial statements. Because of the risks set forth above, catastrophes could materially and adversely affect our results of operations, financial position and/or liquidity.
As a result, our business success is dependent on maintaining the effectiveness of existing technology systems and on continuing to develop and enhance technology systems that support our business processes and strategic initiatives in an efficient manner, particularly as our business processes become more digital and certain of our products, such as cyber insurance, are more technology-based.
As a result, our business success is dependent on maintaining the effectiveness of existing technology systems and on continuing to develop and enhance technology systems that support our business processes and strategic initiatives in an efficient manner, particularly as our business processes become more digital and seek to incorporate artificial intelligence, and certain of our products, such as cyber insurance, are more technology-based.
Changes in applicable legislation and regulations and future court and regulatory decisions may be more restrictive and may result in lower revenues and/or higher costs of compliance and, as a result, could materially and adversely affect our results of operations.
Changes in applicable legislation and regulations and future court and regulatory decisions may be more restrictive and may result in lower revenues, higher costs of compliance and higher risk of non-compliance and, as a result, could materially and adversely affect our results of operations.
See "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Catastrophe Modeling" and "—Changing Climate Conditions." All of the catastrophe modeling tools that we use or rely on to evaluate our catastrophe exposures are based on significant assumptions and judgments and are subject to error and mis-estimation.
See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Catastrophe Modeling” and “—Changing Climate Conditions.” All of the catastrophe modeling tools that we use or rely on to evaluate our catastrophe exposures are based on significant assumptions and judgments and are subject to error and mis-estimation.
For more detail, see "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Outlook." Similar to other industries, the insurance industry is undergoing rapid and significant technological and other change.
For more detail, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook.” Similar to other industries, the insurance industry is undergoing rapid and significant technological and other change.
See also "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations," particularly the "Outlook" section, for additional information about these risks and the potential impact on our business. Our investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses.
See also “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations,” particularly the “Outlook” section, for additional information about these risks and the potential impact on our business. Our investment portfolio is subject to credit and interest rate risk, and may suffer reduced or low returns or material realized or unrealized losses.
See "Competition" sections of the discussion on business segments in "Item 1—Business." Technological change can impact us in other ways as well. For example, rapid changes in the sophistication and use of certain types of cyber-attacks, such as ransomware and social engineering attacks, on our insureds have increased the frequency and severity of losses under our policies.
See “Competition” sections of the discussion on business segments in “Item 1—Business.” Technological change can impact us in other ways as well. For example, rapid changes in the sophistication and use of certain types of cyber-attacks, such as ransomware and social engineering attacks, on our insureds have increased the frequency and severity of losses under our policies.
For a discussion of the top five providers of our reinsurance and structured settlements, see "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Reinsurance Recoverables." Both the availability of reinsurance capacity and its cost can be impacted, and in recent periods have been impacted, by general economic conditions and conditions in the reinsurance market, such as the occurrence of significant reinsured events or unexpected adverse trends.
For a discussion of the top five providers of our reinsurance and structured settlements, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reinsurance Recoverables.” The availability of reinsurance capacity, as well as its cost and terms, can be impacted, and in recent periods have been impacted, by general economic conditions and conditions in the reinsurance market, such as the occurrence of significant reinsured events or unexpected adverse trends.
See the "Asbestos Claims and Litigation," "Environmental Claims and Litigation" and “Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves” sections of "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations." Also see "Item 3—Legal Proceedings." We are exposed to, and may face adverse developments involving, mass tort claims such as those relating to exposure to potentially harmful products or substances.
See the “Asbestos Claims and Litigation,” “Environmental Claims and Litigation” and “Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves” sections of “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Also see “Item 3—Legal Proceedings.” We are exposed to, and may face adverse developments involving, mass tort claims such as those relating to exposure to potentially harmful products or substances.
These efforts may require us to make substantial expenditures and not be successful, and even if successful, they may create additional risks: • Changes to our business processes or workflow, including the use of new technologies, may give rise to execution risk; • Models underlying automated underwriting and pricing decisions may not be effective; • Demand for new products or expansion into new markets may not meet our expectations; • New products or services and expansion into new markets may change our risk exposures, and the data and models we use to manage such exposures may not be as effective as those we use in existing markets or with existing products; • Acquisitions may not be successfully integrated, resulting in substantial disruption, costs or delays and adversely affecting our ability to compete, and may also result in unforeseen liabilities or impact our credit ratings; and • In connection with the conversion of policyholders to a new product, some policyholders’ pricing may increase while the pricing for other policyholders may decrease, the net impact of which could negatively impact retention and profit margins.
These efforts may require us to make substantial expenditures and not be successful, and even if successful, they may create additional risks: • Changes to our business processes or workflow, including the use of new technologies, may give rise to execution risk; • Models underlying automated underwriting and pricing decisions may not be effective; • Demand for new products or expansion into new markets may not meet our expectations; • New products or services and expansion into new markets may change our risk exposures, and the data and models we use to manage such exposures may not be as effective as those we use in existing markets or with existing products; • Acquisitions may not be successfully integrated, resulting in substantial disruption, costs or delays and adversely affecting our ability to compete, may not result in the benefits anticipated by us, and may also result in unforeseen liabilities or impact our credit ratings; and • The conversion of policyholders to a new product could negatively impact retention and profit margins.
Traditional insurance industry participants, technology companies, “InsurTech” start-up companies, the number of which has increased significantly in recent years and some of which are supported by traditional insurance industry participants, and others are focused on using technology and innovation to simplify and improve the customer experience, increase efficiencies, redesign products, alter business or distribution models and effect other potentially disruptive changes in the insurance industry.
Traditional insurance industry participants, technology companies, “InsurTech” start-up companies, some of which are supported by traditional insurance industry participants, and others are focused on using technology and innovation to simplify and improve the customer experience, increase efficiencies, redesign products, alter business or distribution models and effect other potentially disruptive changes in the insurance industry.
There is significant competition from within the property and casualty insurance industry and from businesses outside the industry for qualified employees, especially those in key positions and those possessing highly specialized knowledge in areas such as underwriting, data and analytics, technology and e-commerce.
There is significant competition from within the property and casualty insurance industry and from businesses outside the industry for qualified employees, especially those in key positions and those possessing highly specialized knowledge in areas such as underwriting, data and analytics, technology, claims and artificial intelligence.
We also invest a portion of our assets in equity securities, private equity limited partnerships, hedge funds and real estate partnerships. From time to time, we may also invest in other types of non-fixed maturity investments, including investments with exposure to commodity price risk.
We also invest a portion of our assets in equity securities, private equity limited partnerships, hedge funds and real estate partnerships, as well as strategic investments in private and/or public companies. From time to time, we may also invest in other types of non-fixed maturity investments, including investments with exposure to commodity price risk.
Our efforts or the efforts of agents and brokers with respect to new products or markets, alternate distribution channels, changes to commission terms as well as changes in the way agents and brokers utilize data and technology, including in ways that may be in direct competition with us, could adversely impact our business relationship with independent agents and brokers who currently market our products, resulting in a lower volume and/or profitability of business generated from these sources.
Our efforts or the efforts of agents and brokers with respect to new products or markets, alternate distribution channels, changes to commission terms as well as changes in the way agents and brokers utilize data and technology, including in ways that may be in direct competition with us, could adversely impact our business relationship with independent agents and brokers who currently market our products, resulting in a lower volume and/or profitability of business generated from these sources. 51 In certain markets, brokers increasingly have been packaging portfolios of risks together and offering them to fewer carriers.
We market our insurance products primarily through independent agents and brokers. An important part of our business is written through less than a dozen such intermediaries, including the agency affiliate of GEICO, with whom we have had a distribution arrangement for homeowners' business since 1995.
An important part of our business is written through less than a dozen such intermediaries, including the agency affiliate of GEICO, with whom we have had a distribution arrangement for homeowners’ business since 1995.
We may, depending on circumstances in the future, including as a result of changes in economic and market conditions, make changes to the mix of investments in our investment portfolio as part of our ongoing efforts to seek appropriate risk-adjusted returns. These changes may impact the duration, volatility and risk of our investment portfolio.
We have in the past, and may in the future, depending on changes in circumstances, such as economic and market conditions and relative asset valuations, make changes to the mix of investments in our investment portfolio as part of our ongoing efforts to seek appropriate risk-adjusted returns. These changes may impact the duration, volatility and risk of our investment portfolio.
See "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Catastrophe Modeling." We are subject to additional risks associated with our business outside the United States. We conduct business outside the United States primarily in Canada, the United Kingdom and the Republic of Ireland. In addition, we conduct business in Brazil and Colombia through joint ventures.
See “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Catastrophe Modeling.” We are subject to additional risks associated with our business outside the United States. We conduct business outside the United States primarily in Canada, the United Kingdom and the Republic of Ireland.
Insurance regulators may also increase the statutory capital and surplus requirements for our insurance subsidiaries or, as has happened recently in certain states, reject rate increases or other terms and conditions due to the economic environment or other factors.
Insurance regulators may also increase the statutory capital and surplus requirements for our insurance subsidiaries or, as has happened recently in certain states, reject or delay rate increases or other changes to terms and conditions due to the economic environment or other factors and/or expand FAIR plans or similar residual market mechanisms.
Our business is highly dependent on our ability to engage on a real-time basis in a large number of insurance underwriting, claim processing, treasury and investment activities, many of which are highly complex and constantly evolving, including from a systems perspective. These activities often are subject to internal guidelines and policies, as well as legal and regulatory standards.
Our business is highly dependent on our ability to engage on a real-time basis in a large number of insurance underwriting, claim processing, treasury and investment activities, many of which are highly complex and constantly evolving, including from a systems perspective.
If financial markets experience significant disruption or if economic conditions deteriorate, such as in a period of recession or stagflation, our results of operations, financial position and/or liquidity likely would be adversely impacted.
Financial, Economic and Credit Risks During or following a period of financial market disruption or an economic downturn, our business could be materially and adversely affected. If financial markets experience significant disruption or if economic conditions deteriorate, such as in a period of recession or stagflation, our results of operations, financial position and/or liquidity likely would be adversely impacted.
In certain markets, brokers increasingly have been packaging portfolios of risks together and offering them to fewer carriers. In these and other situations, agents and brokers have an increased influence over policy language and compensation structure which, if we participate on that basis, could adversely impact our ability to profitably manage underwriting risk.
In these and other situations, agents and brokers have an increased influence over policy language and compensation structure which, if we participate on that basis, could adversely impact our ability to profitably manage underwriting risk.
These risks include restrictions such as price controls, capital controls, currency exchange limits, ownership limits and other restrictive or anti-competitive governmental actions or requirements, which could have an adverse effect on our business and our reputation.
In conducting business outside of the United States, we are subject to a number of risks, particularly in emerging economies. These risks include restrictions such as price controls, capital controls, currency exchange limits, ownership limits and other restrictive or anti-competitive governmental actions or requirements, which could have an adverse effect on our business and our reputation.
The effects of these and other unforeseen emerging claim and coverage issues are extremely hard to predict and could harm our business and materially and adversely affect our results of operations. Financial, Economic and Credit Risks During or following a period of financial market disruption or an economic downturn, our business could be materially and adversely affected.
The effects of these and other unforeseen emerging claim and coverage issues are extremely hard to predict and could harm our business and materially and adversely affect our results of operations and/or our financial position.
A significant portion of our fixed maturity investment portfolio is invested in obligations of states, municipalities and political subdivisions. This municipal bond portfolio could be subject to default or impairment.
During an economic downturn, fixed maturity and short-term investments could be subject to a higher risk of default, and our non-fixed income investments could be negatively impacted as well. 47 A significant portion of our fixed maturity investment portfolio is invested in obligations of states, municipalities and political subdivisions. This municipal bond portfolio could be subject to default or impairment.
For example, the ongoing backlog of cases in the courts due to shutdowns related to COVID-19 has resulted in claims being unresolved for longer periods of time, which the Company believes has contributed, and will continue to contribute, to increased loss costs.
The impact of many of these items on ultimate costs for loss reserves could be material and is difficult to estimate. For example, the ongoing backlog of cases in the courts has resulted in claims being unresolved for longer periods of time, which the Company believes has contributed, and will continue to 44 contribute, to increased loss costs.
In the past, certain reinsurers have ceased writing business and entered into runoff. Some of our reinsurance claims may be disputed by the reinsurers, and we may ultimately receive partial or no payment.
In the past, certain reinsurers have ceased writing business and entered into runoff. Some of our reinsurance claims may be disputed by the reinsurers, and we may ultimately receive partial or no payment. This is a particular risk in the case of claims that relate to insurance policies written many years ago, including those relating to asbestos and environmental claims.
See "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Catastrophe Modeling" and "—Changing Climate Conditions." The extent of losses from a catastrophe is a function of the total amount of insured exposure affected by the event, the severity of the event and the coverage provided.
The extent of losses from a catastrophe is a function of the total amount of insured exposure affected by the event, the severity of the event and the coverage provided.
This competition has increased in recent periods and, with the increase in remote work, is taking place on a broader geographic scale.
This competition has increased in recent periods and, with the increase in remote work, is taking place on a broader geographic scale. In addition, the competition for talent and the difficulty in attracting and retaining employees has also increased due to the retirement of members of the “baby boomer” generation.
Also, the reinsurance that we purchase may not cover all of the risks covered by the policies that we issue. Included in reinsurance recoverables are amounts related to certain structured settlements. Structured settlements are annuities purchased from various life insurance companies to settle certain personal physical injury claims, of which workers’ compensation claims comprise a significant portion.
Structured settlements are annuities purchased from various life insurance companies to settle certain personal physical injury claims, of which workers’ compensation claims comprise a significant portion.
For a further discussion of risks that can impact us as a result of financial market disruption or an economic downturn, see “During or following a period of financial market disruption or an economic downturn, our business could be materially and adversely affected” above and “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Outlook.” The intense competition that we face, 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 we operate, could harm our ability to maintain or increase our business volumes and our profitability.
Business and Operational Risks The intense competition that we face, 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 we operate, could harm our ability to maintain or increase our business volumes and our profitability.
If we and our business partners are not able to successfully attract, train, retain and motivate our respective employees, our business, financial results and reputation could be materially and adversely affected. 51 Disruptions to our relationships with our independent agents and brokers or our inability to manage effectively a changing distribution landscape could adversely affect us .
This dynamic has also impacted our agents, brokers, regulators, vendors and other business partners. If we and our business partners are not able to successfully attract, train, retain and motivate our respective employees, our business, financial results and reputation could be materially and adversely affected.
A continued trend of more frequent and severe catastrophes or a prolonged financial market disruption or economic downturn may lead rating agencies to substantially increase their capital requirements. Furthermore, S&P has proposed changes to its capital model that could adversely impact such agency's assessment of capital adequacy for participants in the insurance industry, including the Company.
A continued trend of more frequent and severe catastrophes or a prolonged financial market disruption or economic downturn may lead rating agencies to substantially increase their capital requirements.
Resulting legislative or regulatory actions or litigation could result in negative publicity and/or generate adverse rules or findings, such as curtailing the use of important underwriting criteria, or other data or methodologies, which could materially and adversely affect our results of operations. 53 Technology and Intellectual Property Risks Our business success and profitability depend, in part, on effective information technology systems and on continuing to develop and implement improvements in technology, particularly as our business processes become more digital.
Resulting legislative or regulatory actions or litigation could result in negative publicity and/or generate adverse rules or findings, such as curtailing the use of important underwriting criteria, or other data or methodologies, which could materially and adversely affect our results of operations. Future pandemics (including new variants of COVID-19), could materially affect our results of operations, financial position and/or liquidity.
A control system, no matter how well designed and operated, can provide only reasonable assurance that the control system’s objectives will be met.
These activities, particularly when new technologies such as artificial intelligence are incorporated, often require internal governance, guidelines and policies, and are subject to legal and regulatory standards. A control system, no matter how well designed and operated, can provide only reasonable assurance that the control system’s objectives will be met.
The risk of cyber attacks could be exacerbated by geopolitical tensions, including hostile actions taken by nation-states and terrorist organizations.
The risk of cyber-attacks could be exacerbated by geopolitical tensions, including hostile actions taken by nation-states and terrorist organizations. In addition, new technology, such as artificial intelligence, could create unforeseen exposures or coverage issues under the policies we write and aggravate claims fraud and cybercrime.
Also, political instability and geopolitical tensions could result in financial market disruption or an economic downturn in such regions. The U.K.'s withdrawal from the European Union, for example, has by some estimates resulted in reduced trade levels in the U.K.
Also, political instability and geopolitical tensions have at times resulted, and may in the future result, in inflation, reduced growth, supply chain and financial market disruption or an economic downturn in such regions.
This is a particular risk in the case of claims that relate to insurance policies written 48 many years ago, including those relating to asbestos and environmental claims. In addition, in a number of jurisdictions a reinsurer is permitted to transfer a reinsurance arrangement to another reinsurer, which may be less creditworthy, without a counterparty’s consent.
In addition, in a number of jurisdictions a reinsurer is permitted to transfer a reinsurance arrangement to another reinsurer, which may be less creditworthy, without a counterparty’s consent. Also, the reinsurance that we purchase may not cover all of the risks covered by the policies that we issue. Included in reinsurance recoverables are amounts related to certain structured settlements.
Such defaults and impairments could reduce our net investment income and result in realized investment losses. During an economic downturn, fixed maturity and short-term investments could be subject to a higher risk of default, and our non-fixed income investments could be negatively impacted as well.
Such defaults and impairments could reduce our net investment income and result in realized investment losses.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. PROPERTIES The Company leases its principal executive offices in New York, New York, as well as approximately 162 field and claim offices throughout the United States under leases or subleases with third parties. The Company also leases offices outside the United States, including in Canada, the United Kingdom and the Republic of Ireland.
Biggest changeItem 2. PROPERTIES The Company leases its principal executive offices in New York, New York, as well as approximately 160 field and claim offices throughout the United States under leases or subleases with third parties. The Company also leases offices outside the United States, including in Canada, the United Kingdom and the Republic of Ireland.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. LEGAL PROCEEDINGS The information required with respect to this item can be found under "Contingencies" in note 17 of the notes to the consolidated financial statements in this annual report and is incorporated by reference into this Item 3.
Biggest changeItem 3. LEGAL PROCEEDINGS The information required with respect to this item can be found under “Contingencies” in note 17 of the notes to the consolidated financial statements in this annual report and is incorporated by reference into this Item 3.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod 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) Oct. 1, 2022 Oct. 31, 2022 463,999 $ 178.21 460,350 $ 2,423 Nov. 1, 2022 Nov. 30, 2022 1,243,293 $ 184.21 1,240,668 $ 2,194 Dec. 1, 2022 Dec. 31, 2022 1,013,204 $ 186.94 1,013,112 $ 2,005 Total 2,720,496 $ 184.20 2,714,130 $ 2,005 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.
Biggest changeThe 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.
(2) Assumes $100 invested in common shares of The Travelers Companies, Inc. on December 31, 2017. (3) Companies in the S&P 500 Property & Casualty Insurance Index as of December 31, 2022 were the following: The Travelers Companies, Inc., Chubb Limited, Cincinnati Financial Corporation, The Progressive Corporation, The Allstate Corporation, Loews Corporation (CNA), W.R.
(2) Assumes $100 invested in common shares of The Travelers Companies, Inc. on December 31, 2018. (3) Companies in the S&P 500 Property & Casualty Insurance Index as of December 31, 2023 were the following: The Travelers Companies, Inc., Chubb Limited, Cincinnati Financial Corporation, The Progressive Corporation, The Allstate Corporation, Loews Corporation (CNA), W.R.
For information regarding dividends paid to shareholders in 2022 and 2021 and the declaration and payment of future dividends, see "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Activities—Dividends." 56 SHAREHOLDER RETURN PERFORMANCE GRAPH The following graph shows a five-year comparison of the cumulative total return to shareholders for the Company’s common stock and the common stock of companies included in the S&P 500 Index and the S&P 500 Property & Casualty Insurance Index, which the Company believes is the most appropriate comparative index.
For information regarding dividends paid to shareholders in 2023 and 2022 and the declaration and payment of future dividends, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Activities—Dividends.” 58 SHAREHOLDER RETURN PERFORMANCE GRAPH The following graph shows a five-year comparison of the cumulative total return to shareholders for the Company’s common stock and the common stock of companies included in the S&P 500 Index and the S&P 500 Property & Casualty Insurance Index, which the Company believes is the most appropriate comparative index.
For additional information regarding the Company's share repurchases, see "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources." Information relating to compensation plans under which the Company's equity securities are authorized for issuance is set forth in "Part III—Item 12" of this Report.
For additional information regarding the Company’s share repurchases, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Information relating to compensation plans under which the Company’s equity securities are authorized for issuance is set forth in “Part III—Item 12” of this Report.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is traded on the New York Stock Exchange under the symbol “TRV.” The number of holders of record of the Company’s common stock was 32,871 as of February 13, 2023.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is traded on the New York Stock Exchange under the symbol “TRV.” The number of holders of record of the Company’s common stock was 31,097 as of February 12, 2024.
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 most recent authorization was approved by the Board of Directors on April 19, 2023 and added $5.0 billion of repurchase capacity to the $1.60 billion capacity remaining at that date. The authorizations do not have a stated expiration date.
The Company acquired 6,366 shares for a total cost of approximately $1 million during the three months ended December 31, 2022 that were not part of the publicly announced share repurchase authorization.
The Company acquired 5,455 shares for a total cost of approximately $907,000 during the three months ended December 31, 2023 that were not part of the publicly announced share repurchase authorization.
Accordingly, the Company manages with a long-term perspective. From January 1, 2007, the year prior to the financial crisis, through 57 December 31, 2022, the Company's cumulative return to shareholders was 416% as compared to 274% for the S&P 500 Index and 294% for the S&P 500 Property & Casualty Insurance Index.
From January 1, 2007, the year prior to the financial crisis, through 59 December 31, 2023, the Company’s cumulative return to shareholders was 437% as compared to 372% for the S&P 500 Index and 336% for the S&P 500 Property & Casualty Insurance Index.
Berkley Corporation and Arch Capital Group Limited. Returns of each of the companies included in this index have been weighted according to their respective market capitalizations. A long-term perspective is particularly important in the property and casualty insurance industry, where the periodic occurrences of significant catastrophes have historically produced results that can vary significantly year-to-year.
A long-term perspective is particularly important in the property and casualty insurance industry, where the periodic occurrences of significant catastrophes have historically produced results that can vary significantly year-to-year. Accordingly, the Company manages with a long-term perspective.
As of December 31, 2017 2018 2019 2020 2021 2022 The Travelers Companies, Inc. $ 100.00 $ 90.35 $ 105.72 $ 111.38 $ 126.95 $ 155.40 S&P 500 Index 100.00 95.61 125.70 148.81 191.48 156.77 S&P 500 Property & Casualty Insurance Index 100.00 95.31 119.96 127.56 149.89 178.18 ________________________________________ (1) The cumulative total return to shareholders is a concept used to compare the performance of a company's stock over time.
As of December 31, 2018 2019 2020 2021 2022 2023 The Travelers Companies, Inc. $ 100.00 $ 117.01 $ 123.27 $ 140.50 $ 171.99 $ 178.75 S&P 500 Index 100.00 131.47 155.65 200.29 163.98 207.04 S&P 500 Property & Casualty Insurance Index 100.00 125.87 133.84 157.27 186.95 207.04 ________________________________________ (1) The cumulative total return to shareholders is a concept used to compare the performance of a company’s stock over time.
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Berkley Corporation, Arch Capital Group Limited and The Hartford Financial Services Group, Inc. Returns of each of the companies included in this index have been weighted according to their respective market capitalizations.
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Period Beginning Period Ending Total number of shares purchased Average price paid per share (1) 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) Oct. 1, 2023 Oct. 31, 2023 3,502 $ 143.00 — $ 6,105 Nov. 1, 2023 Nov. 30, 2023 1,404 $ 52.02 — $ 6,105 Dec. 1, 2023 Dec. 31, 2023 351,997 $ 185.72 351,448 $ 6,040 Total 356,903 $ 184.78 351,448 $ 6,040 ___________________________________________ (1) The average price paid per share includes the impact of the 1% federal excise tax imposed on share repurchase activity, net of any shares issued, as part of the Inflation Reduction Act of 2022.
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During months when the value of shares issued exceeds the fair value of any shares repurchased, the reduction of the excise tax results in a reduction of the overall cost of shares repurchased.
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The cost of treasury stock acquired pursuant to common share repurchases includes the 1% excise tax imposed on common share repurchase activity, net of common share issuances, as part of the Inflation Reduction Act of 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table summarizes the components of the Company’s capital structure at December 31, 2022 and 2021: 93 (at December 31, in millions) 2022 2021 Debt: Short-term $ 100 $ 100 Long-term 7,254 7,254 Net unamortized fair value adjustments and debt issuance costs (62) (64) Total debt 7,292 7,290 Shareholders’ equity: Common stock and retained earnings, less treasury stock 28,005 27,694 Accumulated other comprehensive income (6,445) 1,193 Total shareholders’ equity 21,560 28,887 Total capitalization $ 28,852 $ 36,177 Total capitalization at December 31, 2022 was $28.85 billion, $7.33 billion lower than at December 31, 2021, primarily reflecting the impacts of (i) other comprehensive loss of $7.64 billion, primarily reflecting the decrease in net unrealized appreciation on investments due to an increase in interest rates during 2022, (ii) common share repurchases totaling $2.00 billion under the Company’s share repurchase authorization and (iii) shareholder dividends of $880 million, partially offset by (iv) net income of $2.84 billion and (v) proceeds from the exercise of employee share options of $267 million.
Biggest changeThe following table summarizes the components of the Company’s capital structure at December 31, 2023 and 2022: (at December 31, in millions) 2023 2022 Debt: Short-term $ 100 $ 100 Long-term 8,004 7,254 Net unamortized fair value adjustments and debt issuance costs (73) (62) Total debt 8,031 7,292 Shareholders’ equity: Common stock and retained earnings, less treasury stock 29,392 28,005 Accumulated other comprehensive loss (4,471) (6,445) Total shareholders’ equity 24,921 21,560 Total capitalization $ 32,952 $ 28,852 Total capitalization at December 31, 2023 was $32.95 billion, $4.10 billion higher than at December 31, 2022, primarily reflecting the impacts of (i) net income of $2.99 billion, (ii) other comprehensive income of $1.97 billion, primarily reflecting a decrease in net unrealized losses on investments due to a change in interest rates during 2023 and (iii) proceeds from the exercise of employee share options of $141 million, partially offset by (iv) common share repurchases totaling $965 million under the Company’s share repurchase authorizations and (v) shareholder dividends of $915 million. 94 The following table provides a reconciliation of total capitalization presented in the foregoing table to total capitalization excluding net unrealized losses on investments, net of taxes, included in shareholders’ equity: (at December 31, dollars in millions) 2023 2022 Total capitalization $ 32,952 $ 28,852 Less: net unrealized losses on investments, net of taxes, included in shareholders’ equity (3,129) (4,898) Total capitalization excluding net unrealized losses on investments, net of taxes, included in shareholders’ equity $ 36,081 $ 33,750 Debt-to-total capital ratio 24.4 % 25.3 % Debt-to-total capital ratio excluding net unrealized losses on investments, net of taxes, included in shareholders’ equity 22.3 % 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.
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.
Currently, the majority of the Company’s investments are comprised of a widely diversified portfolio of high-quality, liquid, taxable U.S. government, tax-exempt and taxable U.S. municipal, taxable corporate and U.S. agency mortgage-backed bonds. The Company also invests much smaller amounts in equity securities, real estate and private equity, hedge fund and real estate partnerships, and joint ventures.
In addition, given the temporary nature of net unrealized losses combined with the Company’s strong operating cash flows, which include income received on investments and the proceeds received upon maturity of the investments, the net unrealized investment loss is not expected to meaningfully impact the Company’s assessment of capital adequacy or liquidity.
In addition, given the temporary nature of net unrealized losses combined with the Company’s strong operating cash flows (which include income received on investments and the proceeds received upon maturity of the investments), the net unrealized investment loss is not expected to meaningfully impact the Company’s assessment of capital adequacy or liquidity.
In addition, given the temporary nature of net unrealized losses combined with the Company’s strong operating cash flows, which include income received on investments and the proceeds received upon maturity of the investments, the net unrealized investment loss is not expected to meaningfully impact the Company’s assessment of capital adequacy or liquidity.
In addition, given the temporary nature of net unrealized losses combined with the Company’s strong operating cash flows (which include income received on investments and the proceeds received upon maturity of the investments), the net unrealized investment loss is not expected to meaningfully impact the Company’s assessment of capital adequacy or liquidity.
Subject to restrictions imposed by states in which the Company’s insurance subsidiaries are domiciled, the Company’s principal insurance subsidiaries pay dividends to their respective parent companies, which, in turn, pay dividends to the corporate holding (parent) company (TRV). For further information regarding restrictions on dividends paid by the Company’s insurance subsidiaries, see “Part I—Item 1—Business—Regulation.” Holding Company Liquidity .
Subject to the restrictions imposed by states in which the Company’s insurance subsidiaries are domiciled, the Company’s principal insurance subsidiaries pay dividends to their respective parent companies, which, in turn, pay dividends to the corporate holding (parent) company (TRV). For further information regarding restrictions on dividends paid by the Company’s insurance subsidiaries, see “Part I—Item 1—Business—Regulation.” Holding Company Liquidity .
Historically, the one-year change in the reserve estimate for this product line, excluding estimated asbestos and environmental amounts, over the last nine years has varied from -5% to 4% (averaging 0%) for the Company, and from -3% to 1% (averaging -1%) for the industry overall.
Historically, the one-year change in the reserve estimate for this product line, excluding estimated asbestos and environmental amounts, over the last nine years has varied from -5% to 4% (averaging 0%) for the Company, and from -3% to 1% (averaging 0%) for the industry overall.
Historically, the one-year change in the reserve estimate for this product line over the last nine years has varied from -4% to 3% (averaging -1%) for the Company, and from -2% to 2% (averaging 0%) for the industry overall. The Company’s year-to-year changes are driven by, and are based on, observed events during the year.
Historically, the one-year change in the reserve estimate for this product line over the last nine years has varied from -4% to 3% (averaging -1%) for the Company, and from -2% to 4% (averaging 0%) for the industry overall. The Company’s year-to-year changes are driven by, and are based on, observed events during the year.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required homeowners reserves (beyond those included in the general discussion section) include: Homeowners and Other risk factors • Weather/climate variability • Inflation and materials costs and shortages 111 • For the more severe catastrophic events, “demand surge” inflation, which refers to significant short-term increases in building material and labor costs due to a sharp increase in demand for those materials and services • Amount of time to return property to residential use • Lags in reporting claims (e.g., winter damage to summer homes, hidden damage after an earthquake, hail damage to roofs and/or equipment on roofs) • Availability and cost of local contractors • Quality of construction of insured homes • Local building codes • Litigation trends • Trends in jury awards • Court interpretation of policy provisions (such as occurrence definition, or wind versus flooding) • Court or legislative changes to the statute of limitations • Salvage and subrogation opportunities Homeowners and Other book of business risk factors • Policy provisions mix (e.g., deductibles, policy limits, endorsements, etc.) • Degree of concentration of policyholders • Changes in underwriting standards • Changes in the use of permissible data for rating and underwriting Unanticipated changes in risk factors can affect reserves.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required homeowners reserves (beyond those included in the general discussion section) include: Homeowners and Other risk factors • Weather/climate variability • Inflation and materials costs and shortages • For the more severe catastrophic events, “demand surge” inflation, which refers to significant short-term increases in building material and labor costs due to a sharp increase in demand for those materials and services • Amount of time to return property to residential use • Lags in reporting claims (e.g., winter damage to summer homes, hidden damage after an earthquake, hail damage to roofs and/or equipment on roofs) • Availability and cost of local contractors • Quality of construction of insured homes • Local building codes • Litigation trends • Trends in jury awards • Court interpretation of policy provisions (such as occurrence definition, or wind versus flooding) • Court or legislative changes to the statute of limitations • Salvage and subrogation opportunities Homeowners and Other book of business risk factors • Policy provisions mix (e.g., deductibles, policy limits, endorsements, etc.) • Degree of concentration of policyholders • Changes in underwriting standards • Changes in the use of permissible data for rating and underwriting Unanticipated changes in risk factors can affect reserves.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required property reserves (beyond those included in the general discussion section) include: Commercial property risk factors • Physical concentration of policyholders • Availability and cost of local contractors • Inflation and materials shortages • For the more severe catastrophic events, “demand surge” inflation, which refers to significant short-term increases in building material and labor costs due to a sharp increase in demand for those materials and services • Local building codes • Amount of time to return property to full usage (for business interruption claims) • Frequency of claim re-openings on claims previously closed • Court interpretation of policy provisions (such as occurrence definition, wind versus flooding or communicable disease exclusions) 105 • Lags in reporting claims (e.g., winter damage to summer homes, hidden damage after an earthquake, hail damage to roofs and/or equipment on roofs) • Court or legislative changes to the statute of limitations • Weather/climate variability Commercial property book of business risk factors • Policy provisions mix (e.g., deductibles, policy limits, endorsements) • Changes in underwriting standards Unanticipated changes in risk factors can affect reserves.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required property reserves (beyond those included in the general discussion section) include: Commercial property risk factors • Physical concentration of policyholders • Availability and cost of local contractors • Inflation and materials shortages • For the more severe catastrophic events, “demand surge” inflation, which refers to significant short-term increases in building material and labor costs due to a sharp increase in demand for those materials and services • Local building codes • Amount of time to return property to full usage (for business interruption claims) • Frequency of claim re-openings on claims previously closed • Court interpretation of policy provisions (such as occurrence definition, wind versus flooding or communicable disease exclusions) • Lags in reporting claims (e.g., winter damage to summer homes, hidden damage after an earthquake, hail damage to roofs and/or equipment on roofs) • Court or legislative changes to the statute of limitations • Weather/climate variability Commercial property book of business risk factors • Policy provisions mix (e.g., deductibles, policy limits, endorsements) • Changes in underwriting standards Unanticipated changes in risk factors can affect reserves.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required general liability reserves (beyond those included in the general discussion section) include: General liability risk factors • Changes in claim handling philosophies • Changes in policy provisions or court interpretation of such provisions • New or expanded theories of liability • Trends in jury awards • Changes in the propensity to sue, in general with specificity to particular issues • Changes in the propensity to litigate rather than settle a claim • Increases in attorney involvement in, or impact on, claims 104 • Changes in statutes of limitations • Changes in the underlying court system • Distortions from losses resulting from large single accounts or single issues • Changes in tort law • Shifts in lawsuit mix between federal and state courts • Changes in claim adjuster processes or reporting which may cause distortions in the data being analyzed • The impact of inflation on loss costs • Changes in settlement patterns General liability book of business risk factors • Changes in policy provisions (e.g., deductibles, policy limits, endorsements) • Changes in underwriting standards • Product mix (e.g., size of account, industries insured, jurisdiction mix) Unanticipated changes in risk factors can affect reserves.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required general liability reserves (beyond those included in the general discussion section) include: General liability risk factors • Changes in claim handling philosophies • Changes in policy provisions or court interpretation of such provisions • New or expanded theories of liability • Trends in jury awards • Changes in the propensity to sue, in general with specificity to particular issues • Changes in the propensity to litigate rather than settle a claim • Increases in attorney involvement in, or impact on, claims • Changes in statutes of limitations • Changes in the underlying court system • Distortions from losses resulting from large single accounts or single issues • Changes in tort law • Shifts in lawsuit mix between federal and state courts • Changes in claim adjuster processes or reporting which may cause distortions in the data being analyzed • The impact of inflation on loss costs • Changes in settlement patterns General liability book of business risk factors • Changes in policy provisions (e.g., deductibles, policy limits, endorsements) • Changes in underwriting standards • Product mix (e.g., size of account, industries insured, jurisdiction mix) Unanticipated changes in risk factors can affect reserves.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required International and other reserves (beyond those included in the general discussion section, and in the Personal Automobile, Homeowners, General Liability, Commercial Property, Commercial Automobile and Surety discussions above) include: International and other risk factors • Changes in claim handling procedures, including those of the primary carriers • Changes in policy provisions or court interpretation of such provision • Economic trends • New theories of liability • Trends in jury awards • Changes in the propensity to sue • Changes in statutes of limitations • Changes in the underlying court system • Distortions from losses resulting from large single accounts or single issues • Changes in tort law • Changes in claim adjuster office structure (causing distortions in the data) • Changes in foreign currency exchange rates International and other book of business risk factors • Changes in policy provisions (e.g., deductibles, policy limits, endorsements, “claims-made” language) • Changes in underwriting standards • Product mix (e.g., size of account, industries insured, jurisdiction mix) Unanticipated changes in risk factors can affect reserves.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required International and other reserves (beyond those included in the general discussion section, and in the Personal Automobile, Homeowners, General Liability, Commercial Property, Commercial Automobile and Surety discussions above) include: International and other risk factors • Changes in claim handling procedures, including those of the primary carriers • Changes in policy provisions or court interpretation of such provision • Economic trends • New theories of liability • Trends in jury awards • Changes in the propensity to sue • Changes in statutes of limitations • Changes in the underlying court system • Distortions from losses resulting from large single accounts or single issues • Changes in tort law • Changes in claim adjuster office structure (causing distortions in the data) • Changes in foreign currency exchange rates 113 International and other book of business risk factors • Changes in policy provisions (e.g., deductibles, policy limits, endorsements, “claims-made” language) • Changes in underwriting standards • Product mix (e.g., size of account, industries insured, jurisdiction mix) Unanticipated changes in risk factors can affect reserves.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required fidelity and surety reserves (beyond those included in the general discussion section) include: Fidelity risk factors • Type of business of insured • Policy limit and attachment points • Third-party claims • Coverage litigation • Complexity of claims • Growth in insureds’ operations 109 Surety risk factors • Economic trends, including the general level of construction activity • Concentration of reserves in a relatively few large claims • Type of business bonded • Type of obligation bonded • Cumulative limits of liability for the bonded party • Assets available to mitigate loss • Defective workmanship/latent defects • Financial strategy of the bonded party • Changes in statutory obligations • Geographic spread of business Fidelity and Surety book of business risk factors • Changes in policy provisions (e.g., deductibles, limits, endorsements) • Changes in underwriting standards Unanticipated changes in risk factors can affect reserves.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required fidelity and surety reserves (beyond those included in the general discussion section) include: Fidelity risk factors • Type of business of insured • Policy limit and attachment points • Third-party claims • Coverage litigation • Complexity of claims • Growth in insureds’ operations Surety risk factors • Economic trends, including the general level of construction activity • Concentration of reserves in a relatively few large claims • Type of business bonded • Type of obligation bonded • Cumulative limits of liability for the bonded party • Assets available to mitigate loss • Defective workmanship/latent defects • Financial strategy of the bonded party • Changes in statutory obligations • Geographic spread of business Fidelity and Surety book of business risk factors • Changes in policy provisions (e.g., deductibles, limits, endorsements) • Changes in underwriting standards Unanticipated changes in risk factors can affect reserves.
Due to changes in the business mix for this product line over time, incurred claim liabilities for more recent years are generally shorter-tailed (due to both the products and the jurisdictions involved, e.g., Canada, the Republic of Ireland and the United 112 Kingdom), compared to the older liabilities from runoff operations that are extremely long tail (e.g., U.S. excess liabilities reinsured through the London market, and several underwriting pools in runoff).
Due to changes in the business mix for this product line over time, incurred claim liabilities for more recent years are generally shorter-tailed (due to both the products and the jurisdictions involved, e.g., Canada, the Republic of Ireland and the United Kingdom), compared to the older liabilities from runoff operations that are extremely long tail (e.g., U.S. excess liabilities reinsured through the London market, and several underwriting pools in runoff).
For example, estimates of potential claim settlements may be impacted by the risk associated with potential court rulings, but the final settlement agreement typically does not delineate how much of the settled amount is due to this and other factors. 101 The evaluation of data is also subject to distortion from extreme events or structural shifts, sometimes in unanticipated ways.
For example, estimates of potential claim settlements may be impacted by the risk associated with potential court rulings, but the final settlement agreement typically does not delineate how much of the settled amount is due to this and other factors. The evaluation of data is also subject to distortion from extreme events or structural shifts, sometimes in unanticipated ways.
Thus, in almost all cases, it is impossible to discretely measure the effect of a single risk factor and construct a meaningful sensitivity expectation. In order to provide information on reasonably possible reserving changes by product line, the historical changes in year-end claims and claim adjustment expense reserves over a one-year period are provided for the U.S. product lines.
Thus, in almost all cases, it is impossible to discretely measure the effect of a single risk factor and construct a meaningful sensitivity expectation. 103 In order to provide information on reasonably possible reserving changes by product line, the historical changes in year-end claims and claim adjustment expense reserves over a one-year period are provided for the U.S. product lines.
As compared to natural catastrophes, modeling for man-made catastrophes, such as terrorism and cyber events, is even more difficult and less reliable, and for some events (both natural and man-made), models are either in early stages of development and, therefore, not widely adopted, or are not available. 85 For more information about the Company’s exposure to catastrophe losses, see “Item 1A - Risk Factors - High levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas, could materially and adversely affect our results of operations, our financial position and/or liquidity, and could adversely impact our ratings, our ability to raise capital and the availability and cost of reinsurance” and “Item 1A-Risk Factors- We may be adversely affected if our pricing and capital models provide materially different indications than actual results.” CHANGING CLIMATE CONDITIONS Severe weather events over the last two decades underscore the unpredictability of climate trends.
As compared to natural catastrophes, modeling for man-made catastrophes, such as terrorism and cyber events, is even more difficult and less reliable, and for some events (both natural and man-made), models are either in early stages of development and, therefore, not widely adopted, or are not available. 86 For more information about the Company’s exposure to catastrophe losses, see “Item 1A—Risk Factors—High levels of catastrophe losses, including as a result of factors such as increased concentrations of insured exposures in catastrophe-prone areas and changing climate conditions, could materially and adversely affect our results of operations, our financial position and/or liquidity, and could adversely impact our ratings, our ability to raise capital and the availability and cost of reinsurance” and “Item 1A—Risk Factors—We may be adversely affected if our pricing and capital models provide materially different indications than actual results.” CHANGING CLIMATE CONDITIONS Severe weather events over the last two decades underscore the unpredictability of climate trends.
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.” 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.” 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” and see “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exchange Rate Risk.” Capital Position.
See “Our businesses are heavily regulated by the states and countries in which we conduct business, including licensing, market conduct and financial supervision, and changes in regulation, including changes in tax regulation, may reduce our profitability and limit our growth” included in “Part I—Item 1A—Risk Factors.” 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.” 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” and see “Part II—Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exchange Rate Risk.” Capital Position.
The continuing uncertainties include, without limitation: • the risks and lack of predictability inherent in complex litigation; 76 • a further increase in the cost to resolve, and/or the number of, asbestos and environmental claims beyond that which is anticipated; • the emergence of a greater number of asbestos claims than anticipated as a result of extended life expectancies resulting from medical advances and lifestyle improvements; • the role of any umbrella or excess policies we have issued; • the resolution or adjudication of disputes concerning coverage for asbestos and environmental claims in a manner inconsistent with our previous assessment of these disputes; • the number and outcome of direct actions against us; • future developments pertaining to our ability to recover reinsurance for asbestos and environmental claims; • any impact on asbestos defendants we insure due to the bankruptcy of other asbestos defendants; • the unavailability of other insurance sources potentially available to policyholders, whether through exhaustion of policy limits or through the insolvency of other participating insurers; and • uncertainties arising from the insolvency or bankruptcy of policyholders.
The continuing uncertainties include, without limitation: • the risks and lack of predictability inherent in complex litigation; 77 • a further increase in the cost to resolve, and/or the number of, asbestos and environmental claims beyond that which is anticipated; • the emergence of a greater number of asbestos claims than anticipated as a result of extended life expectancies resulting from medical advances and lifestyle improvements; • the role of any umbrella or excess policies we have issued; • the resolution or adjudication of disputes concerning coverage for asbestos and environmental claims in a manner inconsistent with our previous assessment of these disputes; • the number and outcome of direct actions against us; • future developments pertaining to our ability to recover reinsurance for asbestos and environmental claims; • any impact on asbestos defendants we insure due to the bankruptcy of other asbestos defendants; • the unavailability of other insurance sources potentially available to policyholders, whether through exhaustion of policy limits or through the insolvency of other participating insurers; and • uncertainties arising from the insolvency or bankruptcy of policyholders.
The reserves associated with large claims are then analyzed utilizing various methods, such as: • Estimating the number of large claims and their average values based on historical trends from prior accident periods, adjusted for the current environment and supplemented with actual data for the accident year analyzed to the extent available. • Utilizing individual claim adjuster estimates of the large claims, combined with continual monitoring of the aggregate accuracy of such claim adjuster estimates.
The reserves associated with large claims are then analyzed utilizing various methods, such as: 102 • Estimating the number of large claims and their average values based on historical trends from prior accident periods, adjusted for the current environment and supplemented with actual data for the accident year analyzed to the extent available. • Utilizing individual claim adjuster estimates of the large claims, combined with continual monitoring of the aggregate accuracy of such claim adjuster estimates.
Asbestos reserves also include amounts related to certain policyholders with whom the Company has entered into permanent settlement agreements, which are based on the expected payout for each policyholder under the applicable agreement. Additionally, a portion of the asbestos reserves relates to assumed reinsurance contracts primarily consisting of reinsurance of excess coverage, including various pool participations.
Asbestos reserves also include amounts related to certain policyholders with whom the Company has entered into permanent settlement agreements, which are based on the expected payout for each policyholder under the applicable agreement. 75 Additionally, a portion of the asbestos reserves relates to assumed reinsurance contracts primarily consisting of reinsurance of excess coverage, including various pool participations.
For a discussion of some of the factors that could cause actual results to differ, see “Item 1A - Risk Factors” and “Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations.” 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 its forward-looking statements. 115
For a discussion of some of the factors that could cause actual results to differ, see “Item 1A—Risk Factors” and “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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 its forward-looking statements.
While the majority of general liability coverages are written on an “occurrence” basis, certain general liability coverages (such as those covering management and professional liability, including cyber coverages) are typically insured on a “claims-made” basis. 103 General liability reserves are generally analyzed as two components: primary and excess/umbrella, with the primary component generally analyzed separately for bodily injury and property damage.
While the majority of general liability coverages are written on an “occurrence” basis, certain general liability coverages (such as those covering management and professional liability, including cyber coverages) are typically insured on a “claims-made” basis. General liability reserves are generally analyzed as two components: primary and excess/umbrella, with the primary component generally analyzed separately for bodily injury and property damage.
The exact number of prior accident years utilized varies by product line component, based on the stability and consistency of the individual accident year estimates. The expected loss method, which is typically used for 102 loss sensitive business, develops an initial estimate of ultimate claims and claim adjustment expenses for an accident year by analyzing exposures by account.
The exact number of prior accident years utilized varies by product line component, based on the stability and consistency of the individual accident year estimates. The expected loss method, which is typically used for loss sensitive business, develops an initial estimate of ultimate claims and claim adjustment expenses for an accident year by analyzing exposures by account.
The Company has entered into reinsurance agreements to manage its exposure to losses and protect its capital as described in note 6 of the notes to the consolidated financial statements. 95 In order to qualify for reinsurance accounting, a reinsurance agreement must indemnify the insurer from insurance risk, i.e., the agreement must transfer amount and timing risk.
The Company has entered into reinsurance agreements to manage its exposure to losses and protect its capital as described in note 6 of the notes to the consolidated financial statements. In order to qualify for reinsurance accounting, a reinsurance agreement must indemnify the insurer from insurance risk, i.e., the agreement must transfer amount and timing risk.
Due to the subjective nature of the Company’s analysis and estimates of future cash flows, along with the judgment that must be applied in the analysis, it is possible that the Company could reach a different conclusion whether or not to impair a security if it had access to additional information about the issuer.
Due to the subjective nature of the Company’s analysis and estimates of future cash flows, along with the judgment that must be applied in the analysis, it is possible that the Company could reach a different conclusion whether or not to impair a security 114 if it had access to additional information about the issuer.
In cases where the Company did not receive a release from the claimant, the amount due from the life insurance company related to the structured settlement is included in the Company’s consolidated balance sheet as a reinsurance recoverable and the related claim cost is included in the liability for claims and claim adjustment expense reserves, as the Company retains the contingent liability to the claimant.
In cases where the Company did not receive a release from the claimant, the amount due from 88 the life insurance company related to the structured settlement is included in the Company’s consolidated balance sheet as a reinsurance recoverable and the related claim cost is included in the liability for claims and claim adjustment expense reserves, as the Company retains the contingent liability to the claimant.
As an indicator of the causal effect that a change in one or more risk factors could have on reserves for workers’ compensation, a 1% increase (decrease) in incremental paid loss development for each future calendar year could result in a 1.2% increase (decrease) in claims and claim adjustment expense reserves.
As an indicator of the causal effect that a change in one or more risk factors could have on reserves for workers’ compensation, a 1% increase (decrease) in incremental paid loss development for each future calendar year could result in a 1.1% increase (decrease) in claims and claim adjustment expense reserves.
Historically, the one-year change in the reserve estimate for this product line over the last nine years has varied from -2% to 11% (averaging 2%) for the Company, and from 2% to 7% (averaging 5%) for the industry overall. The Company’s year-to-year changes are driven by, and are based on, observed events during the year.
Historically, the one-year change in the reserve estimate for this product line over the last nine years has varied from -2% to 11% (averaging 3%) for the Company, and from 2% to 7% (averaging 5%) for the industry overall. The Company’s year-to-year changes are driven by, and are based on, observed events during the year.
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.
Included in 90 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.
The Company does not believe that the inclusion of hurricane or earthquake losses arising from other geographical areas or other exposures would materially change the estimated threshold loss amounts. Catastrophe modeling relies upon inputs based on experience, science, engineering and history.
The Company does not believe that the inclusion of hurricane or earthquake losses arising from other geographical areas or other exposures would materially change the estimated loss amounts. Catastrophe modeling relies upon inputs based on experience, science, engineering and history.
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. 89 Net investment income is a material contributor to the Company’s results of operations.
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.
All statements, other than statements of historical facts, may be forward-looking statements. Words such as “may,” “will,” “should,” “likely,” “probably,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “views,” “estimates” and similar expressions are used to identify these forward-looking statements.
All statements, other than statements of historical facts, may be forward-looking statements. Words such as “may,” “will,” “should,” “likely,” “probably,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “views,” “ensures,” “estimates” and similar expressions are used to identify these forward-looking statements.
These year-over-year changes were driven by rising interest rates. Since the Company generally holds its high-quality fixed maturity investments to maturity, these net unrealized losses are considered temporary in nature and are not expected to result in significant realized losses.
These year-over-year changes were driven by changes in interest rates. Since the Company generally holds its high-quality fixed maturity investments to maturity, these net unrealized losses are considered temporary in nature and are not expected to result in significant realized losses.
Asbestos and environmental reserves are included in the General liability, Commercial multi-peril and International and other lines in the foregoing summary table. Asbestos and environmental reserves are discussed separately; see “Asbestos Claims and 98 Litigation,” “Environmental Claims and Litigation” and “Uncertainty Regarding Adequacy of Asbestos and Environmental Reserves” herein.
Asbestos and environmental reserves are included in the General liability, Commercial multi-peril and International and other lines in the foregoing summary table. 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” herein.
Changes in the estimates of projected earnings, business growth, economic capital, and the weighted average cost of capital will directly impact the estimated fair value of the reporting units and, depending on the directional 114 change of inputs, may increase the risk of impairment of goodwill.
Changes in the estimates of projected earnings, business growth, economic capital, and the weighted average cost of capital will directly impact the estimated fair value of the reporting units and, depending on the directional change of inputs, may increase the risk of impairment of goodwill.
The Company believes that the combination of operating company liquidity, holding company liquidity, its investment portfolio and its capital resources are sufficient to meet its contractual obligations. 96 Dividend Availability The Company’s principal insurance subsidiaries are domiciled in the State of Connecticut.
The Company believes that the combination of operating company liquidity, holding company liquidity, its investment portfolio and its capital resources are sufficient to meet its contractual obligations. Dividend Availability The Company’s principal insurance subsidiaries are domiciled in the State of Connecticut.
See “Item 1A—Risk Factors—The effects of emerging claim and coverage issues on our business are uncertain, and court decisions or legislative changes that take place after we issue our policies can result in an unexpected increase in the number of claims and have a material adverse impact on our results of operations.” REINSURANCE RECOVERABLES The Company reinsures a portion of the risks it underwrites in order to control its exposure to losses.
See “Item 1A—Risk Factors—The effects of emerging claim and coverage issues on our business are uncertain, and court decisions or legislative changes that take place after we issue our policies can result in an unexpected increase in the number of claims and have a material adverse impact on our results of operations and/or our financial position.” REINSURANCE RECOVERABLES The Company reinsures a portion of the risks it underwrites in order to control its exposure to losses.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required personal automobile reserves (beyond those included in the general reserve discussion section) include: Bodily injury, property damage liability and no-fault risk factors • Trends in jury awards • Changes in the underlying court system and its philosophy • Changes in case law • Litigation trends • Increases in attorney involvement in, or impact on, claims • Frequency of claims with payment capped by policy limits • Change in frequency trends, including the impact of changes in driving behavior 110 • Change in average severity of accidents, or proportion of severe accidents, including the impact of inflation, changes in driving behavior and the involvement of pedestrians • Changes in auto technology, including safety features • Subrogation opportunities • Frequency of visits to health providers • Number of medical procedures given during visits to health providers • Types of health providers used • Types of medical treatments received • Changes in cost of medical treatments • Effectiveness of no-fault laws • Degree of patient responsiveness to treatment • Changes in claim handling philosophies Personal automobile book of business risk factors • Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.) • Changes in underwriting standards • Changes in the use of permissible data for rating and underwriting Unanticipated changes in risk factors can affect reserves.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required personal automobile reserves (beyond those included in the general reserve discussion section) include: Bodily injury, property damage liability and no-fault risk factors • Trends in jury awards • Changes in the underlying court system and its philosophy • Changes in case law • Litigation trends • Increases in attorney involvement in, or impact on, claims • Frequency of claims with payment capped by policy limits • Change in frequency trends, including the impact of changes in driving behavior and customer coverage elections • Change in average severity of accidents, or proportion of severe accidents, including the impact of inflation, changes in driving behavior and the involvement of pedestrians • Changes in auto technology, including safety features • Subrogation opportunities • Frequency of visits to health providers • Number of medical procedures given during visits to health providers • Types of health providers used • Types of medical treatments received • Changes in cost of medical treatments • Effectiveness of no-fault laws • Degree of patient responsiveness to treatment • Changes in claim handling philosophies Personal automobile book of business risk factors • Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.) • Changes in underwriting standards • Changes in the use of permissible data for rating and underwriting Unanticipated changes in risk factors can affect reserves.
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, primarily through joint ventures.
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.
Based on the proprietary and third-party models utilized by the Company, the tables below set forth, as of December 31, 2022, the probabilities that estimated losses, comprising claims and allocated claim adjustment expenses (but excluding unallocated claim adjustment expenses), from a single event occurring in a one-year timeframe will equal or exceed the indicated loss amounts (expressed in dollars, net of tax, and as a percentage of the Company’s common equity).
Based on the proprietary and third-party models utilized by the Company, the tables below set forth, as of December 31, 2023, the probabilities that estimated losses, comprising claims and allocated claim adjustment expenses (but excluding unallocated claim adjustment expenses), from a single event occurring in a one-year timeframe will equal or exceed the indicated loss amounts (expressed in dollars, net of tax, and as a percentage of the Company’s common equity).
Equity securities, which include common and non-redeemable preferred stocks, are reported at fair value with changes in fair value recognized in net income. 83 For fixed maturity investments where fair value is less than the carrying value and the Company did not reach a decision to impair, the Company continues to have the intent and ability to hold such investments to a projected recovery in value, which may not be until maturity.
Equity securities, which include common and non-redeemable preferred stocks, are reported at fair value with changes in fair value recognized in net income. 84 For fixed maturity investments where fair value is less than the carrying value and the Company did not reach a decision to impair, the Company continues to have the intent and ability to hold such investments to a projected recovery in value, which may not be until maturity.
See the preceding discussion of “Asbestos Claims and Litigation” and “Environmental Claims and Litigation.” 99 General Discussion The process for estimating the liabilities for claims and claim adjustment expenses begins with the collection and analysis of claim data.
See the preceding discussion of “Asbestos Claims and Litigation” and “Environmental Claims and Litigation.” General Discussion The process for estimating the liabilities for claims and claim adjustment expenses begins with the collection and analysis of claim data.
Many components of general liability are not subject to material latency or claim complexity risks and hence have materially less uncertainty than the previously mentioned components.
Many components of general liability are not subject to material latency or claim complexity risks and hence have materially 104 less uncertainty than the previously mentioned components.
The Company’s year-to-year changes are driven by, and are based on, observed events during the year. The Company believes that its range of historical outcomes is illustrative of reasonably possible one-year changes in reserve estimates for this product line. General liability reserves (excluding asbestos and environmental) represent approximately 22% of the Company’s total claims and claim adjustment expense reserves.
The Company’s year-to-year changes are driven by, and are based on, observed events during the year. The Company believes that its range of historical outcomes is illustrative of reasonably possible one-year changes in reserve estimates for this product line. General liability reserves (excluding asbestos and environmental) represent approximately 23% of the Company’s total claims and claim adjustment expense reserves.
The Company believes that its range of historical outcomes is illustrative of reasonably possible one-year changes in reserve estimates for this product line. Commercial automobile reserves represent approximately 9% of the Company’s total claims and claim adjustment expense reserves. The Company’s change in reserve estimate for this product line was 0% for 2022, -2% for 2021 and 4% for 2020.
The Company believes that its range of historical outcomes is illustrative of reasonably possible one-year changes in reserve estimates for this product line. Commercial automobile reserves represent approximately 9% of the Company’s total claims and claim adjustment expense reserves. The Company’s change in reserve estimate for this product line was 4% for 2023, 0% for 2022 and -2% for 2021.
Historically, the one-year change in the reserve estimate for this product line (excluding Personal Insurance Other, which for statutory reporting purposes is included with other lines of business) over the last nine years has varied from -28% to 3% (averaging -8%) for the Company, and from -7% to 1% (averaging -2%) for the industry overall.
Historically, the one-year change in the reserve estimate for this product line (excluding Personal Insurance Other, which for statutory reporting purposes is included with other lines of business) over the last nine years has varied from -28% to 3% (averaging -7%) for the Company, and from -5% to 2% (averaging -1%) for the industry overall.
In addition to fixed maturities noted in the foregoing table, the Company has exposure totaling $289 million to private equity limited partnerships and real estate partnerships (both of which are included in other investments in the Company’s consolidated balance sheet) whose primary investing focus is across Europe. The Company has unfunded commitments totaling $169 million to these partnerships.
In addition to fixed maturities noted in the foregoing table, the Company has exposure totaling $289 million to private equity limited partnerships and real estate partnerships (both of which are included in other investments in the Company’s consolidated balance sheet) whose primary investing focus is across Europe. The Company has unfunded commitments totaling $190 million to these partnerships.
For example, on the basis described below the tables, the Company estimates that there is a one percent chance that the Company’s loss from a single U.S. and Canadian hurricane in a one-year timeframe would equal or exceed $2.1 billion, or 8% of the Company’s common equity at December 31, 2022.
For example, on the basis described below the tables, the Company estimates that there is a one percent chance that the Company’s loss from a single U.S. and Canadian hurricane in a one-year timeframe would equal or exceed $2.1 billion, or 8% of the Company’s common equity at December 31, 2023.
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 2023.
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 2024.
As an indicator of the causal effect that a change in one or more risk factors could have on reserves for general liability (excluding asbestos and environmental), a 1% increase (decrease) in incremental paid loss development for each future calendar year could result in a 1.6% increase (decrease) in claims and claim adjustment expense reserves.
As an indicator of the causal effect that a change in one or more risk factors could have on reserves for general liability (excluding asbestos and environmental), a 1% increase (decrease) in incremental paid loss development for each future calendar year could result in a 1.5% increase (decrease) in claims and claim adjustment expense reserves.
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.
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 91 increase in shareholders’ equity.
In 2022 and 2021, the Company acquired 0.4 million and 0.3 million shares of common stock, respectively, from employees as treasury stock primarily 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.
In 2023 and 2022, the Company acquired 0.3 million and 0.4 million shares of common stock, respectively, from employees as treasury stock primarily 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.
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 December 31, 2022.
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 December 31, 2023.
Historically, the one-year change in the reserve estimate for this product line over the last nine years has varied from -21% to -6% (averaging -11%) for the Company, and from -10% to -2% (averaging -6%) for the industry overall. The Company’s year-to-year changes are driven by, and are based on, observed events during the year.
Historically, the one-year change in the reserve estimate for this product line over the last nine years has varied from -21% to 2% (averaging -9%) for the Company, and from -10% to -2% (averaging -6%) for the industry overall. The Company’s year-to-year changes are driven by, and are based on, observed events during the year.
The impact of many of these items on ultimate costs for claims and claim adjustment expenses is difficult to estimate.
The impact of many of these items on ultimate costs for claims 99 and claim adjustment expenses is difficult to estimate.
Historically, the one-year change in the reserve estimate for this product line over the last nine years has varied from -4% to 0% (averaging -3%) for the Company, and from -5% to -1% (averaging -3%) for the industry overall. The Company’s year-to-year changes are driven by, and are based on, observed events during the year.
Historically, the one-year change in the reserve estimate for this product line over the last nine years has varied from -5% to -1% (averaging -3%) for the Company, and from -5% to -1% (averaging -3%) for the industry overall. The Company’s year-to-year changes are driven by, and are based on, observed events during the year.
Borrowers of these securities provide collateral equal to at least 102% of the market value of the loaned securities plus accrued interest. The Company did not incur any investment losses in its securities lending program for the years ended December 31, 2022 and 2021.
Borrowers of these securities provide collateral equal to at least 102% of the market value of the loaned securities plus accrued interest. The Company did not incur any investment losses in its securities lending program for the years ended December 31, 2023 and 2022.
In the event that the life insurance company fails to make the required annuity payments, the Company would be required to make such payments. The following table presents the Company’s top five groups by structured settlements at December 31, 2022 (in millions). Also included is the A.M.
In the event that the life insurance company fails to make the required annuity payments, the Company would be required to make such payments. The following table presents the Company’s top five groups by structured settlements at December 31, 2023 (in millions). Also included is the A.M.
In addition to the regulatory restrictions on the availability of dividends that can be paid by the Company’s U.S. insurance subsidiaries, the maximum amount of dividends that may be paid to the Company’s shareholders is limited, to a lesser degree, by certain covenants contained in its line of credit agreement with a syndicate of financial institutions that require the Company to maintain a minimum consolidated net worth as described in note 9 of the notes to the consolidated financial statements.
In addition to the regulatory restrictions on the amount of dividends that can be paid by the Company’s U.S. insurance subsidiaries, the maximum amount of dividends that may be paid to the Company’s shareholders is also limited, to a lesser degree, by certain covenants contained in its line of credit agreement with a syndicate of financial institutions that require the 97 Company to maintain a minimum consolidated net worth as described in note 9 of the notes to the consolidated financial statements.
For more information regarding the Company’s investments in commercial mortgage-backed securities, see note 3 of the notes to the consolidated financial statements. 82 Equity Securities, Real Estate and Short-Term Investments See note 1 of the notes to the consolidated financial statements for further information about these invested asset classes.
For more information regarding the Company’s investments in commercial mortgage-backed securities, see note 3 of the notes to the consolidated financial statements. 83 Equity Securities, Real Estate and Short-Term Investments See note 1 of the notes to the consolidated financial statements for further information about these invested asset classes.
Property and casualty insurance market conditions are expected to remain competitive during 2023 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.
Property and casualty insurance market conditions are expected to remain competitive during 2024 for new business. In each of the Company’s business segments, new business generally has less of an impact on underwriting profitability than renewal business, given the volume of new business relative to renewal business.
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 December 31, 2022, the Company had no open U.S. Treasury futures contracts. The Company regularly evaluates its investment alternatives and mix.
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 December 31, 2023, the Company had no open U.S. Treasury futures contracts. The Company regularly evaluates its investment alternatives and mix.
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. 61 Net Realized Investment Gains (Losses) The following table sets forth information regarding the Company’s net pre-tax realized investment gains (losses).
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. 63 Net Realized Investment Gains (Losses) The following table sets forth information regarding the Company’s net pre-tax realized investment gains (losses).
The following table presents the amount of losses recorded by the Company for significant catastrophes that occurred in 2022, 2021 and 2020, the amount of net unfavorable (favorable) prior year reserve development recognized in 2022 and 2021 for catastrophes that occurred in 2021 and 2020, and the estimate of ultimate losses for those catastrophes at December 31, 2022, 2021 and 2020.
The following table presents the amount of losses recorded by the Company for significant catastrophes that occurred in 2023, 2022 and 2021, the amount of net unfavorable (favorable) prior year reserve development recognized in 2023 and 2022 for catastrophes that occurred in 2022 and 2021, and the estimate of ultimate losses for those catastrophes at December 31, 2023, 2022 and 2021.
The table includes $487 million of short-term securities which have the highest ratings issued by external rating agencies for short-term issuances. For purposes of this table, the short-term securities, which are rated “A-1+” and/or “P-1,” are included as “Aaa” rated securities.
The table includes $544 million of short-term securities which have the highest ratings issued by external rating agencies for short-term issuances. For purposes of this table, the short-term securities, which are rated “A-1+” and/or “P-1,” are included as “Aaa” rated securities.
The Company’s change in reserve estimate for this product line related to the last nine accident years, which excludes the impacts of increases in asbestos and environmental reserves and increases in reserves in the Company's runoff operations, was -2% for 2022, 0% for 2021 and 0% for 2020.
The Company’s change in reserve estimate for this product line related to the last nine accident years, which excludes the impacts of increases in asbestos and environmental reserves and increases in reserves in the Company’s runoff operations, was 0% for 2023, -2% for 2022 and 0% for 2021.
Approximately 26% 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).
Approximately 33% 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).
Factors contributing to net favorable prior year reserve development during the years ended December 31, 2022, 2021 and 2020 are discussed in more detail in note 8 of the notes to the consolidated financial statements.
Factors contributing to net favorable prior year reserve development during the years ended December 31, 2023, 2022 and 2021 are discussed in more detail in note 8 of the notes to the consolidated financial statements.
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, 2022 through and including December 31, 2022, the period January 1, 2021 through and including December 31, 2021 and the period January 1, 2020 through and including December 31, 2020, respectively.
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, 2022 through and including December 31, 2022 and the period January 1, 2021 through and including December 31, 2021.
The Company does not have a minimum funding requirement for the qualified domestic pension plan for 2023 and does not anticipate having a minimum funding requirement in 2024. The Company has significant discretion in making contributions above those necessary to satisfy the minimum funding requirements.
The Company does not have a minimum funding requirement for the qualified domestic pension plan for 2024 and does not anticipate having a minimum funding requirement in 2025. The Company has significant discretion in making contributions above those necessary to satisfy the minimum funding requirements.
Factors contributing to net prior year reserve development during the years ended December 31, 2022, 2021 and 2020 are discussed in more detail in note 8 of the notes to the consolidated financial statements.
Factors contributing to net prior year reserve development during the years ended December 31, 2023, 2022 and 2021 are discussed in more detail in note 8 of the notes to the consolidated financial statements.
If the Company is unable to implement risk-based pricing, modify policy terms or reduce exposures to the extent necessary to address rising losses 86 related to catastrophes and smaller scale weather events (should those increased losses occur), its business may be adversely affected. See “Item 1—Business—U.S.
If the Company is unable to 87 implement risk-based pricing, modify policy terms or reduce exposures to the extent necessary to address rising losses related to catastrophes and smaller scale weather events (should those increased losses occur), its business may be adversely affected. See “Item 1—Business—Regulation—U.S.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required commercial automobile reserves (beyond those included in the general discussion section) include: Bodily injury and property damage liability risk factors • Trends in jury awards • Changes in the underlying court system • Changes in case law • Litigation trends • Increases in attorney involvement in, or impact on, claims • Frequency of claims with payment capped by policy limits • Change in average severity of accidents, or proportion of severe accidents, including the impact of inflation • Changes in auto safety technology • Subrogation opportunities • Changes in claim handling philosophies • Frequency of visits to health providers • Number of medical procedures given during visits to health providers • Types of health providers used • Types of medical treatments received • Changes in cost of medical treatments • Degree of patient responsiveness to treatment Commercial automobile book of business risk factors • Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.) • Changes in mix of insured vehicles (e.g., long haul trucks versus local and smaller vehicles, fleet risks versus non-fleets) • Changes in underwriting standards 107 Unanticipated changes in risk factors can affect reserves.
This is supplemented with detailed custom analyses where needed. 107 Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required commercial automobile reserves (beyond those included in the general discussion section) include: Bodily injury and property damage liability risk factors • Trends in jury awards • Changes in the underlying court system • Changes in case law • Litigation trends • Increases in attorney involvement in, or impact on, claims • Frequency of claims with payment capped by policy limits • Change in average severity of accidents, or proportion of severe accidents, including the impact of inflation • Changes in auto safety technology • Subrogation opportunities • Changes in claim handling philosophies • Frequency of visits to health providers • Number of medical procedures given during visits to health providers • Types of health providers used • Types of medical treatments received • Changes in cost of medical treatments • Degree of patient responsiveness to treatment Commercial automobile book of business risk factors • Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.) • Changes in mix of insured vehicles (e.g., long haul trucks versus local and smaller vehicles, fleet risks versus non-fleets) • Changes in underwriting standards Unanticipated changes in risk factors can affect reserves.
International and other reserves (excluding asbestos and environmental) represent approximately 7% of the Company’s total claims and claim adjustment expense reserves. International and other represents a combination of different product lines, some of which are in runoff.
International and other reserves (excluding asbestos and environmental) represent approximately 8% of the Company’s total claims and claim adjustment expense reserves. International and other represents a combination of different product lines, some of which are in runoff.
Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required workers’ compensation reserves (beyond those included in the general discussion section) include: Indemnity risk factors • Time required to recover from the injury • Degree of available transitional jobs • Degree of legal involvement • Changes in the interpretations and processes of the administrative bodies that oversee workers’ compensation claims • Future wage inflation for states that index benefits • Changes in the administrative policies of second injury funds Medical risk factors • Changes in the cost of medical treatments (including prescription drugs) and underlying fee schedules (“inflation”) • Availability of medical providers and medical wage impacts • Frequency of visits to health providers • Number of medical procedures given during visits to health providers • Types of health providers used • Type of medical treatments received • Use of preferred provider networks and other medical cost containment practices • Availability of new medical processes and equipment • Changes in the use of pharmaceutical drugs, including drugs for pain management • Degree of patient responsiveness to treatment General workers’ compensation risk factors • Frequency of reopening claims previously closed • Mortality trends of injured workers with lifetime benefits and medical treatment 108 • Changes in statutory benefits, including due to presumption laws • The impact, if any, of potential future changes to government health insurance legislation Workers’ compensation book of business risk factors • Product mix • Injury type mix • Changes in underwriting standards Unanticipated changes in risk factors can affect reserves.
Workers’ compensation reserves are typically analyzed in three components: indemnity losses, medical losses and claim adjustment expenses. 108 Examples of common risk factors, or perceptions thereof, that could change and, thus, affect the required workers’ compensation reserves (beyond those included in the general discussion section) include: Indemnity risk factors • Time required to recover from the injury • Degree of available transitional jobs • Degree of legal involvement • Changes in the interpretations and processes of the administrative bodies that oversee workers’ compensation claims • Future wage inflation for states that index benefits • Changes in the administrative policies of second injury funds Medical risk factors • Changes in the cost of medical treatments (including prescription drugs) and underlying fee schedules (“inflation”) • Availability of medical providers and medical wage impacts • Frequency of visits to health providers • Number of medical procedures given during visits to health providers • Types of health providers used • Type of medical treatments received • Use of preferred provider networks and other medical cost containment practices • Availability of new medical processes and equipment • Changes in the use of pharmaceutical drugs, including drugs for pain management • Degree of patient responsiveness to treatment General workers’ compensation risk factors • Frequency of reopening claims previously closed • Mortality trends of injured workers with lifetime benefits and medical treatment • Changes in statutory benefits, including due to presumption laws • The impact, if any, of potential future changes to government health insurance legislation Workers’ compensation book of business risk factors • Product mix • Injury type mix • Changes in underwriting standards Unanticipated changes in risk factors can affect reserves.
Item 7. 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 for the years ended December 31, 2022 and 2021, including year-to-year comparisons between 2022 and 2021.
Item 7. 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 for the years ended December 31, 2023 and 2022, including year-to-year comparisons between 2023 and 2022.
Mortgage-Backed Securities, Collateralized Mortgage Obligations and Pass-Through Securities The Company’s fixed maturity investment portfolio at December 31, 2022 and 2021 included $1.99 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).
Mortgage-Backed Securities, Collateralized Mortgage Obligations and Pass-Through Securities The Company’s fixed maturity investment portfolio at December 31, 2023 and 2022 included $7.82 billion and $1.99 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).
The 2022 change primarily reflected better than expected loss experience for accident years 2021 and prior. The 2021 change primarily reflected better than expected loss experience for accident years 2020 and prior. The 2020 change primarily reflected better than expected loss experience for accident years 2018 and prior. Fidelity and Surety Fidelity is generally considered a short tail coverage.
The 2023 change primarily reflected better than expected loss experience for accident years 2021 and prior. The 2022 change primarily reflected better than expected loss experience for accident years 2021 and prior. The 2021 change primarily reflected better than expected loss experience for accident years 2020 and prior. Fidelity and Surety Fidelity is generally considered a short tail coverage.
Based on its funded status at December 31, 2022, the Company does not currently anticipate making a voluntary contribution to the qualified domestic pension plan in 2023.
Based on its funded status at December 31, 2023, the Company does not currently anticipate making a voluntary contribution to the qualified domestic pension plan in 2024.
The 2022 change primarily reflected better than expected loss experience related to both catastrophe and non-catastrophe losses for accident years 2020 and 2021. The 2021 change primarily reflected better than expected loss experience related to both catastrophe and non-catastrophe losses for accident year 2020.
The 2023 change primarily reflected higher than expected loss experience related to both catastrophe and non-catastrophe losses for accident year 2022. The 2022 change primarily reflected better than expected loss experience related to both catastrophe and non-catastrophe losses for accident years 2020 and 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeSENSITIVITY ANALYSIS Sensitivity analysis is defined as the measurement of potential loss in future earnings, fair values or cash flows of market sensitive instruments resulting from one or more selected hypothetical changes in interest rates and other market rates or prices over a selected period of time.
Biggest changeThe Company does not currently anticipate significant changes in its primary market risk exposures or in how those exposures are managed in future reporting periods based upon what is known or expected to be in effect in future reporting periods. 116 SENSITIVITY ANALYSIS Sensitivity analysis is defined as the measurement of potential loss in future earnings, fair values or cash flows of market sensitive instruments resulting from one or more selected hypothetical changes in interest rates and other market rates or prices over a selected period of time.
The primary market risk to the Company's market sensitive instruments is interest rate risk (inclusive of credit spreads). The sensitivity analysis model uses 116 various basis point changes in interest rates to measure the hypothetical change in fair value of financial instruments included in the model.
The primary market risk to the Company’s market sensitive instruments is interest rate risk (inclusive of credit spreads). The sensitivity analysis model uses various basis point changes in interest rates to measure the hypothetical change in fair value of financial instruments included in the model.
Durations on tax-exempt securities are adjusted for the fact that the yields on such securities do not normally move in lockstep with changes in the U.S. Treasury curve. Fixed maturity portfolio durations are calculated on a market value-weighted basis, including accrued interest, using holdings as of December 31, 2022 and 2021.
Durations on tax-exempt securities are adjusted for the fact that the yields on such securities do not normally move in lockstep with changes in the U.S. Treasury curve. Fixed maturity portfolio durations are calculated on a market value-weighted basis, including accrued interest, using holdings as of December 31, 2023 and 2022.
For debt, the change in fair value is determined by calculating hypothetical December 31, 2022 and 2021 ending prices based on yields adjusted to reflect a 100 basis point change, comparing such hypothetical ending prices to actual ending prices, and multiplying the difference by the par or securities outstanding.
For debt, the change in fair value is determined by calculating hypothetical December 31, 2023 and 2022 ending prices based on yields adjusted to reflect a 100 basis point change, comparing such hypothetical ending prices to actual ending prices, and multiplying the difference by the par or securities outstanding.
Invested assets denominated in other currencies at December 31, 2022 and 2021 were not material. There were no other significant changes in the Company's primary market risk exposures or in how those exposures were managed for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Invested assets denominated in other currencies at December 31, 2023 and 2022 were not material. There were no other significant changes in the Company’s primary market risk exposures or in how those exposures were managed for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying assets are traded. The following is a discussion of the Company's primary market risk exposures and how those exposures are managed as of December 31, 2022.
Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying assets are traded. The following is a discussion of the Company’s primary market risk exposures and how those exposures are managed as of December 31, 2023.
The sensitivity analysis model used by the Company produces a loss in fair value of market sensitive instruments of approximately $2.68 billion and $2.33 billion based on a 100 basis point increase in interest rates at December 31, 2022 and 2021, respectively.
The sensitivity analysis model used by the Company produces a loss in fair value of market sensitive instruments of approximately $2.58 billion and $2.68 billion based on a 100 basis point increase in interest rates at December 31, 2023 and 2022, respectively.
The Company's analysis indicates that a hypothetical 10% reduction in the value of foreign denominated investments would be expected to produce a loss in fair value of approximately $563 million and $596 million at December 31, 2022 and 2021, respectively. 117
The Company’s analysis indicates that a hypothetical 10% reduction in the value of foreign denominated investments would be expected to produce a loss in fair value of approximately $638 million and $563 million at December 31, 2023 and 2022, respectively. 117
Invested assets denominated in the Canadian dollar comprised approximately 4.2% of the total invested assets at both December 31, 2022 and 2021. Invested assets denominated in the British Pound Sterling comprised approximately 2.2% and 2.1% of total invested assets at December 31, 2022 and 2021, respectively.
Invested assets denominated in the Canadian dollar comprised approximately 4.1% and 4.2% of the total invested assets at December 31, 2023 and 2022, respectively. Invested assets denominated in the British Pound Sterling comprised approximately 2.4% and 2.2% of total invested assets at December 31, 2023 and 2022, respectively.
At December 31, 2022 and 2021, approximately 7.0% and 6.8%, respectively, of the Company's invested assets were denominated in foreign currencies. The Company's exposure to equity price risk is not significant. The Company has no direct commodity risk and is not a party to any credit default swaps.
At December 31, 2023 and 2022, approximately 7.2% and 7.0%, respectively, of the Company’s invested assets were denominated in foreign currencies. The Company’s exposure to equity price risk is not significant. The Company has no direct commodity risk and is not a party to any credit default swaps.
The Company's market risk sensitive instruments, including derivatives, are primarily entered into for purposes other than trading. The carrying value of the Company's investment portfolio at December 31, 2022 and 2021 was $80.45 billion and $87.38 billion, respectively, of which 89% was invested in fixed maturity securities at both periods.
The Company’s market risk sensitive instruments, including derivatives, are primarily entered into for purposes other than trading. The carrying value of the Company’s investment portfolio at December 31, 2023 and 2022 was $88.81 billion and $80.45 billion, respectively, of which 87% and 89%, respectively, was invested in fixed maturity securities.
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The Company does not currently anticipate significant changes in its primary market risk exposures or in how those exposures are managed in future reporting periods based upon what is known or expected to be in effect in future reporting periods.

Other TRV 10-K year-over-year comparisons