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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________
FORM 10-Q
_________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
___________________________________________________________________
 
Commission file number: 001-10898
___________________________________________________________________
The Travelers Companies, Inc.
(Exact name of registrant as specified in its charter)
 ____________________________________________________________________
Minnesota   41-0518860
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
485 Lexington Avenue
New York, NY 10017
(Address of principal executive offices) (Zip Code)
 (917) 778-6000
(Registrant’s telephone number, including area code)
_________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common stock, without par value   TRV   New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        Yes ý    No o 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).         
Yes ý    No o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes    No ý 
The number of shares of the Registrant’s Common Stock, without par value, outstanding at October 16, 2020 was 253,308,761.




The Travelers Companies, Inc.
 
Quarterly Report on Form 10-Q
 
For Quarterly Period Ended September 30, 2020
_________________________________________________________
 
TABLE OF CONTENTS
 
    Page
   
     
Item 1.  
     
 
Consolidated Statement of Income (Unaudited) — Three Months and Nine Months ended September 30, 2020 and 2019
3
     
 
Consolidated Statement of Comprehensive Income (Unaudited) — Three Months and Nine Months Ended September 30, 2020 and 2019
4
     
 
Consolidated Balance Sheet — September 30, 2020 (Unaudited) and December 31, 2019
5
     
 
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) — Three Months and Nine Months Ended September 30, 2020 and 2019
6
     
 
Consolidated Statement of Cash Flows (Unaudited) — Nine Months Ended September 30, 2020 and 2019
7
     
 
8
     
Item 2.
     
Item 3.
     
Item 4.
     
   
     
Item 1.
     
Item 1A.
     
Item 2.
     
Item 5.
     
Item 6.
     
 
     

2


PART 1 — FINANCIAL INFORMATION
 
Item 1.  FINANCIAL STATEMENTS
 
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(in millions, except per share amounts)
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020 2019 2020 2019
Revenues
Premiums $ 7,380  $ 7,179  $ 21,564  $ 21,022 
Net investment income 671  622  1,550  1,852 
Fee income 101  121  323  346 
Net realized investment gains (losses) 37  23  (48) 101 
Other revenues 86  68  195  197 
Total revenues 8,275  8,013  23,584  23,518 
Claims and expenses
Claims and claim adjustment expenses 4,886  5,230  14,782  14,493 
Amortization of deferred acquisition costs 1,207  1,169  3,558  3,420 
General and administrative expenses 1,109  1,098  3,367  3,280 
Interest expense 87  84  256  261 
Total claims and expenses 7,289  7,581  21,963  21,454 
Income before income taxes 986  432  1,621  2,064 
Income tax expense 159  36  234  315 
Net income $ 827  $ 396  $ 1,387  $ 1,749 
Net income per share
Basic $ 3.24  $ 1.52  $ 5.44  $ 6.65 
Diluted $ 3.23  $ 1.50  $ 5.41  $ 6.59 
Weighted average number of common shares outstanding
Basic 253.3  259.2  253.5  261.1 
Diluted 254.3  261.8  254.5  263.4 
Cash dividends declared per common share $ 0.85  $ 0.82  $ 2.52  $ 2.41 

 









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


THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
(in millions)
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020 2019 2020 2019
Net income $ 827  $ 396  $ 1,387  $ 1,749 
Other comprehensive income
Changes in net unrealized gains on investment securities:
Having no credit losses recognized in the consolidated statement of income 217  605  2,001  3,129 
Having credit losses recognized in the consolidated statement of income (7) (3) (10) (2)
Net changes in benefit plan assets and obligations 20  14  64  40 
Net changes in unrealized foreign currency translation 79  (75) (137) (20)
Other comprehensive income before income taxes
309  541  1,918  3,147 
Income tax expense 53  122  420  663 
Other comprehensive income, net of taxes 256  419  1,498  2,484 
Comprehensive income $ 1,083  $ 815  $ 2,885  $ 4,233 
 


































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


THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
 
September 30,
2020
December 31,
2019
(Unaudited)
Assets
Fixed maturities, available for sale, at fair value (amortized cost $67,736 and $65,281; allowance for expected credit losses of $4 at September 30, 2020)
$ 72,574  $ 68,134 
Equity securities, at fair value (cost $381 and $376)
410  425 
Real estate investments 957  963 
Short-term securities 6,329  4,943 
Other investments 3,291  3,419 
Total investments 83,561  77,884 
Cash 583  494 
Investment income accrued 554  618 
Premiums receivable (net of allowance for expected credit
    losses of $96 at September 30, 2020)
8,225  7,909 
Reinsurance recoverables (net of allowance for estimated uncollectible
  reinsurance of $140 at September 30, 2020)
8,317  8,235 
Ceded unearned premiums 902  689 
Deferred acquisition costs 2,406  2,273 
Contractholder receivables (net of allowance for expected credit
   losses of $21 at September 30, 2020)
4,347  4,599 
Goodwill 3,945  3,961 
Other intangible assets 318  330 
Other assets 3,226  3,130 
Total assets $ 116,384  $ 110,122 
Liabilities    
Claims and claim adjustment expense reserves $ 54,418  $ 51,849 
Unearned premium reserves 15,542  14,604 
Contractholder payables 4,368  4,619 
Payables for reinsurance premiums 555  363 
Deferred taxes 448  137 
Debt 7,050  6,558 
Other liabilities 6,154  6,049 
Total liabilities 88,535  84,179 
Shareholders’ equity    
Common stock (1,750.0 shares authorized; 253.3 and 255.5 shares issued and outstanding)
23,646  23,469 
Retained earnings 37,679  36,977 
Accumulated other comprehensive income 2,138  640 
Treasury stock, at cost (525.9 and 522.1 shares)
(35,614) (35,143)
Total shareholders’ equity 27,849  25,943 
Total liabilities and shareholders’ equity $ 116,384  $ 110,122 





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


THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(in millions)
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020 2019 2020 2019
Common stock        
Balance, beginning of period $ 23,606  $ 23,372  $ 23,469  $ 23,144 
Employee share-based compensation 8  28  64  173 
Compensation amortization under share-based plans and other changes
32  32  113  115 
Balance, end of period 23,646  23,432  23,646  23,432 
Retained earnings        
Balance, beginning of period 37,069  36,135  36,977  35,204 
Cumulative effect of adoption of updated accounting guidance for credit losses at January 1, 2020
  —  (43) — 
Net income 827  396  1,387  1,749 
Dividends (218) (215) (646) (636)
Other 1  4  — 
Balance, end of period 37,679  36,317  37,679  36,317 
Accumulated other comprehensive income (loss), net of tax
       
Balance, beginning of period 1,882  206  640  (1,859)
Other comprehensive income 256  419  1,498  2,484 
Balance, end of period 2,138  625  2,138  625 
Treasury stock, at cost        
Balance, beginning of period (35,614) (34,392) (35,143) (33,595)
Treasury stock acquired — share repurchase authorization   (375) (425) (1,125)
Net shares acquired related to employee share-based compensation plans
  —  (46) (47)
Balance, end of period (35,614) (34,767) (35,614) (34,767)
Total shareholders’ equity $ 27,849  $ 25,607  $ 27,849  $ 25,607 
Common shares outstanding        
Balance, beginning of period 253.2  260.3  255.5  263.6 
Treasury stock acquired — share repurchase authorization   (2.5) (3.5) (8.0)
Net shares issued under employee share-based compensation plans
0.1  0.3  1.3  2.5 
Balance, end of period 253.3  258.1  253.3  258.1 
 











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


THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(in millions)
Nine Months Ended September 30,
2020 2019
Cash flows from operating activities    
Net income $ 1,387  $ 1,749 
Adjustments to reconcile net income to net cash provided by operating activities:    
Net realized investment (gains) losses 48  (101)
Depreciation and amortization 577  581 
Deferred federal income tax benefit (67) (10)
Amortization of deferred acquisition costs 3,558  3,420 
Equity in (income) loss from other investments 32  (196)
Premiums receivable (324) (611)
Reinsurance recoverables (150) 212 
Deferred acquisition costs (3,694) (3,619)
Claims and claim adjustment expense reserves 2,673  927 
Unearned premium reserves 960  1,350 
Other (382) 91 
Net cash provided by operating activities 4,618  3,793 
Cash flows from investing activities    
Proceeds from maturities of fixed maturities 5,241  4,895 
Proceeds from sales of investments:    
Fixed maturities 1,994  1,801 
Equity securities 76  99 
Other investments 184  346 
Purchases of investments:    
Fixed maturities (9,951) (8,234)
Equity securities (80) (62)
Real estate investments (33) (95)
Other investments (321) (369)
Net purchases of short-term securities (1,387) (617)
Securities transactions in course of settlement 522  432 
Other (222) (243)
Net cash used in investing activities (3,977) (2,047)
Cash flows from financing activities    
Treasury stock acquired — share repurchase authorization (425) (1,125)
Treasury stock acquired — net employee share-based compensation (46) (47)
Dividends paid to shareholders (643) (633)
Payment of debt   (500)
Issuance of debt 490  492 
Issuance of common stock — employee share options 72  206 
Net cash used in financing activities (552) (1,607)
Effect of exchange rate changes on cash   (4)
Net increase in cash 89  135 
Cash at beginning of year 494  373 
Cash at end of period $ 583  $ 508 
Supplemental disclosure of cash flow information    
Income taxes paid $ 413  $ 367 
Interest paid $ 226  $ 231 




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

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.     BASIS OF PRESENTATION AND ACCOUNTING POLICIES
 
Basis of Presentation
 
The interim consolidated financial statements include the accounts of The Travelers Companies, Inc. (together with its subsidiaries, the Company). These financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP) and are unaudited.  In the opinion of the Company’s management, all adjustments necessary for a fair presentation have been reflected.  Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted.  All material intercompany transactions and balances have been eliminated.  The accompanying interim consolidated financial statements and related notes should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the Company’s 2019 Annual Report).
 
The preparation of the interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period.  Actual results could differ from those estimates. Certain reclassifications have been made to the 2019 financial statements to conform to the 2020 presentation.

 Adoption of Accounting Standards

Registered Debt Offerings that Include Credit Enhancements from an Affiliate

In March 2020, the Securities and Exchange Commission (SEC) adopted amendments to the financial disclosure requirements related to certain debt securities, including registered debt securities issued by a wholly-owned, operating subsidiary that are fully and unconditionally guaranteed by the parent company. Prior to the amendments, a parent guarantor was required to provide condensed consolidating financial information for so long as the guaranteed securities were outstanding, regardless of whether the subsidiary issuer could have suspended its public reporting obligations under the applicable SEC requirements with respect to the securities. In accordance with the amended requirements, a parent guarantor may cease providing the condensed consolidating financial information if the corresponding subsidiary issuer’s public reporting obligation is suspended. The amendments to the financial disclosure requirements are effective on January 4, 2021; however, the SEC permits voluntary compliance in advance of the effective date.  The Company elected to apply the amended requirements beginning with the quarter ended March 31, 2020, and is no longer providing condensed consolidating financial information that resulted from the registered debt obligations of its subsidiaries, Travelers Property Casualty Corp. and Travelers Insurance Group Holdings Inc., that were disclosed in note 8 of the financial statements in the Company’s 2019 Annual Report.

Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments

In June 2016, the Financial Accounting Standards Board issued updated guidance for the accounting for credit losses for financial instruments. The updated guidance applies a new credit loss model (current expected credit losses or CECL) for determining credit-related impairments for financial instruments measured at amortized cost (including reinsurance recoverables and structured settlements that are recorded as part of reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.

The updated guidance also amends the previous other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists.

8

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
1.    BASIS OF PRESENTATION AND ACCOUNTING POLICIES, Continued

The Company adopted the updated guidance for the quarter ended March 31, 2020. For available-for-sale debt securities, the updated guidance was applied prospectively. For financial instruments measured at amortized cost, the updated guidance was applied by a cumulative effect adjustment to the opening balance of retained earnings as of January 1, 2020, the beginning of the period of adoption. The adoption of this guidance resulted in the recognition of an after-tax cumulative effect adjustment of $43 million to reflect the impact of recognizing expected credit losses, as compared to incurred credit losses recognized under the previous guidance. This adjustment is primarily associated with structured settlements that are recorded as part of reinsurance recoverables. The cumulative effect adjustment decreased retained earnings as of January 1, 2020 and increased the allowance for estimated uncollectible reinsurance.

For additional information regarding accounting standards that the Company adopted during the periods presented, see note 1 of notes to the consolidated financial statements in the Company’s 2019 Annual Report.

Accounting Standards Not Yet Adopted
 
For information regarding accounting standards that the Company has not yet adopted, see the “Other Accounting Standards Not Yet Adopted” section of note 1 of notes to the consolidated financial statements in the Company’s 2019 Annual Report.

Accounting Policies

The following accounting policies have been updated to reflect the Company's adoption of Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments as described above.

Investment Impairments

The Company conducts a periodic review to identify and evaluate invested assets that may have credit impairments.

Credit Impairments of Fixed Maturity Investments

Some of the factors considered in assessing impairment of fixed maturity investments due to credit-related factors include: (1) the extent to which the fair value has been less than amortized cost; (2) the financial condition, near-term and long-term prospects for the issuer, including the relevant industry conditions and trends, and implications of rating agency actions and offering prices; (3) the likelihood of the recoverability of principal and interest; and (4) whether it is more likely than not that the Company will be required to sell the investment prior to an anticipated recovery in value.

Beginning on January 1, 2020, credit losses are recognized through an allowance account. See note 1 - Adoption of Accounting Standards - Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments for additional information.

For fixed maturity investments that the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before an anticipated recovery in value, the Company separates the credit loss component of the impairment from the amount related to all other factors and reports the credit loss component in net realized investment gains (losses).  The impairment related to all other factors (non-credit factors) is reported in other comprehensive income. The allowance is adjusted for any additional credit losses and subsequent recoveries. Upon recognizing a credit loss, the cost basis is not adjusted.

For fixed maturity investments where the Company records a credit loss, a determination is made as to the cause of the impairment and whether the Company expects a recovery in the value.  For fixed maturity investments where the Company expects a recovery in value, the constant effective yield method is utilized, and the investment is amortized to par.

For fixed maturity investments the Company intends to sell or for which it is more likely than not that the Company will be required to sell before an anticipated recovery in value, the full amount of the impairment is included in net realized investment gains (losses). The new cost basis of the investment is the previous amortized cost basis less the impairment recognized in net realized investment gains (losses).  The new cost basis is not adjusted for any subsequent recoveries in fair value.

9

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
1.    BASIS OF PRESENTATION AND ACCOUNTING POLICIES, Continued

The Company reports investment income accrued separately from fixed maturity investments, available for sale, and has elected not to measure an allowance for credit losses for investment income accrued. Investment income accrued is written off through net realized investment gains (losses) at the time the issuer of the bond defaults or is expected to default on payments.

Uncollectible available-for-sale debt securities are written-off when the Company determines that no additional payments of principal or interest will be received.

Reinsurance Recoverables

Amounts recoverable from reinsurers are estimated in a manner consistent with the associated claim liability. Included in reinsurance recoverables are amounts related to certain structured settlements. The Company reports its reinsurance recoverables net of an allowance for estimated uncollectible reinsurance. The allowance is based upon the Company’s ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing, disputes, applicable coverage defenses and other relevant factors.  For structured settlements, the allowance is also based upon the Company’s ongoing review of life insurers’ creditworthiness and estimated amounts of coverage that would be available from state guaranty funds if a life insurer defaults. A probability-of-default methodology which reflects current and forecasted economic conditions is used to estimate the amount of uncollectible reinsurance due to credit-related factors and the estimate is reported in an allowance for estimated uncollectible reinsurance. The allowance also includes estimated uncollectible amounts related to dispute risk with reinsurers.  Amounts deemed to be uncollectible, including amounts due from known insolvent reinsurers, are written off against the allowance. Changes in the allowance, as well as any subsequent collections of amounts previously written off, are reported as part of claims and claim adjustment expenses.  The Company evaluates and monitors the financial condition of its reinsurers under voluntary reinsurance arrangements to minimize its exposure to significant losses from reinsurer insolvencies.

Contractholder Receivables and Payables

Under certain workers’ compensation insurance contracts with deductible features, the Company is obligated to pay the claimant for the full amount of the claim. The Company is subsequently reimbursed by the policyholder for the deductible amount. These amounts are included on a gross basis in the consolidated balance sheet in both contractholder payables and contractholder receivables. Contractholder receivables are reported net of an allowance for expected credit losses. The allowance is based upon the Company’s ongoing review of amounts outstanding, changes in policyholder credit standing, and other relevant factors.  A probability-of-default methodology which reflects current and forecasted economic conditions is used to estimate the allowance for expected credit losses.

Premiums and Unearned Premium Reserves

Premiums are recognized as revenues pro rata over the policy period. Unearned premium reserves represent the unexpired portion of policy premiums. Accrued retrospective premiums are included in premium balances receivable. Premium balances receivable are reported net of an allowance for expected credit losses. The allowance is based upon the Company’s ongoing review of amounts outstanding, historical loss data, including delinquencies and write-offs, current and forecasted economic conditions and other relevant factors. Credit risk is partially mitigated by the Company’s ability to cancel the policy if the policyholder does not pay the premium.

10

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2.    SEGMENT INFORMATION

Nature of Operations
 
The Company’s results are reported in the following three business segments — Business Insurance, Bond & Specialty Insurance and Personal Insurance. These segments reflect the manner in which the Company’s businesses are currently managed and represent an aggregation of products and services based on the type of customer, how the business is marketed and the manner in which risks are underwritten. For more information regarding the Company’s nature of operations, see the “Nature of Operations section of note 1 of notes to the consolidated financial statements in the Company’s 2019 Annual Report.

The following tables summarize the components of the Company’s revenues, income and total assets by reportable business segments:
(For the three months ended September 30, in millions) Business
Insurance
Bond & Specialty
Insurance
Personal
Insurance
Total
Reportable
Segments
2020        
Premiums $ 3,841  $ 723  $ 2,816  $ 7,380 
Net investment income 498  58  115  671 
Fee income 95    6  101 
Other revenues 58  7  21  86 
Total segment revenues (1)
$ 4,492  $ 788  $ 2,958  $ 8,238 
Segment income (1)
$ 365  $ 115  $ 392  $ 872 
2019        
Premiums $ 3,882  $ 653  $ 2,644  $ 7,179 
Net investment income 457  59  106  622 
Fee income 114  —  121 
Other revenues 39  22  68 
Total segment revenues (1)
$ 4,492  $ 719  $ 2,779  $ 7,990 
Segment income (1)
$ 179  $ 139  $ 131  $ 449 
_________________________________________________________
(1)Segment revenues for reportable business segments exclude net realized investment gains (losses) and revenues included in "interest expense and other." Segment income for reportable business segments equals net income excluding the after-tax impact of net realized investment gains (losses) and income (loss) from "interest expense and other."


11

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2.    SEGMENT INFORMATION, Continued
(For the nine months ended September 30, in millions) Business
Insurance
Bond & Specialty
Insurance
Personal
Insurance
Total
Reportable
Segments
2020        
Premiums $ 11,440  $ 2,083  $ 8,041  $ 21,564 
Net investment income 1,131  155  264  1,550 
Fee income 305    18  323 
Other revenues 125  17  53  195 
Total segment revenues (1)
$ 13,001  $ 2,255  $ 8,376  $ 23,632 
Segment income (1)
$ 596  $ 309  $ 738  $ 1,643 
2019        
Premiums $ 11,407  $ 1,891  $ 7,724  $ 21,022 
Net investment income 1,365  173  314  1,852 
Fee income 329  —  17  346 
Other revenues 112  19  65  196 
Total segment revenues (1)
$ 13,213  $ 2,083  $ 8,120  $ 23,416 
Segment income (1)
$ 944  $ 451  $ 497  $ 1,892 
_________________________________________________________
(1)Segment revenues for reportable business segments exclude net realized investment gains (losses) and revenues included in "interest expense and other." Segment income for reportable business segments equals net income excluding the after-tax impact of net realized investment gains (losses) and income (loss) from "interest expense and other."

12

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2.    SEGMENT INFORMATION, Continued
Business Segment Reconciliations
  Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions) 2020 2019 2020 2019
Revenue reconciliation        
Earned premiums        
Business Insurance:        
Domestic:        
Workers’ compensation $ 851  $ 969  $ 2,568  $ 2,891 
Commercial automobile 698  672  2,058  1,947 
Commercial property 522  496  1,544  1,429 
General liability 605  594  1,786  1,746 
Commercial multi-peril 891  872  2,660  2,568 
Other 15  12  38  29 
Total Domestic 3,582  3,615  10,654  10,610 
International 259  267  786  797 
Total Business Insurance 3,841  3,882  11,440  11,407 
Bond & Specialty Insurance:        
Domestic:        
Fidelity and surety 277  265  805  769 
General liability 310  276  893  799 
Other 60  54  178  159 
Total Domestic 647  595  1,876  1,727 
International 76  58  207  164 
Total Bond & Specialty Insurance 723  653  2,083  1,891 
Personal Insurance:        
Domestic:        
Automobile 1,391  1,344  3,896  3,962 
Homeowners and Other 1,262  1,119  3,659  3,236 
Total Domestic 2,653  2,463  7,555  7,198 
International 163  181  486  526 
Total Personal Insurance 2,816  2,644  8,041  7,724 
Total earned premiums 7,380  7,179  21,564  21,022 
Net investment income 671  622  1,550  1,852 
Fee income 101  121  323  346 
Other revenues 86  68  195  196 
Total segment revenues 8,238  7,990  23,632  23,416 
Other revenues   —   
Net realized investment gains (losses) 37  23  (48) 101 
Total revenues $ 8,275  $ 8,013  $ 23,584  $ 23,518 
Income reconciliation, net of tax        
Total segment income $ 872  $ 449  $ 1,643  $ 1,892 
Interest Expense and Other (1)
(74) (71) (219) (222)
Core income 798  378  1,424  1,670 
Net realized investment gains (losses) 29  18  (37) 79 
Net income $ 827  $ 396  $ 1,387  $ 1,749 
_________________________________________________________
(1) The primary component of Interest Expense and Other was after-tax interest expense of $69 million and $66 million for the three months ended September 30, 2020 and 2019, respectively, and $202 million and $206 million for the nine months ended September 30, 2020 and 2019, respectively.
13

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
2.    SEGMENT INFORMATION, Continued
(in millions) September 30,
2020
December 31,
2019
Asset reconciliation    
Business Insurance $ 88,040  $ 83,896 
Bond & Specialty Insurance 9,483  8,599 
Personal Insurance 18,230  17,015 
Total assets by reportable segment 115,753  109,510 
Other assets (1)
631  612 
Total consolidated assets $ 116,384  $ 110,122 
 _________________________________________________________
(1)The primary components of other assets at both September 30, 2020 and December 31, 2019 were accrued over-funded benefit plan assets related to the Company’s qualified domestic pension plan and other intangible assets.

3.      INVESTMENTS
 
Fixed Maturities
 
The amortized cost and fair value of investments in fixed maturities classified as available for sale were as follows:
  Amortized Cost Allowance for Expected Credit Losses Gross Unrealized Fair Value
(at September 30, 2020, in millions) Gains Losses
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ 2,083  $   $ 43  $   $ 2,126 
Obligations of states, municipalities and political subdivisions:
Local general obligation 17,019    1,267  8  18,278 
Revenue 11,871    829  6  12,694 
State general obligation 1,160    91    1,251 
Pre-refunded 2,458    160    2,618 
Total obligations of states, municipalities and political subdivisions
32,508    2,347  14  34,841 
Debt securities issued by foreign governments 952    27    979 
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
2,572    158    2,730 
All other corporate bonds 29,599  4  2,314  35  31,874 
Redeemable preferred stock 22    2    24 
Total $ 67,736  $ 4  $ 4,891  $ 49  $ 72,574 


14

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3.    INVESTMENTS, Continued
  Amortized Gross Unrealized Fair
(at December 31, 2019, in millions) Cost Gains Losses Value
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ 2,076  $ 19  $ —  $ 2,095 
Obligations of states, municipalities and political subdivisions:
       
Local general obligation 15,490  829  16,315 
Revenue 9,731  586  10,315 
State general obligation 1,167  64  —  1,231 
Pre-refunded 1,968  88  —  2,056 
Total obligations of states, municipalities and political subdivisions
28,356  1,567  29,917 
Debt securities issued by foreign governments 1,167  1,173 
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
3,192  91  3,280 
All other corporate bonds 30,442  1,195  18  31,619 
Redeemable preferred stock 48  —  50 
Total $ 65,281  $ 2,882  $ 29  $ 68,134 
 
Pre-refunded bonds of $2.62 billion and $2.06 billion at September 30, 2020 and December 31, 2019, respectively, were bonds for which states or municipalities have established irrevocable trusts, almost exclusively comprised of U.S. Treasury securities and obligations of U.S. government and government agencies and authorities.  These trusts were created to fund the payment of principal and interest due under the bonds.
 
Proceeds from sales of fixed maturities classified as available for sale were $1.99 billion and $1.80 billion during the nine months ended September 30, 2020 and 2019, respectively. Gross gains of $52 million and $51 million and gross losses of $3 million and $6 million were realized on those sales during the nine months ended September 30, 2020 and 2019, respectively.
 
Equity Securities
 
The cost and fair value of investments in equity securities were as follows:
    Fair
(at September 30, 2020, in millions) Cost Gross Gains Gross Losses Value
Public common stock $ 346  $ 44  $ 22  $ 368 
Non-redeemable preferred stock 35  8  1  42 
Total $ 381  $ 52  $ 23  $ 410 
 
    Fair
(at December 31, 2019, in millions) Cost Gross Gains Gross Losses Value
Public common stock $ 341  $ 45  $ $ 383 
Non-redeemable preferred stock 35  —  42 
Total $ 376  $ 52  $ $ 425 
 
For the nine months ended September 30, 2020 and 2019, the Company recognized $(14) million and $49 million of net gains (losses) on equity securities still held as of September 30, 2020 and 2019, respectively. Net realized investment losses on equity securities still held for the first nine months of 2020 were driven by the impact of changes in fair value attributable to the volatility in global financial markets associated with the global pandemic beginning in March 2020 related to the novel coronavirus COVID-19.

15

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3.    INVESTMENTS, Continued
Unrealized Investment Losses
 
The following tables summarize, for all investments in an unrealized loss position at September 30, 2020 and December 31, 2019, the aggregate fair value and gross unrealized loss by length of time those securities have been continuously in an unrealized loss position.  The fair value amounts reported in the tables are estimates that are prepared using the process described in note 4 herein and in note 4 of notes to the consolidated financial statements in the Company’s 2019 Annual Report.  The Company also relies upon estimates of several credit and non-credit factors in its review and evaluation of individual investments, using the process described in note 1 of notes to the consolidated financial statements to determine whether credit impairment exists.
  Less than 12 months 12 months or longer Total
(at September 30, 2020, in millions) Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fixed maturities            
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ 169  $   $   $   $ 169  $  
Obligations of states, municipalities and political subdivisions
1,751  14      1,751  14 
Debt securities issued by foreign governments
14        14   
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
11    1    12   
All other corporate bonds 1,095  28  120  7  1,215  35 
Total $ 3,040  $ 42  $ 121  $ 7  $ 3,161  $ 49 
 
  Less than 12 months 12 months or longer Total
(at December 31, 2019, in millions) Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fixed maturities    
U.S. Treasury securities and obligations of U.S. government and government agencies and authorities
$ $ —  $ 193    $ —  $ 198  $ — 
Obligations of states, municipalities and political subdivisions
668  12    —  680 
Debt securities issued by foreign governments
257  147    404 
Mortgage-backed securities, collateralized mortgage obligations and pass-through securities
399  131    530 
All other corporate bonds 1,571  10  662    2,233  18 
Total $ 2,900  $ 19  $ 1,145    $ 10  $ 4,045  $ 29 
 
At September 30, 2020, the amount of gross unrealized losses for all fixed maturity investments reported at fair value for which fair value was less than 80% of amortized cost was not significant.
 
16

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
3.    INVESTMENTS, Continued
Credit Impairment Charges
 
The following tables present changes in the allowance for expected credit losses on fixed maturities classified as available for sale:
Fixed Maturities
(for the three months ended September 30, 2020 in millions) Mortgage-Backed Securities, Collateralized Mortgage Obligations and Pass-Through Securities All Other Corporate Bonds Total