TRAVELERS COMPANIES, INC. (TRV)

Item 2.        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of the Company’s financial condition and results of operations.

FINANCIAL HIGHLIGHTS

2026 Second Quarter Consolidated Results of Operations

•Net income of $2.21 billion, or $10.41 per share basic and $10.26 per share diluted

•Net earned premiums of $10.75 billion

•Catastrophe losses of $518 million ($410 million after-tax)

•Net favorable prior year reserve development of $578 million ($456 million after-tax)

•Combined ratio of 83.6%

•Net investment income of $1.07 billion ($883 million after-tax)

•Net realized investment gains of $60 million ($48 million after-tax)

•Operating cash flows of $1.92 billion

2026 Second Quarter Consolidated Financial Condition

•Total investments of $103.18 billion; fixed maturities and short-term securities comprised 94% of total investments

•Total assets of $143.58 billion

•Total debt of $9.07 billion, resulting in a debt-to-total capital ratio of 21.5% (20.5% excluding net unrealized investment losses, net of tax)

•Total capital returned to shareholders of $1.58 billion, comprising $1.31 billion of share repurchases and $266 million of dividends

•Shareholders’ equity of $33.12 billion

•Net unrealized investment losses of $2.48 billion ($1.96 billion after-tax)

•Book value per common share of $158.81

•Holding company liquidity of $2.51 billion

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

CONSOLIDATED OVERVIEW

Consolidated Results of Operations

The following discussions of the Company’s net income and segment income are presented on an after-tax basis. Discussions of the components of net income and segment income are presented on a pre-tax basis, unless otherwise noted. Discussions of net income per common share are presented on a diluted basis.

Overview

Diluted net income per share of $10.26 in the second quarter of 2026 increased by 57% over diluted net income per share of $6.53 in the same period of 2025. Net income of $2.21 billion in the second quarter of 2026 increased by 46% over net income of $1.51 billion in the same period of 2025. The higher rate of increase in diluted net income per share reflected the impact of share repurchases in recent periods. The increase in income before income taxes in the second quarter of 2026 primarily reflected the pre-tax impacts of (i) lower catastrophe losses, (ii) higher net favorable prior year reserve development, (iii) higher net investment income, (iv) higher net realized investment gains and (v) higher underwriting margins excluding catastrophe losses and prior year reserve development (“underlying underwriting margins”). Catastrophe losses in the second quarters of 2026 and 2025 were $518 million and $927 million, respectively. Net favorable prior year reserve development in the second quarters of 2026 and 2025 was $578 million and $315 million, respectively. The higher underlying underwriting margins in the second quarter of 2026 were driven by Personal Insurance and Business Insurance, partially offset by Bond & Specialty Insurance. Income tax expense in the second quarter of 2026 was higher than in the same period of 2025, primarily reflecting the impact of the increase in income before income taxes.

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

Diluted net income per share of $18.01 in the first six months of 2026 increased by 119% over diluted net income per share of $8.23 in the same period of 2025. Net income of $3.92 billion in the first six months of 2026 increased by 106% over net income of $1.90 billion in the same period of 2025. The higher rate of increase in diluted net income per share reflected the impact of share repurchases in recent periods. The increase in income before income taxes primarily reflected the pre-tax impacts of (i) lower catastrophe losses, (ii) higher net favorable prior year reserve development, (iii) higher net investment income and (iv) net realized investment gains compared to net realized investment losses in the same period of 2025, partially offset by (v) lower underlying underwriting margins. Catastrophe losses in the first six months of 2026 and 2025 were $1.28 billion and $3.19 billion, respectively. Net favorable prior year reserve development in the first six months of 2026 and 2025 was $991 million and $693 million, respectively. The lower underlying underwriting margins in the first six months of 2026 were driven by Business Insurance and Bond & Specialty Insurance, partially offset by Personal Insurance. Income tax expense in the first six months of 2026 was higher than in the same period of 2025, primarily reflecting the impact of the increase in income before income taxes.

The Company has insurance operations in the United Kingdom, the Republic of Ireland, Canada and throughout other parts of the world as a corporate member of Lloyd’s, as well as in Brazil through a joint venture. Because these operations are conducted in local currencies other than the U.S. dollar, the Company is subject to changes in foreign currency exchange rates. For the three months and six months ended June 30, 2026 and 2025, changes in foreign currency exchange rates impacted reported line items in the statement of income by insignificant amounts. The impact of these changes was not material to the Company’s net income or segment income for the periods reported.

Revenues

Earned Premiums

Earned premiums in the second quarter of 2026 were $10.75 billion, $168 million or 2% lower than in the same period of 2025. Earned premiums in the second quarter of 2025 included $266 million related to the Canadian operations divested by the Company in the first quarter of 2026. Earned premiums in the first six months of 2026 were $21.36 billion, $273 million or 1% lower than in the same period of 2025. Earned premiums in the first six months of 2025 included $524 million related to the Canadian operations divested by the Company in the first quarter of 2026. In Business Insurance, earned premiums in the second quarter and first six months of 2026 were comparable with the same periods of 2025. In Bond & Specialty Insurance, earned premiums in the second quarter and first six months of 2026 both increased by 3% over the same periods of 2025. In Personal Insurance, earned premiums in the second quarter and first six months of 2026 decreased by 5% and 4%, respectively, from the same periods of 2025. Factors contributing to the changes in earned premiums in each segment are discussed in more detail in the segment discussions that follow.

Net Investment Income

The following table sets forth information regarding the Company’s investments.

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(1)Excludes net unrealized investment gains and losses and reflects cash, receivables for investment sales, payables on investment purchases and accrued investment income.

(2)Excludes net realized and net unrealized investment gains and losses.

Net investment income in the second quarter of 2026 was $1.07 billion, $128 million or 14% higher than in the same period of 2025. Net investment income in the first six months of 2026 was $2.08 billion, $206 million or 11% higher than in the same period of 2025. Net investment income from fixed maturity investments in the second quarter and first six months of 2026 was $930 million and $1.83 billion, respectively, $97 million and $184 million higher, respectively, than in the same periods of 2025. The increases in both periods of 2026 primarily resulted from higher long-term average yields and a higher average level of fixed maturity investments. Net investment income from short-term securities in the second quarter of 2026 was $53 million, $2 million lower than in the same period of 2025, driven by lower short-term average yields. Net investment income from

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THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued

short-term securities in the first six months of 2026 was $128 million, $16 million higher than in the same period of 2025, driven by a higher average level of short-term securities, partially offset by lower short-term average yields. The Company’s remaining investment portfolios had net investment income of $100 million and $147 million, respectively, in the second quarter and first six months of 2026, $33 million and $4 million higher, respectively, than in the same period of 2025. The increases in both periods of 2026 primarily reflected higher private equity partnership returns. Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income from these other investments is generally reflected in the Company’s financial statements on a quarter lag basis.

Fee Income

Fee income in the second quarter of 2026 was $126 million, $2 million higher than in the same period of 2025. Fee income in the first six months of 2026 was $247 million, $4 million higher than in the same period of 2025. 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.

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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, 2025 and 2024, including year-to-year comparisons between 2025 and 2024. Year-to-year comparisons between 2024 and 2023 have been omitted from this Form 10-K, but may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

On May 27, 2025, the Company entered into an agreement to sell its Canadian personal insurance business and the majority of its Canadian commercial insurance business to Definity Financial Corporation for approximately US$2.4 billion. The assets and liabilities of the Canadian personal insurance business and the majority of its Canadian commercial insurance business have been classified as held for sale in the consolidated balance sheet as of December 31, 2025. The Company retained its surety business in Canada. The sale closed on January 2, 2026. See note 1 of the notes to the consolidated financial statements.

FINANCIAL HIGHLIGHTS

2025 Consolidated Results of Operations

•Net income of $6.29 billion, or $27.83 per share basic and $27.43 per share diluted

•Net earned premiums of $43.91 billion

•Catastrophe losses of $3.69 billion ($2.92 billion after-tax)

•Net favorable prior year reserve development of $1.04 billion ($815 million after-tax)

•Combined ratio of 89.9%

•Net investment income of $3.96 billion ($3.25 billion after-tax)

•Net realized investment losses of $48 million ($37 million after-tax)

•Operating cash flows of $10.61 billion

2025 Consolidated Financial Condition

•Total investments of $101.18 billion; fixed maturities and short-term securities comprised 94% of total investments

•Total assets of $143.71 billion

•Total debt of $9.27 billion, resulting in a debt-to-total capital ratio of 22.0% (21.2% excluding net unrealized investment losses, net of tax, included in shareholders’ equity)

•Total capital returned to shareholders of $4.18 billion, comprising $3.20 billion of share repurchases and $987 million of dividends

•Shareholders’ equity of $32.89 billion

•Net unrealized investment losses of $1.86 billion ($1.48 billion after-tax)

•Book value per common share of $151.21

•Holding company liquidity of $2.41 billion

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CONSOLIDATED OVERVIEW

Consolidated Results of Operations

The following discussions of the Company’s net income and segment income (loss) are presented on an after-tax basis. Discussions of the components of net income and segment income (loss) are presented on a pre-tax basis, unless otherwise noted. Discussions of net income per common share are presented on a diluted basis.

Overview

Diluted net income per share of $27.43 in 2025 increased by 28% over diluted net income per share of $21.47 in 2024. Net income of $6.29 billion in 2025 increased by 26% over net income of $5.00 billion in 2024. The higher rate of increase in diluted net income per share reflected the impact of share repurchases in recent periods. The increase in income before income taxes primarily reflected the pre-tax impacts of (i) higher underwriting margins excluding catastrophe losses and prior year reserve development (“underlying underwriting margins”), (ii) higher net investment income and (iii) higher net favorable prior year reserve development, partially offset by (iv) higher catastrophe losses. Net favorable prior year reserve development in 2025 and 2024 was $1.04 billion and $709 million, respectively. Catastrophe losses in 2025 and 2024 were $3.69 billion and $3.34 billion, respectively. The higher underlying underwriting margins in 2025 were driven by all three segments. Income tax expense in 2025 was higher than in 2024, primarily reflecting the impact of the increase in income before income taxes.

The Company has insurance operations in the United Kingdom, the Republic of Ireland, Canada and throughout other parts of the world as a corporate member of Lloyd’s, as well as in Brazil through a joint venture. Because these operations are conducted in local currencies other than the U.S. dollar, the Company is subject to changes in foreign currency exchange rates. For the years ended December 31, 2025 and 2024, changes in foreign currency exchange rates impacted reported line items in the statement of income by insignificant amounts. The impact of these changes was not material to the Company’s net income or segment income (loss) for the periods reported.

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Revenues

Earned Premiums

Earned premiums in 2025 were $43.91 billion, $1.97 billion or 5% higher than in 2024. In Business Insurance, earned premiums in 2025 increased by 5% over 2024. In Bond & Specialty Insurance, earned premiums in 2025 increased by 4% over 2024. In Personal Insurance, earned premiums in 2025 increased by 5% over 2024. Factors contributing to the change in earned premiums in each segment in 2025 as compared with 2024 are discussed in more detail in the segment discussions that follow.

Net Investment Income

The following table sets forth information regarding the Company’s investments.

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(1)Excludes net unrealized investment gains and losses and reflects cash, receivables for investment sales, payables on investment purchases and accrued investment income.

(2)Excludes net realized and net unrealized investment gains and losses.

Net investment income in 2025 was $3.96 billion, $369 million or 10% higher than in 2024. Net investment income from fixed maturity investments in 2025 was $3.43 billion, $485 million higher than in 2024. The increase primarily resulted from a higher average level of fixed maturity investments and higher long-term average yields. Net investment income from short-term securities in 2025 was $253 million, $27 million lower than in 2024. The decrease primarily resulted from lower short-term average yields, partially offset by a higher level of short-term investments. The Company’s remaining investment portfolios had net investment income of $326 million in 2025, $83 million lower than in 2024, primarily reflecting lower private equity partnership returns. Included in other investments are private equity, hedge fund and real estate partnerships that are accounted for under the equity method of accounting and typically report their financial statement information to the Company one month to three months following the end of the reporting period. Accordingly, net investment income from these other investments is generally reflected in the Company’s financial statements on a quarter lag basis.

Fee Income

Fee income in 2025 was $495 million, $22 million higher than in 2024. The National Accounts market in Business Insurance is the primary source of the Company’s fee-based business and is discussed in the Business Insurance segment discussion that follows.

Net Realized Investment Gains (Losses)

The following table sets forth information regarding the Company’s net pre-tax realized investment gains (losses).

Net realized investment gains on equity securities still held of $50 million and $89 million in 2025 and 2024, respectively, were driven by the impact of changes in fair value attributable to favorable equity markets.

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Other net realized investment losses in 2025 included $67 million of net realized investment losses related to fixed maturity investments, $24 million of net realized investment losses related to other investments and $5 million of net realized investment losses related to equity securities sold. Other net realized investment losses in 2024 included $126 million of net realized investment losses related to fixed maturity investments and $10 million of net realized investment losses related to other investments, partially offset by $17 million of net realized investment gains related to real estate sales and $10 million of net realized investment gains related to equity securities sold.

Other Revenues

Other revenues in 2025 were $508 million, $59 million higher than 2024. Other revenues include revenues from Simply Business, installment premium charges and other policyholder service charges.

Claims and Expenses

Claims and Claim Adjustment Expenses

Claims and claim adjustment expenses in 2025 were $27.22 billion, $162 million or 1% higher than 2024, driven by Business Insurance, partially offset by Personal Insurance and Bond & Specialty Insurance. Catastrophes in 2025 primarily resulted from the January 2025 California wildfires and severe wind and hail storms in multiple states. Catastrophes in 2024 primarily resulted from Hurricane Helene and numerous severe wind and hail storms in multiple states. Factors contributing to the changes in claims and claim adjustment expenses in each segment are discussed in more detail in the segment discussions that follow.

Factors contributing to net prior year reserve development are discussed in more detail in note 8 of the notes to the consolidated financial statements.

Significant Catastrophe Losses

The Company defines a catastrophe as a severe loss event designated, or reasonably expected by the Company to be designated, a catastrophe by one or more industry recognized organizations that track and report on insured los

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