First Quarter 2016 Results 1 April 21, 2016 Long-Term Financial - PowerPoint PPT Presentation

First Quarter 2016 Results 1 April 21, 2016

Long-Term Financial Strategy Balanced Generation of approach to Meaningful and top tier earnings rightsizing capital sustainable and capital and competitive substantially in growing book advantages excess of growth value per share needs over time CREATE SHAREHOLDER VALU E Objective: Mid-Teens Operating ROE Over Time 2

First Quarter 2016 Overview Travelers Reports First Quarter Net and Operating Income of $2.30 and $2.33 per Diluted Share, Respectively, Including Catastrophe Losses of $0.69 per Diluted Share First Quarter Return on Equity and Operating Return on Equity of 11.6% and 12.5%, Respectively Board of Directors Declares 10% Increase in the Company’s Regular Quarterly Cash Dividend to $0.67 per Share • Net and operating income of $691 million and $698 million, respectively, declined from the prior year quarter primarily due to an increase in catastrophe losses of $101 million after-tax ($156 million pre-tax), mainly arising out of hail storms that occurred in Texas in late March. • Strong underwriting results in each business segment as reflected in a consolidated combined ratio of 92.3% and an underlying combined ratio of 90.0%. • Net written premiums of $6.166 billion increased 5% from the prior year quarter due to higher levels of retention and new business volumes and positive renewal premium changes in each business segment. • Total capital returned to shareholders of $790 million in the quarter, including $609 million in share repurchases. • Book value per share of $82.65 increased 6% from the prior year quarter and 4% from year-end 2015. Adjusted book value per share of $76.63 increased 7% and 2%, respectively, from the same dates. 3

Analysis of 1Q 2016 Operating Results Versus Prior Year Quarter Versus Consensus Estimate ($ in millions, after-tax) First Quarter 1Q 2016 TRV Operating income per 2016 2015 Change diluted share - as reported $ 2.33 TRV Operating income $ 698 $ 827 $ (129) Consensus estimate (1) $ 2.55 Included the following items: Catastrophe losses $ (207) $ (106) $ (101) Remove: consensus catastrophe losses (as estimated by TRV (2) ) $0.36 Fixed income net investment income 412 436 (24) Add: TRV catastrophe losses – as reported (0.69) $(0.33) Consensus estimate (1) – as Total items $ 205 $ 330 $ (125) adjusted $ 2.22 Source: FactSet – as of April 19, 2016 (1) (2) TRV estimate based on the analysis of models received from covering sell-side analysts – as of April 19, 2016 4

Consolidated Performance ($ in millions, except per share amounts, after-tax) First Quarter 2016 2015 Change Operating income $ 698 $ 827 (16) % per diluted share $ 2.33 $ 2.53 (8) % Included the following items: Net favorable prior year reserve development $ 119 $ 158 Catastrophes, net of reinsurance (207) (106) Total items $ (88) $ 52 Loss and loss adjustment ratio 61.1 % 57.4 % Underwriting expense ratio 31.2 31.5 Combined ratio 1 92.3 % 88.9 % (3.4) pts 3.0 4.1 Net favorable prior year reserve development Catastrophes, net of reinsurance (5.3) (2.7) Underlying combined ratio 90.0 % 90.3 % 0.3 pts Net Written Premiums $ 6,166 $ 5,897 5 % 5 1 A benefit to the combined ratio is indicated as a positive item, and a charge is indicated as a negative item.

Very Strong Financial Position ($ and shares in millions, except per share amounts) Capital At or above target levels for all rating agencies. • March 31, December 31, 2016 2015 Repurchased 5.6 million shares during the first quarter 2016 • at a total cost of $609 million. Debt $ 6,344 $ 6,344 Common equity 1 22,407 22,309 Dividends in the first quarter were $181 million. • Total capital 1 $ 28,751 $ 28,653 Debt-to-capital 1 22.1% 22.1% Leverage Common shares Debt-to-capital ratio 1 of 22.1%, comfortably within target 292.4 295.9 • outstanding range. Book value per common Low level of maturing debt . • $ 82.65 $ 79.75 share 2016 $400 million - Adjusted book value per 2017 $450 million - $ 76.63 $ 75.39 common share 1 2018 $500 million - Tangible book value per $ 63.63 $ 62.58 Very high quality investment portfolio common share 1, 2 Net unrealized investment gains of $1.759 billion after-tax • Statutory capital and ($2.693 billion pre-tax) at March 31, 2016. $ 20,569 $ 20,567 surplus • Fixed maturities average weighted quality Aa2, AA. Holding company liquidity $ 1,706 $ 1,625 • Fixed maturities below investment grade 2.9%. 6 1 Excludes net unrealized investment gains, net of taxes 2 Excludes the after-tax value of goodwill and other intangible assets

Combined Net Investment Income – After-tax ($ in millions) Total First Quarter 2016 Commentary • Net investment income from the long-term fixed income portfolio declined modestly from the prior year quarter primarily due to $554 $503 $478 $484 $476 lower reinvestment rates as expected $439 $440 • Short-term portion of fixed income portfolio continued to be impacted by very low interest rates • Net investment income from the non-fixed income portfolio decreased from the prior year quarter due to lower hedge fund returns 1 1 2014 2015 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 After-tax yield • 3.1% 2.7% 2.7% 2.9% 2.7% 2.5% 2.5% Non-Fixed Income 2 Fixed Income 2 $462 $436 $428 $431 $422 $422 $98 $412 $79 ` $68 $55 $48 $33 $25 1 1 2014 2015 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 1 1 2014 2015 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 After-tax yield Short-term After-tax yield Long-term Total 2.8% 2.6% 2.7% 2.7% 2.6% 2.6% 2.5% 7.4% 4.1% 3.6% 5.8% 5.0% 1.8% 2.5% Short-term 0.1% 0.2% 0.1% 0.2% 0.2% 0.2% 0.3% Long-term 2.9% 2.8% 2.8% 2.8% 2.8% 2.8% 2.7% 1 2014 and 2015 data represent quarterly average 7 2 Excludes investment expenses

Components of Operating Return on Equity 14.1% 6.1% 11.0% 15.5% 15.5% 15.2% 14.5% 12.5% 9.4% 9.4% 9.0% 0.7% 8.5% 8.4% 1.3% 1.3% 0.9% 0.4% 7.4% 7.8% 0.1% 7.3% 7.2% 1.2% 1.5% 1.5% 7.1% 7.0% 6.8% 0.7% 0.7% 0.9% 0.5% 5.7% 6.9% 8.1% 7.3% 6.5% 6.6% 6.3% 8.3% 8.0% 4.7% 1.6% 2005 (2.9%) through 2011 2012 2013 2014 2015 2015 2016 2010 1 st Quarter Full Year Long-term fixed net investment portfolio investment income less holding company interest expense Short-term fixed net investment portfolio investment income Non-fixed net investment portfolio investment income Underwriting gain / (loss) and other From Jan. 1, 2005 through Mar. 31, 2016, TRV’s average annual operating ROE was approximately 13.5% 8

Business and International Insurance Performance ($ in millions) First Quarter 2016 2015 Change Operating income $ 476 $ 515 (8) % 62.4 % 61.2 % Loss and loss adjustment ratio 32.4 32.1 Underw riting expense ratio Combined ratio 1 94.8 % 93.3 % (1.5) pts Net favorable prior year reserve development 2.6 2.1 Catastrophes, net of reinsurance (4.1) (2.7) Underlying combined ratio 93.3 % 92.7 % (0.6) pts Net written premiums Domestic Select Accounts $ 724 $ 722 - % Middle Market 1,829 1,726 6 320 299 7 National Accounts First Party 358 340 5 Specialized Distribution 286 268 7 3,517 3,355 5 Total Domestic 397 442 (10) International Total Business and International Insurance $ 3,914 $ 3,797 3 % Change in total net written premiums excluding the impact of changes in foreign exchange rates 4 % 9 1 A benefit to the combined ratio is indicated as a positive item, and a charge is indicated as a negative item.

Domestic Business Insurance (Ex. National Accounts) Illustrative Business Statistics 10% Renewal Premium Change 1 %  Renewal Rate Change 2 % Renewal Rate Change 2 % ex. National Property • Exposure/Other % 8% 6% 4% 2% 1.0% 1.2% 0.8% - 0.5% -0.1% (2%) 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 ($ in millions) Retention 84% 83% 84% 84% 85% Renewal premium 3.7% 3.1% 3.1% 2.2% 2.2% change 1 New business $520 $477 $446 $470 $575 10 1 Represents the estimated change in average premium on policies that renew, including rate and exposure changes. 2 Represents the estimated change in average premium on policies that renew, excluding exposure changes. Note: Statistics are in part dependent on the use of estimates and are therefore subject to change.

Domestic Business Insurance: Select Accounts Illustrative Business Statistics 10% Renewal Premium Change 1 %  Renewal Rate Change 2 % • Exposure/Other % 8% 6% 4% 2.8% 2.6% 2.3% 2.4% 2% 1.3% - (2%) 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 ($ in millions) Retention 81% 81% 81% 80% 81% Renewal premium 7.4% 7.8% 7.2% 7.2% 6.6% change 1 New business $100 $96 $89 $86 $103 11 1 Represents the estimated change in average premium on policies that renew, including rate and exposure changes. 2 Represents the estimated change in average premium on policies that renew, excluding exposure changes. Note: Statistics are in part dependent on the use of estimates and are therefore subject to change.